AMC Networks (AMCX), the company formerly known as Rainbow Media that was split off from Cablevision in 2011, has been the epitome of a successful public market spin-off. Huge hits led by Breaking Bad and Mad Men have the company, which owns four national channels (Sundance Channel, IFC, and WE tv, in addition to the flagship AMC), on a roll with both viewers and investors. As you can see from the chart below, the stock has doubled in the two years since the shares made their stock market debut as an independent company.
Bulls may want to consider taking some of their chips off the table. The final eight episodes of Breaking Bad premiere on August 11th and Mad Men‘s seventh and final season will air in 2014. After AMC’s two biggest hits, which essentially put AMC on the map after it shifted its prime-time strategy to original series (the channel used to be called American Movie Classics), come to an end the company’s executives will have large shoes to fill and a lot of pressure to do so. In fact, news that Breaking Bad creator Vince Gilligan is in talks about a spin-off show (sans main characters) is interesting because although spin-offs of popular shows are always intriguing from a networking exec’s perspective (case in point: Major Crimes debuted sans Kyra Sedgwick following the end of The Closer on TNT), they do not have good long-term track record (ask some of the Friends stars, for instance).
As a big fan of both Breaking Bad and Mad Men, I hope AMC can keep its winning streak alive. However, we know that television network ratings are cyclical and the bar is going to be set extremely high after Mad Men ends next year. With the stock up so much over the last two years, investors should understand that few networks have multi-year runs without hiccups, especially when they have to plug gaps in their show lineups after big hits come to an end.
Full Disclosure: No position in AMCX at the time of writing, but positions may change at any time.