This article was first published in January.

Well, that was a week. Investors apparently decided all at once that they’re not into deficit-financed companies, in streaming video or any other wildly overvalued corner of technology. What that means when all the major streaming services plan to spend billions more than they’re bringing in to fuel a brutal arms race for attention is suddenly much more complicated. 

To recap, the stock market had already begun a reckoning on Tuesday, whacking share prices in the tech-heavy Nasdaq by 2.6%, and dropped again both Wednesday and Thursday. Then came Netflix earnings after Thursday’s market closed. 

It’s possible the earnings miss by the world’s biggest streaming service wouldn’t have been a big deal in more forgiving circumstances, say, nine months ago. 

Also read: Netflix Shocks -- Shocks! -- Investors by Forecasting Only 2.5 Million Customer Adds in Q1

But amid broader market chaos, Netflix’s not-great numbers set off a brutal death march on Friday, shares falling nearly 22% in a day, and now off 42% from a mid-November peak. That is, in Wall Street technical terms, ugly. 

The owners of other streaming services also capped a slow decline with a horrible week. 

Over the last three months, Disney shares are down 19%, ViacomCBS nearly 18%, Amazon 17% and Comcast 7.5%. Not incidentally, all those companies plan to spend as much as $10 billion more on content this year compared to last year, when they collectively debuted 559 scripted series (roughly 1.5 per day).

The calculus up to now had been more (good) shows make a service stand out in the race for a sustainable share of a still nascent market. But what happens if subscriber adds continue to slow, costs keep rising, and the market no longer rewards streaming-service owners for uncertain future growth?

AT&T, which is trying to ditch out of streaming by spinning WarnerMedia into a joint venture with Discovery, is actually up almost 3% over the past three months. But headwinds for AT&T are re-emerging. 

Wall Street Journal columnist Holman Jenkins Jr. savaged AT&T this week, suggesting its management grasped for a crummy deal with an “inferior” partner, because undersized Discovery posed the lowest regulatory risk, not the smartest, richest or most capable partner. 

And why unwind the original, accretive WarnerMedia acquisition that AT&T had fought so hard to consummate just three years earlier? Jenkins suggested it was because AT&T execs realized they couldn’t invest in both more streaming content and a crucial 5G wireless buildout, while also maintaining the dividends it’s paid for decades. 

Dumping the dividend, and the value-trapped investors who stuck around for it, would force AT&T to find new investors interested in AT&T as a growth stock. 

Jenkins suggested that’s the obvious solution. But it also might mean new managers who know how to run a fast-moving growth company, rather than slogging along with a stolid utility.

It’s possible antitrust regulators may still save AT&T from its latest $45 billion bad idea. What’s less clear is what’s going to save everyone else. 

This week may prove to be pivotal in the streaming wars, as many of the companies chasing market share reconsider their strategies. Certainly, LightShed Partners wondered before Thursday’s earnings announcement whether Netflix should do a rethink.

“If overall subscriber growth does not begin to reaccelerate back into the low-mid 20 million range (as we believe it will, see our #Top22for22), should we look for a moderation in content spend growth,” the analysts asked this week. “Or do you believe pricing power is enough to support increased content spending?”

That question faces most of the streaming services, as the market’s slow collapse undercuts the financial underpinnings of previous strategies. Who’s still in good position? The tech giants, of course. 

Apple, which saw a big run-up in share prices since September, is still up nearly 8% despite the market mess. 

To put a further exclamation on it, Apple just unveiled an amusing Apple TV Plus ad featuring Jon Hamm watching all the other celebrities populating the service’s growing library of shows, from “Reese and Jen” (Witherspoon and Aniston on The Morning Show) to two Mahershala Alis (in sci-fi clone drama Swan Song, of which Hamm mutters “kinda feels like cheating”). The ad’s final teaser line shows off Apple’s expansive programming ambitions: “Everyone but Jon Hamm.”

