Seth Zaslow - Senior Vice President of Investor Relations Joshua W. Sapan - Chief Executive Officer and President Sean S. Sullivan - Chief Financial Officer and Executive Vice President Edward A. Carroll - Chief Operating Officer.

Michael C. Morris - Guggenheim Securities, LLC, Research Division Michael Nathanson - MoffettNathanson LLC Ryan Fiftal - Morgan Stanley, Research Division Brian Russo - UBS Investment Bank, Research Division Alexia S. Quadrani - JP Morgan Chase & Co, Research Division Vasily Karasyov - Sterne Agee & Leach Inc., Research Division Benjamin E.

Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division Todd Juenger - Sanford C. Bernstein & Co., LLC., Research Division David Carl Joyce - ISI Group Inc., Research Division.

Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the AMC Networks Fourth Quarter and Full Year 2014 Earnings Call. [Operator Instructions] Thank you. And I will now turn the call over to Seth Zaslow, Senior Vice President, Investor Relations. Please go ahead..

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 full year and fourth quarter 2014 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. With that, I would now like to turn the call over to Josh..

globally through the acquisition of Chellomedia; and domestically by adding BBC AMERICA to our portfolio, a channel with a powerful brand and strong content. The impact of Chellomedia and BBC AMERICA are reflected in our financial results.

We were able to increase audience delivery at our National Networks, making 2014 one of the most successful years for our channels in terms of viewership. And we received critical praise and industry honors for our television content as well as our films.

Our financial results continue to be driven by the performance of our National Networks, especially AMC. Our results, we think, are testament to the success of our core strategy of investing in engaging original content that creates advertiser and distributor demand for our National Networks and, increasingly, for our global channels as well.

We believe that our long-term focus on having high-quality content has positioned us well for current trends affecting programmers. At a time when people are watching more video on more platforms, we have content that people are consuming at increasing levels, and it's the kind that seems to be more resilient in an on-demand world.

Recently, we reached a new carriage agreement with DirecTV for our National Networks that we believe is good for Direct and good for us. We also reached an agreement with DISH Network, renewing carriage for BBC AMERICA and including our channels on their new Sling TV platform.

Now if I may, I'd like to provide some detail on our National Networks performance. AMC continues to be the biggest revenue driver for our National Networks segment. For the year, AMC was a top 10 cable network in primetime in its target demos.

The Walking Dead, currently in its fifth season, continues to perform strongly, remaining the #1 show on all of TV, cable and broadcast among adults 18 to 49. Earlier this month, AMC debuts the highly anticipated new series, Better Call Saul, airing it on a Sunday and Monday in a 2-night premier event.

The Sunday night showing alone became the biggest series premiere in cable history among adults 18 to 49 in live same-day ratings. With 3 days of time-shifting viewing factored in, it set a record for a cable premiere in both adults 18 to 49 and adults 25 to 54.

Spinning off Breaking Bad was an ambitious and somewhat intimidating undertaking, yet Breaking Bad's Vince Gilligan and Peter Gould who wrote the show have done what we think is really quite a masterful job, creating a world in Better Call Saul that stands entirely on its own.

In the coming year, AMC has a strong slate of new and returning original series, including the much anticipated final episodes of Mad Men. Hell on Wheels, which has a large and loyal audience and anchors our Saturday Nights returns for a fifth and final season. Turn and Halt and Catch Fire will be back after their first seasons.

Both series attracted a core base of devoted fans, with a notably upscale audience for Halt and Catch Fire. We're pleased to continue these stories and bring them back for what we hope will be second seasons that build on the first.

New AMC shows this year include a series called Humans, an adaptation of the Swedish sci-fi series that we think is a compelling look at the impact of artificial intelligence and robots in our world; and a series called Badlands.

It's a dramatic series that we think is a very fresh take on the classic martial arts genre, which we ordered straight to series last year. We've also ordered 2 pilots, series based on the popular comic book franchise called Preacher, and a companion series to The Walking Dead. Moving on to BBC AMERICA.

We're very pleased with the performance of the channel. It continues to attract a growing number of viewers, with year-over-year growth in primetime and total viewers and in the channel's target demographic. In the fourth quarter, BBC AMERICA ranked as the most affluent entertainment network on television, and its Dr.

Who series is second only to AMC's Mad Men in terms of upscale audience. This audience profile makes the network especially attractive to advertisers, and we look forward to taking more advantage of this opportunity in the coming upfront. We've all worked, we hope, quickly and well to integrate BBC AMERICA into our existing business.

