Reed Hastings, Co-CEO, Netflix speaks at the 2021 Milken Institute Global Conference in Beverly Hills, California, U.S. October 18, 2021.
David Swanson | Reuters
The media and entertainment industry prides itself on its mastery of classical storytelling’s three acts: the setup, the conflict and the resolution.
It’s safe to declare the first act of the streaming video wars over. Barring a surprise late entrant, every major media and technology company that wants to be in the streaming game has planted a flag. Disney+, Apple TV+, Paramount+, Peacock and other new streaming services are spreading around the globe.
“Act one was the land grab phase,” said Chris Marangi, a media investor and portfolio manager at Gamco Investors. “Now we’re in the middle act.”
Last month, the central conflict of the streaming wars came into focus. The industry was thrust into turmoil after Netflix disclosed its first quarterly drop in subscribers in more than a decade and warned subscriber losses would continue in the near term.
Second act problems
- Netflix’s rapid decline after a pandemic-fueled boom has investors questioning the value of investing in media companies.
- Streaming is the future of the business, regardless of recent problems, as consumers have gotten used to the flexibility the services offer.
- There could be more consolidation to come, and streamers are increasingly embracing cheaper, ad-supported tiers.
That news set off worries about streaming’s future and cast doubt on whether the growing number of platforms could become profitable. At stake are the valuations of the world’s largest media and entertainment companies — Disney, Comcast, Netflix and Warner Bros. Discovery — and the tens of billions of dollars being spent each year on new original streaming content.
As recently as October, Netflix, whose hit series “Stranger Things” returned Friday, had a market capitalization more than $300 billion, topping Disney’s at $290 billion. But its shares are down over 67% from the start of the year, slashing the company’s worth to around $86 billion.
Legacy media companies that followed Netflix’s lead and pivoted to streaming video have suffered, too.
Disney shares are among the worst performing stocks on the Dow Jones industrials this year, down about 30%. That’s even though series such as “The Book of Boba Fett” and “Moon Knight” helped Disney+ add 20 million subscribers in the past two quarters. The highly anticipated “Obi-Wan Kenobi” premiered on Friday.
Warner Bros. Discovery’s HBO and HBO Max services also added 12.8 million subscribers over the past year, bringing total subscribers to 76.8 million globally. But shares are down more than 20% since the company’s stock began trading in April following the merger of WarnerMedia and Discovery.
Nobody knows whether streaming’s …….