AMC Networks will take a 49.9% stake in BBC America for $200 million in a joint venture with BBC Worldwide. Under the arrangement, BBC Worldwide will retain 50.1% in equity but AMC Networks will have operational control of BBC America with operational results to be included in AMC Networks' financial statements.
AMC Networks will also be in charge of advertising and affiliate sales for BBC America, which reached 78.4 million US pay TV homes at year end 2013 according to IHS TV Channel Intelligence. BBC America will join AMC Networks as a standalone channel and be included in a portfolio that includes AMC, IFC, We tv, Sundance TV and AMC Networks International, which consists of more than 60 international channels owned by Chellomedia, purchased earlier in the year for $1 billion.
Also in the agreement, BBC World News in the US will now be represented by AMC Networks for US advertising and affiliate sales.
AMC Networks' acquisition of a stake in BBC America is one step futher in broadening its domestic business beyond the movie mould, with another general entertainment brand shoring up its portfolio. AMC currently owns AMC, IFC, We TV, and Sundance. The problem for the company is that none of these networks, except for AMC, is considered must-have by pay TV operators - and even AMC is borderline. The company is looking to improve AMC's image by cancelling the majority of its unscripted series and focusing on scripted originals, where it has seen great success with commissons like The Walking Dead and Breaking Bad.
BBC America is a moderately successful cable network, which IHS estimates will bring in roughly $300 million in carriage fee revenue in 2014. The price paid is a bargain, and will likely lead to profit for AMC earlier than for other networks. The acquisition is another step in AMC Networks' strategy of future-proofing via acquisition. Its purchase of Chellomedia gives the company some cushion room, in anticipation of a downturn in the domestic pay TV video business.
As IHS has noted, the business of pay TV is under pressure in the USA from significantly rising programming costs. While the move by AMC Networks to purchase BBC America won't be of a particular benefit to consumers, the move will help the company negotiate better carriage deals in the future. Although, like any other programmer making deals with US pay TV operators, AMC will have to tread increasingly lightly when it comes to carriage fee increases.