As a seasoned investor with a decade of experience under my belt, I find the recent trends in the entertainment industry intriguing and somewhat perplexing. Having closely followed the evolution of media conglomerates like Comcast, Fox Corporation, and WarnerMedia (now known as WBD), I’ve witnessed their transformation from traditional broadcasters to streaming giants.
My personal journey began during a time when the VHS tape was still king, and the idea of streaming content seemed like science fiction. Watching these companies adapt and grow over the years has been nothing short of fascinating. However, it’s not all smooth sailing for these titans; they face challenges in an increasingly competitive landscape where new players such as Netflix, Amazon Prime Video, and Disney+ continue to emerge.
The recent moves by Comcast and WBD to reorganize their corporate structures suggest that consolidation could be on the horizon. As a long-time observer of the industry, I can’t help but wonder if these changes signal a new era in media mergers and acquisitions. Only time will tell whether these moves will lead to increased flexibility, unlocking value for shareholders, or if they’ll result in more headaches down the line.
One thing is certain; the entertainment industry never ceases to surprise me. I remember when DVDs replaced VHS tapes and Betamax, and now we have streaming services like Hulu and Peacock that offer thousands of hours of content at our fingertips. Who would’ve thought that a small device connected to the internet could revolutionize the way we consume entertainment?
As for my personal investment strategy, I remain cautiously optimistic about the future of these media giants. While there are undoubtedly risks involved in investing in this rapidly-changing industry, I believe that those who can navigate the shifting sands will reap significant rewards. And who knows, maybe one day we’ll look back and laugh at the days when we had to physically go to a video store to rent a movie!
Joke: I remember when I used to rent movies from Blockbuster. Now I feel like I’m living in the future with all these streaming services. But sometimes, I still miss those late fees… They were like my own personal financial advisors!
In the year 2022, the shares of Netflix and many Hollywood production companies experienced a significant drop. The following year, 2023, brought another challenging period for major media and tech firms as they faced skepticism from investors regarding streaming services. However, in 2024, there were indications of advancements in profitability within the streaming industry and renewed discussions about mergers and acquisitions, which positively impacted the shares of some prominent companies in the sector.
As a seasoned Wall Street analyst with over two decades of experience under my belt, I’ve seen my fair share of market fluctuations and industry trends. Heading into 2025, I find myself optimistic about the media sector. In a recent preview of the new year, I penned down my thoughts, expressing a generally bullish outlook for this dynamic industry. The rapid advancements in technology and consumer behavior have opened up exciting opportunities, and I’m eager to see how these developments will shape the future landscape of media.
In a recent outlook for 2025, Wells Fargo analyst Steven Cahall expressed optimism, stating it’s the most positive he’s been about the industry since 2021.
As a long-time media enthusiast and investor, I have seen my fair share of market fluctuations over the years. The recent dip in sentiment towards direct-to-consumer (DTC) and traditional media fundamentals in early ’22 was a stark reminder of the volatility that comes with investing in this industry. However, after careful analysis and observation of the current trends, I am optimistic about the prospects for media heading into 2025.
The shift towards streaming platforms such as ESPN and Fox is particularly exciting, as it opens up new market potential that was previously untapped. Additionally, the possibility of mergers and acquisitions (M&A) in TV broadcasting, involving companies like Warner Bros. Discovery and potentially Lionsgate, could support valuations in this sector for some time.
Moreover, I believe the ad market is also solid, which bodes well for the overall health of the industry. While linear risks to ad and affiliate revenue remain, meaningful strategic improvements in DTC performance offer a glimmer of hope for a more profitable future.
In conclusion, after experiencing various ups and downs throughout my investment journey, I have never been this optimistic about potential outperformance in the media sector since the downturn in ’22. The trends mentioned above give me confidence that we are on the cusp of a new era for media, and I eagerly await the opportunities that lie ahead.
In a report dated December 18th, Morgan Stanley analyst Benjamin Swinburne pointed out that in the year 2024, there will be significant differences in the performance of various sector stocks. Specifically, he noted that those companies with long-term growth advantages, often found within the media and entertainment industry (referred to as a ‘winner’s circle’), would likely perform better compared to those which are more dependent on economic cycles or facing long-term challenges.
Despite the optimistic trends in the streaming industry and the possibility of consolidation, he’s not ready to become overly optimistic about these stocks right now. He continued by saying, “The challenges faced by traditional TV are still substantial, the demand for TV licensing might not fully bounce back to pre-pandemic levels, and mergers and acquisitions usually take longer than anticipated to bear fruit.
This year, Netflix significantly increased by approximately 90%, reaching $891.32, making it one of the top performers within its sector. However, Cinemark surpassed this with a staggering 121% increase. Fox Corp experienced a 60% gain, while Imax followed closely behind with a 71% rise. These media and entertainment stocks all significantly outperformed the S&P 500’s broad-based index, which itself rose by 23%.
Even though Netflix is currently thriving with its popular content and rivals cutting back on spending, I, as a gaming enthusiast who also follows the streaming world, still find myself feeling quite optimistic about Netflix’s future. As Pivotal Research Group analyst Jeff Wlodarczak put it in late November, “Our perspective remains that Netflix has emerged victorious in the global streaming competition, evident from this year-to-date performance and raised guidance (particularly compared to their streaming counterparts). In our view, this is what winning truly looks like.” He even increased his stock price target to an impressive $1,100, marking a new high on Wall Street.
