For much of Hollywood, things are looking rough right now. Streaming subscriptions appear to be stagnant, with Netflix reporting subscriber losses for the second straight quarter (the first time that’s happened) and NBCUniversal’s Peacock flat on quarter-over-quarter growth. Ads are in worse shape, with Apple, Roku, Snap and Meta seeing a spending slowdown and NBCU CEO Jeff Shell telling analysts the market is indeed “jerky.”
But as bad as things may seem in the major media business models of subscription and advertising, there is another area that seems to be thriving, with no signs of slowing down: live events and theme parks. And companies that have this revenue stream may be able to stick with it until the jerkiness subsides elsewhere.
Consider NBCU, which reported its Q2 results on July 28. The company says its US theme parks in Orlando and California are moving above 2019 levels financially. “It is clear that the Parks business has been subject to macro trends in the past and there is no reason to believe that it will not be the case in the future,” said Jeff Shell, CEO of NBCUniversal, during the earnings call. Comcast. “When we look at our business, we don’t see it in our numbers and our performance yet. And we’re posting these numbers despite the fact that our international visit domestically is about half what it was in the past.”
The numbers bode well for Disney, which will report earnings on Aug. 10 as it faces investor pressure over its streaming business. The power of the parks could ease investor concerns about short-term streaming or concerns about advertising. To that end, Disney execs have focused on theme parks. Last Quarter, CEO Bob Chapek started talking with investors about the “fantastic performance” of the domestic parks, with spending per capita increasing by more than 40 percent compared to 2019. This came even while the domestic parks still limit the number of visitors. (Disney used the pandemic to transform its park operations, launching a new pass system designed to generate more revenue from frequent visitors. It also launched products like Genie+ and Lightning Lanes, which offer enticing upsells to guests.)
The parks have been an important part of Disney’s recovery story and have helped the company lower its leverage ratio, which was high at the start of the lockdown, Disney CFO Christine McCarthy said at a May 18 MoffettNathanson conference: “Our recovery , mainly driven by theme parks, has really given us the opportunity to take that leverage down.”
And, as Morgan Stanley analyst Ben Swinburne wrote in a July 1 note, the parks could even be a “cover” against a potential recession. “We think pent-up demand is clearly a factor in Parks’ current strength, which, along with investment in Disney’s yield management, can grow the business even in a modest recession,” he wrote.
Parks are by no means the only sector experiencing a boom moment. The live events that have been able to host post-COVID returns seem to be thriving even amid greater economic concerns. A source at an agency familiar with the live music and events industry says the pent-up demand is real.
“The demand is still insane. When there’s a recession, we don’t see it in that space. Tickets are still flying, and at higher prices than before the pandemic,” adds this source, noting that they were “not sure how long it might take, but there’s no sign it will slow down any time soon.”
That demand could further stimulate Live Nation, the dominant player in live music. While live events can still be affected by inflation or other economic factors later on, they have the benefit of the suppressed demand from the pandemic, an abundant supply of talent and tours (which were also limited during the lockdown), and the benefit of pre-sold events. products, Macquarie analyst Paul Golding wrote in a July 5 note.
Live Nation has already indicated that it expects to reap the benefits of this trend, with the company anticipating a record high in 2022, driven by high demand in the UK this summer, and 2023 (with more than 60 tours already under discussion). ). The company also recently resigned CEO Michael Rapino to a multi-year deal that could be worth as much as $30 million a year, justifying the hefty pact by noting that Live Nation is on track to reach 100 million people in 45 countries this year. to operate, a record for the company.
Madison Square Garden Sports, while dependent on the popularity of its teams (the NBA’s Knicks and NHL’s Rangers), also sees high demand for its sporting events, notes Golding, with season ticket renewals at 85 percent in the last quarter, suite revenue which were above pre-pandemic levels and March ticket levels at the highest point of the season. And it’s not just ticket sales. According to Shell, consumers who have been to Universal’s parks have spent more per person than before the pandemic. He adds that “we have not seen any weakness in the transition from the quarter to the next quarter.” That means that food, merchandise and other additional income will increase in addition to ticket sales.
For companies like Comcast or Disney, with broad exposure to that world, the diversified revenue streams could help smooth out what appears to be a bumpy year for the entertainment industry. And for other companies attending live events, such as the WWE (which would benefit from a boost to its profits as sales speculation heats up) or Endeavor (the owner of the UFC and the Professional Bull Riders competition alongside a healthy music representation ), it could even be a source of growth.
In other words, advertisers can scale back ad purchases in anticipation of a slowdown as consumers become more cost-conscious about where they spend their streaming dollars.
But when it comes to a family vacation or a concert, all bets are off and the wallets remain open.
This story appeared in the July 27 issue of The Hollywood Reporter magazine. Click here to subscribe.