SundanceTV President, Sarah Barnett, has taken over management of BBC AMERICA and has a strong and experienced team working with her on it. For 2015, the network has an excellent slate of returning in new shows.

The popular and long-running series, Top Gear, which returned last month, so far ranks as the highest-rated season ever; a third season of Orphan Black, which will debut as a roadblock on April 18 at 10:00 p.m.

across all of our AMC channels for the first hour of the season; a second series of the excellent series called Broadchurch; and a new series called Jonathan Strange & Mr. Norrell, which is based on the best-selling novel; and later this year, a new season of the amazingly enduring Dr.

Who franchise, which most recently aired in the fourth quarter and was the highest-rated season ever on BBC AMERICA. So that's just a few of the many shows that will inhabit the 2015 schedule.

WE tv had another strong year, with impressive double-digit growth, driven by a programming lineup that is increasingly appealing to both women and men, as the network diversifies its brand with growing viewership for shows, including Sisters With Voices Reunited, Marriage Boot Camp and Braxton Family Values.

And IFC was up 20% last year in its key target demographics. The popular series, Portlandia, has been renewed for a sixth and seventh season. The show creators and stars, Fred Armisen and Carrie Brownstein, will remain at the helm, and we're pleased that Portlandia will continue on IFC well into the future.

We're prepping a new miniseries on IFC from Will Ferrell called The Spoils Before Dying. It's a follow-up to last year's Emmy-nominated Spoils of Babylon, which became one of that network's most watched shows of the year.

And we're looking forward to a new comedy series called American Documentary from Saturday Night Live's Fred Armisen, Seth Meyers and Bill Hader. Sundance TV delivery last year grew by 13%, fueled by its scripted series and miniseries.

This year, joining the returning series, The Red Road and Rectify, is a new drama, Hap and Leonard, based on the celebrated book series. A new miniseries called Deutschland 83 will premiere later this year. It recently debuted overseas to strong early buzz at the Berlin Film Festival.

And it follows on the success of other SundanceTV miniseries, including Carlos, Top of the Lake, and most recently, the Honourable Woman, all of which struck a responsive chord and received a lot of critical and award attention. Our focus on international expansion continues.

As part of the Chellomedia integration process, we've made key management changes, with senior executives now in place overseeing our operations in more than 140 territories.

In the fourth quarter, we began a major rebrand overseas of the widely distributed MGM Channel to be named AMC, introducing the AMC brand outside of North America for the first time. AMC is now available in over 120 countries and has been well-received by pay TV distributors and audiences alike.

We see continued growth opportunities for the channel globally in 2015, especially as we continue to bolster its programming slate. 2014 was also an important year of growth for the Sundance Channel brand overseas. The channel, which launched in Europe in 2009, is now available in over 70 countries.

Latin America and Europe hold particular interest for us in terms of growth prospects in the pay TV marketplace. These are also the 2 markets where our channels are currently experiencing the best reception from distributors. In Latin America, our growth has been particularly significant and rapid.

We recently reached an agreement to bring AMC to DirecTV subscribers in 7 countries in Latin America, and we also secured new distribution in Mexico for AMC, as well as Sundance Channel, with both networks now widely carried by all major operators.

So in summary, as a company, our belief in taking risks on talent and on different kinds of storytelling, we think, has provided us with a sort of creative motor that we believe has been good for our business and is particularly well-timed for the dynamics of the content marketplace today.

We think we saw that in evidence recently with the success of our movie Boyhood. We are seeing it in the early strength of Better Call Saul. And we see it in the strong reception of our other creatively driven content that inhabits our channels and we'll be in broad pursuit of that strategy as we go forward.

I'd now like to turn the call over to Sean Sullivan, our CFO..

Thanks, and good morning. As Josh highlighted, 2014 was a successful and productive year for the company, delivering strong revenue, AOCF and free cash flow growth. We're optimistic about the outlook for 2015. I will touch on that after reviewing the 2014 results.

In summary, the financial results for the fourth quarter delivered total company revenue growth of 40% and AOCF growth of 97%. For the full year, total company revenues grew 37%, and AOCF grew 26%.

As a reminder, these results include Chellomedia from the acquisition date, January 31, and 100% of the results of BBC AMERICA from the acquisition date of October 23. Turning to our operating segments -- to our reporting segments, excuse me. National Networks revenues for the full year increased 13.5% or $208 million.

