Entertainment stocks, such as Paramount Global, had a weak performance in 2023 - although this year could prove different as streaming and gaming sectors continue to evolve.
ADVERTISEMENTEntertainment stocks were quite resilient in 2023 with several streaming companies doing well. However, Hollywood and big-cap entertainment companies were dealt a few setbacks due to strikes by the Writers Guild of America, as well as the Screen Actors Guild- American Federation of Television and Radio Artists (SAG-AFTRA).
This year though, the tide seems to be turning for the better, with streaming and gaming services expected to recover, boosted by more advertisement support, as well as the popularity of streaming bundles. More untapped markets such as Indonesia are also expected to grow, making them attractive choices for expansion.
Streaming services are also likely to adopt a more customer-first mindset, with more choices related to particular genres, interests and demographics.
Deloitte highlights that the “combined number of subscription video on demand tiers offered by the top US providers will more than double between 2022 and 2024, from an average of four to eight.
From cheap ad-supported offerings and gated content to premium tiers with instant access, streamers are expected to shift from growth at all costs to making it easier for all their subscribers to get value for the price.
Paramount Global
At the time of writing, Paramount Global's share price was down 35 per cent over the last year to $13.75 (€12.69), mainly because of its increasingly heavy investments into the streaming arm of the business. This has led to a loss of investor confidence as to whether the company will be able to compete with streaming stalwarts such as Netflix.
Earlier in 2023, the company had also dramatically slashed its dividend by nearly 79%. Currently, there is increasing speculation that Paramount Global, controlled by the Redstone family, may merge with Warner Bros in the coming few months. If so, this would lead to CBS, CNN and HBO all being under the same company.
However, tighter merger and antitrust regulations in the current US economic climate are likely to slow these plans down considerably in the coming year. Paramount is also expected to continue struggling with the loss of revenue from cancelled cable-TV subscriptions, as well as rising programming and streaming costs.
The Walt Disney Company
The Walt Disney Company fell 9.06 per cent in the past year to $93.8 (€86.16), mainly following the company being involved in a stream of lawsuits with the likes of Emma Stone, Scarlett Johansson, the state of Florida and Stan Lee’s heirs, to name a few.
Disney has also been facing competition from other streaming services such as Netflix, Amazon Prime, Universal and Apple, among others. Recently, the company has also been accused of losing its originality and leaning too much on remaking old favourites or a line of sequels, leading to several of their new movies not doing as well as expected.
In 2024, the company expects to focus heavily on their Experiences business, which includes extending their park contracts, as well as making a number of changes to their offerings. It will also boost ESPN and cement it further in the digital sports platform sector, as well as continue its investments in the streaming business.
Tencent Holdings
Tencent dropped about 27 per cent in the last year to €33.8, losing about $43 billion following China announcing surprise online gaming regulations in December last year. This was mostly done in order to help consumers curb excessive spending and gaming during the Christmas holidays.
These new guidelines included banning daily login rewards, as well warnings on recharges and top-ups. China also now needs online game owners to stop showing and promoting expensive virtual entity transactions, amongst other changes.
Although these regulations keep the consumers at the forefront, they have severely impacted gaming companies which rely on gaming rewards and incentives to promote loyalty and boost customer retention. Along with Tencent, NetEase and Bilibili have also been hit hard.
Unfortunately, Tencent has also started the year ahead on a sour note, with the company’s Riot Games brand announcing layoffs of about 530 jobs, or 11% of their current workforce, in order to streamline and focus itself better. Earlier in September 2023, Tencent’s Epic Games had also slashed its workforce by about 16%.
While more clarity is currently being awaited on how these new Chinese gaming regulations will continue to impact gaming services, if Tencent does not manage to regain its footing this year, it is likely that more layoffs may come.
Netflix
Netflix surged 53.4 per cent over the last year to €503.9. The streaming service saw an increase of almost 30 million subscribers in 2023, clocking in at almost 260 million global subscribers by the end of the year. This was mainly due to bringing in more commercials, taking a firmer stance on password sharing, as well as dividing their content into tiers, thus increasing the top tier prices.
As Michael Hewson, chief market analyst at CMC Markets highlighted: “When Netflix reported in Q3, there was some doubt as to whether it would be able to compete with its deeper pocketed peers, as well as whether its new ad-supported tier would cannibalise its revenue base as users traded down to a cheaper package."
ADVERTISEMENT"Fears that the crackdown on password sharing would prompt a slowdown in subscriber numbers have thus far proved unfounded, with the shares up over 20% to 2-year highs, since those Q3 numbers were released,” Hewson said.
One of the greatest difficulties for the company this year is likely to be maintaining last year’s momentum, as well as finding new ways to advance into the video gaming industry. Although it might still be several years before the company sees any real revenue from its tier system, it is still far ahead of several competitors with its range of programmes as well as distribution.
Comcast Corporation
Shares in Comcast Corporation, the owner of NBCUniversal and Peacock, climbed 9.72 per cent to $43.6 (€40.1) in the past year, mainly due to its growing wireless subscriber base. The company is also seeing somewhat strong broadband sales. However, fiber and fixed wireless is a growing threat.
Furthermore, the rise of more hybrid work and co-working spaces post-COVID have also led to more broadband subscriptions being cut, with Comcast losing about 18.000 customers in Q3 2023. However, the company is recovering well in the movie and park business.
In the coming year, Comcast plans to continue investing heavily in its streaming business, as well as its theme park and wireless business, in order to offset potential broadband losses. Comcast’s telecommunications company Xfinity has also recently launched a line of door and window motion sensors, in order to venture further into the home-monitoring sector.
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Spotify
Spotify leaped 114.26 per cent to $212.2 (€194.9) over the past year, mainly due to both monthly active users and premium subscribers growing considerably. In Q3 2023, year-on-year monthly active users grew by about 26% to 574 million, whereas premium subscribers jumped by 11% to 226 million.
The company has also managed to scale sustainably, by reducing operating costs significantly, as well as increasing its premium subscription prices, as well as ad-supported revenue. With podcasts growing in popularity over the last few years as well, Spotify has also been able to capitalise on that trend with a number of hit podcasts.
For the year ahead, Spotify is planning to launch in-app purchases. However, it has been facing strict restrictions from Apple’s app store so far, which severely limits apps wanting to sell digital services. However, with the upcoming introduction of the Digital Markets Act in the European Union from 7 March, this is expected to change, with Spotify hopefully being allowed to share promotions, deals and cheaper payment options.
