As always, the numbers tell the tale. At the half-year mark, 2024 has been a brutal ride of double-digit stock price declines for traditional media giants with the exception of Disney and Fox Corp. Big Tech and Netflix, on the other hand, have swelled with double-digit gains year to date.
So why aren't the well-heeled Silicon Valley and Seattle crowd swallowing up vulnerable media companies at long last? That would seem to be the natural order of things for industries that have been inching into each other's businesses for three decades.
Apple, Meta, Alphabet and most recently Netflix have yet to show any evidence of wanting to buy a hunk of old Hollywood. Amazon dipped a toe in with its purchase of MGM (a relatively contained studio operation and large library without massive overhead commitments) in 2022 but has stayed out of the hunt (so far) for the two biggest targets, Paramount Global (down 22.5% on the year to date as of July 3) and Warner Bros. Discovery (down 36.5%). Paramount's cliff was even steeper 48 hours ago before the stock began to pop on news of renewed merger talks with Skydance Media and the possibility of a BET sale coming down the pike.
Those companies and cable-endowed Comcast (down 13% year to date) have struggled with losses in repositioning production operations and channel platforms for the streaming age. Disney shares have enjoyed a rebound so far this year (up 9%) thanks to the resilience of its theme parks and improved financials for Disney+ and Hulu. Fox Corp. has logged a 17% year-to-date bounce thanks to the strength of its news and sports cable assets.
By sharp contrast, the tech set is soaring. Facebook parent Meta is up 44% year to date while Netflix is close behind with a 40% spike. Google parent Alphabet is up 33%; Amazon has climbed 30%. Apple has logged a more modest 15% rise. Microsoft, which swallowed up video game giant Activision Blizzard in October, is up 22.5%.
Media heavyweights are likely due to endure more pain as the year goes on. The political and regulatory environment for mergers and acquisitions is so volatile that there's little hope of getting a horizontal combination in any form among Paramount, WBD or Comcast/NBCUniversal approved by the Biden administration's Justice Department and Federal Trade Commission.
On Tuesday, the FTC reinforced its anti-consolidation bona fides by suing to block the proposed $4 billion acquisition of retailer Mattress Firm by mattress manufacturer Tempur Sealy International. The FTC, which has moved to block consolidation efforts across myriad industries, said the combination of the retail giant with the world's largest mattress manufacturer would ultimately "suppress competition and raise prices for mattresses for millions of consumers."
The chaotic swings of the 2024 presidential race haven't helped the situation for the media stock laggards, which also include AMC Networks (down 49%) and Lionsgate (down 19%). If President Joe Biden is reelected, the administration's hard line against M&A activity in mature industries like media (and mattresses) may hold. If Donald Trump returns to the White House, anything is possible amid his threats to settle scores and punish his perceived enemies, of which there are many in media and entertainment.
With only bad and worse options on the horizon, most Big Media stocks are likely to stay underwater for the rest of 2024.
BIG MEDIA'S BIG DILEMMA
Industry headwinds and M&A obstacles are taking a toll showbiz stocks
CLOSING PRICES AS OF JULY 3:
AMC Networks: $9.63
Comcast: $38.05
Disney: $98.61
Fox Corp.: $32.44
Lionsgate: $8.48
Netflix: $682.51
Paramount Global: $11.46
Warner Bros. Discovery: $7.23
Source: Yahoo Finance
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