National Networks AOCF for the full year increased 9.8% or $57 million versus the prior year period to a total of $634 million. In the fourth quarter, National Networks revenues increased 19.7% or $82 million. Advertising revenues increased 24.3% to a total of $255 million. A portion of this increase related to the inclusion of BBC AMERICA.

Excluding the BBC AMERICA impact, advertising growth was in the mid-teens over the prior year period. We saw strength across all of our domestic networks, as AMC, WE, IFC and Sundance each had double digit advertising growth in the quarter.

AMC led the growth in terms of absolute dollars, as it benefited from the performance of its original programming, most notably, The Walking Dead. For the full year, advertising revenue grew 15.4% on a reported basis.

Normalizing for BBC AMERICA, we delivered comfortable double-digit growth, an accomplishment we're quite proud of, given the performance of the overall ad market. Distribution revenues of the National Networks in the fourth quarter increased 15.3% or $33 million to a total of $245 million versus the fourth quarter of 2013.

Affiliate fee growth for the quarter was in the low double digits on a reported basis. Excluding the impact of BBC AMERICA, growth was in the mid to high single digits, consistent with the range that we previously articulated.

Our results this quarter also reflected a strong double digit year-over-year increase in non-affiliate revenues due to increases in revenue related to the licensing of our scripted original programs, most notably, The Walking Dead on various ancillary platforms, as well as IFC content on digital platforms.

For the full year, distribution revenue grew 12.1% on a reported basis, reflecting mid- to high single-digit growth in affiliate fees on both a reported and organic basis and strong double-digit increases in non-affiliate revenues. Moving to expenses. Expenses in the quarter increased 1% or $3 million versus the prior year period.

Excluding the impact of BBC AMERICA, expenses were down mid-single digits as compared to the fourth quarter of 2013. Technical and operating expenses decreased 3% compared to the prior year period to $212 million.

In the fourth quarter of 2014, we recorded $28 million in charges, primarily related to the cancellation of The Divide on WE tv, as well as our decision not to move forward with 2 pilots in AMC. For the full year 2014, we recorded $44 million in charges.

These amounts compare to write-offs of $52 million in the fourth quarter of 2013 and $61 million for the full year of 2013.

The $24 million favorable variance in program write-offs in the fourth quarter was partially offset by our continued investment in original programming across all of our networks as well as the impact of approximately 2 months of BBC AMERICA activity.

SG&A expenses were $95 million in the fourth quarter, an increase of 2% versus the prior year period. The increase primarily reflect -- related to the consolation of BBC AMERICA as well as $4 million of professional fees related to the transaction that we recorded in the quarter.

This increase was partially offset by year-over-year decline in marketing cost related to the timing of originals, most notably, at Sundance. With respect to our International and Other segment, revenues for the full year increased $378 million to $434 million. AOCF for the full year increased $81 million to a total of $24 million.

In the fourth quarter, International and Other revenues increased $92 million to $110 million. AOCF was $3 million, an increase of $16 million versus the prior year. The increase in revenues and AOCF in the fourth quarter and the full year primarily reflect the consolidation of the Chellomedia business.

Total company net income from continuing operations for the full year was $261 million or $3.63 per diluted share compared to $291 million or $4 per diluted share in the prior year period. As a reminder, we recorded a litigation settlement gain in the second quarter of 2013 of $133 million or $1.13 per diluted share.

Excluding the impact of this nonrecurring gain, EPS increased 26% year-over-year. For the fourth quarter, total company net income from continuing operations was $78 million or $1.06 per diluted share compared to $35 million or $0.49 per diluted share in the prior year period.

Adjusted EPS for the full year and fourth quarter of 2014 was $3.91 and $1.15 per diluted share, respectively, excluding the impact of amortization of acquisition-related intangibles.

EPS and adjusted EPS for the fourth quarter of 2014 included $9 million in restructuring charges related to the elimination of certain positions and $4 million in miscellaneous expense related to unrealized foreign currency losses that were partially offset by a $5 million gain from the sale of an investment.

In terms of free cash flow, the company reported $336 million in free cash flow for the 12 months ended December 2014. For the 12 months, cash interest was $122 million, tax payments were $100 million, and capital expenditures were $40 million.

Programming rights amortizations for the 12-month period were $630 million, and programming rights payments were $690 million, resulting in a use of cash of $60 million for the full year. This compares to a use of cash for programming of $20 million for the prior year. Turning to the balance sheet.

