AMC's CEO isn't scared of Netflix's money

Over the past few months, there's been a lot of hand-wringing in the TV industry about new players like Netflix and Amazon throwing around a ton of money to buy shows.

The thinking goes like this: If Netflix can afford to spend millions on whatever show it wants, that will hurt networks that aren't selling a future growth story to justify big spending.

But AMC Networks CEO Josh Sapan says that all the streaming money sloshing around isn't hurting his company.

"The common notion [is] that price will get [the show]," he said on the Wall Street Journal's Media Mix Podcast. But that's not true. "It's probably a greater challenge to identify the right [show], and get the right [show], and money doesn't always help."

Basically, in making a drama or comedy TV show, you're usually not buying a finished product, Sapan explained. A show is "either going to be good or it's going to flop, and you don't know beforehand," he said. "Your biggest bet is whether it's going to work or not. And then every once in awhile there's competitive bidding [where multiple companies are bidding against each other]. But most projects, or certainly many, do have extensive development periods. You're really not 'bidding' because it's not fully baked."

So Netflix's spending has less effect that you might think on AMC, according to Sapan. He contrasted the market for scripted shows to the market for sports. "Sports is a limited commodity that gets bid up, and it goes one place and not the other," he said. The implication is that there's an unlimited number of new scripted show ideas, and picking the good ones is what matters for success.

A crowded market

What AMC might be worried about more than Netflix's bank account is the sheer amount of shows being made, with 409 scripted shows released in 2015 alone.

AMC has built its recent reputation on marquee dramas like "Breaking Bad," "Mad Men," and "The Walking Dead." And the network frequently gets brought up when people talk about a new "golden age" of TV.

But the market has been flooded with high-quality dramas. In recent conversations with investors, Pacific Crest analysts Andy Hargreaves and Evan Wingren heard that many believed that "the explosion in serialized drama production has somewhat commoditized the genre." That's not good for AMC's bottom line.

AMC pioneered a winning TV genre, but now everyone else has rushed in, and the company could have a hard time maintaining its edge.

But AMC remains committed. "Despite increased competition, AMC believes its focus on high-quality serialized dramas remains the best approach for future success," the Pacific Crest analysts wrote in a note, based on conversations with AMC management.