AMC Networks Inc. (AMCX) Q3 2013 Earnings Report, Transcript and Summary

Good afternoon. My name is Rachel, and I will be your conference operator today. At this time, I would like to welcome everyone to the AMC Networks Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Seth Zaslow, Senior Vice President of Investor Relations.

Thank you. Good morning, and welcome to the AMC Networks Third Quarter 2013 Earnings Conference Call. Joining us this morning are members of our Executive Team, Josh Sapan, President and Chief Executive Officer; Ed Carroll, Chief Operating Officer; and Sean Sullivan, Chief Financial Officer. Following a discussion of the company's third quarter 2013 results, we will open the call for questions. If you don't have a copy of today's earnings release, it is available on our website at amcnetworks.com. This call can also be accessed via our website. Please take note of the following. Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of the future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to the company's filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The company disclaims any obligation to update the forward-looking statements that may be discussed during this call. Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP results provides you with useful supplemental information concerning the company's ongoing operations and is appropriate in your evaluation of the company's performance. Please refer to the press release and related footnotes for GAAP information and a reconciliation of GAAP to non-GAAP information, which we'll refer to on this call. I would now like to turn the call over to AMC Networks President and CEO, Josh Sapan.

Good morning, and thank you for joining us. I'll provide a summary of our financial performance followed by an update on the business and then turn it over to Sean Sullivan for some greater financial detail. Before I go over the performance for the quarter, I wanted to briefly address the announcement we made last week regarding Chellomedia. As we discussed on that conference call, we have entered into an agreement with Liberty Global to purchase Chellomedia, a portfolio of international cable networks, for EUR 750 million or approximately $1 billion. We are very excited about the long-term growth opportunity that the Chellomedia business represents for the company and its shareholders. Over time, we will have much more to say about this transaction. However, I hope you understand that due to the fact that the deal has not yet closed and the various confidentiality provisions associated with the agreement, we will be limited in our ability to discuss the transaction in great detail at this time. As appropriate, we'll continue to keep you updated on further developments. So, turning to our financial results. In the third quarter of 2013, we delivered solid financial results and the fundamentals of our business remained strong. For the quarter, the company reported 19% growth in revenue and 25% growth in AOCF. For the first 9 months of the year, the company grew both revenue and AOCF 17%. As you may recall, our results for the third quarter of 2012 were impacted by litigation that was ongoing with DISH Network related to the VOOM HD business. The litigation and the associated temporary termination of carriage negatively impacted our affiliate and ad revenue and caused us to incur incremental marketing and litigation expenses. As a result, our current period performance with respect to these line items benefited from the favorable year-over-year comparison. Our top line revenue growth continued to be directly stimulated by the success of our investment in original programming across all 4 of our networks. As we've discussed on prior calls, we've been steadily and significantly increasing the investment in our programming. As we look out to the remainder of 2013 and into 2014, we expect this investment to continue as we believe our content will increasingly define the performance of each and all of our networks. In an increasingly competitive business, this investment in our programming and our networks is crucial in allowing us to continue to identify and deliver high-quality original programming that truly connects with our target audiences. Advertisers continue to respond to that programming. In the third quarter, the National Networks grew advertising revenue 36% over the prior year. Our growth was led by AMC, the largest of our 4 channels, where we saw significant demand, particularly for our original scripted series. Breaking Bad, which was recognized with 2 Emmy Awards, including Best Drama Series, wrapped up its run with, I think, it's fair to say, 8 wonderfully crafted episodes. Ratings for the final season were up over 100% versus the prior year in key demos. The Walking Dead premiered its fourth season in October and attracted the most viewers in the series history. The premier delivered 16 million total viewers and over 10 million viewers in the key