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Media conglomerates lose $500 billion in value as stocks head for historic decline

Media conglomerates lose $500 billion in value as stocks head for historic decline

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More than $500 billion was wiped from the market value of the world’s biggest media companies this year as investors pissed off the streaming revolution, triggering historic share price declines for broadcast and entertainment giants.

Intensified competition and rising costs, coupled with a tightening of the consumer belt and a slowdown in advertising, have triggered an industry-wide downturn.

Media, which encompasses a wide range of activities for investors from film production to advertising and cable television, was among the hardest-hit sectors in what is expected to be the worst year for global equities since the financial crisis.

“It was a perfect storm of bad news,” said Michael Nathanson, media analyst at MoffettNathanson. “I’ve been in this sector for a long time and I’ve never seen such a poor collection of data points before.”

Walt Disney stock, which has fallen about 45 percent, is heading for its biggest annual decline since at least 1974. Shares have come under more pressure in recent days as earnings from Disney’s much-anticipated sequel Avatar fell short of some estimates in its opening weekend.

Paramount Global is down 42 percent this year and Netflix is ​​down 52 percent, while Warner Brothers Discovery has plummeted 63 percent since its inception this year through AT&T’s combination of Discovery and WarnerMedia.

The conglomerate’s executives are trying to integrate two of the biggest media companies at a time of industry turmoil, and last week warned there could be up to $5.3 billion in restructuring and other costs associated with the merger.

Streaming companies generally coped well with the onset of the pandemic, as lockdown restrictions boosted audiences and propelled shares across the sector during the March 2020 stock market boom.

But while executives spent tens of billions of dollars streaming content, viewing options have multiplied while the cost of living has skyrocketed — encouraging cash-strapped households to “switch,” or flip between subscriptions.

The Dow Jones Media Titans Index, which tracks the performance of 30 of the world’s largest media companies, is down 40 percent this year, with its combined market value shrinking to $808 billion from $1.35 trillion.

The bar chart of the biggest media stock is down year-to-date, showing cable companies and streamers hit hard by the sell-off

Rising interest rates have depressed valuations, particularly for the sector’s ‘growth’ stocks. The music provider Spotify has slumped by 69 percent and the video specialist Roku by 81 percent.

Traditional broadcasters are also affected. Some of the sharpest falls have occurred for US cable plant owners, who have long been a cash cow. Charter Communications is down 53 percent and Comcast is down 31 percent.

Cord-cutting has accelerated in the US, with traditional pay-TV subscriptions tracked by Macquarie falling 8.3 percent in the third quarter compared to the same period last year.

Price increases — particularly for esports — had until recently mitigated the drop in customers, “but when you get into a recession, you worry the consumer will refuse to pay,” said Tim Nollen, media tech analyst at Macquarie.

Most streaming services were making “very heavy losses” so media companies “are not yet able to see where [they] can compensate for the linear decline,” adds Nollen.

Meanwhile, advertisers have become more reluctant to promote brands as the global economy slows, hurting media owners including Britain’s ITV, whose shares have fallen 36 per cent.

The broadcaster recently said that despite a boost from the World Cup, it is on track for a decline in annual advertising revenue.

In response to the challenges, some of the industry’s largest companies are turning to price hikes, job cuts, and other initiatives like ad-supported tiers of streaming.

Analysts at Morgan Stanley wrote in a report this week that if such moves didn’t yield “significant” gains in streaming, companies would be forced to either “give up” or consolidate.

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