Meanwhile, the Sundance Film Festival’s mostly virtual latest iteration kicked off this weekend. Among the prominent players that already have locked up showcase projects: Amazon Studios.

Emergency, an opening-day feature from three-time Sundance director Carey Williams, is already set for a May 27 Amazon debut after a theatrical-only release the week before. 

Emergency deftly mixes comedy and drama as two close college friends, both young Black males, clumsily navigate the terrors of trying to get medical help for a passed-out white girl found on their living room floor without getting blamed or shot. 

And the fine Amy Poehler-directed documentary Lucy and Desi, about television’s pioneering couple Lucille Ball and Desi Arnaz, will arrive on Amazon Prime in March. It makes an excellent companion to the service’s Being the Ricardos, an awards-contending feature from writer-director Aaron Sorkin that debuted in December.

The market reset is unlikely to affect spending plans by either Apple or Amazon. How Disney, Comcast, ViacomCBS and most of all, that possible Warner Bros. Discovery combination, navigate programming plans while facing down a suddenly hostile market will be occupy many conversations in coming months. 

Influential media analyst Craig Moffett took a deep dive into Altice USA Wednesday, issuing a 39-page report that says with broadband growth behind its peers and doubts that its rural markets can take up the slack, one way to unlock its value would be to take the company private. 

Altice USA stock has been battered over the past few months, dropping more than 20% since July 28 when it released Q2 results that showed zero broadband subscriber growth at a time when its larger peers are watching their high-speed data rolls rise. In his report, Moffett, principal and senior analyst at MoffettNathanson, noted that despite that sluggish performance, Altice USA’s sum-of-the-parts valuation indicates that Wall Street perhaps has the cable company all wrong. 

While Moffett admitted that Altice USA has a “broadband pricing problem,” that there is some doubt that efforts to boost broadband customers in its more rural Suddenlink footprint will offset subscriber declines in its more metropolitan Optimum footprint, even conservative valuations of its four major geographies indicate a much higher value for the company than Wall Street has assigned. 

“There’s a price for everything … and, to put it bluntly, this ain’t it,” Moffett wrote. “Altice’s current valuation is simply too cheap, and by a huge margin.”

The notion of going private at latest appeared to be attractive to some investors. Altice USA shares were up nearly 4% ($1.05 each) in early trading Sept. 8 to $28.19 per share. The stock was priced at $27.94 at 12:57 p.m. Wednesday, up 3% or 81 cents each.

Given the high valuations for recent private cable deals, including Altice’s own  purchase of Service Electric Cable of NJ  (10 times consensus cash flow) and its March  agreement to buy North Carolina broadband provider Morris Broadband (24 times), Moffett assigned an 11.7 times multiple to Suddenlink, a 10.1x  multiple to legacy Optimum systems and a 14.6 times multiple to its Lightpath division, pushing the combined company’s estimated trading multiple to 10.8 times forward looking cash flow. At that multiple, Moffett estimated that Altice USA stock should be priced at $51 per share, nearly double its Sept. 7 close of $27.25 each. 

Moffett added that to take Altice USA private, the company would have to pay a premium to its current stock price, but at $30, $35, $40 or even $45 per share, that option would appear to be a bargain.

Going private is nothing new for cable operators, and usually is driven by the perception that the public market is severely undervaluing assets. Mediacom Communications was the last major publicly traded cable operator to go private in 2011, and has had tremendous success as a private company. In 2004, Cox Communications went private in a deal valued at $8.5 billion, and hasn’t looked back since. 

The analyst added that in one scenario, Altice USA could sell off its Suddenlink division at an 11.7 times multiple (implying a selling price of $22.7 billion) and Lightpath for 14.6 times cash flow (implying a $1.57 billion sale price), while retaining the Optimum business by purchasing the remaining public float. Moffett estimated that at a $35 per share take out price and the sale of Suddenlink and Lightpath, Altice USA could take itself private — debt free — for about $7.9 billion. At $45 per share, the total cost would rise to $10.3 billion.

