First-quarter earnings season is officially underway, and media companies are gearing up to peel back the curtain on their financials, with Netflix kicking things off April 20.
All eyes will be on subscriber figures for the major streaming platforms. The only one within striking distance of Netflix is Disney+, which grew rapidly in the year it has been on the market. As of March, Disney+ had more than 100 million global subscribers, while Netflix reported 204 million at the end of 2020.
COVID gave a strong boost to subscriber growth through 2020, so it’s worth noting that streaming services will be facing very tough year-over-year comparisons in the first half of 2021. Furthermore, more competition from newer market entrants could have put pressure on the growth momentum of more mature services like Netflix.
International expansion will be the focal point for mature services, while nascent services will have to prove they’ve found their footing in the highly saturated domestic market.
Discovery+ and Paramount+ hit the market in Q1, and both will give investors a glimpse into how their services fared after launching at the beginning of this year.
Shares of Discovery and Paramount parent ViacomCBS have been on a roller-coaster ride. Both stocks saw massive gains in the first quarter of this year before their shares plunged by half in just a matter of a week. While some of the decline in ViacomCBS’ and Discovery’s stocks weren’t due to issues in the fundamentals of the company or even negative news, investors felt the burn all the same.
At the peak, ViacomCBS stock crossed about $100 per share and its valuation rose to $60 billion. As of April 13, the stock was trading around $40 per share with a market cap of roughly $26 billion. Last quarter’s earnings and forward guidance will play a critical role in determining the future direction of the stock.
Covid vaccinations in the U.S. are ramping up, and as the health crisis improves, corporations will finally see meaningful rebounds to the parts of their businesses hit the hardest.
The advertising market is expected to continue its recovery following a strong rebound in the fourth quarter. The U.S. ad market is estimated to have grown 7.4% year-over-year in Q1, excluding cyclical events like the election and the Olympics, according to ad giant MAGNA.
Though that’s a slight cooling off from 8.1% growth in 2020 Q4, the recovery is expected to accelerate further through the rest of 2021. MAGNA projected total ad revenue will grow 6.4% in 2021, up significantly from a much more modest 0.6% growth last year.
After getting clobbered for more than a year, it’s a slow but meaningful comeback for the studios and theme park businesses. Companies like Disney and Comcast were hit particularly hard when COVID forced the closure of their theme parks and halted productions of movies and TV shows.
Revenue declined significantly from those core businesses. Disney saw its theme parks revenue plummet 37% in 2020, and its studio entertainment revenue sank 13%. NBCUniversal’s theme parks revenue dropped 69%, and its filmed entertainment segment revenue decreased 19% in 2020.
The recovery won’t be swift in the beaten-down segments, but proof of a steady recovery and optimistic commentary from management will be key in determining post-earnings stock moves.
Investors will be paying close attention to how media companies kicked off 2021 but, more importantly, what their plans are for the future in a post-pandemic world.
For even more in-depth analysis on what to expect in Q1 from the top media and tech companies, check out VIP’s latest monthly report.