Drew Anger
As 2022 draws to a close, the outlook for major media companies and their earnings in 2023 is looking dire as many media channels struggle with ad revenue.
That’s it part of the analysis of the TV and entertainment market from Bank of America analyst Jessica Reif Ehrlich, who said that with “a little transparency” ahead, the commercial market will remain difficult next year due to a number of factors that can increase the tone. for streaming companies, especially.
These factors include the continued shift of ad revenue from traditional TV to ad platforms, as well as how companies recover from lost revenue.
Ehrlich said ad spending shifting from “viewing lines” to ad services, new ad-supported marketing strategies and the growth of “retailer networks” like Amazon ( AMZN ) “will all expand the ad budget” in a non-financial manner. brand marketing.
Ehrlich said that while many media companies are taking part in advertising, without major changes in their advertising, “We still doubt that they will be able to recoup the lost ad revenue at one time” over the long term. time.
Among the companies that Ehrlich said are famous, but not in a good way, is Disney (NYSE: DIS). Media and entertainment have been rocked recently by the sudden firing of Chief Executive Bob Chapek, and the return of retired CEO Bob Iger to the company on a two-year contract. Ehrlich said investors and the film industry will “celebrate” Iger’s return, and called Iger a “strong, well-rounded and charismatic leader.”
However, Ehrlich said that “bringing back the magic to Disney may take some time” as Iger faces several strategic decisions that will affect Disney ( DIS ) in the coming years.
The options include how to change the Disney Media and Entertainment Division [DMED]which includes Disney +, whether it will change the price increase in Disney’s ( DIS ) theme parks, Hulu options and whether or not to release ESPN and other linear TV channels Disney ( DIS ) has.
Ehrlich said Iger needs to move quickly on restructuring, which could put him at odds with Kareem Daniel, the former DMED chief who Iger fired in one of his moves to return to Disney’s ( DIS ) CEO office. Ehrlich expects Iger to spend more time evaluating other factors before making major changes.
“We expect Iger to carefully review all of this and it may take several months until we fully understand his long-term vision,” Ehrlich said.
Spending remains a major challenge for media and entertainment companies, which Ehrlich said is “regulatory” at the moment like Netflix (NASDAQ: NFLX) and other media companies have said they are cutting their budgets. “We believe that inflation will continue [into 2023],” Ehrlich said “Indicative of budget stability from year to year means less or more of a mix of lower costs. [content] other ways.”
One area where product demand is expected to remain strong is gaming rights. Ehrlich noted that Amazon’s ( AMZN ) coverage of Thursday night’s National Football League games, and Apple (NASDAQ: AAPL) Major League Soccer’s new opening contract states that “the demands of the sport [should] stay strong for the next few years. “
With various moving parts affecting the media sector, Ehrlich said the industry is “moving very close” to new business consolidation. Ehrlich said that “tweaking the exact timing of any deal is difficult” but that there is one company out of all the others that can set up a buy and sell deal.
“We believe that Bob Iger’s vision for Disney can be a catalyst for moving forward,” Ehrlich said. “Potential disruptions could cause significant disruption to the entire market.”
Disney ( DIS ) gave a hint of where it might be headed with its latest earnings report.
