AMC Networks Inc.: The Walking Dead Problem

Description

In August 2017, AMC Networks Inc. (AMCN), a New York City–based cable television provider, faced a lawsuit from the creative talent behind the hit show The Walking Dead. The lawsuit charged that AMCN used its vertical integration into content development to reduce the profits available for distribution to participants. For AMCN, which was originally a content distributor, expanding into content creation through its AMC Studios had several benefits. However, the industry was changing with the advent of online streaming services such as Netflix Inc., Hulu, and Amazon Prime, as well as an industry-wide shift among cable networks to offer proprietary content. These changes had an impact on the relationship between the business and the creative side of the industry. AMCN’s chief executive officer had to decide how to respond to the lawsuit.

Learning Objective

This case discusses vertical integration and is designed for a strategic management course at either the undergraduate or graduate level. Students should already be familiar with the topic of vertical integration and the related concepts of firm boundary and transaction cost theory before studying this case. After completion of the case, students will be able to do the following: ·Assess the pros and cons of a vertical integration strategy. ·Understand how vertical integration works in the television industry. ·Identify the trade-offs between the economic benefits of vertical integration and the costs of conflict of interest.

Keywords

lawsuit media and entertainment value chain Vertical integration