Media companies grit their teeth. Investors have given up

Towards the end of last year, Buzzfeed’s public offering began as a day of reckoning rather than a day of celebration.
When it hit the market in December – a test of investors’ appetite for digital media – BuzzFeed’s share price plummeted. The first employees were furious when the value of its shares halved within days to about $ 5 per share.
As it turns out, this was just the beginning. Its stock has now dropped to about $ 1.50, 84 percent lower than its listing price.
One Buzzfeed optimist could blame the broader stock market sales. Over the past six months, the S&P 500 has fallen nearly 20 percent as the Federal Reserve raises interest rates to keep rising inflation in check.
But in the media sector, the decline was, to say the least, terrible. For example, since its peak in November, Netflix has fallen nearly 75 percent, while The New York Times has fallen 48 percent, Disney has fallen 45 percent, Warner has fallen 49 percent and Spotify has lost 60 percent. .
These sharp declines in valuation indicate that investors are deeply concerned about the future of these industries – journalism, film, television and music – and the large companies that drive them.
“Right now, investors are very frustrated with the whole category,” says Rich Greenfield, an analyst at Light Shed.
What is strange, at least in public, is that corporate reactions to this horrific massacre have so far been largely muted. These companies have largely opposed mass layoffs or radical cost-cutting measures.
Netflix has cut about 4 percent of its workforce. His global head of television said this last month, declaring that the company “will not fundamentally change its business”. The New York Times currently lists more than 200 posts on its website. Spotify did not cut staff, but said it would delay rents by 25 percent.
In turn, Warner has stopped its original production in places like Northern Europe and Hungary, but is expected to spend $ 22 billion on content in 2022 – more than last year. Most large studios still plan to spend more on programming in 2023 than in 2022.
BuzzFeed said it would only approve “essential appointments” while giving journalists a controlling interest, while also making it clear that it would cut about 1.7 percent of its staff. By comparison, BuzzFeed laid off 15 percent of its workforce in 2019, and in 2020, 6 percent of its employees cut in the United States.
In fact, these groups indicate that, in the face of market turmoil, they will mostly continue on the path of their strategies and growth plans, and bet on the continuity of their business.
But can she tolerate it? At what point does this become a real problem for Buzzfeed, whose share price is dangerously close to zero? Against the Hollywood studios that committed more than $ 140 billion to programming this year at a time when the economy is heading into a recession?
Over the past month, these have been the questions I have been asking industry managers. Spotify CEO Daniel Eck downplayed his company’s decline as a challenge to the wider market. “I don’t think the market has specifically turned its back on Spotify,” he said. “I think the market has gotten bad for just about everything,” he added.
According to a veteran entertainment lawyer, the studios he works with have canceled shows and movies in recent weeks, but they have remained relatively quiet. “Cuts are now in full swing,” he said. “But you do not want consumers to read that you are not going to make content for which they pay $ 15 a month. So they are going to keep quiet.” “But a number of offers are being canceled,” he added.
The reception for media shares was so fierce that Greenfield, an analyst at Lightshade, suggested that struggling companies, such as Buzzfeed, could withdraw from the public market altogether and go private.
What is clear is that the excesses of the era of “peak television” are not sustainable. The monetary and fiscal stimulus after 2008 brought unlimited money to Hollywood. As consumers, we had more TV business to watch than ever before, and we paid less money for it than ever before.
Now, that will change. Higher interest rates make future earnings for growth stocks relatively less attractive. The Netflix model – to spend big and sacrifice profits in the name of growth – is therefore no longer as glamorous.
Eventually, media companies are likely to start spending less. “Something has to change, because if you leave it as it is, no one will make money,” a longtime consultant told Hollywood Studios.

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