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Netflix rises again as legacy media failures mount

Bob Iger, CEO of The Walt Disney Company, left; David Zaslav, CEO and President, Warner Bros. Discovery, center; and Bob Bakish, President and CEO, Paramount Global.

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Companies and industries have ups and downs. Old media industry in a valley.

The first half of 2023 was a huge disappointment for media executives who wanted this year to be a rebound from a terrible 2022, when a slowdown in subscriber flow slashed ratings. NetflixAnd DisneyAnd Discovery Warner Brothers And Paramount Global to almost half.

Instead, investors are once again excited about Netflix’s future prospects as it cracks down on password sharing, which could lead to tens of millions of new sign-ups. Shares of Netflix have soared in the past five months, outperforming the S&P 500.

Meanwhile, the old players couldn’t get out of their own way.

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

“When it’s raining, it’s drizzling,” said LightShed media analyst Rich Greenfield. “It just keeps getting worse.”

It’s been a bumpy ride for Disney CEO Bob Iger since he returned to lead the company late last year. Disney It recently finished laying off 7,000 employees. Chief Financial Officer Christine McCarthy stepped down last week. The company is pulling programming from streaming services to save money. Its animation business is in deep trouble, with its latest Pixar movie, “Elemental,” having the studio’s lowest opening weekend gross since the original “Toy Story” came out in 1995. Stock has struggled in the past five months.

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Disney versus 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 It cut its dividend last quarter as broadcast losses peaked this year and a weak advertising market exacerbated the ailing cable network business. Wells Fargo issued an analyst note Friday saying the company’s bull case and bear case are the same: selling for parts. Said Warren Buffett, perhaps the most famous investor in history CNBC presents Paramount Streaming “Basically not good for this business.”

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Paramount Global vs. the Standard & Poor’s 500 over the past five months.

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Fox Corp. against the S&P 500 over the past five months.

NBCUniversal weathered the storm better, shielded by its parent company, Comcast, which derives its revenue from its cable and wireless assets. The above errors have also been taken advantage of. MSNBC became the No. 1 news network this month for the first time in 120 weeks, dethroning Fox News amid coverage of former President Donald Trump’s federal indictment. The Super Mario Bros. Universal’s Movie is the biggest box office hit of the year, yet stocks haven’t moved much.

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Comcast vs. the Standard & Poor’s 500 over the past five months.

All of this is happening with an expanding strike of Hollywood writers playing out in the background with no end in sight. Writers know that the longer the strike lasts, the greater the pain will be inflicted on the media companies, who will eventually run out of content already written. Zaslav recently gave a commencement speech at Boston University and was drowned out in boos and cheers of “pay your book.”

This week may bring more bad news. Film and TV actors are set to join the writers’ strike unless they reach an agreement with Hollywood studios by Friday.

Greenfield said the beneficiaries of shutting down work in Hollywood will likely be YouTube, TikTok and Netflix, which continue to produce international content not affected by the strike.

Legacy media may get a small reprieve if advertising jumps back up as the 2024 US presidential campaign heats up. But there is still little evidence that investors will reward media companies simply for cutting costs. There is currently no solid growth narrative for legacy media, and merger prospects are murky as regulators block media-adjacent deals like Microsoft’s acquisition of Activision and Penguin Random House’s Simon & Schuster acquisition proposal.

The industry has just concluded its annual advertising gala in Cannes, France. Old media executives still shell out company dollars for a yacht lounging trip and rosé drinking. The background was as beautiful as ever.

But the scene is bleak.

Disclosure: Comcast owns NBCUniversal, which is the parent company of CNBC.

WATCH: Mark Reid, CEO of WPP, on the state of the advertising market, from Cannes Lions 2023

WPP CEO Mark Read on the state of the advertising market



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