December 9, 2022
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How the Media Business Changed During the Pandemic—and 4 Stocks to Play It

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There’s fresh turmoil in the media industry. Advertising spending is softening, pressured by a toxic brew of high inflation, rising interest rates, and worries about an economic slowdown. While consumers are starting to head back to movie theaters, the streaming-video business is showing signs of maturing, with slowing growth and increasing competition.


is going to sell ads. Elon Musk is (maybe) buying



is airing baseball games.

For some perspective on what it all means, we turned to Rich Greenfield, proprietor of LightShed Partners, a research and investment boutique focused on technology, media, and telecommunications. When we last sat down with Rich, just before the pandemic in November 2019, the entertainment-business buzz was all about the arrival of new streaming services from Apple (ticker: AAPL), HBO, and

Walt Disney

(DIS), which now all have millions of subscribers. What happens next? Rich offers some educated guesses in this edited interview.

Barron’s: The media world has been transformed since our pre-Covid chat. What has changed, and what hasn’t?

Rich Greenfield: The consumer is still shifting from linear TV to internet TV. No change in that trajectory. But we’ve gone through a pandemic, which has made modeling the media business challenging. Right now, we’re seeing a boomerang effect; people are far less interested in being at home. Look at concert-ticket demand:

Live Nation Entertainment

[LYV] just had its best first quarter ever. Also, when you buy a connected TV, you sign up for a bunch of streaming services. But now, people are buying fewer TVs and signing up less.

You can see that in the subscriber issues at Netflix [NFLX]. Is the company done growing?

Is Netflix going to plateau at 220 million subscribers around the world? No, the ceiling is going to be a lot higher, maybe even one billion subscribers. But the speed of getting there may be longer than expected, given the competitive dynamics. The level of competitive spend by


[CMCSA] and Disney and others has been greater than Netflix anticipated.

Netflix surprised everyone with a promise to launch an ad-supported version of the service, and it is cracking down on password sharing. Will that solve its problems?

Selling ads and a password crackdown will help. But the biggest issue is content. When there wasn’t as much competition, having “good enough” content was fine. The single greatest reason why Netflix’s growth is slowing is because its content hasn’t been good enough. It hasn’t been breaking through the noise. You’re going to see them focus more on how they spend, but there’s no quick fix. In reporting earnings, they took a pretty pessimistic view of the next 12 to 18 months.

Maybe Netflix has to play a role in industry consolidation, either as a buyer or a seller.

Netflix has certainly been acquisitive when it comes to unique intellectual property, like the Roald Dahl library. And it has acquired small game studios. But with its market cap now where it is, it is unlikely the company will do any transformative mergers and acquisitions.

You said in a recent blog post that Disney should consider buying Netflix.

If you were Disney CEO Bob Chapek, you would have to wonder if you would be better off getting rid of ESPN, ABC, and Hulu, when the linear TV business is dying, and buying Netflix. Do I think it will happen? Probably not. But those two companies together would be incredibly powerful. Disney is really good at being Disney, with Marvel and Lucasfilm and Pixar—stuff that works in theme parks and consumer products, where there’s a flywheel that sustains demand for content. Sports doesn’t do that. They don’t own the NFL. They’re just a licensee, and the rights keep getting more expensive. It’s hard to see how ESPN fits into the flywheel.

And why does Disney need to own ABC? Broadcast TV is not the future. It could buy Netflix and have the largest streaming asset on the planet, combined with the industry’s best content-creation factory. It seems like a perfect marriage, especially if you get rid of Disney’s linear TV business. ESPN and ABC were incredibly valuable when Disney bought them in 1995, but today they’ve worn out their utility to Disney.

You had an alternative idea: Disney could buy the gaming service



If you think about the audience that watches Disney+, they’re spending a lot of their other minutes per day on Roblox. If Disney’s goal is to keep consumers in the world of Disney for more minutes per day, then either Roblox or Fortnite parent Epic Games would be transformative transactions.

Roblox stock is down 70% this year.

That’s what’s so appealing. The market cap is down to $19 billion. It was four times that not so long ago. If I were sitting in Disney’s shoes, when everyone is pessimistic, I would shed noncore assets—Hulu, ESPN, and ABC—and reposition for 2023 and beyond.

Meanwhile, Comcast CEO Brian Roberts reportedly tried to buy

Electronic Arts


Brian also had an interest in

Activision Blizzard

[ATVI] before


[MSFT] agreed to buy it. Comcast is in a challenging position in its core cable-broadband business. Growth is slowing. Telcos are getting more aggressive.

Verizon Communications

[VZ] and

T-Mobile US

[TMUS] are marketing 5G wireless to the home, no wired connection required. Video subscribers are declining at an accelerating rate. Comcast’s Sky satellite TV business faces continued pressure. They have subscale cable and broadcast networks facing the same headwinds as everyone else, and Peacock is losing $2.5 billion a year. They are trying to compete in a streaming market that will require massive scale and spending.

