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ICYMI: Did Wall Street Just Give Up on the Streaming Wars?

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(Image credit: Cal Tech)

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. 

David Bloom

(Image credit: David Bloom)

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. 

David Bloom of Words & Deeds Media is a Santa Monica, Calif.-based writer, podcaster, and consultant focused on the transformative collision of technology, media and entertainment. Bloom is a senior contributor to numerous publications, and producer/host of the Bloom in Tech podcast. He has taught digital media at USC School of Cinematic Arts, and guest lectures regularly at numerous other universities. Bloom formerly worked for Variety, Deadline, Red Herring, and the Los Angeles Daily News, among other publications; was VP of corporate communications at MGM; and was associate dean and chief communications officer at the USC Marshall School of Business. Bloom graduated with honors from the University of Missouri School of Journalism.