As of December 31, AMC Networks had a net debt position of $2.6 billion. Our leverage ratio based on LTM AOCF of $659 million was 4x. Despite the impact of the BBC A transaction, leverage declined 20 basis points in the fourth quarter as a result of our AOCF growth and free cash flow generation.

Looking to 2015, we feel good about the outlook for our company's performance. At our National Networks, advertising is expected to continue to be a growth driver. It should benefit from our strong original programming lineup across all of our domestic networks, but most notably at AMC.

We're excited about AMC's lineup, which includes a mix of returning shows, including The Walking Dead and Mad Men, as well as several new shows such as Better Call Saul, Humans and Badlands.

With respect to distribution, we have a high degree of visibility into affiliate revenues, and we also expect strong growth in our non-affiliate revenue stream as we continue to look to take advantage of opportunities to monetize our content and ancillary windows.

On the cost side, while we expect to continue to invest in content, mainly in the form of programming and marketing, we would anticipate managing the National Networks business to a margin that is broadly stable with the 2014 level. Our reported results will also reflect the impact of a full 12 months of BBC AMERICA as compared to 2 months in 2014.

At our International and Other segment, despite foreign currency headwinds, we expect to continue to see revenue growth as we execute on our strategy of further developing and expanding our international footprint.

We expect International and Other margins to improve year-over-year, most notably due to the absence of $14 million in professional fees that we reported in the first quarter of 2014 related to the Chellomedia acquisition, as well as the full 12 months of Chello activity in 2015 as compared to 11 months of activity in 2014.

With regard to our performance in any given quarter, we anticipate continued variability as a consequence of the specific timing of our investment in content and the airing of our shows. Looking into the first quarter, we anticipate delivering a particularly strong quarter.

In terms of advertising, we expect the benefit from the continued strength of The Walking Dead as well as the performance of Better Call Saul and the inclusion of BBC AMERICA. On the cost side, we expect National Networks expenses to increase year-over-year, most notably due to the inclusion of BBC AMERICA in our reported results.

At our International and Other segment, first quarter AOCF will benefit from the absence of the professional fees that I mentioned related to Chello that we recorded in the first quarter of 2014, as well as 3 full months of Chello activity in 2015 compared to 2 months in the first quarter of 2014.

In terms of capital allocation, our primary focus remains on investing in our core business. We believe this strategy will allow us to continue to grow AOCF on a sustainable basis and will generate the greatest return for our shareholders over the long term.

To the extent that they present themselves, we will consider strategic opportunities to strengthen our existing business and we'll do so in a disciplined manner. 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 next question comes from Michael Morris with Guggenheim..

Two questions quickly.

BBC AMERICA, I know we've asked this before, but now that you have a quarter under your belt, can you talk a little more about the digital opportunity there and how we should think about what your rights are, and how the financial impact of the shows that are -- legacy shows that were there before the acquisition, and then also shows that come on now that you own it? And then, second of all, maybe a bit more broadly, there's a lot more investment in scripted programming by your peers.

And one of the things that subscription video-on-demand guys can do is stack the programs and serve them back-to-back. You guys have that on a 1-year like basis, but on your new stuff, we have to wait a week for the new show.

When you think about that, what do you think is the evolution there? How long can you continue with this method? Or how should we think about how you will approach things going forward?.

Sure, Michael. This is Josh. So on your first question, our BBC joint venture does allow us to participate economically in shows that are sold to digital platforms in the U.S. that air on BBC AMERICA.

So we are participants in that revenue stream and not at -- I'm not at Liberty to provide the details of what it is, but we are -- we do enjoy the benefits of the sale of shows that air on BBC AMERICA to digital platforms that's part of the overall arrangement that we reached with BBC that was both economically motivated and also motivated by, frankly, a desire to have us be fully in with the BBC on everything that occurs in North America, so that we are always aligned.

So we like that, and we think they like that, too. We reached that agreement for those reasons. On the subject of scripted future SVOD and stack, it's obviously an evolving issue and question because it's a new form of consumption. SVOD before, a few years ago, didn't exist, and you couldn't watch all the shows at any one point in time.

So it's undergoing an evolution. So I'll make a couple of comments, if I may, but they won't be definitive.

We think that what we are doing on linear and with MVPD on-demand, in conjunction with a subsequent window on SVOD, which has been historically, for us, Netflix, about a year later, is -- has worked out to be a very good arrangement for consumers and for the health of our shows.

And evidence of that, most notably and most recently, is The Walking Dead where we're in Season 5, people have an opportunity to catch up on Netflix, get current, and then when the new season occurs, we're seeing, obviously, abundant viewership live, not only to Walking Dead, but to the companion series, Talking Dead, in which people talk about it afterwards.

