Hollywood Stocks Fall Sharply in 2022 Amid Ad Challenges, Focus on Streaming Profits – Hollywood Reporter

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U.S. media stocks fell back to Earth amid pressure on streaming subscriber growth, increased cord-cutting and weakened advertising trends.


Netflix’s stock may have been immune to the coronavirus pandemic and risen even during the volatile 2021, but it couldn’t escape seeing its own shares, and most other Hollywood stocks, being brought down to Earth in 2022.
The streamer ended trading Thursday at $290, down 58 percent over the last 12 months. After often being seen as an unstoppable juggernaut, the Reed Hastings and Ted Sarandos-led company reported its first subscriber loss in more than a decade on April 19. That shocked investors and sent its shares down more than 35 percent, which marked the firm’s biggest one-day share price collapse. Netflix vowed to pull back on some of its spending plans, subsequently launched a lower-priced advertising tier in key markets and is set to roll out a plan to charge users for password sharing in 2023.

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Those initiatives, and the fact that the streamer returned to subscriber growth in the third quarter — adding 2.4 million subscribers for a total of 223 million globally — has made some analysts more optimistic, while others remain in wait-and-see mode.
It was also a rough year elsewhere for entertainment conglomerates and their stocks. Cord-cutting, while nothing new for traditional pay TV providers, accelerated in 2022 and wreaked havoc on subscribers and cable networks units, which have been the traditional profit centers of sector giants.
That wasn’t all. The industry also faced questions about its ability to reverse declines with a pivot to streaming. Investors asked when big content spends to drive subscriber growth would lead to streaming profitability.
That left Wall Street running its ruler more closely over content and other spending decisions in streaming. And more broadly, companies have ended the year reviewing their organizations to find restructuring, optimization and cost-cutting opportunities.
That closer scrutiny was compounded by weakening advertising trends amid recession fears in 2022. Ultimately, sector biggies giant saw their stocks finish 2022 down sharply, often underperforming the drop in the broad-based S&P 500 stock index, which fell 19.5 percent as of Dec. 29.
“In the past year, media and entertainment (M&E) stocks saw streaming growth suddenly moderate, advertising and reopening tailwinds turn to recessionary headwinds, cord-cutting accelerate and rising interest rates drive down multiples,” wrote Morgan Stanley’s Benjamin Swinburne in a Dec. 19 report. “As a result, 75 percent of the 27 companies in our M&E coverage group underperformed the S&P 500.”

In addition, various Hollywood giants also had to deal with company-specific issues and themes in 2022.
The Walt Disney Co., for example, marked its biggest stock drop in decades after it struggled with the likes of bigger-than-expected streaming losses — $1.47 billion in Q4, more than double the $630 million reported in the comparable period of 2021 — and political missteps before surprising Wall Street late in the year by bringing back Bob Iger as CEO to replace Bob Chapek. But with the ultimate box office performance for Avatar: The Way of Water still unclear after underperformance in the early days, there was some investor debate (although the sequel made up ground over Christmas weekend and this week). Disney’s shares wrapped 2022 down 46 percent at $87.20 on Dec. 29.
Meanwhile, Warner Bros. Discovery was only created in early April, when Discovery closed a deal for AT&T’s WarnerMedia, and the merged company’s stock had a tough start, falling 63.5 percent since then and ending the year with a preoccupation on cost-cutting and a profit push. Among the early investor and Hollywood debates was management’s decision to scrap a nearly finished Batgirl movie for HBO Max and other projects, leading to multiple content writedowns. Warner Bros. Discovery also lowered its full-year financial forecast, citing a $2 billion hit from decisions made during Warner’s ownership by AT&T.
Elsewhere, a challenging streaming space with peak Peacock losses — $614 million in its latest quarter, up from $520 million in the comparable period a year before — and increased cord-cutting impacted Comcast, which saw its share price fall by 31 percent in value over the course of the year.

Entertainment conglomerate Sony Corp. saw its stock fall by nearly 41 percent to $76.69 Thursday, even as Sony Pictures posted increased box office sales for theatrical releases this year, like Uncharted (as well as last December’s blockbuster Spider-Man: No Way Home), and a boost in TV licensing sales. 
A muddled entertainment business also impacted Fox. Corp., which saw its shares fall 19 percent in value as 2022 neared a close and the Lachlan Murdoch-run firm weighs whether to merge itself with the other major piece of the Murdoch family empire: News Corp., the owner of Dow Jones, The Wall Street Journal and Australia’s Foxtel.
An industry occupied by macroeconomic headwinds impacted AMC Networks, which lost its CEO Christina Spade, after less than three months on the job, and signaled the need for heavy restructuring charges that could hit $475 million amid steep layoffs. Shares in The Walking Dead producer were down 59 percent for the year as of Dec. 29.
Another beaten down stock for 2022 is Lionsgate, which was down 53.5 percent to $5.44 on Dec. 29 as top execs have been talking up the benefits of potentially spinning off its Hollywood studio business just as Starz pivots to the streaming space. The goal appears to be creating two stand-alone companies so investors can value the Starz and studio assets separately.
On the exhibition front, the big bets retail investors placed on parent AMC Entertainment Holdings were greatly reduced in 2022 as shares in the mega-exhibitor slid by 40 percent in value over the last year, to close at $4.14 on Dec. 29. AMC Theatres, led by CEO Adam Aron, has unveiled debt restructuring plans to offset steep borrowings coming out of the pandemic.

The continuing economic storm circling the wider theatrical movie business also impacted Cinemark, which saw its stock price fall 48 percent in 2022. The exhibitor is looking to benefit next year as Hollywood studios lean back into theatrical releases and streaming companies make use of theatrical releases after Netflix unveiled plans to play Glass Onion: A Knives Out Mystery at Cinemark, AMC Theatres and Regal Cinemas locations.
Among cinema stocks, Imax stood out at the year end for gaining from Disney’s Avatar: The Way of Water movie playing on its screens at premium prices. The technology company, which saw its stock fall by 23 percent in value over the last year, is betting on higher box office and increased theater signings and installations in 2023, even as there’s a question mark over its China box office next year as the country ends its zero-COVID policy and virus infections shoot up.
Looking ahead, Wells Fargo analyst Steven Cahall expects more difficult times ahead for the entertainment industry in the new year. “Our 2023 predictions indicate media and cable sectors reacting to generally harder times, both cyclical and structural. Tough times mean tough decisions,” he wrote in a Dec. 20 report. The Wall Street expert’s prediction is for the “sector to remain out of favor until at least cyclical pressure abates.”
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