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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Firms and industries have ups and downs. The legacy media industry is in a valley.
The primary half of 2023 has been a colossal disappointment for media executives who wanted this yr to be a rebound from a terrible 2022, when a slowdown in streaming subscribers cut valuations for Netflix, Disney, Warner Bros. Discovery and Paramount Global roughly in half.
As a substitute, investors have once more develop into excited by Netflix’s future prospects because it’s cracked down on password sharing, potentially resulting in tens of hundreds of thousands of latest signups. Netflix shares have surged the past five months, outpacing the S&P 500.
Meanwhile, the legacy players cannot get out of their very own way.
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Netflix vs the S&P 500 over the past five months.
“When it rains it pours,” said LightShed media analyst Wealthy Greenfield. “It just keeps getting worse.”
It has been a bumpy ride for Disney Chief Executive Officer Bob Iger since he returned to guide the corporate late last yr. Disney recently finished shedding 7,000 employees. Chief Financial Officer Christine McCarthy stepped down last week. The corporate is pulling programming from its streaming services to get monetary savings. Its animation business is in a serious rut, with its latest Pixar movie, “Elemental,” recording the lowest opening weekend gross for the studio because the original “Toy Story” premiered in 1995. Shares have struggled previously five months.
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Disney vs. the S&P 500 over the past five months.
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Warner Bros. Discovery vs. the S&P 500 over the past five months.
Paramount Global cut its dividend last quarter as streaming losses peak this yr and a weak promoting market exacerbates a terminally sick cable network business. Wells Fargo released an analyst note Friday saying the bull case and the bear case for the corporate were the identical: selling for parts. Warren Buffett, perhaps essentially the most acclaimed investor in history, told CNBC that Paramount’s streaming offering “fundamentally is just not that good of a business.”
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Paramount Global vs the S&P 500 over the past five months.
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Fox Corp. vs the S&P 500 over the past five months.
NBCUniversal has weathered the storm the very best, shielded by its parent company, Comcast, which gets its revenue from cable and wireless assets. It is also taken advantage of missteps from the aforementioned. MSNBC became the No. 1 cable news network this month for the primary time in 120 weeks, dethroning Fox News for per week amid coverage of former President Donald Trump’s federal indictment. Universal’s “The Super Mario Bros. Movie” is by far the most important box office hit of the yr, yet shares have not moved much.
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Comcast vs the S&P 500 over the past five months.
All of this is going on with an prolonged Hollywood writers’ strike occurring within the background with no sign of ending. The writers know the longer the strike lasts, the more pain can be inflicted on media corporations, who will eventually run out of already-made scripted content. Zaslav recently gave a commencement address to Boston University and was drowned out by boos and chants of “pay your writers.”
This week may bring much more bad news. Film and TV actors are set to hitch writers on strike unless they reach a cope with Hollywood studios by Friday.
The beneficiary of Hollywood work shutdowns will likely be YouTube, TikTok, and Netflix, which continues to churn out international content that’s unaffected by the strike, said Greenfield.
Legacy media may get a small reprieve if promoting jumps back because the 2024 U.S. presidential campaign heats up. But there’s still scant evidence investors will reward media corporations for simply cutting costs. There’s currently no strong growth narrative for legacy media, and consolidation prospects are murky as regulators block media-adjacent deals reminiscent of Microsoft’s acquisition of Activision and Penguin Random House’s proposed purchase of Simon & Schuster.
The industry just wrapped up its annual promoting gala in Cannes, France. Legacy media executives still spent company dollars to make the trip to hang around on yachts and drink rosé. The backdrop was as beautiful as ever.
However the landscape is bleak.
Disclosure: Comcast owns NBCUniversal, which is the parent company of CNBC.
WATCH: WPP CEO Mark Read on the state of the promoting market, from Cannes Lions 2023