Moffett stressed that going private is not something he is suggesting that Altice USA will do, but is something they could do. And there are also several possible iterations of the going private option, he wrote.

“The takeaway here is that, even with a meaningful premium, the current valuation is so  cheap that it creates enormous optionality,” Moffett wrote, adding that Altice USA has been doing its own “modified take-private” for years.

Moffett noted that since separating from Altice N.V. in 2018, Altice USA has made about $7.7 billion in share repurchases, reducing its total shares outstanding by about 38%. Excluding the ownership stake held by Altice N.V. chairman Patrick Drahi, and Altice USA has reduced  its public float by more than half.   

“Indeed, it may be the case that Drahi would conclude that it is more attractive to simply stay the course and retire shares until the remaining float is so small that almost any premium paid to complete the job would be financially immaterial,” Moffett wrote. He estimated that Altice USA, if it maintains its leverage target of 4.5 times to 5 times cash flow, would buy back about $8.5 billion of its stock through 2025.

“Altice could go private, sell select assets — we highlighted Suddenlink just because we suspect it would be so easy to sell — and own what's left for... well, for nothing at all,” Moffett continued. 

The most volatile stock in the media-technology business is back in free fall. 

And we're not talking about ViacomCBS.

Roku, which ascended to the lofty heights in early February of a $395 share price and a market capitalization exceeding $50 billion, dipped to $295 a share as of late-day Friday Nasdaq trading, and a market cap of around $38 billion.

Roku declined more than 6% in Friday trading before a late-day rally started. 

In early March, celebrity equity analyst Craig Moffett sent Roku shares down when he revised his price target from $410 to $360. The company, which is ambitiously branching out into original programming, might be biting off a lot to chew, and it may be a bit overvalued, Moffett suggested.  

But for Roku, which has seen wild fluctuations before in its Wall Street valuation since it went public in late 2017, it’s tough to pinpoint a performance metric that can justify around $15 billion of wealth disappearing, seemingly overnight. 

On Feb. 18, Roku reported that it finished the last three months of 2020 with a record $649.9 million of total revenue, up 58% year over year.

Roku also saw a 58% revenue bump for the full pandemic year, taking in $1.778 billion. That surpassed the $1.6 billion guidance the company stated at the beginning of 2020.

Roku reported a $65.2 million net profit for the quarter--Wall Street had expected a loss. And its active user count keeps surging, surpassing 51 million in Q4.

Also in early March, Roku purchased Nielsen’s advanced advertising business, prompting LightShed Partners’ Rich Greenfield to ponder whether the company was set to “devour the TV ad market.”

Roku has seen volatility before—in fact, Next TV tried to drill down on the company’s price fluctuations in this May 2020 story. 

This time around, the Los Gatos, Calif.-based media-tech giant, which is now arming up for the expensive original content arms race, might just be a little over-heated.

Even after its boffo Q4 earnings call, some analysts expressed caution … and concern over a stock price exceeding $400 a share.

"Looking forward with interest rates rising materially and still arguably cheap economic rebound plays out there, we believe the broad outlook for tech is at least temporarily weakening,” Pivotal Research Group analyst Jeffrey Wlodarczak wrote at the time. “While Roku has a very solid backdrop/outlook it is unquestionably expensive.”

New York -- Despite it being what she called one of the darkest periods for media in recent history, Bank of America Merrill Lynch senior media and entertainment analyst Jessica Reif said there is still plenty of room for growth for cable operators at the NextTV Summit here.

While the video segment has been pressured by intense competition from over-the-top and subscription video and demand players -- cable video penetration is around 30% of homes passed, she said -- there is still ample room to grow the broadband segment.

There is no doubt that the video landscape has changed dramatically -- Reif said we are in probably the “bleakest period for media we’ve ever seen.” But broadband penetration is still under 50% and there are opportunities in wireless and commercial services.

