US stocks just had their worst year since 2008, with media and technology leading the downward spiral. Streaming went haywire, linear TV declined, a cinematic recovery faltered, inflation, interest rates, unemployment and geopolitics turned ugly, recession hugs hit advertising, and M&A largely ground to a halt. If not, it probably would have (eg Elon Musk’s painful $44 billion takeover of Twitter).
“This is a very complicated environment and largely unprecedented,” said Moody’s SVP Neil Begley.
The SmackDown had a winner: Sports Entertainment Engine WWE ended the year with 38%. Runner-up – flagship station and new CW owner Nexstar, which was up 16%.
These were rare exceptions in a year of carnage for players big and small in all levels of entertainment. Disney, the only media stock in the Dow Jones Industrial Average, fell 44% and not only had a bad year, it also had its worst year since 1974.
See pie charts below.
Other lows: Fubo shares fell nearly 90%. Roku, Snap and AMC Entertainment were down more than 80%. Warner Bros. Discovery and Lionsgate lost more than 60%. From Netflix to Charter and Chicken Soup for the Soul, from Apple and Meta to Spotify and Cinemark, it was a sea of red. National CineMedia has become a penny stock and is in danger of being delisted. Behind the storm is a composite of economic worries and industry-specific woes, led by the painful reassessment of streaming priorities even as cord-cutting accelerates.
“This has been as bad a year in the media industry as I can remember,” lamented one veteran analyst.
The S&P 500 ended 2022 up 19.4% from Friday’s closing bell. Communications services by S&P, one of 11 sectors in the index, which includes most media and telecommunications companies, fared the worst, losing nearly 40%. (The only sector that will rise in 2022 – energy.)
The DJIA lost 8.8%. The Nasdaq fell 33%, the hardest hit among major stock indexes, which was not unexpected given the massive disruption in tech stocks.
WWE bucked the downward trend and made for a surprisingly smooth management transition after CEO Vince McMahon resigned amid scandal. An internal investigation found that he made improper payments to a number of women in exchange for their silence about sexual relations. The company, with a slew of wildly popular shows soon to be revamped at a time of rising sports rights costs, is now run by co-CEOs Stephanie McMahon and former top CAA sports agent Nick Kahn, along with former wrestler Triple H (Paul Michael) Levesque ) as Chief Content Officer. Weekly shows Monday Night Raw and NXT aired on NBCUniversal’s US network, and Friday night smackdown on Fox have five-year contracts ending in 2024. Peacock will retain the streaming rights until 2026.
Wall Streeters see more bidders in the mix (as in other sports) and higher prices for the next few rounds. Meanwhile, negotiations for the first two co-terminus transactions will take place Ring madness 39WWE’s annual pay-per-view and live streaming event.
It could also sell itself, with Comcast a likely buyer. There has been speculation about this for years. Vince McMahon remains the controlling shareholder, and some analysts wonder if he might be less interested in owning the company if he can’t run it. As extravagant as the product is, WWE’s financial management is conservative and has a strong balance sheet with $450 million in cash and about $235 million in debt at the end of the September quarter.
As for Nexstar, the big broadcaster benefits from scale, including multiple broadcasters in some markets with hard political races; It surpassed $500 million in political advertising in 2022. And it has also reduced its advertising exposure, with more than half of its revenue coming from distribution, or retransmission, a business that has historically been resilient to economic downturns.
“It was the only station that really did the political figures. It has relatively low leverage, pays a healthy dividend and has bought back a lot of shares,” noted one analyst.
Net debt, a measure of a company’s financial health, refers to net debt as a proportion of EBITDA: earnings before interest, taxes, depreciation and amortization. Debt is once again becoming a major concern for businesses in a world of high and rising interest rates. Supply chain disruptions due to Covid and the war between Russia and Ukraine have pushed inflation to a 40-year high, prompting the Federal Reserve to raise interest rates seven times in 2022.
Tegna, another broadcaster, also rose 14%, likely thanks in large part to Standard General’s upcoming $24-a-share acquisition. Advertising giant Omnicom also ended the year in positive territory. But it’s an unusual state to be able to count all the media and technology winners on one hand.
Among the losers, Fox fell just 17%, less than most. It remains something of a Wall Street favorite, also fiscally conservative, strong in sports and news, and less affected by the streaming wars than rivals. Investors like Rupert Murdoch’s proposed re-combination of Fox and News Corp. It will take place next year.
As the media heads toward 2023, Wall Street understands the great existential dilemma: The streaming genie is out of the bottle. But it now requires a clearer path to profit. Quick fixes are not in sight. However, there is a learning curve as the industry develops. Streaming is still pretty new to everyone, but Netflix and even the Pioneer are trying to adapt.
“Stocks have had a terrible year, but if you turn it around, you can say they’re already starting to reflect most of the bad news,” said one investor — at least that’s the hope.
Writer: Jill Goldsmith
Source: Deadline
Bernice Bonaparte is an author and entertainment journalist who writes for The Fashion Vibes. With a passion for pop culture and a talent for staying up-to-date on the latest entertainment news, Bernice has become a trusted source for information on the entertainment industry.
