Media companies are facing a challenging time with two Hollywood strikes, slumping ad revenue, and money-losing streaming businesses. Here are some of the key factors contributing to the industry’s turmoil:
Hollywood Strikes
Two Hollywood strikes are currently underway, with writers and crew members demanding better pay and working conditions. These strikes have disrupted the production of many TV shows and movies, leading to delays and cancellations.
Slumping Ad Revenue
Many media companies are struggling with declining ad revenue, as businesses cut back on their marketing budgets during an economic slowdown and cost of living crisis. For example, TV ad revenue is predicted to decline by 2.4% this year, bringing total ad revenue down to $67.7 billion. The slowdown in ad revenue is not limited to TV networks and news publishers, but also affects social media and tech firms.
Money-Losing Streaming Businesses
Despite the popularity of streaming services, many media companies are struggling to turn a profit from their streaming businesses. For example, Netflix recently reported a decline in subscribers, leading to a 35% drop in its stock price and a loss of $50 billion in market capitalization. Other streaming services are also struggling, with some analysts warning of an “unstable future” for the industry. The addition of ad-supported streaming tiers may help media companies to lower prices and make up for the temporary losses.
Recession Fears
The media industry is also facing recession fears, with executives cutting costs and enacting hiring freezes as direct-to-consumer profits stay elusive. Macroeconomic trends are hurting linear advertising dollars, which companies had used to help support investments in streaming. And while companies with live sports may be able to leverage those events to minimize damage to their advertising businesses, pure-play entertainment companies will feel the most pain, due to the macroeconomic hit, in addition to secular challenges.
Media companies are facing significant challenges that are likely to continue in the coming months and years. Companies will need to adapt to these changes in order to survive and thrive in a rapidly changing landscape.
