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Can HBO’s ‘Game of Thrones’ Become as Big as AMC’s ‘The Walking Dead?'

By Tim Beyers, Steve Symington, and Leo Sun – Mar 30, 2014 at 12:00AM

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As one season ends, another begins. Here’s a look at what these franchises mean to AMC and Time Warner.

Andrew Lincoln's character, Rick Grimes, hasn't just survived the zombie apocalypse. He's helped create the biggest franchise in AMC Networks history. Credit: Gene Page/AMC.

The Walking Dead returns tonight for the season 4 finale, an episode that's expected to define lead character Rick Grimes (played by Andrew Lincoln) in ways we haven't yet seen.

"This is Rick Grimes being pushed to his absolute limit. And if you think you've seen that before, you haven't. And the Rick Grimes that comes out of this is really going to shock people," co-creator Robert Kirkman said in an interview with Entertainment Weekly.

No doubt that's music to the ears of AMC Networks (AMCX 4.39%) chief Josh Sapan, who's been involved with the network since joining one-time AMC parent Cablevision (NYSE: CVC) in 1987. But it's been the years since 2010, when The Walking Dead first aired, that have arguably defined his career.

Revenue growth has accelerated in each of the past three years. Net margins are expanding. And advertising revenue? Up 31% in the fourth quarter, which makes sense when you consider that only a few months ago AMC was charging broadcast network rates for 30-second spots tied to TWD.

It's an amazing success story that shows no signs of ending, with a Walking Dead spinoff due to begin airing in 2015. Kirkman and Sons of Anarchy Executive Producer Dave Erickson will write the new series for AMC. You can bet Time Warner (TWX) is watching with interest.

Why? HBO's Game of Thrones returns next week, and it's been almost as big a catalyst for Warner's pay cable subsidiary as The Walking Dead has been for AMC. Already the most-pirated show on television, Game of Thrones drew more than 13 million viewers an episode in season three, after accounting for DVR, on-demand, and repeat viewings. Meanwhile, HBO's operating income improved 8.5% last year -- no doubt aided by surging viewership for Game of Thrones.

As investors, the key question before us now is how far will Warner go in exploiting what it has in Game of Thrones. Will it grow to be as big as The Walking Dead has been for AMC? We asked three of our top pop culture analysts to weigh in.

Leo Sun: Spinoffs aren't HBO's expertise
With the success of The Walking Dead, it's highly tempting for HBO to consider following AMC and launching a spinoff for Game of Thrones. Indeed, author George R.R. Martin recently confirmed that he has been in discussions with HBO regarding a film or series adaptation of his Dunk and Egg short stories, which take place in Westeros 89 years before the events portrayed in Game of Thrones.

Unfortunately, a Game of Thrones spinoff is unnecessary and could harm the original series due to two problems: quality control and franchise dilution.

The main problem is that spinoffs could tarnish HBO's reputation for delivering high-quality, self-contained series such as Six Feet Under, Entourage, The Sopranos, Sex and the City, Boardwalk Empire, and True Detective. HBO doesn't spin off new series from its flagship shows. Ideas for Entourage, Sopranos, and The Wire spinoffs were all scrapped in the past. The Carrie Diaries, which was spun off of Sex and the City, ended up on The CW network, which is co-owned by Time Warner and CBS. Therefore, I don't think it could happen considering Time Warner's past decisions for its premium channel.

A Game of Thrones spinoff would remind me too much of what Peter Jackson did with The Hobbit, which needlessly stretched a 310-page children's book into three long films.The Hobbit certainly feels connected to the Lord of the Rings films, but they arguably aren't as good. Now imagine if The Hobbit and The Lord of the Rings trilogy had hit theaters simultaneously, and you can see the problems that spinning off a Dunk and Egg series before Game of Thrones concludes could cause -- plenty of confusion and unfavorable comparisons, which could cause both series to suffer.

Steve Symington: Game of Thrones can be an anchor for HBO Go
I absolutely believe HBO's Game of Thrones could eventually be as big or bigger than AMC's The Walking Dead. But putting aside the possibility of a companion series as AMC has commissioned for TWD, Game of Thrones simply cannot approach the popularity of its zombie-centric rival if Time Warner continues harboring HBO under its massive wing.

Instead, I think Game of Thrones is exactly the kind of cornerstone series Time Warner needs to be able to start toying with the idea of spinning off HBO Go as a stand-alone service.

After all, the original telecast of Game of Thrones' season three finale brought 5.4 million live viewers, an increase of 28% over season two's 4.2 million. That's a far cry from the 13.47 million people who tuned in live for last weekend's new episode of The Walking Dead, but still remarkable considering Game of Thrones resides on a premium pay channel.

And Time Warner knows an HBO Go spinoff wouldn't need to be an all-or-nothing deal. Earlier this month, HBO chief Richard Plepler even stated they'd be up for breaking out HBO Go, but only if the math made sense.

Plepler elaborated that, on a broad scale, breaking out HBO Go simply isn't in Time Warner's best interest right now with just 9 million broadband-only homes in the U.S. By comparison, there are roughly 70 million domestic cable and satellite subscribers.

The solution? Time Warner could begin by focusing on select markets where breaking out HBO Go wouldn't cannibalize existing subscribers. As the scales continue to tip toward broadband-only households down the road, they can adjust HBO Go's stand-alone availability accordingly.

Season 4 of HBO's Game of Thrones kicks off on Sunday, April 6. History says tens of millions will tune in live and via download, DVR, and on-demand. Sources: HBO, YouTube.

Tim Beyers: Leaning on the familiar is part of the calculus in Hollywood
Warner has a lot to gain by taking Game of Thrones as far as it can -- from the small screen to the big. Why? We've seen it before. Warner has already made two Sex and the City movies and an Entourage adaptation is on the way.

Plus, George R.R. Martin has so much material layered in his A Song of Ice and Fire book series that HBO recently inked a deal to bring showrunners David Benioff and Dan Weiss back for at least two more seasons. Plepler wouldn't do that without designs on turning Game of Thrones into a large-scale, long-tail franchise.

Finally, let's remember that franchises are Hollywood's go-to mechanism for managing risk. It's why we're seeing Sony pour hundreds of millions into making a new Spider-Man movie every year, and why Twenty-First Century Fox just announced plans to beef up its schedule of X-Men movies. Franchises are predictable sources of cash flow, which can be used to reinvest in experiments like the one Steve describes above.

In the end, that's what Time Warner investors really need: franchises that fund the next franchise-to-be. HBO's Game of Thrones already looks like that sort of enterprise. Matching The Walking Dead, if it ever happens, would just be a bonus.

Neither Leo Sun nor Steve Symington owned share in any of the companies mentioned in this article at the time of publication. Tim Beyers owned shares of Netflix and Time Warner. The Motley Fool recommends, AMC Networks, and Netflix. The Motley Fool owns shares of and Netflix. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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