‘Walking Dead’ Ending Leaves an Ad Hole in AMC’s Zombie Universe

(Bloomberg) -- AMC Networks Inc.’s “The Walking Dead” will end after its 11th season, leaving a large void at a media company that has relied on the popular zombie series to attract viewers and advertisers.

The show, which has been among the most-watched shows on cable for the past decade, isn’t leaving right away, the company said Wednesday. It will air its remaining 30 episodes over the next two years, and plans to extend the franchise for years with more spinoffs.

“We think we’ve figured out how to satisfy our creative, but also do that in a way that keeps the economics moving in the right direction,” Ed Carroll, AMC’s chief operating officer, said in an interview.

But the end of “The Walking Dead” will present a challenge for the company at a time when it’s already facing several. As recently as 2018, about one-third of AMC Networks’ advertising sales came from “The Walking Dead” and a spinoff, “Fear the Walking Dead,” according to Bloomberg Intelligence. Both shows air on the company’s flagship AMC channel.

Meanwhile, the company, which is controlled by the Dolan family, remains a small player in a business where bigger companies are growing through consolidation and the number of people subscribing to pay TV is dwindling. “The Walking Dead” was once most-watched drama on television, drawing more than 20 million viewers per episode in its fifth season. That’s since retreated to about 5.4 million.

‘Carefully Managed’

“We have managed ‘The Walking Dead’ very carefully and we’ve been planning this for a while,” Carroll said. “Spinoffs can be more profitable than the initial series.”

The coronavirus has presented its own challenges. Like many of its peers, AMC halted production during the pandemic, forcing the company to delay the conclusion of the 10th season until October. The 11th season of “The Walking Dead” is set to resume shooting in Georgia next month.

AMC’s revenue fell 16% last quarter, with ad sales at its national networks and revenue from U.S. pay-TV providers both declining. That was steeper than the drop at competitors like Discovery Inc. Sales are forecast to tumble again this period. In addition to its flagship AMC network, the company also operates channels like IFC, Sundance and BBC America.

“AMC remains exposed to the challenging advertising environment and incremental deterioration in (pay-TV) subscriber trends,” Cowen & Co. analyst Doug Creutz wrote in a note to clients last month.

Some analysts say the company, known for prestige dramas like “Mad Men” and “Breaking Bad,” could be forced to sell as deep-pocketed streaming services play the same game.

“We continue to believe that the company could (and perhaps should) be sold to a peer or taken private,” MoffettNathanson analyst Michael Nathanson wrote in a note last month.

Zombie Franchise

For years, Josh Sapan, who has been the company’s chief executive officer since 1995, has tried to ease investors’ concerns as the “Walking Dead” audience declined. Sapan has said he envisions the “Walking Dead” franchise having the same longevity as “Star Trek” or “Law & Order.”

But Sapan has also pushed to make the company less reliant on cable by launching four niche streaming services. By the end of this year, the company expects to have as many as 4 million subscribers across those services, the largest of which is Acorn TV, which streams British mysteries and dramas. It’s also producing more of its own shows so it can profit off the sale of them to other services.

“AMC stands to be one of the first beneficiaries of a likely narrative shift of media companies getting credit for their” push into streaming, said Kutgun Maral, an analyst at RBC Capital Markets LLC who recommends the stock.

AMC will try to squeeze even more mileage out of “The Walking Dead.” Its popularity has already fueled a spinoff, “Fear the Walking Dead,” and a talk show, “Talking Dead.” Next month, AMC will premiere yet another spinoff, “The Walking Dead: World Beyond.” A spinoff focused on two characters will debut in 2023. There’s also a feature film in the works.

“Evolution is upon us,” the show’s co-creator, Scott Gimple, said in a statement. “‘The Walking Dead’ lives.”

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