THB #507: Will Wall St & The Media Yawn ParGlobal (and WBD) Out Of Business?
It’s Monday, the 18th of March, 2024.
Nothing of significance happened in industry since The Oscars, 8 days ago.
So what was happening on Wall Street today?
These are the closing numbers from Monday.
Why?
No real reason. Obviously, it remains “Netflix good… WBD and Para bad… Disney better, but still maybe.”
But the more serious concern is that perception becomes reality.
Paramount Global is all kinds of fucked up. But are CBS, MTV Networks, Paramount Television, Paramount Studios, and some prime real estate (with a view of a cemetery) really worth only $7.8 billion, their current market cap? That’s a couple billion less than Amazon paid for MGM. Oy For Oy’s Sake.
When Matt Belloni was told to write that “Shari” (always use the overly familiar) was ready to sell, Paramount Global had managed to rise from a low in October of $10.70 to a couple of weeks over $14, rising to $15.03 a share on December 7.
This was 7 months after the stock fell from $22.89 to $16.40 overnight, never really recovering. So $15 seemed like a good place to get out… someone made the call to Puck, where Belloni and William D. Cohan had convinced investors that they were worth listening to. (Sigh for Mike Fleming at Deadline… king of breaking rumors for decades, he has the clicks, but not quite the perceived juice anymore. He’s significantly more savvy than Belloni, but doesn’t show it very often in print anymore.)
Of course, in this case, maybe he was fortunate.
(There is a very good chance that the person whispering in Matt’s cauliflower ear was David Ellison’s team at Skydance… more on that later.)
Belloni published the “news” then leapt up and down and licked himself like a puppy dog as the Paramount stock moved from $15.03 to $16.85. He was, in his public claims, responsible for a 12% bump to Paramount’s stock price overnight!
Hooray, Matt! Hooray, Pukoyo!
Small problem.
The stock stayed over $16 for 11 days. It dropped under $15 in 20 days. It dropped under $14 in 35 days.
Of course, this was not Puck or Belloni’s fault, except as part of the bigger problem.
Wall Street really doesn’t base its attitudes about the entertainment industry on the realities… it is all perception.
Netflix is a fantastic company and an industry-changing success… but only someone delusional could try to argue that it is worth $262 billion and rising consistently for over a year. Closing the shared password loophole mads sense. They added around 18 million subs - albeit at a lower price - based on the crackdown. Smart. Successful. But it’s still a $35 billion a year revenue company with thin prospects for significant increases on that number and about $6 billion a year net profit.
That’s a lot! That’s a great business. But is it worth $262 billion? Apple generates $1.4 trillion a year. It’s valued by the market at about 10x what Netflix is valued. So does Netflix generate $140 billion a year? Nope? Half of that? Nope.
And Wall Street is obsessively pro-Apple. But Apple, which has ups and downs, has a lot of ways of trying to expand and build new revenue streams. Netflix is searching hard for new revenue streams these days… and it’s hard going.
But I digress…
The flip side of Netflix is, it seems, Paramount Global and Warner Bros Discovery. Disney was stuck in that mud for a while too… but seems to have broken free a bit since Iger’s masterful quarterly performance a couple months ago.
And the thing is, no matter what they do - and focusing first on Paramount, it’s still a mess - the only break Wall Street will give the company that is not a darling is in the reflection of the possibility of an acquisition. I am convinced that Wall Streeters have their own private porn site called, M&AHub, because that is all that seems to get them off.
There was that moment in 2021 when Wall Street went crazy with hope for streaming and all the Linear companies hit peaks. But that was delusional too. The conversion from Linear to Streaming was and is inevitable… the technical benefits and potential benefits for consumers is just overwhelming. But it was always clear that Linear content providers had a remarkable thing going, backing both the cable companies and the consumers into a very expensive corner.
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