So it is different for every TV show, but in the shows that we are directing our energy to, we like to describe them as having urgency and great interest for the people who like them. And our linear viewership is urgent and, we hope, as much event-like as possible.

And people like it, watch it, and we monetize the advertising and it's supported by the availability of prior seasons on SVOD. So that's the way we think of it. Much to be seen about how all that evolves in the future..

Your next question comes from Michael Nathanson of MoffettNathanson..

I have one for Josh and one for Sean. Josh, you talked a bit about the differences in CPMs between the AMC originals and the BBC originals. I know you won't give me the actual CPMs, but the magnitude of the differences between original CPMs.

And then, how do you plan to monetize the BBC originals in this upfront? Are you going to bundle it with the AMC originals?.

Right. So Michael, this is Ed. A couple of things. On the BBC originals, I should say that we're in an integration process and the ad sales group is now consolidated under Arlene Manos, who's the President of Ad Sales for AMC Networks.

And so right now, we are coordinating, so BBC A will move together with AMC, with IFC, Sundance and WE into this upfront. One of the things I think we do well historically, and hope to do well again in this upfront, is our inventory management and our planning and pricing.

So without being too specific, Michael, I would say we enjoy a multiple CPM on our originals. We enjoy it on AMC, we enjoy it on IFC, and we anticipate we will enjoy it and improve it on BBC AMERICA. That is the strategy..

Can you -- any sense of scale of that magnitude?.

I think we've said in the past, for AMC, the CPM multiple could be in the range of 3x to 5x the average for -- against movies. That's a range and it moves broadly depending on the show and depending on the anticipated delivery..

Right.

And AMC is closer to the acquired -- sorry, BBC is closer to the lower end of that range?.

I'm not going to comment on the range on BBC. We're just in the integration process now..

Okay. And then, Sean, thanks for giving us the delta between the amortization in '14 and the cash spending in '14, the $60 million or so.

What is your expectations for '15 to grow the relationship between what's amortized and what's expense in cash?.

Yes, Michael. I think that I said what I'm going to say about 2015, I think that the macro and specific comments are we're still in very much a growth mode. We're still very much in investment mode across all the networks. We're increasing programming, as we highlighted, probably most notably today on AMC. So I wouldn't give you the exact relationship.

We're certainly still in an investment mode by giving you some sense of at least what our plans are in terms of managing to a margin for the National Networks. So I think, at this point, that's probably the best of what we can do for you, sorry..

Your next question comes from Ryan Fiftal with Morgan Stanley..

I have one for Sean and one for Josh, if I can.

Sean, I guess, post-DirecTV and DISH, is there any upward or downward pressure to the general guidance in your outlook, just given on affiliate fees in mid- to high single-digit growth?.

I don't know if there's pressure. I think we've given you a consistent articulation about what our expectations are. I think we've completed a significant number of deals over the last 3 or 4 years, many of which I think we've either disclosed or known to the public.

As I said in my prepared remarks, we have a high visibility to our affiliate revenue streams. So I think that you should conclude from that..

Okay. And then, Josh, I guess, a question on Sling and then Over the Top, more broadly. I'm curious, the negotiations over Sling, were those very different than your typical MVPD-type negotiation? I'm just thinking, Charlie is assembling a smaller bundle, so he can more credibly walk away from any content groups.

So I'm wondering if you felt the position that you came in into those negotiations were very different? And then maybe more broadly on Over the Top. There's a lot going on in the ecosystem. HBO talking about going Over the Top. And then even some of the linear cable nets, Discovery, Viacom are starting to make comments about going Over the Top.

So any thoughts on the evolution of the ecosystem and whether AMC could ever start to go down that path?.

Sure. We were, on DISH, pleased to support and be engaged with the Sling extension, if you want to call it, or initiative of DISH. We joined, as you know, Time Warner Scripps, Disney and A&E, each of whom have channels that will be part of it.

Specifically, I think we disclosed that we also extended the BBC AMERICA affiliate agreement on the satellite part of the platform. So the negotiation wasn't extraordinary. We were pleased to support it. We think that we received fair value and delivered fair value. And it's obviously a work in progress, and we'll see how it performs.

Much to be learned about how Sling performs at its price, what it offers, whether it really reaches broadband only, whether it has an incurring effect or not. On the subject of OTT more broadly, there's little to see in terms of actual market deployment and much to think about and anticipate that people have talked about.