demo, adults 18 to 49, an increase of roughly 40% over the prior season premiere. The premier was the most-watched drama series in basic cable history ever and outperformed all of broadcast TV, including Sunday night football, for the week in key adult 18 to 49 demo. With time-shifted playback included, the premier exceeded 20 million total viewers. Season to date, the show is up over 35% in the adult 18 to 49 demo as compared to the prior season. The network recently announced several new scripted series that are in development, including a companion series to The Walking Dead and something called Better Call Saul, a spinoff of Breaking Bad, featuring the character Saul Goodman from Breaking Bad, who's played by Bob Odenkirk. Each of our other networks, WE tv, IFC and Sundance Channel are enjoying solid momentum as well. We continue to ramp up our programming investment in order to make each of those channels stronger and, ultimately, make our portfolio of networks more valuable. As was the case with AMC, developing strong distinctive content that resonates with audiences is a multiyear undertaking, and we're at a different stage with each of our networks in terms of implementing this long-term plan. At WE tv, ratings performance in the quarter were led by a combination of new and returning originals, including the second season of a show called Tamar & Vince, which has become a consistent top performer for the network, and a new show called Marriage Boot Camp, which we renewed for a second season. IFC continues its push into developing alternative comedies and continues to attract well-known and proven comedic talent. IFC's Comedy Bang! Bang!, starring comedians Scott Aukerman and Reggie Watts, is performing quite well in its second season. And The Birthday Boys, a sketch comedy show that premiered in mid-October, is off to a good start. Portlandia, which stars Fred Armisen from Saturday Night Live and is returning for its fourth season, along with another show called The Spoils of Babylon, which is executive produced by and features Will Ferrell, are both set to air on IFC in January. As we previously discussed on September 30, Sundance Channel transitioned to a traditional ad model, following the path previously taken by AMC, WE and IFC in years past. We believe there is a tremendous opportunity for Sundance under an ad-supported model, and we're already seeing significant advertiser demand for the channel, and we think much of that comes from the rather rapid success we've had in establishing the network pretty quickly as a destination for high-quality scripted content. Sundance has what we believe to be 2 terrific scripted original series now in production. Rectify, Sundance's first wholly-owned scripted original, which premiered earlier this year to strong critical acclaim, is set to return for its second season next year. Joining Rectify is another wholly-owned scripted series called The Red Road. We think it's a really unique story set against the backdrop of 2 dueling communities that live side-by-side. The Honourable Woman, a mini series starring Maggie Gyllenhaal, is the latest in a line of critically acclaimed limited series from Sundance, following in the footsteps of Top of the Lake, Restless and Carlos, each of which enjoyed good success. We think all of those projects are strong additions to Sundance's expanded scripted slate. Our ability to produce content that is valuable and monetizable is increasingly driving our top line performance. On the distribution side, the National Networks grew revenue by 11% in the third quarter over the prior year period. Affiliate revenue continued to increase at a rate that was consistent with what we previously discussed. On our last call, we mentioned a pair of affiliate agreements with smaller MVPDs that were up for renewal in the second half of the year. I'm very pleased to say that we were able to reach resolution on both agreements at terms that we think fairly reflect the value of our networks. The non-affiliate portion of our distribution revenue base includes a combination of newer developing revenue streams from the distribution of our content on various ancillary platforms such as digital and the international sale of our shows. In the quarter, we recognized revenue from the availability of some of our AMC scripted originals on the Netflix platform, most notably, The Walking Dead Season 3 and Hell on Wheels Season 2. And on the International front, our activity going forward will, of course, be significantly informed and influenced by the acquisition of Chellomedia. We continue to move ahead with the expansion of our existing footprint of channels outside of the U.S. Of particular note, in September, we launched Sundance Channel for the first time in Latin America in partnership with DirecTV, the largest pay-TV distributor in the region. With that, I'd like to turn the call over to Sean Sullivan, who will provide further detail on the financial results for the quarter.

