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AMC, America’s most over-the-top cable network, faces carriage crisis

AMC, which has been among the most aggressive cable networks in terms of distributing content through over-the-top channels like Netflix (s NFLX), faces the prospect of going dark in about 18 million pay TV homes this weekend.

On Wednesday evening, negotiations with AT&T went public, with the operator of telco TV service U-Verse threatening to pull AMC and its smaller sibling channels (IFC and We TV) off its system if a new carriage agreement can’t be worked out by Saturday.

Also read: Dish/AMC fight breaks bad, channels banished to the 9,000s

The loss of U-Verse and its 4 million subscribers would be a major blow to AMC Networks, which faces the near-certain prospect of also getting pulled out of the homes of Dish Network’s 14 million customers on the same day over a carriage dispute that looks to be, from the outside, even more complicated.

While the rift between satellite operator Dish and AMC is compounded by a ongoing legal action between the two companies, simple money matters seem to be at the heart of the AT&T issue.

UPDATED: “We are disappointed that, just days before the July 15 season premiere of AMC’s Breaking Bad, we have not yet reached an agreement with AT&T that adequately reflects the popularity of our programming and AMC’s position as a top tier network with acclaimed shows like “The Walking Dead,” basic cable’s highest-rated scripted drama series,” read an AMC statement.

“We have been consistently supportive partners of AT&T and are proud that our investment in original programming has provided so much value to all of our distribution partners,” the AMC statement added. “We hope AT&T will recognize this and quickly reach a fair agreement with us, so their viewers don’t lose out.”

Also read: For basic cable channels, movies fend off cord-cutting

Those familiar with AMC’s carriage renewal talks say the cable programmer is seeking to translate the niche popularity of critically acclaimed original series including Mad Men, Breaking Bad and The Walking Dead into major carriage-fee increases — to around 75 cents per subscriber from a current base of around 40 cents.

Also read: For Netflix users, “catching up” has a catch

These shows have proven to be outstanding brand-builders for AMC, cultivating a niche class of affluent, educated viewers. But numbers-wise, the audiences aren’t huge.

Perennial Emmy-winner Breaking Bad, for example, only drew about 3 million viewers to the premiere and encore runs of its season 4 finale back in October.

“We believe the rates they are seeking are disproportionate compared to the viewership we see across their channels,” AT&T said in a statement, released Wednesday night. “We don’t think that’s reasonable, especially in these economic times, and we will continue to work toward a fair deal.”

This isn’t the first time AMC has struggled to reach a carriage agreement with AT&T, with the AMC also struggling two years ago to secure a deal when it was owned by Cablevision.

Also read: Dish’s Ergen: Netflix streaming devalues Mad Men

For their part, AT&T executives stopped short of mentioning the high concentration of AMC shows that are available in the subscription streaming market — a factor brought up by Dish chairman Charlie Ergen last month, who said such licensing “devalues” AMC programming when it comes time to negotiate pay TV renewals.

Among myriad digital agreements for AMC shows, the network and Sony Pictures TV respectively license archival seasons of The Walking Dead and Breaking Bad to Netflix, while Lionsgate licenses Mad Men to Netflix and Hulu.

Unlike other types of cable TV programming, the serial nature of AMC’s adult programming gives it an over-the-top advantage, with new viewers able to “catch up” to the narrative via subscription streaming.

In fact, at Wednesday’s “Future of Television” hearing in front of the House Communications Subcommittee, Netflix general counsel David Hyman specifically noted that such catch-up viewing of Mad Men resulted in a linear TV ratings bump of about 1 million viewers for the show’s season 5 premiere over the spring on AMC.

But while Netflix viewing may not be hurting AMC’s ratings and advertising in the same way it is for Viacom properties like Nickelodeon, it does seem as though it is having some impact on AMC’s most lucrative revenue stream, pay TV carriage fees.