So it is a -- I would first say it's a speculative conversation. We know what's been announced. There's been little that's actually hit the market from any incumbent suppliers on the MVPD side or the incumbent programmer side. So it's mostly speculative.

What we, of course, know is that there's an appetite on consumers' behalf to buy Netflix at its price and Hulu Plus, Amazon Prime, in the manners that they're offered. And there's much to learn. Our general point of view today is that we think that the ecosystem, as everyone calls it, that we're part of is a vital one.

It appears that it may undergo some changes in shape. We don't know if they'll be modest or more radical over time. I would note, of interest, that there's been remarkable stability in the United States paid subscriber count over the past 5 years, while the SVOD services have grown, in the case of Netflix, to inhabit 1 of every 3 television homes.

And it appears that consumers are buying lots of stuff from lots of people and have significant appetites. So our first priority is the support of the ecosystem, the support of the on-demand and TV E initiatives of our MVPD suppliers and the support of things like Sling that are related to our MVPD customers and we'll take it from there..

Your next question comes from Doug Mitchelson of UBS..

It's Brian Russo for Doug. Two questions. So I guess, first, for Josh. We've heard from several cable management teams this quarter lament the number and the growth of original programming in the industry. And I'd like to get your thoughts on the matter.

Have you changed, at all, the way you develop new programming based on the increased level of competition for consumers' time? And then, also, kind of as you think about maybe in 5 years’ time, do you think we'll still be at the same level of original programming? Or could it be more? Or less? And then, just a quick follow-up on the affiliate growth outlook.

Are there any major renewals in 2015 that we should be aware of or that's kind of baked into your thinking process?.

So I'll respond, if I may, to your last question first. We don't -- I think, as Sean mentioned, we have a fairly stable circumstance on our distribution agreement -- on the distribution agreement side of our business. We don't disclose specifics about expiring contracts or contract renewals.

So if you don't mind, I'll just leave it and say that we think we have a broadly stable circumstance. On the subject of program competition, it's really an interesting question. There has been a move on behalf of programmers to do more dramatic scripted programming than in the past.

We were earlier to it on the basic cable side with Mad Men 8 years ago or so and Breaking Bad, and it's been joined by others who found degrees of success in it.

I think for all sorts of reasons, a lot of it having to do with changes in technology that were -- we talked about it earlier, when you have a complicated drama, they're fun to watch on-demand and stay with and talk about. They're fun to co-view. They're fun to talk about with friends. And you can endure more nuance.

So there's a little more heat in that market and interest as people develop and buy. It's obviously not a limited commodity. It's not a sporting event that you have to bid on. You can find a good show here or there. We can have a very successful show in Better Call Saul. Amazon can do Mozart in the Jungle or Transparent. HBO can do what it does.

Showtime, Hulu, FX. And the impact of that is, at the moment, fine for us. As long as our shows are good, frankly, that's the big variable, we find significant audiences, and we find appetite in ancillary markets. There appears to have been a macro shift to that material. So I think we're enjoying the benefits of the macro shift.

Where that sits in 5 years is a little hard to project. We'll obviously monitor it. We'll be mindful of costs. We're careful about time and horizons. And it's the daily business of our work, so we're also intrigued by it. I'd probably hesitate and stop short of trying to prophesize what the whole thing would look like in 5 years..

Your next question comes from Alexia Quadrani of JPMorgan..

My question is on the -- I guess, also on the changes to the ecosystem and the ongoing fragmentation in the audiences. I guess, given that, capturing a real outside audience like you were able to do with The Walking Dead seems becoming harder and harder to accomplish.

I guess, can you comment on how pricing continues to reflect bigger ability to reach those really, really large audiences and how you're continuing to see those, I guess, wider premiums in CPMs on The Walking Dead and how much you can leverage maybe that demand onto your other programs?.

Right. So if I follow your question, in the first quarter, it just happens that AMC had 3 of the top 5 shows in terms of audience size among adults 18 to 49. So we're off to a good start. And we think our development process is good. And we think our selection process is good.

And most notably, and you can see, hopefully, with the launch of Better Call Saul, with the right shows and the right scheduling and marketing mix, you really can bring a good-sized audience to it, a healthy audience to it.

We're also, in terms of our development screen, we do tend to look for, across several of our networks, smarter shows that have -- that tells slightly complicated stories and have outsize appeal to an upscale audience.