Thanks, Josh. Good morning. Turning to the results for the third quarter. Total company revenues grew 19.1% and AOCF grew 25.4%. As Josh mentioned, comparative results for the third quarter were impacted by our dispute with DISH in the prior year period. At the National Networks, revenues increased 20.2% or $62 million. National Networks AOCF increased 24.5% or $29 million versus the prior year period to a total of $145 million. Advertising revenues increased 36.3% to a total of $146 million. A portion of the increase related to the favorable DISH comparison. Excluding this impact, AMC was the primary driver of growth as it benefited from the performance of Breaking Bad, as well as an increase in the aggregate scripted original programming hours in the channel as compared to the prior year period. Distribution revenues of the National Networks increased 11.4% or $23 million to a total of $221 million versus the third quarter of 2012. The third quarter results reflected the aggregate impact of several items. With respect to affiliate fees, reported revenue growth was in the mid-teens as the results in the prior year reflected the absence of carriage on the DISH platform. Adjusting for this item, our affiliate revenue growth was in the mid to high single-digit range over the prior year period. Third quarter results reflected non-affiliate revenues that were essentially flat year-over-year as increases in revenue related to AMC scripted original programs, most notably The Walking Dead, offset nonrecurring digital and licensing revenues in the prior year period. Moving to expenses. Expenses increased 17.5% or $33 million in the quarter, principally due to increased programming and marketing costs versus the prior year period. The increase in programming expense was principally associated with our continued investment in original programming across all 4 of our networks. Third quarter also included a charge of $3 million related to the write-off of various programming assets compared to a charge of $8 million in the prior year period. The increase in marketing expense related to the timing of originals on AMC, which more than offset the impact of the dispute with DISH in the prior year period. Turning to the International and Other segment, revenues for the third quarter increased $2 million to $31 million. The AOCF deficit was essentially flat versus the third quarter of 2012 at $9 million. The revenue performance in the third quarter principally reflects an increase in our International affiliate fees. AOCF in the third quarter reflected the increase in revenue, offset by an increase in expenses. We incurred professional fees of $3 million in the quarter related to the Chellomedia acquisition as compared to $5 million in the prior year period related to the VOOM lawsuit. An increase in expenses at IFC Films principally offset the decrease in professional fees. Total company net income from continuing operations for the third quarter was $58 million or $0.80 per diluted share. This compares to $37 million or $0.51 per diluted share in the third quarter of the prior year. In terms of free cash flow, the company reported negative $92 million of free cash flow for the 9 months ended September 2013. This amount includes approximately $215 million of payments related to the VOOM settlement. Excluding the VOOM-related payments, free cash flow for the first 9 months of the year was $123 million. For the 9 months ended September 2013, total tax payments were $124 million. This amount includes $40 million of net tax payments related to VOOM. Cash interest was $90 million and capital expenditures were $18 million. Turning to the balance sheet. As of September 30, AMC Networks had $2.2 billion of outstanding debt, with cash and cash equivalents of $510 million for a net debt position of $1.7 billion. Our leverage ratio was 3.2x based on LTM AOCF of $529 million. The 3.2x leverage ratio was down from 5.4x on June 30, 2011 and 3.5x in the prior quarter. As we announced last week, our leverage ratio is expected to increase by approximately 1 turn as a result of the Chellomedia acquisition. We do, however, expect to delever over time through a combination of AOCF growth and as a result of the strong free cash flow characteristics of both our existing assets as well as the Chellomedia business. In terms of capital allocation, we remain focused on investing in our core business as we think this will generate the greatest return for our shareholders over the long term. With that, I would like to move to the question-and-answer portion of the call. Operator, please open the call to questions.

[Operator Instructions] Your first question is come from the line of Michael Morris.

A couple of questions about -- on the expense side, especially as we look forward to the big slate that you have in the coming year. First, can you talk a bit about how much you think the cash programming spend will increase next year as a result of the bigger slate of original scripted programming? Also, can you help us with how much of the scripted programming is owned versus licensed then? And if you could share how that impacts the amortization -- the pace of amortization relative to some of the licensed shows that you've had in the past? And then finally, the marketing cost, as you have more shows, is it a 1:1 relationship in terms of increased marketing spend for the programming? Or do you get some scale as the slate gets broader at AMC?

