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2022 was tough for media stocks like Netflix and Disney, and 2023 doesn’t look good, either



In this photo illustration, a hand holding a TV remote control in front of the Disney Plus logo on a TV screen.

Rafael Henrique | Sopa Images | Lightrocket | Getty Images

Media stocks got rocked this year, with companies losing billions of dollars in market value, as streaming subscriber growth waned and the advertising market worsened. 

The pain is likely to continue in the first half of 2023, according to media executives and industry analysts. 

Disney and Warner Bros. Discovery, two companies undergoing transitions, especially when it comes to streaming, each hit 52-week lows in recent days. So far this year, Warner’s stock is down more than 60% and Disney is off more than 45%. 

The media industry has come to a turning point as competition among streaming services is at an all-time high and consumers are getting pickier about their number of subscriptions. On top of that, companies are contending with lower ad revenue and more cord cutting. Some expect consolidation to occur in the near future.

“Across the sector, it’s chaos,” said Mark Boidman, head of media and entertainment investment banking at Solomon Partners. “Everyone has been saying for years that technology is going to change the media world, and it has. But we’re at this real point now where it’s crunch time.” He predicts bundled streaming will become more important in 2023.

It’s been a tough year across the board for the market. The Nasdaq Composite is headed for its worst decline since 2008, and it’s positioned to underperform the S&P 500 for a second straight year. Other industries’ stocks, including tech, have been clobbered. 

Major tech stocks have lost at least half of their value. Streaming giant Netflix’s stock has dropped more than 50%, with its market cap cut in half to roughly $123 billion.

Netflix’s first quarter subscriber loss–it’s first in more than 10 years–weighed on the media sector this year.

Streaming woes

When Netflix reported it lost subscribers in the first quarter — the first time in more than 10 years — the news sent a shock wave through the sector. The streaming giant blamed heightened competition. It also started exploring an ad-supported, cheaper option for customers, something the company had long said it wouldn’t do. 

Since then, other media company stocks have followed suit. 

Disney, meanwhile, has been facing challenges since the early days of the pandemic, when movie theaters and theme parks were closed for months. Disney’s financial performance has been scrutinized in recent months, and following its disappointing earnings report in November, the company’s board ousted Bob Chapek and brought back longtime former boss Bob Iger. 

Although Disney investors were immediately elated over Iger’s return, the stock soon after faltered, most recently due in part to a lower-than-expected opening box office weekend for “Avatar: The Way of Water.”

Warner’s stock got slammed this year as management for the newly combined company — the merger between Warner Bros. and Discovery closed this spring — has been cutting costs, warning of the tough ad market, and focusing on making its streaming business profitable in the future.

Since Netflix’s losses earlier this year, Wall Street has been questioning the viability of streaming business models. 

“I think everyone was trying to emulate Netflix with the hope of seeing a similar valuation, and at this point the jig is up,” said John Hodulik, an analyst at UBS. “Netflix is no longer being valued at a revenue multiple. Investors are asking how direct-to-consumer gets to profitability.” 

The sentiment also has weighed on Warner, which plans to combine HBO Max and Discovery next year, as well as Paramount Global and Comcast’s NBCUniversal. Investors have a magnifying glass on subscriber counts and content spending, which has mounted to tens of billions of dollars for these companies.  

“Now there’s a new focus on these costs,” said Hodulik. “I think Warner Bros. Discovery is leading the charge, but we’re going to see other companies pare back their ambitions in the streaming space over time.”

Tightening ad market

On top of this, the ad market has worsened. During times of economic uncertainty, companies often pull back on advertising spending, which is often seen as discretionary. 

Paramount missed third-quarter estimates after its ad revenue dropped, with its stock hitting a low in the following days. The stock is down more than 45% this year. Paramount’s shares did get a boost recently after Warren Buffett’s Berkshire Hathaway upped its stake in the company, fueling speculation that it could be an acquisition target.

Earlier this month at an industry conference, CEO Bob Bakish lowered expectations for the company’s fourth-quarter ad sales. NBCUniversal CEO Jeff Shell also said at the same conference advertising has steadily worsened in the last six to nine months, although he noted ad revenue would be up in the fourth quarter.

Paramount Global YTD

“These stocks have been down a lot, and investors are asking themselves why would I buy this ahead of bad news not just next quarter, but the next few quarters,” Hodulik said. “Things might get worse before they get better.” 

There were some bright spots on the advertising front, however. 

Streamers like Netflix and Disney now offer ad-supported, cheaper options for customers, which is expected to be a positive for their businesses. “We also anticipate that advertising streaming will become more important in the year to come,” Solomon Partners’ Boidman said. 

Political advertising revenue was also up in the third and fourth quarters due to the heated midterm elections, with broadcast station owners like Nexstar Broadcast Group and Tegna reaping the benefits. These stocks, particularly Nexstar, were both up year to date, despite their industry’s overall weakness, as their revenues heavily rely on the high fees distributors pay to air their local networks.