So it's probably worth noting that right in the past 12 months, 6 of the top 10 most upscale shows on cable TV can be found on AMC, BBC AMERICA or Sundance. And we think that's something audiences notice, at least our target audience notices, and certainly, advertisers notice..

So would you say that -- I guess, is that a sort of a ramp-up way of saying yes that CPMs continue to see premium pricing? And I guess that the logic would dictate that, given what you're saying?.

Yes. We do receive premium pricing for those shows in success..

And just a follow-up on The Walking Dead itself.

The companion show, which you all have announced, I guess, any more color you can provide about how different it might be from the existing show?.

I think we've said we sort of go back to the beginning of the story when the zombie apocalypse began. And we said it will be located in a different part of the U.S. And right now, we're in production on the pilot..

Your next question comes from Vasily Karasyov of Sterne Agee..

My question is about SVOD pricing.

So Josh and Ed, probably, can you tell us how pricing evolved, how it started and how you're pricing your product now? And given how important scripted originals are for SVOD players, how do you make sure that you're pricing the product correctly? How do I get comfortable with not leaving money on the table there?.

Right. I think we -- the nice news is that there has been a growing market in terms of SVOD entrants. Netflix has grown, Hulu Plus, Amazon Prime, and then there are smaller ones on the edges that are moving up. So it's been a growing market.

And as you point out, it does absolutely appear to be the case that scripted originals, both that are made by those entities or licensed are strong performers and highly desirable.

So we price with care is the first thing I'll say, knowing that it's a strong market and that, of course, we want to maximize it but also be in service of a client who we have an ongoing relationship with.

So I'm really not at liberty to talk the details of the pricing, except to say we think we've reached formulations with them that provide degrees of stability for them and us that are nice; appropriate reward for us, which is nice; fair value for them that -- for shows that really perform; and reasonable degrees of adjustments as we go forward.

I'm sorry I can't really say more than that..

Are you happy with the pricing? Sounds like you are..

I would say yes. In general, yes. We think we do fair deals..

Your next question comes from Ben Mogil of Stifel..

So one for Josh and one for Sean. I'll start with the one for Josh first. You talked a lot about the focus on upscale audiences in terms of where the AMC and BBC America shows are doing. And obviously, from an advertising perspective, that's a very valuable and targeted demographic, which is one part of the equation.

In terms of the consumption trends, do you see upscale audiences consuming media any different than other audiences? Do you see them as more C+3 ratings? Are they more likely to use the MVPD, VOD system or even more likely to make an EST purchase? I'm kind of curious if on the non-ad side, the upscale audience has something that you can sort of leverage from a monetization perspective?.

Right, Ben. So this is Ed. I think on the consumption pattern, we would say it varies by show. I don't want to give a roundabout answer, but it does. We're sort of -- we attend to -- Josh mentioned urgency before. And as we roll out these shows, we do like the fact that a community of audience builds.

And that audience wants to hopefully experience the show in real-time or close to it because they're water cooler shows. They speak specifically about The Walking Dead. We've demonstrated that any character might be killed off any week for any reason. So that makes people reluctant to wait and to risk spoilers.

And I think we saw, as Breaking Bad kicked off toward its final episodes, and hopefully, we'll see that build with Mad Men, there's sort of a community that arises around it.

So at the crux of your question, upscale audiences, do they tend to have more access to technology? And do they have the ability to be selective in how they consume media? If they do, then we counterbalance that against the ingredients of the show. So there's unfortunately not one specific answer to give there..

Okay. And that's fair enough. And then, Sean, just on your perspective. When you're talking about guidance, rough guidance that you think '15 National margins would be relatively similar to those in '14.

Are you sort of stripping out the write-off, the program write-offs of $44 million in '14 or are you sort of including them in there in the base level of operations?.

Yes. I'm commenting on a reported basis, so I wouldn't be stripping them out..

Got it.

And then sort of, do you anticipate over time that the BBC margins sort of eventually get back toward the AMC legacy margins? Or maybe can you talk a little bit about margin differential between the channels?.

Yes. I'm not going to -- as you know, we don't specifically talk about each channel and its margin profile, et cetera.

I guess what I will reiterate, we said it on, I think, on the prior call, obviously, we were attracted to BBC AMERICA for its content, its programming, the complementary nature to our existing business, but clearly, there were opportunities whether it's in the advertising market as we move together in the upfront, the strength that we have and the strength that they have, in certain instances, in our affiliate negotiations, obviously, hopefully, there's operating leverage as we look at our infrastructure and theirs.