Thanks, Mike. Again, it's probably best to talk about it in the context of what our historical discipline and focus has been in terms of investment. Obviously, given our lack of guidance in terms of formally telling you what next year will look like, I think it's fair to say that we continue to invest incrementally. As you look at the programming amortization, our business has increased in excess of 20%. That's consistent again here as we look at the 9-month period '13 versus the prior year experience. We're not only doing that on AMC, but we're doing it on IFC, WE and Sundance because we think in the long-term that is the best strategy for our long-term value creation. In terms of the mix between owned and original, I think as Josh and Ed had said quite often, we look for great content that we think will engage with our viewers across our respective. So of course we want to own where we can. However, we still do a fair amount of licensing of content, too, so we're looking for the best material that meets the brand, that meets the screen, that engages with consumers. I think everyone in the call is fairly well informed in terms of how we account and recognize expense. So if it's an ownership model, it's an ultimate. To the extent, it's a licensed product, it's a straight line. To the extent it's co-owned or coproduced, a co-owned situation will be ultimate as well. So I think that again hopefully gives you the parameters of how we're looking at the business in our investment profile and the cash needs to achieve our strategy. As it relates to the marketing, as you know, it is a discretionary expense. So I don't necessarily -- I think we believe that ultimately there is leverage in the spend, but we are looking at each show and how best to launch that, whether it's through trade media, whether it's through cross-promotion, whether it's a cross-promotion across all of our channels. So I think we do have the discretionary ability to incrementally invest in marketing or pull back.

Yes, we don't market every show. Some of the shows we rely on social media and press as the drivers for those shows. Other, on the scripted side, we generally launch a new season, and you see our scheduling strategy, where we will do something like follow The Walking Dead with Talking Dead, and then into the unscripted show Comic Book Men. So we do look for synergies in the strategy -- in the scheduling strategy, and we're selective about which shows we significantly spend against.

Your next question is from the line of Michael Nathanson.

I have one for Josh and one for Sean. Josh, just a sense of strategy. On the shows that you're about to launch that you own, how fast would you consider putting those shows into an SVOD player given the success SVODS had to drive awareness? So how do you think about that relationship? And then I have one for Sean.

Sure. It's something that we've been obviously paying a lot of attention to with the goal of trying to balance several things, including the strength and propriety of the MVPD platforms, and secondly, the money that we might realize and do realize from an SVOD sale. And there's now a third factor, which is the apparent benefit, not yet quantifiable exactly, that occurs from exposure on an SVOD platform and can deliver benefit to subsequent season or seasons on MVPD. So the terrain has gotten a little bit more complicated and actually a little bit more interesting. The approach that we've taken to date, which we think is the right approach, is to essentially put, in most cases, not everyone, roughly a year between MVP exhibition -- MVPD exhibition and availability on SVOD. And we've done that historically. We seemed to have benefited from it in that we're among the most, if you want to call it, conservative, meaning longest period of time that a show has from Linear MVPD to Internet delivered on-demand. And we think we've benefited pretty reasonably, in some cases, significantly, from sampling and exposure on SVOD. The one thing I'll just add if I might, which is just another piece of it, which is not talked about as much, is iVOD, not to use too many words, but transaction, meaning sale of shows, which is another windowing question, and cable on-demand or MVPD on-demand, which is increasingly available, increasingly significant in its capacity and increasingly used by people. And so, there's, for us and everybody else, a lot to balance in that mix. We'll continue to monitor as we go forward. We don't necessarily think that an answer today is the absolute answer for tomorrow. We think we're in the right zone.

Okay. And then one for Sean. As you just called out, there was a onetime nonrecurring item in digital licensing and home video this quarter that affected the comparability. And when we look at the fourth quarter of comparability in the non-affiliate distribution line, is there anything that's nonrecurring or different about the compare from 4Q to 4Q that we should be aware of?

Yes, yes. The comparability was a result of what we recognized in Q3 of 2012 as it related to Q3 of 2013. In terms of the fourth quarter, I don't believe there's any real comparability relative to the prior year.