Pay-TV exodus

Cord cutting, albeit not a new trend for the industry, “accelerated to all-time worsts” in the third quarter, according to data from MoffettNathanson. Along with advertising, Paramount cited it as a hindrance on its most recent quarterly results.

For media companies like Comcast and Charter Communications, lagging subscriber growth on the broadband front, rather than the pay-TV business, weighed more significantly on their stocks. 

Charter, which solely offers pay-TV, broadband and mobile services and doesn’t have a foot in the streaming wars like peer Comcast, has particularly seen its stock suffer recently. Charter’s stock is down nearly 50% year to date, and it got hit earlier this month when the company told investors it would increase spending on its broadband network in the years to come. Comcast’s stock is down more than 30% so far this year.

“We knew cord cutting was happening, but it definitely accelerated since the beginning of the pandemic,” said Hodulik. “It looks set to get worse as we go into the first quarter.” 

Comcast vs. Charter

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

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Lucid to cut 1,300 workers amid signs of flagging demand for its EVs



Lucid Motors CEO Peter Rawlinson poses at the Nasdaq MarketSite as Lucid Motors (Nasdaq: LCID) begins trading on the Nasdaq stock exchange after completing its business combination with Churchill Capital Corp IV in New York City, New York, July 26, 2021.

Andrew Kelly | Reuters

Struggling EV maker Lucid said in a regulatory filing on Tuesday that it plans to cut about 18% of its workforce, or roughly 1,300 employees, as part of a larger restructuring to reduce costs as it works to ramp up production of its Air luxury sedan.

Lucid said it will incur one-time charges totaling between $24 million and $30 million related to the job cuts, with most of that amount being recognized in the first quarter of 2023.

News of the job cuts was first reported by Insider earlier on Tuesday. Lucid’s shares closed down over 7% on Tuesday following the Insider report.

In a letter to employees, CEO Peter Rawlinson said the job cuts will hit “nearly every organization and level, including executives,” and that affected employees will be notified over the next three days. Severance packages will include continued healthcare coverage paid by Lucid, as well as an acceleration of equity vesting, Rawlinson wrote.

Lucid ended 2022 with about $4.4 billion in cash on hand, enough to last until the first quarter of 2024, CFO Sherry House told CNBC last month ahead of the company’s fourth-quarter earnings report. But there have been signs that demand for the high-priced Air has fallen short of Lucid’s internal expectations, and the company may be struggling to convert early reservations to sold orders.

Lucid said that it had more than 28,000 reservations for the Air as of Feb. 21, its most recent update. But it also said that it plans to build just 10,000 to 14,000 vehicles in 2023, far fewer than the roughly 27,000 that Wall Street analysts had expected.

With Lucid’s factory currently set up to build about 34,000 vehicles per year, the company has warned of continuing losses.

“As we produce vehicles at low volumes on production lines designed for higher volumes, we have and we will continue to experience negative gross profit related to labor and overhead costs,” House said during Lucid’s earnings call on Feb. 22.

Lucid hasn’t yet announced a date for its first-quarter earnings report.

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Virgin Orbit extends unpaid pause as Brown deal collapses, ‘dynamic’ talks continue



NEWQUAY, ENGLAND – JANUARY 09: A general view of Cosmic Girl, a Boeing 747-400 aircraft carrying the LauncherOne rocket under its left wing, as final preparations are made at Cornwall Airport Newquay on January 9, 2023 in Newquay, United Kingdom. Virgin Orbit launches its LauncherOne rocket from the spaceport in Cornwall, marking the first ever orbital launch from the UK. The mission has been named Start Me Up after the Rolling Stones hit. (Photo by Matthew Horwood/Getty Images)

Matthew Horwood | Getty Images News | Getty Images

Virgin Orbit is again extending its unpaid pause in operations to continue pursuing a lifeline investment, CEO Dan Hart told employees in a company-wide email.

Some of the company’s late-stage deal talks, including with private investor Matthew Brown, collapsed over the weekend, people familiar with the matter told CNBC.

Hart previously planned to update employees on the company’s operational status at an all-hands meeting at 4:30 p.m. ET on Monday afternoon, according to an email sent to employees Sunday night. At the last minute, that meeting was rescheduled “for no later than Thursday,” Hart said in the employee memo Monday.

“Our investment discussions have been very dynamic over the past few days, they are ongoing, and not yet at a stage where we can provide a fulsome update,” Hart wrote in the email to employees, which was viewed by CNBC.

Brown told CNBC’s “Worldwide Exchange” last week he was in final discussions to invest in the company. A person familiar with the terms told CNBC the investment would have amounted to $200 million and granted Brown a controlling stake. But discussions between Virgin Orbit and the Texas-based investor stalled and broke down late last week, a person familiar told CNBC. As of Saturday those discussions had ended, the person said.

