Striking members of the Writers Guild of America (WGA) have gathered outside Netflix offices in Los Angeles as the industry faces numerous challenges. Traditional TV is on the decline, ad revenue is weak, and streaming services are not generating profits. The work stoppage by actors and writers unions is expected to be prolonged and contentious. Netflix, however, appears to be in a better position than its legacy media counterparts, with a new advertising model and efforts to combat password sharing. Disney, on the other hand, is struggling with its TV networks. The media industry’s earnings season begins with Netflix reporting first, and investors will be eager to hear about the company’s crackdown on password sharing and the success of its ad-supported option.
Investor focus will also be on other legacy media companies such as Paramount Global, Comcast Corp., and Warner Bros. Discovery, especially after Disney CEO Bob Iger hinted that traditional TV may not be a core part of Disney’s business and that all options, including a sale, are being considered.
Meanwhile, the ongoing strikes by the Writers Guild of America and the Screen Actors Guild – American Federation of Television and Radio Artists have brought the industry to a standstill. This is the first dual strike since 1960 and comes at a time when growth in streaming has slowed and media companies are facing budget cuts and layoffs.
The decline in pay-TV subscribers continues to accelerate as consumers shift towards streaming. Despite this decline, many TV networks remain profitable and supply content to streaming platforms. However, MoffettNathanson recently reported that the quantity of subscribers is falling too fast for pricing to offset the losses. Iger acknowledged that traditional TV is far worse than he expected and suggested that Disney may consider selling its network portfolio. Other media companies, such as Paramount and Comcast’s NBCUniversal, are also considering selling or shutting down networks.
Furthermore, the weak advertising market has been a source of pain for the industry, particularly traditional TV. Advertising pricing growth is a cause for concern, especially as ad-supported streaming services enter the market. The introduction of cheaper, ad-supported tiers by streamers like Netflix and Disney+ is expected to be a hot topic during the earnings season.
Lastly, last week’s ruling allowing Microsoft’s acquisition of Activision Blizzard to proceed could spur more mergers in the industry. While the Federal Trade Commission has appealed the ruling, bankers see it as a positive development for dealmaking in a slow period for mega-deals.
Overall, the media industry is facing significant challenges, and investors will be closely monitoring the earnings reports of companies like Netflix to gauge their performance during this turbulent time.
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