Your next question is from the line of Todd Juenger. Todd Juenger - Sanford C. Bernstein & Co., LLC., Research Division: Two seemingly unrelated questions. One, on the advertising side. Can you just give a sense of -- and clearly, I'm sure you were bullish on your hit shows coming into the year. They're probably exceeding maybe even your own expectations. Wondering if you can share with us some sense of how much of that inventory you sold upfront, which I suspect you probably didn't even promise this sort of audience against, versus how much you held back for scatter. And also looking forward to the rest of the upfront season, the next 3 quarters on that basis. The second question related distribution. I just want -- it looks like you actually picked up, I don't know, an extra 100 or 200 bps of more households at -- across most of your networks even from just 3 months ago. So I'm wondering, where's that coming from? Is that moving networks onto more popular tiers? Is it just a natural progression of households to digital? Is it aggressive -- is it something else? And can we expect that to continue?

Sure. On the advertising side, as you might imagine, we engage in an awful lot of planning and modeling and forecasting of how we'll do in order to maximize revenue. We did have on the shows that performed particularly well, the end of Breaking Bad and the new season of The Walking Dead, we had trend lines that were heading up. And actually this joins with the earlier question and comment we had about what happens between seasons. And so, we were anticipating growth, and we actually thought that Breaking Bad was a very special circumstance because of it ending and because of the amount, frankly, of heat and attention that it was getting. So I think we did a pretty good job of balancing aggressive expectations in what we sold with some degree of sanity in inventory that we held. I think we came out pretty well in terms of maximizing it.

And so on the distribution question, as a consequence of recent MVPD deals, we've enjoyed universe growth, particularly on Sundance, WE and IFC. That's another way that we're able to use the leverage of the hit series, not only for increased rates, but for increased exposure for all of our networks. Todd Juenger - Sanford C. Bernstein & Co., LLC., Research Division: And so, should we expect that, if you don't mind me just following up, to maybe continue growing or sort of reset to a new level that at least will continue to roll over for another few quarters?

It's always a focus of us to grow the universe. It's a goal in every MVPD negotiation, and so we sort of go at it deal to deal.

Your next question is from the line of Richard Greenfield.

Really a question related to allocation of capital. You talked about how you're just converting what is your final major U.S. network to an ad-supported network. Obviously, there's -- not just on AMC, but as you look across the portfolio of IFC, WE and Sundance, there's a tremendous amount of opportunity that you have to, I guess, for lack of a better term, kind of create the same type of magic you've done with Walking Dead, but to build that into a far broader set of assets in the portfolio. And just wondering, putting $1 billion overseas versus using a substantial amount of capital to accelerate original programming in the U.S., how did you balance -- how you thought about that use of capital decision?

Sure, Rich. I think we do view the opportunity in the U.S. as you described it. We do think that the conversion of IFC to ad-support and, just to the earlier conversation, the expansion of its universe domestically represents a good opportunity. And similarly for Sundance and even less well-developed for Sundance in terms of its universe and the recency of the introduction of advertising, so there's a lot of opportunity there, we hope. We were very, very attracted and have been to all the things that brought us to the Chellomedia acquisition, and they include the fact that the business is a good business today. The good business has, we think, reasonable margins and very strong cash flow characteristics. We think that it has the opportunity for growth as we make determinations over where to deploy overseas the increased amount of original programming that we own and or control, and we think that it's good for our business to be in multiple businesses and in multiple geographies. So we thought of it as a great priority, obviously. And the balance of the allocation of capital is something that we considered with great care and determined that this was particularly in light of our current leverage and the fact, as Sean said, from June a couple years ago when we went out at 5.5 roughly and being down to 3-point roughly 2, that we had the wherewithal to do it and, frankly, to accomplish with a reasonable amount of today current leverage and a sort of a horizon of deleveraging based upon the nature of business that we could pretty comfortably take care of both activities.

And can I read into comment essentially that by having the global footprint now, it will make it easier for you to finance your own original programming that you wholly control because you're not just looking at it against the U.S., you're looking at it across a much wider footprint?

