The media industry has experienced its fair share of highs and lows, and currently, it finds itself in a low point. Media executives had high hopes for a rebound in 2023 after a disappointing 2022, but their expectations have gone unmet. Streaming slowdowns led to a decline in valuations for major players like Netflix, Disney, Warner Bros. Discovery, and Paramount Global. However, Netflix has managed to regain investor excitement with its crackdown on password sharing, which could result in a significant increase in new signups. As a result, Netflix shares have been performing exceptionally well, outperforming the S&P 500.
On the other hand, the legacy media players are struggling to regain their footing. Disney’s CEO, Bob Iger, has faced numerous challenges since returning to lead the company. Layoffs, the departure of the CFO, budget cuts to streaming services, and a decline in the animation business have put a strain on Disney’s performance. Similarly, Paramount Global has experienced streaming losses, a weak advertising market, and declining cable network business, leading to a cut in its dividend. Criticism from renowned investor Warren Buffett has also impacted the company’s reputation.
In contrast, NBCUniversal, protected by its parent company Comcast, has weathered the storm relatively well. While it has capitalized on missteps from its competitors, such as becoming the top cable news network for the first time in years and achieving box office success with “The Super Mario Bros. Movie,” its shares have not seen significant gains.
In the background, a Hollywood writers’ strike looms, causing further uncertainty for the industry. The longer the strike lasts, the more media companies will suffer, as their pool of scripted content dwindles. Media companies will face even more challenges if film and TV actors join the strike. This uncertain landscape has benefited platforms like YouTube, TikTok, and Netflix, as they continue to produce content unaffected by the strike.
While legacy media may experience a slight respite with an uptick in advertising during the 2024 U.S. presidential campaign, investors show little evidence of rewarding companies solely for cost-cutting measures. Legacy media lacks a strong growth narrative, and consolidation prospects remain unclear due to regulatory limitations on media-adjacent deals.
The recent advertising gala in Cannes, France, showcased the glamorous side of the industry, with legacy media executives spending company funds to enjoy luxuries like yacht trips and rosé. However, the reality remains bleak for the industry.
(Note: Comcast owns NBCUniversal, CNBC’s parent company.)
WATCH: WPP CEO Mark Read on the state of the advertising market, from Cannes Lions 2023
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