Report: Legacy Media Stuck In A Valley

The first half of 2023 has been a colossal disappointment for media executives who wanted this year to be a rebound from a terrible 2022, when a slowdown in streaming subscribers cut valuations for Netflix, Disney, Warner Bros. Discovery and Paramount Global roughly in half, according to CNBC.

Instead, investors have once again become excited by Netflix’s future prospects as it’s cracked down on password sharing, potentially leading to tens of millions of new signups. Netflix shares have surged the past five months, outpacing the S&P 500.

Meanwhile, the legacy players can’t get out of their own way.

“When it rains it pours,” said LightShed media analyst Rich Greenfield. “It just keeps getting worse.”

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

Warner Bros. Discovery is laying off more employees after cutting thousands of jobs last year as it tries to boost free cash flow. Chief Executive Officer David Zaslav threw his weight behind CNN CEO Chris Licht for a year, only to fire him this month after a series of internal errors with employees and external mistakes with programming.

Then there’s the company’s movie, cable and streaming businesses. DC Studios’ co-chief James Gunn and Zaslav both trumpeted “The Flash” as one of the greatest superhero movies ever made, but the film flamed out at the box office amid mediocre reviews. This week, Zaslav held an emergency call with directors Steven Spielberg, Martin Scorsese and Paul Thomas Anderson to convey his commitment to classic movies as he lays off employees at the cable network TCM. HBO Max is now Max, but that hasn’t stopped the service from removing programming for consumers.

Legacy media may get a small reprieve if advertising jumps back as the 2024 U.S. presidential campaign heats up. But there’s still scant evidence investors will reward media companies for simply cutting costs. There’s currently no strong growth narrative for legacy media, and consolidation prospects are murky as regulators block media-adjacent deals such as Microsoft’s acquisition of Activision and Penguin Random House’s proposed purchase of Simon & Schuster.