I'd say, broadly, yes. More specifically, what it will give us, Rich, is greater opportunity to make specific determinations with future shows about whether they're sold to third parties, whether we keep them for ourselves, which shows will work in which geographies and on which channels. About half of the channels in the Chello portfolio are movie and entertainment. They're obviously a more welcome and easy home for some of our material. Some of the other channels are different in their editorial construct and are less obviously an immediate home, and they have different geographies. So it is a somewhat -- it's a bit of a puzzle, but we think that it creates very nice options. And we have been, of course, selling our shows internationally and operating channels internationally. So we're not unfamiliar with it today, and of course, we're inheriting a great management team. So yes, we think that it gives us more option to do that and to do it better, and I'd stop short of saying more perfectly, but I'd say more surgically.

Your next question is from the line of Vasily Karasyov. Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: One is, can you tell us, please, if there was a write-off in the quarter of the National Networks in 3Q? Or is it all run rate amortizations?

I'm sorry Vasily. Can you repeat the question? You're cutting in and out. Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: Sorry. Was there a write-off in Q3 in the Networks segment?

Yes. There was a programming write-off in the quarter of $3 million. I think I mentioned that in the prepared remarks, and that was various programs across our -- each of our channels. Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: All right. And then a couple more. One, is last quarter when we spoke about margins, I think you guys were very specific about saying that there will be year-on-year volatility from quarter-to-quarter, that margins can compress. And yet when I look at today's margin -- Q3 margin, it actually expanded year-on-year. Does that mean that the advertising revenue was higher than you expected internally?

Yes. Again, just to reiterate I think what we've said fairly consistently, we expect to maintain a relatively stable margin. Quarter-to-quarter, you will see volatility based on the timing of our original programming spend and the related marketing, because those are substantial investments and costs that can fluctuate the number. Again, we're not displeased. I think the margin that we experienced this quarter was not unexpected. Vasily Karasyov - Sterne Agee & Leach Inc., Research Division: Okay. And the last one is, looking at the International and Other AOCF, one would think that the comps from last year's comps were easy because you had litigation expenses and yet, it seems that the run rate is constant around $9 million loss a quarter. So is there anything unusual in the first 3 quarters of this year that amplified losses? And should we expect improvement in that run rate?

Yes, Vasily, as you know, there's quite a number of things that go through the International and Other segments. So it is a bit challenging, I recognize. In the current third quarter, as we talked about, we had expenses related to obviously the Chellomedia activities. We had the VOOM expenses in the prior year as it related to the litigation. Also in the current year, as I indicated, we saw some incremental expenses year-over-year in our IFC Entertainment and Films business. So it's hard for me to give you what the normalized run rate is given the various activities that are flowing through the segment.

Your next question is from the line of Ben Mogil. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: So I'm going back to sort of the whole scripted drama and the competition that's out there. Clearly, that's a very hot area for not just you but for a lot of other folks. On the cost side, are you seeing any material cost inflation either on production or in the promotion cost from even just a year or 18 months ago? And then flipping over to SVOD, with sort of so much products being out there and everyone understandably seeing SVOD as a great way to build awareness for a show, are you seeing SVOD beginning to push back either on what they're taking or on pricing?

