AMC’s Mad Men. Image: Reddit.

How Profitable Was AMC’s Mad Men?

Though Mad Men’s story was about advertising, AMC’s strategy for the show was not.

By AMANDA D. LOTZ

Far more profound than what has happened to Don Draper in the last eight years is what has happened to AMC. The channel moved from obscurity to a channel that would be missed if a cable system dropped it. Though Mad Men’s story was about advertising, AMC’s strategy for the show was not.

AMC launched in 1984 as a subscription cable channel of classic movies, shown complete without commercial interruption. AMC began accepting advertising in 1998 and initially kept commercials to between films. By 2001, it began interrupting films with commercials — although only programmed eight minutes of commercials per hour, while it was standard to feature twice that.

Mad Men was always a prestige project for AMC, it set out to find its “Sopranos,” and it wasn’t about developing a show that would draw a mass audience and massive advertising dollars. Unlike most cable channels, AMC was relatively unconnected from a major media conglomerate. AMC was part of a cluster of cable channels including IFC, Sundance, and WeTV known as Rainbow Media and owned by the cable service provider Cablevision. None of the Rainbow-owned channels was particularly well known or in demand when Mad Men launched.

AMC’s move into original scripted series was consequently motivated by larger business concerns than those driving channels connected to major media conglomerates such as USA, TNT, or FX. Though carriage of its channels on Cablevision systems was secure, Rainbow needed a channel that it could use to drive carriage of its other channels as cable tiers grew bloated and to warrant higher subscriber fees.

When Mad Men debuted in 2007, AMC ranked 21st among cable channels in prime-time viewership. The series wasn’t a clear hit out of the gate, and in truth, the series was never a hit by conventional measures. Mad Men debuted to 1.6 million viewers and averaged about two million viewers over its run. The series was an enormous critical success and won Emmy awards for best dramatic series in it first four seasons, a Peabody award, as well as other honors.

Someone living in the US from 2007–2015 could reasonably be forgiven for believing Mad Men was much more widely viewed. As had been the case of The Sopranos before it, the series caught the fancy of journalists and entertainment pundits so that the number of articles published about Mad Men bore little relation to the relative size of its audience. But by Mad Men’s arrival, different measures of success were emerging that AMC capitalized upon.

The “profitability” of Mad Men has been a topic raised by many of the journalists writing about it. Mad Men was profitable, but not in the way traditionally measured. Mad Men cost AMC about twice as much as it earned in advertising. AMC paid Lionsgate, the studio that produced and owns Mad Men, about $2 million per episode or $26 million a year.

Industry analysts estimated the channel received about $22,000 dollars per 30-second commercial for the first airing of Mad Men and $12,000 for rerun airings. AMC still runs far fewer ads than most cable channels. By those back-of-the-envelope estimates, at 20 ads an hour and two rerun airings, Mad Men might earn AMC about $12 million in advertising per season. And that doesn’t include the costs incurred by AMC in promoting the show.

But ads are only half of a cable channel’s business model. The motivation for a cable channel to develop original scripted series emerged from a desire to ensure cable service providers found the channel relevant and to increase the fees the channel could charge service providers.

Between Mad Men’s 2007 debut and 2010, the fees service providers such as Comcast and DirecTV paid for AMC increased by two cents per subscriber. That may sound insignificant, but that two cents multiplied by the 95 million homes that AMC reaches — regardless of whether they watch it — multiplied by 12 months, equals $22.8 million a year.

The increase in the subscriber fee goes a long way to explaining why cable channels gamble on original series and how a niche hit such as Mad Men can prove lucrative. In 2011, after blockbuster The Walking Dead premiered on AMC, Michael Idov reported the subscriber fee had grown an additional 15 cents, which would mean an additional $1.7 billion of subscriber revenue. This was especially beneficial in the valuation of AMC Networks as it went public in 2011.

Certainly the fee growth would not have been so profound if AMC hadn’t followed Mad Men with Breaking Bad and The Walking Dead. The case of Mad Men for AMC illustrates why cable programs — even those on advertiser-supported channels — look so different from those on broadcast networks, as well as why cable bills continue to grow as considerably as the content on the channels they provide.

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