AMC tests an ad-free channel as the TV industry struggles to please viewers who hate commercials

June 29, 2017 4:10 PM PT

Advertising-supported TV is taking another step to becoming “The Walking Dead.”

AMC Networks Inc., the cable programming company that is home to the zombie apocalypse drama, on Thursday became the first major ad-supported network to offer a commercial-free version through a traditional television distributor.

But the offer comes with a catch: the ad-free AMC Premiere channel is available only to Comcast cable subscribers and it costs an additional $4.99 a month — on top of the monthly fees Comcast already charges for its lineup of channels.

The move is the latest example of the television industry scrambling to find different ways to market their channels. AMC Premiere is an acknowledgment of the disruption brought on by streaming giants Netflix, Hulu and Amazon that have conditioned viewers to expect commercial-free TV content.

“This appears to be an experimental move to see what the demand is for such a channel, and what the appropriate price point should be,” said Derek Baine, a senior analyst at consulting firm SNL Kagan. “And there is a big niche of AMC fans; many of their shows have large and loyal audiences.”

New episodes of such AMC series as “The Walking Dead,” “Into the Badlands” and “Better Call Saul” will be available to subscribers of AMC Premiere at the same time the episodes are shown live, with ads, on the traditional AMC channel.

Charlie Collier, president of AMC, SundanceTV and AMC Studios, said in an interview that the on-demand, commercial-free service is not meant to be a replacement for the AMC channel.

“It’s not for everybody,” Collier said. “It’s for those who want the choice and the upgrade opportunity.”

Other programmers have tested commercial-free options. Hulu, which is owned by NBCUniversal, Walt Disney Co. and 21st Century Fox, launched nearly a decade ago with in-show commercials. Hulu eventually rolled out a premium advertising-free option for $11.99 a month, $4 more than the ad-supported service. CBS Corp. introduced its CBS All Access channel directly to consumers nearly three years ago and last summer introduced an advertising-free option for $9.99 a month. (The CBS All Access channel with commercials sells for $5.99 a month — and also offers exclusive programs like “The Good Fight” and an upcoming “Star Trek” series that aren’t available on TV.)

“They found that there was a demand for ad-free programming at a certain price point,” said Baine, the analyst.

AMC, however, appears to be the first network to partner with a traditional pay-TV operator, in this case Comcast, to launch an ad-free option.

One industry insider said AMC was probably working with Comcast because many carriage agreements restrict cable programmers from marketing their channels directly to consumers — or a la carte to a competing service, such as Amazon Prime.

Baine said AMC might find that only the most ardent fans will pay an additional $4.99 a month for the ad-free option.

“It’s a lot of money to pay for one channel,” he said. “But AMC might be looking for the sweet spot.”

Philadelphia-based Comcast, the nation’s largest cable TV provider with nearly 20 million subscribers, is in discussions with other cable programmers to offer similar services, said Matt Strauss, Comcast’s executive vice president and general manager, video and entertainment services.

“There are a handful of networks of the caliber of AMC that lend themselves to this premium experience, and those are on our shortlist,” Strauss said in a telephone interview.

He acknowledged that companies must respond to changes in consumption patterns.

“Viewing habits are continuing to change,” Strauss said. “People are becoming more accustomed to watching what they want when they want it.”

AMC’s Collier said he believes that AMC Premiere will “super serve” fans of its shows by providing additional content not shown on the ad-supported channel.

The long-term plan is to expand AMC Premiere beyond Comcast — to customers of other cable and satellite providers that carry AMC. It eventually may be offered to “over-the-top” streaming services like Hulu that provide video content to cord-cutters.

“We continue to believe that a curated service targeted to superfans of AMC content is a compelling potential revenue-generative opportunity,” Guggenheim Securities media analyst Michael Morris wrote in a report. “Given the significant amount of high-quality scripted content available to consumers, it is important for branded networks to build stronger engagement with their fans.”

For AMC, it is a way to gauge viewer appetite for an ad-free product “with limited risk,” Morris said.

Other cable companies said they are watching the move.

“We are always interested in exploring content arrangements that create more flexibility and improve the viewing experience,” said Todd Smith, a spokesman for Cox Communications, which serves Rolling Hills Estates and south Orange County. “At the same time, we have to ensure that any new deals don’t add unnecessary additional cost to our broader customer base.”

AMC Networks stock closed Thursday at $53.26 a share, down 1.39%, or 75 cents.

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Twitter: @SteveBattaglio

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UPDATES:

4:10 p.m.: This article was updated with analyst commentary.

This article was originally published at 6 a.m.