Sure. I think the larger arena of scripted drama has changed a bit, and there are new entrants into -- in theory, that's closer to what we've been doing. And so that has probably having -- it's affecting the overall dynamic sort of in real time. The networks are doing some shows that look more like cable dramas. SVOD services are themselves doing scripted dramas with some success. And so I think the full implications of that over time are not yet entirely understood. We along the way have had continued to have pretty good success not only on AMC, but on Sundance, as we mentioned when I read the prepared remarks. On Rectify, we're very encouraged on this new show called The Red Road, and we're doing the scripted drama for WE tv called The Divide. So there appears to be significant appetite and increased appetite. And on the larger question of whether there's ever saturation of that appetite and under what circumstances it occurs, I think the answer is really unknown. To your question about SVOD, and I'll talk about cost in a second, the effect on SVOD and its contribution is unknown. We think -- we know it's beneficial; we don't know exactly how beneficial. And the SVOD or the broader on-demand landscape is changing because it's not just the Internet. It's also the MVPDs themselves. It has not, to date, affected costs in a significant way, and so we're not seeing any inflation in costs other than those that existed previously, where if you're a licensor of a show in success, in later seasons, you tend to pay more, which contributes to our bias to own. So that's the landscape for the moment and for the foreseeable future. We think the appetite is strong. We think the consumption of it is being aided by technology really dramatically. You see it on the network dial, you see it on the cable dial, you'll see it on the SVOD lineup. And we think it's a good business. And we just will continue to monitor it. At the moment, there's no significant cost escalation and there's worldwide appetite, so it's a pretty good model. Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc., Research Division: Following up on that, when you guys are looking at just regular VOD that you're offering as part of your overall MSO deals, and what's your thought -- I mean, I know that there's being sort of a view by some of the programmers not to offer the entire sort of season on VOD under the view that it's going to impact DVD sales and potentially even SVOD license fees. What's your thought around that? I mean, one of the complaints, just from a customer perspective, is that if I can't sort of see a whole season, if I'm on Episode 6 and I can't see the first 5, I'm kind of lost, if you will. What's your thoughts on sort of enhancing how much you offer on VOD?

Yes. It's a -- that gets to be a very specific question, obviously, about number of episodes and when and where. Our general point of view on it is that the MVPDs are absolutely our primary distributors. They're our life blood. That's where we live. And so we want to be in full service of their needs and agenda, and we think that's good for our business. So we have rights, considerations to deal with depending upon who owns the show, and there's always economic considerations. But we begin and state through those conversations with a bias to be in service. And it sounds simplistic but we mean it, to be in service of them, our wholesale customers, A and B, the consumers who are connected either to their hard-line services or to their electronic signals that come from a satellite. So that's sort of what we do. And then we bang out the details of it.

Your next question is from the line of David Joyce. David Carl Joyce - Miller Tabak + Co., LLC, Research Division: I was just wondering if you can provide some more color about some of your upcoming companion shows or spinoffs, such as with Better Call Saul, might you get some shared economics in that going forward? And was it possible that, that could be produced in time to replace Breaking Bad on this schedule next year or is that going to spill into the following year? And then also, if you could comment on how much longer you have rights to maybe some of those licensed shows such as Breaking Bad and what sort of lift you're still seeing on your various networks where you air them?

I won't comment specifically on the deal terms with Sony. I will say, generally, Better Call Saul is a licensed show but there are deal points inside that, that I can't get into. We do not, at the moment, have a target date. We are sort of in the early stages of development on the show, so we don't have a launch date. We continue to enjoy rights to Breaking Bad and due for some time. And we continue to air it to good effect on AMC. It's still a pretty hot show, and advertisers still like running in it.

Your next question is from the line of Ben Swinburne.

This is Ryan Fiftal in for Ben. Just a follow-up on some of the earlier SVOD questions. I'm curious if SVOD's success has at all impacted your marketing strategy, particularly around your wholly-owned originals? It seems like the off-season build and interest is increasingly important. So I'm wondering if you guys have thought about marketing around that SVOD releases or if you really leave that to your SVOD partners?

