The media industry is in turmoil, and that’s not changing anytime soon

Accustomed TV is dying. Ad revenue is soft. Streaming isn’t profitable. And Hollywood is practically shut down as the actors and writers unions precipitate out in for what is shaping up to be a long and bitter work stoppage.

All of this turmoil will be on investors’ minds as the media sedulousness kicks off its earnings season this week, with Netflix up first on Wednesday.

Netflix, with a new advertising form and push to stop password sharing, looks the best positioned compared with legacy media giants. Terminal week, for instance, Disney CEO Bob Iger extended his contract through 2026, telling the market he needed more space at the Mouse House to address the challenges before him. At the top of the list is contending with Disney’s TV networks, as that part of the enterprise appears to be in a worse state than Iger had imagined. “They may not be core to Disney,” he said.

“I think Bob Iger’s observes were a warning about the quarter. I think they are very worrying for the sector,” said analyst Michael Nathanson of SVB MoffettNathanson look into b pursuing Iger’s interview with CNBC’s David Faber on Thursday.

Although the soft advertising market has been weighing on the application for some quarters now, the recent introduction of a cheaper, ad-supported option for services like Netflix and Disney+ will tenable be one bright spot as one of the few areas of growth and concentration this quarter, Nathanson said.

Iger has talked at length in new investor calls and Thursday’s interview about how advertising is part of the plan to bring Disney+ to profitability. Others, embodying Netflix, have echoed the same sentiment.

Netflix is scheduled to report earnings after the close Wednesday. Partition off Street will be keen to hear more details about the rollout of its password sharing crackdown in the U.S. and state of its newly started ad-supported option. The company’s stock is up nearly 50% this year, after a correction in 2022 that appreciated its first subscriber loss in a decade

Investor focus will also be on legacy media companies like Dominant Global, Comcast and Warner Bros. Discovery, which each have significant portfolios of pay-TV networks, take in Iger’s comments that traditional TV “may not be core” to the company and all options, including a sale, were on the table. These bodies and Disney will report earnings in the weeks ahead.

Just a week ahead of the earnings kickoff, members of The Screen Actors Guild – American Federation of Tube and Radio Artists joined the more than 11,000 already striking film and television writers on the picket slash.

The strike – a result of the failed negotiations with the Alliance of Motion Picture and Television Producers – brings the industry to an actual halt. It’s the first dual strike of this kind since 1960.

The labor fight blew up just as the industry has went away from streaming growth at all costs. Media companies saw a boost in subscribers – and stock prices – earlier in the Covid pandemic, swear ining billions in new content. But growth has since stagnated, resulting in budget cuts and layoffs.

“The strike happening suggests this is a sector in tremendous turmoil,” bruit about Mark Boidman, head of media and entertainment investment banking at Solomon Partners. He noted shareholders, particularly hedge subsidizes and institutional investors, have been “very frustrated” with media companies.

Iger told CNBC survive week the stoppage couldn’t occur at a worse time, noting “disruptive forces on this business and all the challenges that we’re cladding,” on top of the industry still recovering from the pandemic.

These are the first strikes of their kind during the streaming era. The in writers strike occurred in 2007 and 2008, which went on for about 14 weeks and gave rise to unscripted, actuality TV. Hollywood writers have already been on strike since early May of this year.

Depending on the longevity of the implant, fresh film and TV content could dry up and leave streaming platforms and TV networks – other than library content, animate sports and news – bare.

For Netflix, the strikes may have a lesser effect, at least in the near term, Insider Information analyst Ross Benes said. Content made outside the U.S. isn’t affected by the strike — an area where Netflix has heavily initiated.

“Netflix is poised to do better than most because they produce shows so well in advance. And if push separate to shove, they can rely on international shows, of which they have so many,” said Benes. “Netflix is the opposition in the eyes of strikes because of how it changed the economics of what writers get paid.”

The decline of pay-TV subscribers, which has dipped up in recent quarters, should continue to accelerate as consumers increasingly shift toward streaming.

Yet, despite the rampant sink, many networks remain cash cows, and they also supply content to other parts of the business — surprisingly streaming.

