Media stocks lost over $500 billion in value this year — here’s what happens next – Yahoo Finance
The media industry has battled a tumultuous 2022.
Rising costs, debt-ridden balance sheets, and a renewed focus on profitability weighed on the embattled sector as investors quickly punished companies struggling to turn a profit.
Netflix (NFLX) shares are down about 50% on the year, while companies like Warner Bros. Discovery (WBD) and Spotify (SPOT) have sunk more than 60% with Roku (ROKU) plummeting a whopping 80%.
Cable operators Fox (FOX) and Comcast (CMCSA) dropped roughly 20% and 30%, respectively, as Paramount Global (PARA) shares plunged more than 45%.
Disney (DIS), once a Wall Street darling, also slid 45% on the year, and the stock is heading toward its worst year since 1947 after the much-anticipated “Avatar” sequel missed opening weekend expectations to cap off a challenging year for the House of Mouse.
In this year alone, the stock market wiped a whopping $500 billion-plus in market capitalization from the world’s biggest media, cable, and entertainment companies with more pain expected in 2023 amid higher interest rates and an unfavorable macroeconomic environment.
So, what exactly happened — and what could happen next?
Wall Street’s profit push: ‘Time to be a real company’
2022 was a clear “soul searching” year for media after the industry experienced a bumpy ride throughout the pandemic with record highs and jarring lows.
As the “stay at home” trade ran its course, peak subscriber penetration levels in the U.S. and Canada resulted in streaming companies quickly seeing growth flatten.
Netflix, the long-time leader of the streaming wars, lost subscribers for the first time in its history as its market cap sank from more than $267 billion at the end of 2021 to roughly $130 billion.
Similarly, NBCUniversal’s Peacock experienced zero growth in its second quarter, although subscribers rebounded in Q3 with 2 million net additions.
Stalling subscriber growth has led to heightened criticism of production budgets, which have sharply increased as competition intensifies. Netflix committed $18 billion to content alone in 2022 while Disney upped its budget by $8 billion this year to $33 billion.
Among companies that have begun to pivot from linear to streaming (excluding platforms like Netflix, Amazon, and Apple), direct-to-consumer content spending jumped from $2.7 billion in 2019 to $15.6 billion in 2021, according to Wells Fargo data, cited by Variety.
That number is expected to balloon to nearly $24 billion this year — despite mounting streaming losses.
Disney’s direct-to-consumer division shed a whopping $4 billion-plus in its fiscal 2022, which ended on October 1. Meanwhile Paramount told investors streaming losses would total about $1.8 billion this year — higher than Wall Street expectations.
Warner Bros. Discovery, …….