WWE, Nexstar Standouts In Tough Year – Deadline

US stocks just finished their worst year since 2008, with media and technology leading the decline. Streaming got messy, linear TV declined, theatrical recovery fell, inflation, interest rates, unemployment and geopolitics turned ugly, recession worries hit advertising, and M&A mostly stopped. When it didn’t, it probably should have (ie, Elon Musk’s tortured $44 billion acquisition of Twitter).

“It’s a very complex environment and largely unprecedented,” said Moody’s vice president Neil Begley.

SmackDown had a winner: Sports entertainment machine WWE ended the year with a 38% gain. Second — major broadcaster and new CW owner Nexstar, up 16%.

These were rare exceptions in a year of carnage for players big and small across all fields of entertainment. Disney, the only media stock in the Dow Jones industrial average, down 44%, didn’t just have a bad year, it had its worst year since 1974.

See the branch diagrams below.

Other low points: Fubo shares fell nearly 90%. Roku, Snap and AMC Entertainment all fell more than 80%. Warner Bros Discovery and Lionsgate were down more than 60%. From Netflix to Charter and Chicken Soup for the Soul, from Apple and Meta to Spotify and Cinemark, it was a sea of ​​red. National CineMedia became a penny stock and is in danger of being delisted. Behind the storm, a host of financial concerns and industry-specific woes are being driven by the painful re-evaluation of streaming priorities, even as cord-cutting continues to accelerate.

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“This has been as bad a year as I can remember in the media sector,” lamented one longtime analyst.

The S&P 500 ended 2022 down 19.4% from Friday’s closing bell. S&P Communications Services, one of the index’s 11 sectors, which includes most media and telecommunications companies, was its worst performer, down nearly 40 percent. (The lone sector will rise in 2022 — energy.)

The DJIA lost 8.8%. The Nasdaq fell 33%, the worst hit among the major stock indexes, which was not unexpected given the massive disruption in tech stocks.

Bucking the downward trend, WWE created a surprisingly smooth transition in management after CEO Vince McMahon stepped down amid scandal. An internal investigation found that he had made improper payments to some women in exchange for their silence about sexual relations. The company, with a suite of wildly popular programming soon to be renewed at a time when sports rights costs are rising rapidly, is now led by co-CEOs Stephanie McMahon and former CAA top sports agent Nick Kahn, with former wrestler Triple H (Paul Michael Levesque) as head of content. Weekly shows Monday Night Raw and NXT which aired on NBCUniversal’s USA Network and Friday Night SmackDown at Fox, they have five-year deals that expire in 2024. Peacock retains streaming rights through 2026.

Wall Streeters see more bidders in the mix (as for other sports) and higher prices for later rounds. Negotiations for the first two co-terminus agreements are due to begin during WrestleMania 39WWE’s annual pay-per-view and live streaming event.

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It could also be sold, with Comcast a possible buyer. There has been speculation about this for years. Vince McMahon remains the controlling shareholder, and some analysts wonder if he might be less interested in owning the company when he can’t run it. Meanwhile, as flamboyant as the product is, WWE’s financial management is conservative and has a strong balance sheet with $450 million in cash and about $235 million in debt at the end of the September quarter.

As for Nexstar, the big broadcaster benefits from scale, including several stations in some markets with highly competitive political races. surpassed $500 million in political advertising by 2022. It also reduced its ad exposure, with more than half of sales coming from distribution or conversion, a business historically resilient to economic downturns.

“He was the only broadcaster who really hit the political numbers. It is relatively under-leveraged, pays a healthy dividend and has bought back a lot of shares,” noted one analyst.

Net leverage, a gauge of a company’s financial health, refers to net debt as a percentage of EBITDA — earnings before interest, taxes, depreciation and amortization. Debt is once again becoming a big issue for companies in a world of high and still rising interest rates. Supply chain disruptions from Covid and the Russia-Ukraine war, among other factors, have pushed inflation to 40-year highs, prompting the Federal Reserve to raise interest rates seven times in 2022.

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Tegna, another broadcaster, also rose, gaining 14% likely on the back of Standard General’s pending $24-a-share takeover. Advertising giant Omnicom also ended the year higher. But it’s an unusual state of affairs when you can count all the winners in media and technology on one hand.

Among the losers, Fox fell only 17%, less than most. It remains a bit of a Wall Street darling, also fiscally conservative, big on sports and news and less exposed to the streaming wars than rivals. Investors don’t like the proposed merger of Fox and News Corp. that Rupert Murdoch desires. This will happen next year.

As the media enters 2023, Wall Street understands its great existential dilemma: the streaming genie is out of the bottle. But now it requires a clearer path to profits. There are no quick fixes. However, there is a learning curve as the industry evolves. Streaming is still pretty new to everyone but Netflix, and even the pioneer is trying to adapt.

“Stocks have had a horrible year, but to turn it around, one could argue they’ve already started to reflect” most of the bad news, one investor said — or at least that’s the hope.


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