Scale, however, remains critical, as is evident by recent mega deals in the programming space -- AT&T’s purchase of Time Warner and The Walt Disney Co.’s buy of 21st Century Fox assets.

Reif said the latter deal -- Disney Fox -- shook the industry in that it showed that one of the industry’s founders -- Fox executive chairman Rupert Murdoch -- saw the need for a dramatic transformation of his business from linear entertainment to live sports and news.

“He saw the handwriting on the wall. That’s why everyone went into internal introspection -- do we buy or do we sell?” Reif said.

Scale doesn’t just mean increasing your domestic bulk. Reif added that today’s media giant needs to be global, adding that she believes Comcast would have been “marginalized” had it not won the auction for British satellite giant Sky.

“You need to be able to deliver content in many, many ways,” Reif said.

While Netflix appears to be the model every programmer is chasing, Disney’s 2019 direct-to-consumer offering -- chock full of Disney, Pixar, Marvel, Star Wars and Fox content -- and other DTC offerings to come could chip away at that dominance if that content were to be removed from the SVOD pioneer, Reif said.

Slumping oil prices and continued economic unrest in Asia and Europe pounded U.S. stocks Wednesday as the Dow Jones Industrial Average fell by about  539 points by mid-day, with some cable stocks posting heavy declines.  

It was another day of unrest in what has been a trying month for the stock market, dropping 539 points to 15,474 points by mid-day Wednesday. The Dow Jones Industrial Average is down nearly 2,000 points since the beginning of the year.

Cable stocks took it on the chin Wednesday, with Netflix and Starz leading the decliners, down 6.5% and 6.1%, respectively. The rest of the sector didn’t fare much better, with 21st Century Fox (down 5%), Viacom (down 4.5%), MSG Networks (down 4.1%),  Discovery (down 3.4%) and Disney (down 3.2%) all losing ground.

Distribution stocks fared a little better – Charter fell 3.1% to $162.25 per share; Comcast was down 2.75% to $52.46, Time Warner Cable dipped 1.2% to $175.47 and Cablevision dipped 1.5% to $30.86 each.  

The San Diego CBS affiliate KFMB-CBS 8 went dark to DirecTV customers Thursday at 5 p.m., Pacific Standard Time, two-hours prior to the NFL Preseason opener of the hometown San Diego Chargers vs. the Dallas Cowboys, after the parties could not come to terms on a retransmission consent agreement.

According to KFMB’s web site, the station had been negotiating with DirecTV for several months – and offered six weeks of extensions -- while it tried to work out a deal. The station, owned by Midwest Television Inc., says it continues to negotiate with DirecTV and hopes a deal can be reached soon.

The station blamed the standoff on DirecTV’s recent acquisition by AT&T and the telco’s promise that it would cut costs after the deal was completed. AT&T completed its $48.5 billion acquisition of DirecTV on July 24.

“This black out is brought to you by Wall Street,” KFMB said on its web site. “When AT&T bought DirecTV, it told Wall Street that it would reduce its programming costs by 20%.  Now, AT&T/DirecTV has decided to make San Diego subscribers responsible for the promises AT&T made to its Wall Street investment bankers. CBS8 is only asking DirecTV to agree to the same low rates that other companies (including AT&T U-Verse) have agreed to pay.  AT&T/DirecTV has refused to do that.  We can’t give in to AT&T/DirecTV (and its Wall Street backers) and keep delivering to you the high quality local sports and entertainment programming you’ve come to expect from us.”

In a statement, DirecTV said the dispute is over money – it claims KFMB is demanding an exorbitant price increase.

"We intend to get KFMB back for our customers very soon and apologize for this temporary disruption,” DirecTV said in a statement. “KFMB is blacking out DirecTV homes unless customers pay more than double just to get back the same KFMB shows that remain available for free over-the-air on channel 8 and often at CBS.com. Local broadcasters including KFMB have now blacked out their communities more than 65 times already this year, forcing families to pay billions of dollars extra to keep conventional 'free' broadcast TV. We have asked for our customers’ patience since it will help to keep their bills lower.”