Yes, we actually have thought a lot about it in the broader picture of on-demand as opposed to just SVOD, if you don't mind me making that comment. I've said it a few times, I think it's important to that conversation when one thinks about it. We do think that -- I mean, I hope I don't give a too long a speech on it. It just interests me an awful lot -- that there's an awful lot of screens that you can go find stuff on at your leisure, right? You can go find them if you had a pad -- an iPad or a tablet device, cable on-demand menu and a phone. And the dramas, particularly that we're talking about that are playing on AMC and on Sundance and now soon on WE tv, are the type of material that benefit from greater focus and personal attention as opposed to trying to launch into a linear schedule. So we've actually messed with and played with the windows to take maximum advantage of the way people are paying attention and consuming, particularly scripted dramas. So on -- just for instance on Rectify, which premiered, as we mentioned, quite strongly into great critical reception on the Sundance channel, just for instance, we actually made it available on-demand on cable TV before the Linear premier. And that would have historically been seen as heretical, right? When you have propriety, you don't give something away before it occurs, that's anathema. And we gave it away before it occurs because we felt that the word-of-mouth stimulated by the consumption of it and, frankly, the time and attention required would benefit the actually Linear exhibition. And we think we were redeemed. And so, we will continue to look at all the on-demand platforms as a way of maximizing attention, sampling, consumption, and we think the patterns will continue to change. It is an interesting subject. The one thing -- the guardrails of it all, of course, are money, and you have to make sure that where you get your money from is working as you're in service of consumers and that you're operating in complete sympathy with those businesses on which you're dependent.

Your next question is from the line of Alan Gould.

I've got 2 questions. First, Sean, you provided us with the affiliate fee comp normalizing for DISH last year. I know there'd be some additional assumptions, but could you give us the same comp for Total revenue and the operating cash flow? And then for Josh, I know it's early days, but this must come up in your affiliate negotiations. What are the prospects for sharing ad revenue on cable VOD as dynamic ad insertion is implemented and measured? And how big a market do you think that could be?

Yes, Alan, on your first question as it related to the DISH, if you don't mind, as we said in the past, I think that the impact of the business in terms of advertising revenue, in terms of the marketing spend to reach our consumers directly during the DISH dispute, obviously, the litigation expense, I think we've given hopefully broad enough strokes. Anything beyond that I think is -- it's too hard to be too scientific in terms of what shows would have rated on their platform, et cetera, and what the impact was. So I think we've given as much color I think as we're prepared to on the DISH situation.

I think on the advertising on VOD, that's been a work at work and a work in progress for now a number of years and it's getting technologically better by the day. So dynamic insertion and all the things that aid it will, we believe, make it increasingly fertile territory. The sort of rules of engagement are not, I believe, entirely yet set for every different type of content. And sorry to be vague about it, but they're often determined by the sort of existing relationship on that content, so they may be different for different stuff. I think it's probably fair to say that there has been a blueprint created in Linear that's pretty widely adapted by everyone, in which there's a percentage of inventory that is taken by the affiliates versus the programmer entity. And that's probably the most significant piece of history that will serve as a guidepost for the future.

Your last question is from the line of Alexia Quadrani. Alexia S. Quadrani - JP Morgan Chase & Co, Research Division: You mentioned a few smaller affiliate deals this year, and I believe you had a few more sizable ones in 2012. Could you just give us a ballpark of what you may have roughly up for renewal next year? And then my follow-up question is just -- I just want to clarify if I understood an answer to a question earlier in the call. Did you say that we should not expect any SVOD revenues in the fourth quarter?

The affiliate deals -- in a general sense, the deals are broadly most often between, call it, 3 and 7 years, which is fairly standard, I think, in the industry and for us, some shorter, some longer. So if one looks at our horizon, there's generally always something expiring in -- coming to an end in some year, generally, something of significance. I think 2012 was a particularly heavy year for us, and we mentioned the smaller ones because we thought it was important to convey that information prospectively for very specific reasons, because they weren't at the time going well. So we have -- we'll always have in every year expiring agreements almost certainly, and some will be significant almost certainly, and that's what our future looks like.

Yes. And then in terms of the comment, I didn't say that we had no SVOD revenue in the fourth. I think the question was more about the comparability of fourth quarter '13 versus fourth quarter '12, and that there wouldn't be any onetime nonrecurring items that would skew the comparability of those 2 quarters. But I think to the extent you fully appreciate the windowing of our marquee shows on AMC, The Walking Dead, Hell on Wheels, those are revenues we recognized in the third quarter. So hopefully, that's helpful.

Well, thank you, everyone, for joining us and for your interest in AMC Networks. Operator, you can conclude the call.

This concludes today's conference call. You may now disconnect.