Separately, another person said talks with a different potential buyer broke down on Sunday night.

The people asked to remain anonymous to discuss private negotiations. A representative for Virgin Orbit declined to comment.

Hart promised Virgin Orbit’s over 750 employees “daily” updates this week. Most of the staff remain on an unpaid furlough that Hart announced on Mar. 15. Last week, a “small” team of Virgin Orbit employees returned to work in what Hart described as the “first step” in an “incremental resumption of operations,” with the intention of preparing a rocket for the company’s next launch.

Virgin Orbit’s stock closed at 54 cents a share on Monday, having fallen below $1 a share after the company’s pause in operations.

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Virgin Orbit developed a system that uses a modified 747 jet to send satellites into space by dropping a rocket from under the aircraft’s wing mid-flight. But the company’s last mission suffered a mid-flight failure, with an issue during the launch causing the rocket to not reach orbit and crash into the ocean.

The company has been looking for new funds for several months, with majority owner Sir Richard Branson unwilling to fund the company further.

Virgin Orbit was spun out of Branson’s Virgin Galactic in 2017 and counts the billionaire as its largest stakeholder, with 75% ownership. Mubadala, the Emirati sovereign wealth fund, holds the second-largest stake in Virgin Orbit, at 18%.

The company hired bankruptcy firms to draw up contingency plans in the event it is unable to find a buyer or investor. Branson has first priority over Virgin Orbit’s assets, as the company raised $60 million in debt from the investment arm of Virgin Group.

On the same day that Hart told employees that Virgin Orbit was pausing operations, its board of directors approved a “golden parachute” severance plan for top executives, in case they are terminated “following a change in control” of the company.

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Historic UAW election picks reform leader who vows more aggressive approach to auto negotiations



Supporters wave signs during an address at the Time Warner Cable Arena in Charlotte, North Carolina, on September 5, 2012 on the second day of the Democratic National Convention (DNC).

Mladin Antonov | AFP | Getty Images

DETROIT – United Auto Workers members have ousted their president in the union’s first direct election, ushering in a new era for the prominent organized labor group ahead of negotiations later this year with the Detroit automakers.

The union’s new leader will be Shawn Fain, a member of the “UAW Members United” reform group and local leader for a Stellantis parts plant in Indiana. He came out ahead in a runoff election by hundreds of votes over incumbent Ray Curry, who was appointed president by union leaders in 2021.

Fain, in a statement Saturday, thanked UAW members who voted in the election. He also hailed the election results as a historic change in direction for the embattled union, which he says will take a “more aggressive approach” with its employers.

“This election was not just a race between two candidates, it was a referendum on the direction of the UAW. For too long, the UAW has been controlled by leadership with a top-down, company union philosophy who have been unwilling to confront management, and as a result, we’ve seen nothing but concessions, corruption, and plant closures,” Fain said.

Curry, who previously protested the narrow election results, said in a statement that Fain will be sworn in on Sunday and that Curry is “committed to ensuring that this transition is smooth and without disruptions.”

“I want to express my deep gratitude to all UAW staff, clerical support, leaders and most of all, our union’s active and retired members for the many years of support and solidarity. It has been the honor of my life to serve our great union,” Curry said.

More than 141,500 ballots were cast in the runoff election that also included two other board positions, a 33% increase from last year’s direct election in which neither of the presidential candidates received 50% or more of the votes.

The election was overseen by a federal monitor, who did not immediately confirm the results. The election results had been delayed several weeks due to a run-off election as well as the close final count.

Shawn Fain, candidate for UAW president, is in a run-off election with incumbent Ray Curry for the union’s highest-ranking position.

Jim West for UAW Members United

Fain’s election adds to the UAW’s largest upheaval in leadership in decades, as a majority of the union’ s International Executive Board will be made up of first-time directors who are not part of the “Administration Caucus” that has controlled the union for more than 70 years.

Fain and other members of his leadership slate ran on the promise of “No corruption. No concessions. No tiers.” The last being a reference to a tiered pay system implemented by the automakers during recent negotiations that members have asked to be removed.

The shuffle follows a yearslong federal investigation that uncovered systemic corruption involving bribery, embezzlement, and other crimes among the top ranks of the UAW.

Thirteen UAW officials were convicted as part of the probe, including two past presidents. As part of a settlement with the union in late 2020, a federal monitor was appointed to oversee the union and the organization held a direct election where each member has a vote, doing away with a weighted delegate process.

For investors, UAW negotiations with the Detroit automakers are typically a short-term headwind every four years that result in higher costs. But this year’s negotiations are anticipated to be among the most contentious and important in recent memory.

Fain has said the union will seek benefit gains for members, advocating for the return of a cost-of-living adjustment, or COLA, as well as raises and job security.

The change in the UAW comes against the backdrop of a broader organized labor movement across the country, a pro-union president and an industry in the transition to all-electric vehicles.

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