Dish Network has weathered its fair share of criticism over the $10 billion it recently spent in the federal government’s AWS-3 wireless spectrum auctions, but according to several analysts, the satellite-TV provider’s participation has accomplished at least one major goal — it has significantly boosted its overall value.

Dish has said all along that the AWS-3 auctions — involving about 65 Megahertz of spectrum — would finally place a value on its existing wireless holdings, which have seesawed between $3 billion and $10 billion over the past several years.

Englewood, Colo.-based Dish was expected to be an aggressive participant in the AWS- 3 bidding and did not disappoint. Through two designated entities, SNR Wireless LicenseCo LLC and Northstar Wireless LLC, it successfully bid about $13.3 billion on licenses ($10 billion after the 25% designated entity discount) in major markets like New York, Los Angeles and Chicago, and more rural areas.

It was the second highest amount bid by any individual company in the auctions — AT&T was first, with $18.2 billion — and bested Verizon Communications’s bids of $10.4 billion.

While some regulators have criticized Dish’s use of designated entities to obtain the discounts (according to the FCC, a designated entity is primarily a small business, but those rules were relaxed for this auction), most analysts focused on the value of the spectrum.

BTIG Research telecom analyst Walt Piecyk estimated that Dish’s AWS-3 spectrum could add significantly to the overall value of the company, because it can be used as both upload and download spectrum. Download spectrum is worth a lot more.

In the AWS-3 auction, according to Piecyk’s estimates, upload spectrum was valued at about $1.04 per MHz POP (or point of presence, a measurement of the number of people covered by each Megahertz of spectrum) in the top 35 markets, while downloadonly spectrum garnered a value of $6.70 per MHz POP. (A carrier that has 6 MHz of spectrum reaching a region of 6 million people has 6 million MHz POPs.)

At that valuation, Dish’s total spectrum holdings are worth about $72 billion — $55 billion for its licenses in the top 35 markets and about $17.2 billion for licenses elsewhere.

Add in $18 billion for its satellite-TV assets, and Piecyk puts Dish’s total enterprise value at about $90 billion.

Factoring out $14 billion of debt, including the $10 billion for the AWS-3 licenses, Piecyk puts Dish’s valuation at $165 per share — more than twice the $77 price range of Dish stock.

Accounting for taxes and even removing the $3.3 billion designatedentity discount drops the total value to $118 per share, still about more than 50% above Dish’s current price range.

While Dish’s spectrum purchases have increased its overall value, they could be a hurdle in any possible acquisition of the company.

Morgan Stanley media analyst Ben Swinburne wrote in a research note that in five of the top 20 markets (New York, Chicago, Boston, Minneapolis and Cleveland) Dish bought 10-15 MHz of paired spectrum, while Verizon bought none.

There were no markets in the top 20 where Dish acquired spectrum and AT&T bought none, Swinburne added, suggesting that Dish’s strategy was to concentrate its bidding in strategic markets and block Verizon.

“Verizon could find itself under additional pressure to sit down at the table with Dish,” Swinburne said, adding that any potential deals could take several forms, including acquisition, leasing spectrum or joint ventures.

M&A has been an issue with Dish in the past. With its satellite business maturing, investing in spectrum has been a boon to its share price as it contemplated building out a wireless broadband network with a partner, leasing spectrum or selling it outright.

Dish chairman Charlie Ergen has offered up the possibility of an overall sale of the company in the past — half-jokingly. Now what was always expected to be a hefty forsale price has gotten even more expensive.

“The bigger issue will be finding the company that can afford $90 billion,” Piecyk said in his blog post. “We suspect that Ergen might be willing to settle for somewhere in between today’s price and $165.”