Netflix rebounds once more whereas conventional media outages mount

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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Companies and industries have ups and downs. The old media industry is in a valley.

The first half of 2023 was a colossal disappointment for media executives, who wished for a rebound this year from a terrible 2022, when a drop in streaming subscribers drove down ratings Netflix, Disney, Warner Bros. Discovery And Paramount Global about half.

Instead, investors are once again excited about Netflix’s future prospects as the company cracks down on password sharing, potentially leading to tens of millions of new signups. Netflix stock has surged over the past five months, outperforming the S&P 500.

Meanwhile, the old players can’t avoid each other.

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Netflix vs. the S&P 500 over the past five months.

“When it rains, it pours,” said LightShed media analyst Rich Greenfield. “It keeps getting worse.”

It’s been a bumpy road for Disney CEO Bob Iger since he returned to run the company late last year. Disney recently completed the layoff of 7,000 employees. CFO Christine McCarthy resigned last week. The company is retiring programs from its streaming services to save money. The animation business is in dire straits as the latest Pixar film, Elemental, posted the studio’s lowest opening weekend gross since the original Toy Story first aired in 1995. Stocks have struggled for the past five months.

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Disney vs. the S&P 500 over the past five months.

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Warner Bros. Discovery compared to the S&P 500 over the past five months.

Paramount Global cut its dividend last quarter as streaming losses peak this year and a sluggish advertising market exacerbates a terminally ill cable network business. Wells Fargo issued an analyst note on Friday that said the bullish and bearish scenarios are the same for the company: sell for parts. Warren Buffett, perhaps the most respected investor in history, told CNBC that Paramount’s streaming offering is “fundamentally not such a good deal.”

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Paramount Global vs. the S&P 500 over the past five months.

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Fox Corp. compared to 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 cellular assets. It also exploited the missteps mentioned above. MSNBC became the No. 1 cable news channel this month for the first time in 120 weeks, dethroning Fox News for a week while reporting on the federal indictments against former President Donald Trump. Universal’s The Super Mario Bros. Movie is easily the biggest box-office hit of the year, yet stocks haven’t moved much.

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Comcast vs. S&P 500 over the last five months.

All of this is happening while an extended Hollywood writers’ strike is taking place in the background, with no end in sight. The writers know that the longer the strike lasts, the more suffering will be inflicted on media outlets, which will eventually run out of scripted content already produced. Zaslav recently gave a graduation speech at Boston University and was drowned out by boos and shouts of “pay your authors”.

This week could bring even more bad news. Film and television actors will join the writers’ strike unless they reach an agreement with Hollywood studios by Friday.

Beneficiaries of the Hollywood shutdowns are likely to be YouTube, TikTok and Netflix, which continue to produce international content unaffected by the strike, Greenfield said.

Mainstream media may get a small reprieve if advertising picks up again in the wake of the 2024 US presidential campaign. However, there’s still little evidence that investors will simply reward media companies for cutting costs. Currently, there’s no strong growth narrative for legacy media, and prospects for consolidation are bleak as regulators block media-related deals like Microsoft’s acquisition of Activision and Penguin Random House’s proposed purchase of Simon & Schuster.

The industry just wrapped up its annual promotional gala in Cannes, France. Older media execs still spent company money to make the journey, hang out on yachts, and drink rosé. The setting was as beautiful as ever.

But the landscape is bleak.

Disclosure: Comcast owns NBCUniversal, CNBC’s parent company.

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