It’s the same conversation we had about Disney. In the battle for consumer time, it makes sense to consider looking at videogaming. There are only so many hours in a day, and more people are playing games. Maybe Roblox and Epic aren’t for sale. But the observation is that time spent on streaming video content is declining due to mobile entertainment—like TikTok—and videogaming.

OK, let’s talk about digital advertising.


[SNAP] just warned that the quarter is going to miss estimates, and the stock fell more than 40% in one day. This comes in the context of retailer earnings reports that weren’t very good. Is the consumer economy in trouble?

[In TikTok], Meta is facing a company that has almost unlimited resources.

— Rich Greenfield

Looking at those retail numbers, it feels like the first signs of the consumer weakening. We’ve seen these cycles before. Just go back to the beginning of the pandemic. Almost overnight, everyone started to pull back. Ad spend evaporated. If the economy is slowing and consumers are spending less, companies will not spend as much on ads. It seems obvious that the economy is slowing, and that is going to have a negative impact on digital advertising.

You wrote a long post recently about your skeptical view of

Meta Platforms

[FB]. Barron’s was bearish on Meta in a recent cover story. The company is facing increasing competition from TikTok. It is having targeting issues due to Apple’s privacy changes, and it is spending heavily on the metaverse. What is your take?

Let’s start with the most serious problem. Time spent using Facebook and Instagram is declining at the expense of TikTok. Facebook and YouTube have both copied it, with Facebook Reels and YouTube Shorts. But the bottom line is that the product that is best-in-class is TikTok.

Meta likes to point out that it has gone through transitions before, like shifting from a focus on desktops to mobile, and launching stories to compete with Snap. It thinks it can do that again with Reels.

The shift to mobile was one of the most amazing pivots in the history of tech. [Meta CEO Mark Zuckerberg] put the company on his shoulders, shifted the whole company to mobile, and got it done in record time. The difference here is, TikTok is a monster, with a billion highly addicted users. This is no longer just teens and tweens—it’s moms and dads. TikTok has a much, much wider audience than people realize. And it’s growing at a crazy rate. Meta is facing a company that has almost unlimited resources. If you were to ask a group of 15-year-olds, “What do you think of Instagram Reels versus TikTok?” they’re going to laugh at you.

I asked my college-age daughter about TikTok, and she said almost all of her friends are not only watching TikTok videos but also creating them.

That’s important, and doesn’t get enough attention. It’s not just the fact that TikTok has a billion users. It’s the very high percentage of users who are content creators. They’ve made content creation so much fun and so easy that they have a much, much higher creator-to-viewer ratio than other platforms.

How should Zuckerberg respond?

He has already given you his answer. He’s pivoting the company. He has renamed it. If Mark believed he could win this battle, would we be pivoting so hard to the metaverse? I think he’s acknowledging what’s happening. He wants to be the operating system for the metaverse, because what Mark has learned is that being a massive platform with multiple billions of people is really powerful—but not powerful enough, relative to Apple and Google. Mark knows that having not established a mobile operating system left him exposed in the Apple privacy issue. As he looks toward the metaverse, his goal is to be that operating-system layer for the metaverse.

Will it work?

He’s one of the most incredible visionaries of our time. But what worries me is that Meta hasn’t created much that’s new in a while. While they’re doing a great job dealing with the Apple challenges, the reality is that it shows the importance of being a platform—and the risks of not being one.

OK, Twitter [TWTR]: Do you think Musk will actually close the deal?

I can’t see why not. He has committed financing, and it doesn’t appear there are regulatory issues. If Elon tries to walk away, the board is going to do what they have every right to do and insist that it closes. Now, you can ask if the Twitter board would want to be involved in a lawsuit with the world’s richest man. But given where the environment is, it seems hard to see how Elon gets out of this.

Let’s finish with some stock picks.

Let me start with

Spotify Technology

[SPOT]. This is a subscription business that has been left for dead. But Apple is shifting toward video, and


is focusing more on Prime and sports and video. Spotify is laser-focused on winning in audio. The stock is well below where it went public several years ago. They have global reach and hundreds of millions of users. I think Spotify looks incredible right here.

Another pick?

Well, Twitter. If the deal closes at $54.20, then the upside from here looks substantial.

And one more?

I’ll give you two, both with minimal advertising exposure. One we already mentioned briefly, Live Nation. Concert ticket demand is the best it has ever been. And the other is

Endeavor Group Holdings

[EDR], which has sports holdings, operates live events, and does talent management. Both benefit from the experience economy. There is a tremendous desire for people to be outside and experience things again versus being stuck in their homes.

Thank you, Rich.

Write to Eric J. Savitz at

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