Over the last two weeks, AMC has pushed to make cuts on two of its other big shows — "The Walking Dead" and "Breaking Bad" — moves that came as a surprise to the creative forces behind those popular series.
The push to rein in costs comes only months after "Mad Men" creator and executive producer Matt Weiner received a huge new contract to continue the show about swinging 1960s ad men for at least two more seasons. His price tag of close to $10 million a season has those who work on rival shows grumbling that they are being asked to foot the bill for Draper's martinis.
Sony Television, the studio behind "Breaking Bad," was so irked at the terms AMC offered for a fifth season of the show, which included making only six or eight episodes instead of the usual 13, that last week it approached other cable networks, including FX, about buying the program. Cooler heads have since prevailed and AMC and Sony are trying to hammer out a new deal.
In the case of the zombie smash "The Walking Dead," AMC will be slashing about $250,000 per episode for its second season. Frank Darabont, the well-regarded executive producer of "The Walking Dead," was also replaced last week, just days after he appeared at the Comic-Con convention to greet the show's fan base and promote upcoming episodes.
AMC declined to comment on speculation that Darabont was forced out in part over a disagreement about the show's new budget. Darabont did not return a call seeking comment.
The cable network, a unit of AMC Networks Inc., is also slowing down on producing new shows. Earlier this year, it held a much ballyhooed bake-off at Santa Monica's Shutters hotel at which producers came and pitched new projects. After narrowing the list of potential shows to three, the network ultimately decided not to move forward with any of the pitches.
AMC President Charlie Collier strongly denied that the cost of keeping "Mad Men" is in any way hampering the network's programming strategy.
"We're investing more than we ever have before," Collier said in an interview. "The fact that future seasons of 'Mad Men' were going to be expensive is not a surprise to us." He was also quick to defend the network against complaints about its recent dealings with producers. "We've taken some of the most expensive, riskiest shows around and nurtured them and managed to grow our network."
Collier declined to talk specifics about "Breaking Bad" and "The Walking Dead." With regards to the latter, he said, "The viewer will see we're making shows that will look like a movie every week."
Until recently, AMC was a unit of New York cable operator Cablevision Systems Corp. In July, it along with sister cable channels Sundance, IFC and WE were spun off into AMC Networks Inc., a stand-alone public company. That will mean greater scrutiny of its spending by Wall Street.
"As a public company, the financials of AMC are gradually going to become much more apparent to investors," said Barclays Capital analyst Anthony DiClemente. "There will be many more questions about programming expenses and margins."
Prior to the debut of "Mad Men" in 2007, AMC was known primarily as a network of old movies. Realizing that it needed to offer original programming if it wanted to compete with bigger channels such as Comcast's USA, Time Warner's TNT and News Corp.'s FX, the network started investing more in fresh content. According to research firm SNL Kagan, AMC's annual programming budget jumped over 40% from $123.3 million in 2006, the year before "Mad Men" launched, to a projected $174.5 million in 2011.
The investments have paid off in terms of critical acclaim. Both "Mad Men" and "Breaking Bad" have shelves full of Emmys. Neither, however, are big commercial hits. "Mad Men" averaged 4.3 million viewers in its fourth season, and so far this season "Breaking Bad" is averaging 2.3 million. By comparison, "The Walking Dead" averaged over 6 million viewers and TNT's "The Closer" routinely gets over 7 million.
Although AMC has grown its ad revenue with original programming, it still trails its bigger rivals in terms of the subscription fees it collects from cable and satellite operators. AMC averages 25 cents per-subscriber per-month, according to Kagan SNL. TNT gets about $1 per subscriber, USA averages close to 70 cents and FX pulls in 40 cents.
One of the challenges for AMC is that it does not own most of the shows it airs. That's why Sony was able to threaten the network with moving "Breaking Bad" if a deal was not to its liking. AMC owns "The Walking Dead," which is why it could enforce such a dramatic budget cut, though it came with the loss of the show's creative force.
Collier for one defends AMC's track record: "Are there bumps along the road, sure, but the net results have turned out pretty well."