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AMC Premiere: AMC's premium channel play?

Commercial broadcast groups around the world are constantly searching for means to diversify revenue streams and escape the highly cyclical TV advertising market – particularly as it is subjected to further pressure caused by falling TV audiences.

To this end, basic cable TV channel AMC - which debuted as premium channel in 1984 but later added advertisements - has launched AMC Premiere, an ad-free offering costing $4.99 per month, available exclusively to cable company Comcast’s Xfinity subscriber base, which currently stands at around 22.6m. The service will include ad-free live broadcasts of its primetime shows such as The Walking Dead, plus on-demand access to movie and TV content from AMC’s library.
 
Broadcasters have approached the diversification challenge in a few different ways. Free-to-air broadcaster CBS requires users to watch advertising during live simulcast streams on its subscription All Access service, even if they opt for the $9.99pm 'ad-free' tier. By contrast, AMC’s ad-free move will see its content essentially used to develop a new premium channel. The immediate opportunity is potentially large. From Ampere’s Q1 2017 US Consumer study, nearly 25% of Comcast’s AMC viewers rarely see commercials that they deem relevant – an addressable market of two million households and almost $120m in annual revenue up for grabs. 
 
AMC has been performing well financially in recent periods, even as domestic broadcast audiences wane. AMC reports it made nearly $1bn from advertising in 2016, an increase of over 130% on 2011 - roughly $11 per AMC household. The ad-free Premiere option, by contrast, could generate revenues of as much as $60 per year per subscriber, shared with Comcast. AMC Premiere may also be an opportunity for Comcast to offset increasing carriage costs of AMC channels. AMC has been generating growing revenue from sales of its channels and content, which reached $1.3bn in 2016, up from $0.6bn in 2011.