For pay-TV distributors, hiking the price of cable bundles has been a method of staying profitable. But, according to a current report from MoffettNathanson, “the quantity of subscribers is falling far too fast for pricing to continue to offset.”

Iger, who began his vocation in network TV, told CNBC last week that while he already had a “very pessimistic” view of traditional TV in preference to his return in November, he has since found it’s even worse than he expected. The executive said Disney is assessing its network portfolio, which comprises broadcaster ABC and cable channels like FX, indicating a sale could be on the table.

Paramount is currently considering a sale of a lions share stake in its cable-TV network BET. In recent years Comcast’s NBCUniversal has shuttered networks like NBC Sports and combined humours programming on other channels like USA Network.

“The networks are a dwindling business, and Wall Street doesn’t like condensing businesses,” said Nathanson. “But for some companies, there’s no way around it.”

Making matters worse, the weak advertising store has been a source of pain, particularly for traditional TV. It weighed on the earnings of Paramount and Warner Bros. Discovery in recent billets, each of which have big portfolios of cable networks.

Advertising pricing growth, which has long offset audience wanes, is a key source of concern, according to MoffettNathanson’s recent report. The firm noted that this could be the first nonrecessionary year that advertising upfronts don’t deliver increases in TV pricing, especially as ad-supported streaming hits the market and zaps up inventory.

Streamers’ introduction of cheaper, ad-supported ranges will be a hot topic once again this quarter, especially after Netflix and Disney+ announced their tenets late last year.

“The soft advertising market affects everyone, but I don’t think Netflix is as affected as the TV companies or other demonstrated advertising streamers,” said Benes. He noted while Netflix is the most established streamer, its ad tier is new and has plenty of cell for growth.

Advertising is now considered an important mechanism in platforms’ broader efforts to reach profitability.

“It’s not a coincidence that Netflix rapidly became judicious about freeloaders while pushing a cheaper tier that has advertising,” said Benes, referring to Netflix’s crackdown on countersign sharing. “That’s pretty common in the industry. Hulu’s ad plan gets more revenue per user than the script without advertising.”

Last week’s ruling from a federal judge that Microsoft‘s $68.7 billion getting of game publisher Activision Blizzard should move forward serves as a rare piece of good news for the media exertion. It’s a signal that significant consolidation can proceed even if there’s temporary regulatory interference.

Although the Federal Transact Commission appealed the ruling, bankers took it as a win for deal-making during a slow period for megadeals.

“This was a nice win for bankers to go into take meals rooms and say we’re not in an environment where really attractive M&A is going to be shot down by regulators. It’s encouraging,” said Solomon Confederates’ Boidman.

As media giants struggle and shareholders grow frustrated, the judge’s ruling could fuel more have to do withs as “a lot of these CEOs are on the defensive,” Boidman added.

Regulatory roadblocks have been prevalent beyond the Microsoft behave. A federal judge shut down book publisher Penguin Random House’s proposed purchase of Paramount’s Simon & Schuster remain year. Broadcast station owner Tegna scrapped its sale to Standard General this year due to regulatory pushback.

“The incident that we are so focused on the Activision-Microsoft deal is indicative of a reality that deal-making is going to be an enormous tool going forward-looking to solidify market position and jump your company inorganically in ways you couldn’t do yourself,” said Jason Anderson, CEO of Quire, a boutique investment bank.

Anderson noted bankers are always thinking about regulatory pushback, however, and it shouldn’t not be the reason deals don’t come together.

Warner Bros. and Discovery merged in 2022, ballooning the combined company’s portfolio of guy networks and bringing together its streaming platforms. Recently, the company relaunched its flagship service as Max, merging content from Determining+ and HBO Max. Amazon bought MGM the same year.

Other megadeals occurred before that, too. Comcast acquired U.K. broadcaster Sky in 2018. The next year, Disney hit $71 billion for Fox Corp.’s entertainment assets – which gave Disney “The Simpsons” and a controlling stake in Hulu, but makes up a minute portion of its TV properties.