Creative industries need answers as revenues dry up: Showbiz in a tizz

As the song goes, there may be no business like show business. But everything about it is less attractive if the big players in the industry don’t perform.

Shares in entertainment empire Walt Disney have plummeted 40 percent this year, alongside declines in other major media names including Netflix, Roku and Tencent.

Behind the downturn are the dramas set in Disney, the House of Mouse, famous everywhere for its theme parks, movie studios and TV divisions, including ABC.

Dismay at these antics caused me to reduce my interest in Disney several months ago. I didn’t sell out because I was curious to see how the next installment in this company’s story would play out.

Disney, Netflix, Roku, Tencent and the rest will have to summon all their creative powers to counteract the effects of the cost of living. But if they can end their free-spending practice while continuing to innovate, then investors can hope that stock prices recover. However, this will take time.

Disney CEO Bob Chapek was ousted last month after losing Wall Street’s confidence. Bob Iger, his replacement, is the former boss of the company, celebrated in part for his diplomatic dealings with Hollywood talent. This is an important feature as these individuals may find themselves expected to accept less lavish rewards in the future.

Iger is aiming for profit improvement at streaming services Disney Plus, ESPN Plus and Hulu. Asset manager Guggenheim Investments argues that it should be able to achieve “industry-leading margins at Disney Plus,” which is a reason to buy the stock.

In the eyes of New York analyst Michael Nathanson of Moffett-Nathanson, Iger’s abilities are so great that he claims the stock could reach $120, up from $93 currently. This outcome would certainly be encouraging for the holders of the investment funds F&C and Witan, who have interests in Disney.

The more optimistic analysts say shares in Netflix — which are at $310 — could rise to $375. But again, this is a bet on how the company can adapt to tougher times, keep its 225 million subscribers worldwide and win more.

Netflix is ​​making a lot of noise with its documentary series Harry & Meghan. But, quieter, it’s also launched an ad-supported reduced-price plan, costing £4.99 a month in the UK and $6.99 in the US. James Dowey, co-manager of the Liontrust team, which manages the Global Innovation and Global Dividend funds, admits holding Netflix stock has been a wild ride this year.

But he adds, “We don’t see why Netflix can’t have 500 million or even 1 billion subscribers.” Among those hoping for Netflix to reach such heights are investors in the UK funds that own this stock, such as Baillie Gifford US Growth, F&C Monks and Scottish Mortgage (where I am an investor).

Shares of streaming giant Roku are down 78 percent this year. But brokers Oppenheimer say 2023 could be a turning point for the stock as more Roku channels increase their ad inventory.

Patience will also be required of anyone investing in funds – such as JP Morgan China Growth, Abrdn China and, of course, Scottish Mortgage – that own Chinese internet titan Tencent.

Shares are down 28 percent since the start of the year, recovering in response to the easing of restrictions on the time young people can spend gaming.

If you’re not an investor in any of these companies, you might view their stock as a bargain, based on our enduring desire for entertainment.

But while thrills are guaranteed, spills are bound to happen. That is show business after all.