So we would buy it with the expectation that there was a meaningful amount of upside to what they were doing on their own. But that's probably not surprising but as much as I'll say..

Was there much cost rationalization in the 4Q numbers to speak of?.

No. I mean it's still early. I mean we're still integrating the business across all lines. Physically, they've moved into our building. So it will take some more time. But I think we called out some transaction fees but I don't think we specifically called out anything specific to integration..

Your next question comes from Todd Juenger of Sanford Bernstein..

I know there've been several questions about CPMs and advertising. And so I really hope this isn't redundant, I don't feel it is. I guess I just love to sort of tie it together.

I'm still trying to figure out mechanically how you can translate what I think was delivery declines in primetime across your network portfolio, somewhere in the negative mid-single digits year-over-year, and turn that into mid-teen advertising revenue growth, especially in an environment where other companies are talking about scatter pricing being down year-over-year and just an overall tepidness in the market.

You gained massive share. So clearly, you have the #1 show on TV, that helps, but it's really not that many hours. So any further commentary you can give as to how does negative mid-single ratings turn into mid-teens advertising growth? Would love any further thoughts on that. And I have a quick follow-up..

Yes, Todd. So I do think the demand for shows is the short answer that I would give you. Demand for the shows, not only on AMC, Portlandia on IFC for example, Dr.

Who and Orphan Black on BBC AMERICA, that is really what is driving -- the specifics of the content is what has been driving the ad sales market in the past upfront, the scatter market and what we anticipate with the future upfront. And I do think our group does an exceptionally good job of inventory management and of driving that pricing.

So I think that's the essence of it. And then we touched on it before. The upscale nature of our shows has appeal.

And The Walking Dead, the sheer size of the audience, and an elusive audience, it has a high concentration of young men, and so that's noted by categories of advertisers, particularly in the gaming, in the entertainment, movie advertising segments..

Okay. Fair enough. A quick follow-up. Sort of along those lines, there's been a couple of questions about SVOD and your Netflix relationship. I just want to explore that a little further, when you think about -- you've cited that it's a positive impact for, obviously, some of your really big hit franchises and the catch-up viewership.

How do you think about the tradeoff of the potential negative impacts of SVOD on the many hours on your networks, for instance, that might be license programming, and substitution of viewing and when you think about the tradeoffs to the good guys and the bad buys of SVOD, how do you handicap those different elements?.

Look, Todd, I guess I would say that, to state the obvious, SVOD, a bit [ph] large, is an alternative viewing platform for video content. So they are, by definition, a competitor in that regard. However, anyone who has video content is a competitor.

The more focused, I think, a narrow -- an important part of our relationship to SVOD is where our shows go and when they go. And there, we believe we've seen a lot more sympathy than competition.

And we've seen that because of the phenomenon, not with every show, but with many of season-over-season increases, and that is not a standard phenomenon in television. Usually, shows decline year-over-year, they don't grow year-over-year. And we have seen growth year-over-year while we've had this reservoir of past multiple years material on SVOD.

So in the case of particularly scripted dramas, I think it applies to comedy as well, while it's inherently competitive because you can be there or here, the specific effect on our channels has really been sympathetic. And it's helped us.

And we do think it's because people are familiarizing themselves, finding stuff, being referred by friends, finding a show. How many times have someone said, "Hey, you ought to watch this thing. Check it out." You do, and then if you like it enough, you may find your way to watch it on linear. And we think we've seen that phenomenon.

So we don't think it applies to everybody, but it has applied to us and seems to continue to apply..

Your final question is coming from David Joyce with Evercore ISI..

I was just wondering, with the coming changes in the Nielsen ratings, including new tablets and other viewing, I was wondering what your sense is of the rollout timeframe for better delayed viewing measurements since a lot of your shows are viewed in delayed environments? And then, secondly, if we could just get some color on what the differential on international revenue and EBITDA growth is on a currency adjusted basis, that'd be appreciated..

Yes. This is Ed, David. I'm not sure I have any visibility into Nielsen's timeline for rolling out better than they've disclosed..

And have you done any....

And then -- sorry. David, in terms of the revenue AOCF, I think it was about a 1% impact that we had in the -- for '14..

And have you done any back-testing on what these new ratings could do on, say, your fourth quarter ratings results?.

No. We have not. All right. Well, thank you, everyone, for joining us on today's call. We appreciate your interest in AMC Networks. Operator, you can now conclude the phone call..

Thank you. This does conclude today's conference call. You may now disconnect..