Bob Iger, CEO of The Walt Disney Company, left; David Zaslav, CEO and President of Warner Bros. Discovery, center; and Bob Bakish, president and CEO of Paramount Global.
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Businesses and industries have ups and downs. The legacy media industry is in a trough.
The first half of 2023 has been a huge disappointment for media executives who wanted this year to be a recovery from a terrible 2022 when a slowdown in streaming subscriber numbers drove up valuations for Netflix, disney, Warner Bros. Discovery And Paramount Global about half of it.
Instead, investors have once again become excited about Netflix’s future prospects as it cracks down on password sharing, potentially leading to tens of millions of new signups. Netflix shares have soared over the past five months, surpassing the S&P 500.
Meanwhile, the legacy players can’t get out of their way.
Netflix versus the S&P 500 over the past five months.
“When it rains, it pours,” said LightShed media analyst Rich Greenfield. “It’s only getting worse.”
It’s been a bumpy ride for Disney Chief Executive Officer Bob Iger since he returned to lead the company late last year. disney recently completed lay off 7,000 workers. Chief Financial Officer Christine McCarthy stepped down last week. The company is draw programming of its streaming services to save money. The animation business is in a major rut, with its latest Pixar movie, “Elemental,” hitting the lowest opening weekend gross for the studio since the original “Toy Story” premiered in 1995. Stock prices have struggled for the past five months.
Disney versus the S&P 500 over the past five months.
Warner Bros. Discovery vs. the S&P 500 over the past five months.
Paramount Global cut its dividend last quarter as streaming losses peaked this year and a weak advertising market exacerbated a terminally ill cable network company. Wells Fargo released an analyst note on Friday saying the bull case and bear case for the company were the same: selling for parts. Warren Buffett, arguably the most acclaimed investor in history, narrated CNBC that Paramount “fundamentally is not such a good company.”
Paramount Global versus the S&P 500 over the past five months.
Fox Corp. versus the S&P 500 over the past five months.
NBCUniversal weathered the storm best, protected by its parent company, Comcast, which derives its revenue from cable and wireless assets. It has also benefited from missteps of the aforementioned. MSNBC became the #1 cable news network this month for the first time in 120 weeks, dethroned Fox News amid coverage of former President Donald Trump’s federal indictment. Universal’s “The Super Mario Bros. Movie” does by far the biggest blockbuster of the yearbut stocks haven’t moved much.
Comcast versus the S&P 500 over the past five months.
All this is happening while an extensive Hollywood writers’ strike is going on in the background, with no end in sight. The writers know that the longer the strike lasts, the more pain will be inflicted on media companies, which will eventually run out of already created scripted content. Zaslav recently gave a starting address to Boston University and was drowned out by boos and chants of “pay your writers.”
This week may bring even more bad news. Movie and TV actors join the writers who are going on strike unless they strike a deal with the Hollywood studios on Friday.
The beneficiaries of the Hollywood work halt will likely be YouTube, TikTok and Netflix, which will continue to produce international content unaffected by the strike, Greenfield said.
Legacy media may get a slight reprieve as advertising bounces back as the 2024 US presidential campaign heats up. But there is still little evidence that investors will reward media companies for simply cutting costs. There is currently no strong growth story for legacy media, and the consolidation outlook is murky as regulators block deals that border media, such as Microsoft’s acquisition of Activision and Penguin Random House’s proposed purchase of Simon & Schuster.
The industry has just completed its annual advertising gala in Cannes, France. Legacy media executives still spent corporate dollars to make the trip to hang out on yachts and drink rosé. The background was as beautiful as ever.
But the landscape is bleak.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
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