Media, Entertainment Stocks Non-Participants in Soaring Market
While the Dow Jones Industrial Average climbs, the entertainment industry is caught in a downward trend.
Donald Trump has pointed to a soaring stock market as an early victory in his presidency, as most sectors have seen a dramatic rise through the first three quarters of the year, which ended Friday.
One notable laggard? The entertainment-media industry.
While the Dow Jones Industrial Average has surged 13 percent so far this year, 32 of the 50 media stocks tracked by The Hollywood Reporter have not matched that gain, with the carnage spread mostly among the companies focused on movies and television.
As to the former, movie theater chain AMC Entertainment is faring the worst, down a whopping 55 percent as audiences have thus far failed to show up for movies at the same pace they did a year ago.
The other two big theater owners, Regal Entertainment and Cinemark, are off 20 percent and 3 percent through the third quarter, while giant-screen operator Imax is down 28 percent. National CineMedia, which is responsible for the 20-minute videos that roll out prior to the trailers in theaters, has seen its shares fall 49 percent.
Among the companies focused more on television, CBS has fallen 8 percent so far this year, Dish Network is down 6 percent, Sinclair Broadcast and Tivo have each fallen 2 percent, and the ratings service Nielsen managed to gain 1 percent.
Some speculate the dustup over protesting NFL players has something to do with falling stock prices at TV companies, as ratings for pro football games declined last year and are down, collectively, for the first three weeks of the season this year, as well.
A JPMorgan analyst on Thursday, in fact, told clients to bet against CBS this weekend. “NFL-related revenue is not trivial to CBS, and any decline in NFL viewership related to the national anthem debate may negatively affect future results,” the analyst said.
Beyond sinking NFL ratings, cord-cutting is another major issue facing the television industry. As Americans cancel their pay TV subscriptions and rely more on internet-delivered entertainment, the traditional television industry is responding by offering digital services, but some observers remain skeptical.
“Old media is fighting hard to protect legacy business models, rather than working backwards from consumer needs,” says Ben Weiss, chief investment officer at 8th & Jackson Capital Management.
Discovery Communications — home of Animal Planet, TLC and Discovery Channel — is down 22 percent while AMC Networks — owner of IFC, SundanceTV and AMC — is up a respectable 12 percent, still lagging the gains made by the Dow Jones.
“Most consumers do not want to come home after a long, stressful day at work and shuffle between 30 apps to find a show,” Weiss says. “If CBS, Disney and Fox, three of the worst performers, worked backwards from consumer needs, they would not be slicing and dicing their content into an alphabet soup of apps — Fox Now; FX+; CBS All Access; Showtime Anytime; Hulu; ESPN OTT.”
Disney and 21st Century Fox, of course, are conglomerates reliant both on movies and TV, as are Viacom, Comcast, Sony and Time Warner, which is in the midst of being acquired by AT&T. Through the end of the third quarter, only one of these companies — Sony, up 33 percent — has performed as well as the Dow Jones.
Of the others, Viacom, the parent of the MTV, Comedy Central, BET and the Paramount film studio, is faring the worst, down 19 percent. Disney, owner of ESPN, Pixar, Lucasfilm and Marvel, is next worst, down 5 percent, followed by Fox (down 5 percent) then Comcast (up 12 percent). AT&T, the future owner of Time Warner, which includes Warner Bros., CNN and HBO, is down 5 percent on the year thus far.
"Today, the group is seen as uninvestable by many," says Steven Birenberg of Northlake Capital Management. "Until we see a slowing of negative trends in cord-cutting, cord-shaving, lower TV ratings and weakening ad growth, it will be hard to make money in these stocks."