Some individuals are becoming more conservative in their approach. For instance, Loop Capital analyst Alan Gould reduced his rating on Netflix stocks from “buy” to “hold” around mid-December due to its high valuation. He justified this change by stating that nearly sixteen months ago, he had upgraded NFLX based on the belief that competitors raising prices and reducing spending would enhance Netflix’s competitive position. Additionally, he pointed out that Netflix had the largest pipeline of unreleased content and global production, successfully implemented paid sharing, and was optimistic about advertising. However, Gould believes that these factors are now largely reflected in the stock price, and the shares are approaching their fair value.
In contrast to Netflix’s success, many established Hollywood players fell short or even experienced decreases in performance. This has led Wall Street to view traditional linear TV networks as struggling businesses due to cord-cutting and increased digital competition. However, Comcast and Warner Bros. Discovery’s (WBD) intentions to divest their cable network operations, potentially creating opportunities for further industry consolidation, have garnered approval from some analysts, although others remain skeptical.
Following Bob Iger’s return as CEO, Walt Disney’s stock soared by 23% this year, reaching approximately $111.35, which aligns with the broader market trends. Analyst Kenneth Leon from CFRA Research expressed confidence that by 2025, Disney will see enhanced financial performance in its direct-to-consumer (DTC) division and better-than-anticipated results in Experiences (theme parks and cruise lines). In his December 26 report, Leon increased his stock price target to $128 and upgraded his earnings forecasts for the current and following fiscal year. According to Leon’s perspective, DTC is now poised for profitable growth with a steady subscriber base. Sports are considered a crucial component of live entertainment that can attract advertising sponsors to offset sports rights costs.
In 2024, Paramount Global sealed the deal as Shari Redstone, its chairperson, relinquished control in a transaction with a group headed by Skydance Media and RedBird Capital, with David Ellison leading the way. This merger is anticipated to finalize in September. Ellison and his team have presented their vision for Paramount as a growth opportunity. However, despite this announcement, Paramount’s shares plummeted by 27%, reaching $10.46.
In late November, Comcast, headed by chairman Brian Roberts and CEO, announced it would be the first major entertainment corporation to split off the majority of its cable networks into a standalone company. This new entity, under the leadership of Mark Lazarus as CEO, did not immediately receive a name but was temporarily referred to as “SpinCo.” Comcast expressed optimism for a fresh growth path for all its assets moving forward.
According to analyst Jessica Reif-Ehrlich from Bank of America, SpinCo could serve as a unifying platform for various cable networks within the industry. In her report, she expressed optimism, suggesting that Comcast’s action might alleviate regulatory worries about a potential merger with another significant cable competitor.
However, certain spectators expressed doubts about the separation of these assets. Tim Nollen, an analyst from Macquarie, pointed out that it’s uncertain if cable networks would retain their value as standalone entities, devoid of connections to NBCU’s studio and streaming services, and without advertising partnerships, following Comcast management’s initial mention of this potential shift.
Comcast’s stock ended the year down 14.4 percent at $37.53.
Warner Bros. Discovery, headed by CEO David Zaslav, made a similar decision on December 12th, announcing they would restructure their corporate setup. This new structure separates their global linear TV division from their streaming and studios division. The revised structure aims to increase strategic agility and potentially uncover further value for shareholders. In simpler terms, as Macquarie analyst Tim Nollen highlights, this move might indicate a potential divestment of the linear networks, mirroring Comcast’s recent plans to separate most of its cable networks from NBCU.
Recently, Zaslav has expressed confidence that Warner Bros. Discovery (WBD) will surpass their previously stated goal of generating over $1 billion in direct-to-consumer profits by 2025. He believes his team will significantly outperform this target, highlighting the successful outcomes from their strategic focus, investments, and persistence with the streamer Max. However, WBD’s stock ended the year at a decrease of 9%, closing at $10.57.
2023 saw Lionsgate, a major player in Hollywood, among its yearly winners, experience a setback, with its shares dropping by 26% to reach $7.55.
In the meantime, Fox Corporation, under the leadership of Lachlan Murdoch following his father Rupert Murdoch’s promotion to Chairman Emeritus, experienced growth due to optimism surrounding its news and sports properties. Notable among these assets is Fox News, which saw a boost thanks to a significant election year. By the end of the year, the Corporation’s stock price reached $48.58, marking a 60% increase for the year.
As a gamer, I’d say, “In my gaming world of stock market investments, AMC Networks, under the leadership of CEO Kristin Dolan in her second year, took quite a hit. By the end of the year, it had shed approximately half its worth, ending at around $9.90 – that’s a 48% drop for those keeping score.
Conversely, TKO Group, owner of UFC and WWE, experienced a significant rise in its shares following its establishment in September 2023. By the end of the year, it had climbed an impressive 74 percent, closing at $142.11. On the other hand, Endeavor also saw growth, increasing by 32 percent over the same period to close at $31.29.
2024 proved to be a varied year for cinema operator stocks. The parent company of AMC Theatres, AMC Entertainment Holdings, experienced a decline in its shares, dropping 35% to close the year at $3.97. Conversely, Cinemark’s stock significantly increased by 121%, ending the year at $30.98. Similarly, Imax Corp. saw growth as well, with its shares increasing by 70% to reach $25.59, capitalizing on the recovery of the box office for Hollywood studios.
2024 saw a general decline for stocks related to music and audio entertainment, with most companies losing value. Shares of Warner Music Group decreased by 13.3%, closing at $31.00. The stock of Universal Music Group, listed in Amsterdam, dropped 4.2% and finished the year at $24.72. iHeartMedia ended the year where it began, closing at $1.98, and SiriusXM’s stock price ended at $22.80, marking a decrease of 58%.
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2025-01-01 00:56