Warner Bros. Discovery, Paramount, Fox and Lionsgate are among studios reporting earnings this week after Big Tech announced weakness in ad spending
And that puts Hollywood’s major entertainment groups in a tough spot—strong ad sales are what’s keeping most of them from caring in the red. Studios are spending billions of dollars to grow their streaming services and grow customers, which investors believe will be the main revenue drivers as theater-goers dwindle and more consumers cut the cord.
“The sentiment in the online advertising sector has softened of late, with more anecdotes of budget cuts as advertisers withdrew some budgets in anticipation of a fourth-quarter flush,” UBS analysts announced. “Looking at 23, we think planning amidst this level of macro uncertainty sets the stage for growth below consensus in ’23.”
Or maybe investors should have listened to Rich Greenfield of Lightshade Partners. For the past six months, outspoken media analysts have been warning that studios that neglect their advertising base in favor of streaming do so at their own risk. iSpot.tv. data fromWhich tracks television ad spend, showed that Home Depot, Macy’s and automakers like Chevrolet, Toyota and Volkswagen literally dropped out of the top 60 major advertisers list in the country.
“Overall, it looks like big, less price-sensitive ads are running away from spend TV,” Greenfield said. “We suspect there has been a meaningful increase in cancellation behavior, with the glut of available inventory made worse by the lack of live sports content.”
Anyhow, Big Tech’s quarterly financial performance this week may be what may be in store for investors in the Hollywood conglomerate, as Fox kicks off a week of earnings Tuesday (Paramount and Roku File Wednesday, Warner Bros. Discovery and Lionsgate). Network on Thursday, AMC Friday and Disney slated for next Tuesday). Chief financial officers of companies nicknamed “FAANG” — Facebook, Apple, Amazon, Netflix and Google — all reported declines in revenue pinned directly on the evaporation of ad spending.
And the industry got its first (somewhat disappointing) glimpse of how entertainment companies are faring amid economic constraints – cable behemoth Comcast. Last Thursday, the company posted a 4.4% increase in ad revenue, beating another loss from streaming service Peacock, which has been bleeding nearly $600 million a quarter so far this year.
But a bright spot, possibly a glimpse of what will likely be seen from Disney’s earnings on November 8, is that the live events and tourism businesses are showing signs of a blockbuster end to the year. Comcast reported strong performance at its Universal theme parks as crowds returned after the pandemic, with revenue for the unit rising 42.4% from last year to $2.1 billion. Universal Beijing Resort had its first profitable quarter since opening in September 2021.
What is at stake is the performance of the stock. Investors have been left wondering about the future of Hollywood’s streaming ambitions and how much advertising can be drumming up during the expected downturn — especially after the $6 billion spent on political ads for this year’s midterm elections following this year’s ad spend. After a record 7.5 billion, According to ad-tracking firm AdImpact,
Entertainment groups will be particularly hard hit as TV advertisers slash budgets, families cancel summer vacations at Disney World and Universal Studios and there are further disruptions to streaming services.
Here’s what to see:
fox
When Lachlan Murdoch jumps on a call with Wall Street analysts to go over Tuesday’s earnings report, there will be an actual live plot for a “succession” in the boardrooms of both Fox and News Corp, as Rupert Murdoch bites himself. Reunites empires spun off into separate companies a decade ago. Earnings of $1.14 per share on revenue of $3.2 billion will go unnoticed analysts are speculating, Still, Fox may be undermining the narrative about the dry magic of ad spending with strong contributions from political realms ahead of the midterm election. (Fox shares are down 22% since the beginning of the year.)
of great quality
CEO Bob Bakish makes his quarterly appearance on Wednesday’s earnings call, where he’ll likely mention Paramount’s megahit “Top Gun: Maverick” at least a dozen times. We don’t blame him. The blockbuster dominated the international box office, raking in nearly $1.5 billion in ticket sales. And the CEO is expected to say what date the film will release on Paramount+. Analysts Expected company to report profit 44 cents per share on revenue of $7 billion. (Paramount stock is down 41% year to date.)
Warner Bros. Discovery
Investors still feel stunned by CEO David Zaslav’s decision to cancel HBO Max’s $90 million “Batgirl,” hours before the company reported second-quarter earnings. On Thursday, they’ll be even more concerned about progress in blending HBO Max and Discovery+ together, with plans to add CNN’s streaming future after that. There has been some well-received momentum on finally taking the lead over the DC Comics franchise. Analysts Are Expecting Loss of 21 cents per share on revenue of $10.4 billion. (WBD stock is down 49% since the April merger.)
lionsgate
According to people familiar with the matter, the company is moving to shut down its film and TV studio division instead of its Starz cable and streaming unit. This may be a bright idea, given that many large tech firms can deploy large amounts of cash if one should be interested in expanding their studio capabilities. Lionsgate was previously in talks to sell a 20% stake in Starz to a number of suitors, including France’s Canal+ – but no deal was reached. company suppose to post Thursday lost 28 cents per share on revenue of $44.6 billion. (Lionsgate shares are down 52% since the beginning of the year.)
Disney
Next week, Bob Chapek revealed full-year results that could be slightly below expectations. The company said during the third quarter that demand for live events was so high that it could close sales for the last three months of the year. He’s already three times down on Disney’s intention to buy Hulu and keep ESPN, and even integrate gambling into the sports network’s platform. look for earnings Analysts expect a hit 58 cents per share on revenue of $21 billion. Oh, he finally woke up About the awakened culture. (Disney stock is down 32% year to date.)
