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AMC Networks Inc. (Nasdaq: AMCX)  is investing $65 million in RLJ Entertainment Inc. (Nasdaq: RLJE), a company backed by the founder of Black Entertainment Television, creating a partnership aimed at reaching two niche audiences, African-American viewers and fans of British programming , with online video services.

AMC, best known for the U.S. cable channel that airs “The Walking Dead,” also operates BBC America through a joint venture with BBC Worldwide, and owns WE tv, a network popular with black viewers. RLJ Entertainment owns two streaming video services: Acorn TV, which broadcasts British mysteries and dramas, and Urban Movie Channel, which is geared to African-Americans. AMC will provide money and resources to RLJ Entertainment and look for ways the two companies can work together. “The asset base is quite complementary,” AMC  chief executiveoOfficer Josh Sapan said in an interview.

Sapan added that AMC is looking to expand its business of providing shows and movies to viewers over the internet, an area of growth as the U.S. pay-TV industry declines.

Dozens of online subscription video services have cropped up in the past few years, mostly seeking to find paying monthly subscribers by streaming shows and movies for niche audiences. AMC, for instance, offers paid streaming services like Doc Club, which is focused on documentaries, and Shudder, which is for horror-movie fans.

“Streaming is an attractive technology,” Sapan said. “We would like to be in it further.” He added that RLJ Entertainment has become a “leader in dedicated niche streaming services.” Acorn TV, launched in 2011, has more than 370,000 subscribers.

AMC wants to diversify its business as the U.S. pay-TV industry faces threats from cord-cutters dropping cable subscriptions for cheaper online options like Netflix, Amazon and Hulu. AMC is producing more original series so it can own the rights and profit from selling those shows overseas. It also expanded its presence to about 140 countries by buying Liberty Global Plc’s Chellomedia for about $1 billion in 2013.

AMC’s investment comes in the form of loans. It will have the option to buy 50.1 percent of RLJ Entertainment at a later date at a price of $3 per share.

RLJ’s chairman is Robert L. Johnson, the first black billionaire in the U.S. and the founder of Black Entertainment Television. Johnson sold BET Holdings LLC to Viacom Inc. in 2001 for $2.35 billion.

Over the summer, RLJ Cos. and Roth Capital Partners launched an investment bank called RLJ Capital Markets, which focuses on raising equity, debt and growth capital for businesses. The firm will also take advantage of Roth’s research and trading services. RLJ Capital Markets concentrates on the business services, consumer, health care, industrials and technology sectors.

He said African Americans are “heavy consumers” of entertainment, and often subscribe to pay-TV services and premium cable channels like HBO and Showtime.

“You’re looking at close to $1 billion to $2 billion in money spent on those pay services,” Johnson said in an interview. “Imagine what can happen if we deliver compelling content at a lower price [than HBO and Showtime] but higher value because it’s targeted directly to their interests.”

Johnson said he was “concerned about the role of diversity in content” and that the AMC partnership will “open up more doors” for minorities in the entertainment business.

Black viewers ordered and watched the most cable channels among all races, according to Nielsen data based on May 2016 viewing habits. Black adults also spend more hours watching TV each week, almost 48, than other groups and watched more online video than the rest of the population, Nielsen found.

Purchasing power was about $1.2 trillion in 2015 for black Americans, according to the University of Georgia’s Selig Center for Economic Growth. Total U.S. disposal income in 2015 was $13.5 trillion, according to the Selig Center.

AMC is the latest traditional TV programmer to bet on digital media. In June, Walt Disney Co. agreed to buy a one-third stake in the video-streaming unit of MLB Advanced Media. On Oct. 13, Discovery Communications Inc., home of the TLC and Animal Planet cable networks, invested $100 million in a new digital media holding company. In the past two years, Comcast Corp. invested $200 million in BuzzFeed and Vox Media, while Time Warner Inc. led a $45 million investment in online publisher Refinery29 and a $15 million funding round for the news website Mashable.

--Additional reporting by Mergers & Acquisitions' Demitri Diakantonis

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