Netflix’s stock may have been immune to the coronavirus pandemic and soared even during the volatile 2021, but it couldn’t escape the fact that its own stock, and most other Hollywood stocks, were brought to Earth in 2022.
The streamer ended Thursday at $290.00, down 58 percent over the past 12 months. After often being seen as an unstoppable juggernaut, on April 19, 2022, the Reed Hastings and Ted Sarandos-led company reported its first subscriber loss in more than a decade. That shocked investors and sent its shares down more than 35 percent, marking the firm’s biggest share price collapse in a single day. Netflix promised to pull back some of its spending plans, then launched a lower-priced tier of advertising in key markets and will roll out a plan to charge users for password sharing in 2023.
Those initiatives, and the fact that the streamer returned to subscriber growth in the third quarter — with 2.4 million subscribers for a total of 223 million worldwide — has left some analysts more optimistic, while others remain in wait-and-see mode.
Elsewhere, it was also a difficult year for entertainment conglomerates and their stocks. Cable cutting, while nothing new to traditional pay TV providers, accelerated in 2022, wreaking havoc on subscribers and cable networks, which have been the traditional profit centers of industry giants.
That wasn’t all. The industry also faced questions about its ability to reverse declines with a pivot to streaming. Investors wondered when major spending on content to drive subscriber growth would lead to streaming profitability.
That made Wall Street more closely scrutinize its ruler over content and other spending decisions in streaming. And more generally, companies ended the year reviewing their organizations to find opportunities for restructuring, optimization and cost savings.
That tighter scrutiny was compounded by weakening advertising trends amid fears of a recession in 2022. Ultimately, the industry giant saw their stocks fall sharply in 2022, often trailing the decline of the broad S&P 500 stock index, which from December fell 19.5 percent. 29.
“Over the past year, media and entertainment (M&E) stocks have seen streaming growth suddenly moderate, advertising and reopening headwinds turn into recessive headwinds, cord-cutting accelerates, and rising interest rates drive multiples downward,” Morgan Stanley’s Benjamin Swinburne wrote in a December. 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 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 leaving Wall Street late in surprised 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 the water still unclear after underperforming in the early days, there was some discussion among investors (although the follow-up was made good over the Christmas weekend and this week). Shares of Disney wrapped 2022 by 46 percent on Dec. 29 at $87.20.
Meanwhile, Warner Bros. Discovery was not formed until early April, when Discovery struck a deal with AT&T’s WarnerMedia. push profit. One of the early debates between investors and Hollywood was management’s decision to scrap a nearly completed project bat girl film for HBO Max and other projects, leading to multiple content write-offs. Warner Bros. Discovery also lowered its full-year financial forecast, citing a $2 billion loss from decisions made during AT&T’s ownership of Warner.
Elsewhere, a challenging streaming space with peak losses from Peacock — $614 million in the last quarter, up from $520 million in the comparable period a year earlier — and an increase in cable cutting impacted Comcast, which hurt its stock price. saw a 31 percent drop in value over the course of the year.
Entertainment conglomerate Sony Corp. saw its shares drop nearly 41 percent to $76.69 on Thursday, even as Sony Pictures posted higher theatrical box office sales this year, such as Not charted (as well as last December’s blockbuster Spider-Man: No Way Home) and a boost in TV license sales.
A confused entertainment business also affected Fox. Corp., which saw its shares fall 19 percent in value as 2022 came to a close and the Lachlan Murdoch-run company is considering merging with the other major part of the Murdoch empire: News Corp., the owner of Dow Jones, The Wall Street Journaland Australia’s Foxtel.
An industry facing macroeconomic headwinds impacted AMC Networks, which lost its CEO Christina Spade after less than three months on the job. Shares in The living Dead producer was down 59 percent for the year as of December 29.
Another downgraded stock for 2022 is Lionsgate, which fell 53.5 percent to $5.44 on Dec. 29 as top executives have discussed the benefits of potentially divesting its Hollywood studio business just as Starz pivots to the streaming space. The goal appears to be to create two standalone companies so that investors can value the Starz and studio assets separately.
On the stock market front, retail investors’ big bets on parent company AMC Entertainment Holdings were sharply reduced in 2022 as the mega-exhibitor’s shares fell 40 percent in value over the past year, to close at $4 on Dec. 29. 14. AMC Theaters, led by CEO Adam Aron, has unveiled debt restructuring plans to offset the high borrowing resulting from the pandemic.
The ongoing economic storm circling the wider theatrical film business also affected Cinemark, which saw its share price fall 48 percent in 2022. The exhibitor wants to profit next year as Hollywood studios fall back on theatrical releases and streaming companies leverage theatrical releases afterward. Netflix revealed plans to play Glass Onion: A Mystery of the Blades at the Cinemark, AMC Theaters and Regal Cinemas locations.
Among cinema stocks, Imax stood out at the end of the year as it benefited from Disney’s Avatar: the way of the water movie playing on its screens at premium prices. The tech company, which saw its shares fall 23 percent in value over the past year, is betting on a higher box office and more theater signings and installations in 2023, even though there is a question mark over China’s box office next year as the country ends its zero-COVID policies and virus infections are skyrocketing.
Looking ahead, Wells Fargo analyst Steven Cahall expects tougher times for the entertainment industry in the new year. “Our forecasts for 2023 indicate that the media and cable sectors are responding to generally tougher times, both cyclical and structural. Tough times mean tough decisions,” he wrote in a Dec. 20 report. The Wall Street pundit’s forecast is that the “sector will remain out of favor until cyclical pressures at least ease.”
