Some of America’s largest media and entertainment companies have lost nearly $400 billion in market capitalization this year as a looming recession, post-pandemic changes in user behavior and a slowdown in the advertising industry created a “perfect storm”.

This includes major media groups as well as entertainment companies including Disney, Netflix, Comcast, Spotify, Roku, Paramount, Fox, Warner Bros. Discovery, The New York Times, News Corp. Shares of major US stocks in the sector have fallen an average of 35% since the start of the year, with the S&P 500 down 13%, according to the Financial Times. This reduction results in losses reaching $380 billion in their capitalization. Executives and analysts believe that the “bubble” in the shares of these companies burst due to a number of factors. As the US and other countries recover from the pandemic, people seem ready to go outside and spend less time in front of screens at home.

At the same time, Netflix said that a decade of growth had stalled, leaving investors worried about the viability of the entire industry. Adding to these concerns is the widespread fear that the US economy could slide into recession as central banks raise interest rates in an attempt to control inflation while household budgets tighten. And advertising, which companies cut first, is already showing signs of slowing down, as seen in Snap, Meta and Google’s Q2 results.

“How negatively has the pandemic affected their course? How long do people wait for an exit? How is the economy doing? There are several factors now,” LightShed analyst Rich Greenfield told the FT. “I would call this the perfect storm to blow up streaming history.” In addition, companies whose income mainly comes from streaming and advertising have been hit the hardest. Shares in Roku, which sold streaming devices, are down 65% this year and down 83% from their all-time high last July. “Advertisers are starting to worry about the possibility of a recession, so we’re watching them cut their spending,” chief executive Anthony Wood told analysts last week.

Netflix recorded the second largest decline after Roku. Shares of the US giant are down 62% this year, down even more from their November highs of 67%. Shares of Spotify, which derives most of its revenue from member subscriptions, are down 49% this year. Companies operating in more traditional channels such as television and film are more resilient because in these cases advertising contracts are negotiated for several years. This category includes companies such as Fox, whose shares are down 9% this year and down 24% from last year’s all-time high.

Source: MoneyReview.gr