Feb 1, 2023
James Dolan’s Empire is Beset by Challenges. AMC Networks Tops the List.
(Bloomberg) -- For decades, James Dolan had a front-row seat to the storm gathering around the cable-TV business. The son of an industry pioneer, he predicted in 2015 that subscribers could plunge 25% over the next five years, warning that it’s “going to have an impact on the programmers.” Later that year, he distanced himself from part of the business, selling Cablevision Systems Corp., the TV and internet provider his father founded in the 1970s, for $17.7 billion. But despite forecasting an ominous future, Dolan held onto his stable of cable channels, AMC Networks Inc., even as things grew worse.
These days, AMC Networks is just one piece of the Dolan empire facing challenges. His sports and entertainment companies recently underwent layoffs. MSG Sphere, a new event venue in Las Vegas set to open this year, is over budget after its costs soared by more than $300 million. Madison Square Garden is under fire for using facial recognition technology to deny entry to lawyers whose firms are suing the company. In late January, Dolan suggested he’d halt alcohol sales at New York Rangers hockey games in response to an ongoing investigation by the New York State Liquor Authority.
At a time of mounting pressure on Dolan, he’s also been acting as executive chairman of AMC Networks since late last year, after its chief executive officer stepped down having served less than three months in the role and the company announced a restructuring and a 20% reduction in staff.
Meanwhile, even as the cable industry has grown more imperiled, Dolan has so far spurned opportunities to sell his networks. In the second half of 2021, two private equity firms, Apollo Global Management Inc. and Providence Equity Partners, expressed interest in buying AMC Networks, according to people familiar with the matter. Top managers at AMC Networks thought they should make a deal, or at least consider it seriously. The company’s cable networks, famous for shows like The Walking Dead, Mad Men and Breaking Bad, were losing subscribers and profits were falling.
Dolan decided not to explore a sale, said the people, who requested anonymity while discussing private negotiations. At the time, the company’s shares were trading at around $40. In recent months, the rate of customers canceling their cable subscriptions has accelerated and the TV advertising market has weakened. Shares of AMC Networks are now trading around $18, down by more than half from just two years ago.
“They might be in one of the most precarious spots as you look across the landscape,” said Bloomberg Intelligence analyst Geetha Ranganathan. “With the amount of exposure they have to the linear TV model and their smaller footprint in streaming, they’re under tremendous pressure.”
Representatives for AMC Networks, Providence and Apollo declined to comment.
James Dolan’s father, Charles Dolan, was one of the architects of the pay-TV business, founding an early cable provider, later renamed Cablevision, as well the premium TV network HBO, which he eventually sold to Time Life. The elder Dolan built Cablevision into one of the largest cable operators in the northeastern US and bought the New York Rangers hockey team, the New York Knicks basketball team and Madison Square Garden. James Dolan pursued a career in music before taking over the family business in 1995. He is known to many sports fans as the executive chairman of the Knicks, a team that has posted a losing record for 16 of the last 20 seasons.
Dolan’s cable channels are now minnows in a land of giants. By 2017, with massive tech companies, including Amazon.com Inc. and Apple Inc., muscling into the field and Netflix pouring billions of dollars per year into original programming, the future of home entertainment was shaping up to be a global showdown between behemoths. Rather than trying to compete directly with Netflix, AMC Networks signed deals to license reruns of its shows to other growing streamers—Hulu in the US and Amazon Prime Video globally. Going forward, AMC Networks would build a roster of smaller streaming services catering to niche audiences, including Shudder for fans of horror films, Acorn TV for devotees of British programming, ALLBLK for Black audiences and Sundance Now for indie film aficionados. In 2020, the company added AMC+, a more generalized streaming service, offering hits from its new and traditional channels.
With so-called Peak TV in full swing, it was growing harder each year for smaller companies like AMC Networks to stand out. Analysts cautioned that to stay relevant media companies would need to bulk up. Many companies heeded the warning signs, setting off a flurry of blockbuster deals. Scripps Networks Interactive Inc., home of lifestyle channels like HGTV and Food Network, sold to Discovery Inc.; Time Warner Inc., home of HBO and Warner Bros. studio, sold to AT&T Inc.; Fox sold its entertainment assets to Walt Disney Co.
“They saw the writing on the wall,” said Michael Nathanson, an analyst at SVB MoffettNathanson.
AMC isn’t the only prominent media company that declined to cash in. Lions Gate Entertainment Corp., home of Starz and movies franchises like John Wick, rejected an offer from the toymaker Hasbro Inc. in 2017 and is now trying to find a buyer, most likely at a lower price. Even Paramount Global, larger than AMC and Lions Gate combined, is seen by many investors as undersized.
Dolan’s decision not to sell wasn’t the only fork in the road for AMC Networks. In the mid 2010s, its then-president Charlie Collier thought the network should buy the TV rights to World Wrestling Entertainment Inc., or perhaps even acquire the entire company, according to sources familiar with the network’s strategy. The pro wrestling league would have given AMC Networks fresh spectacles two nights a week, and they could have used the characters to create various new TV shows. But the idea ultimately fizzled. WWE programming has since turned out to be a reliable ratings draw for its current broadcasters, USA and Fox.
Instead, AMC Networks poured resources into expanding The Walking Dead, eventually releasing multiple spinoffs. Recently, it’s been trying to create a new franchise based on novels from Anne Rice, the gothic fiction author known for Interview With the Vampire. The company’s streaming business is still growing, approaching 12 million subscribers at the end of last year. While that’s more than halfway to its goal of having between 20 million and 25 million by 2025, S&P Global Ratings downgraded the company in December, noting it no longer expected it to meet its streaming goals.
For years, after they spun AMC Networks out from Cablevision in 2011 and placed Josh Sapan, a trusted lieutenant, in charge, the Dolan family didn’t meddle much in their cable networks. Sapan, CEO of AMC Networks for a decade, served as a buffer between his staff and their billionaire owners. Then in August 2021, less than a year after signing a new contract, Sapan stepped down. His Chief Operating Officer Ed Carroll left the following month. Their departure upset what had been a stable leadership team and created an opening for Dolan to take a more assertive role. Dolan replaced Sapan with Matt Blank, the former head of Showtime. Blank served as an interim CEO for about a year before they brought in Christina Spade, a longtime media executive who had previously served as chief financial officer of ViacomCBS Inc.
During the pandemic, Kristin Dolan — who for almost 20 years worked at Cablevision before starting a company that helps measure and analyze TV viewership data — refurbished an office on the executive floor at the AMC Networks headquarters in midtown Manhattan. Kristin is James Dolan’s wife, although the pair are separated. Lately, she has been serving as a de facto leader, said people familiar with her role. Meanwhile, James Dolan, who wasn’t available for comment for this story, is looking for a fourth head of AMC Networks in less than two years.
(Corrects in the final paragraph the status of Kristin and James Dolan’s relationship.)
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