Maybe Rupert Murdoch and AT&T knew all along what they were doing. In recent years, both have scaled back their Hollywood ambitions. The duo sold entertainment assets to buyers interested in fighting the streaming wars.
So far this year, Fox and AT&T stocks have held up against falling market indices. Other media titans have found that the business of sending content directly to consumers is not only expensive, but a smaller market than expected.
Last week, Disney, which acquired Fox’s studio assets, said it had logged 14.4 million new streaming subscribers to its Disney+ service, more than expected. The next day its stock rose 6% in response. But that growth was expensive. Disney+ posted a quarterly operating loss of US$1.1 billion (R$5.6 billion) on revenue of US$5.1 billion (R$26 billion). The group also admitted that it would not reach its long-term forecast of 260 million subscribers by 2024.
An even bigger media event is the newly christened Warner Bros Discovery, the result of Discovery’s $43 billion acquisition of AT&T’s Warner Media in 2021. Medium-grossing Discovery and pretentious Warner they hardly fit. Discovery’s net debt/EBITDA (earnings before interest, taxes, depreciation and amortization) ratio is five times higher.
This looks precarious. The new company admits to some painful integration issues, particularly in the way it releases new shows and movies. Warner Bros. Discovery stock has already lost 42% this year. Still, it looks better than Netflix, the worst performer in the industry in 2022.
Meanwhile, sellers have returned to their roots. AT&T has retreated into the cash-flow-rich wireless and broadband businesses. Fox focused on its traditional pay-TV networks with news and sports. While sports rights remain expensive, affiliate fees and advertising have proven surprisingly resilient.
For companies like Disney and Discovery, standing still was never an option. But the streaming battles they’ve entered could make them think twice about the cost of the expansion.
