Lionsgate Studios Begins Trading on NASDAQ as a Standalone Business

Lionsgate Studios, the recently spun-off publicly traded company, May 14 began trading on NASDAQ with an opening $10.70 per share price and market capitalization around $2.79 billion. Lionsgate Studios claims to have an enterprise value of $4.6 billion.

Lionsgate separated its motion picture and television production business, including 20,000 title content library, in an effort to upgrade the value of its Starz pay-TV and streaming business.

Lionsgate Studios’ franchise properties include “The Hunger Games,” “John Wick,” “The Twilight Saga,” “Now You See Me” and “Saw,” and the television series “Mad Men,” “Orange Is the New Black,” “Ghosts,” “The Rookie” and the “Power” universe, a diversified film and television production and distribution business, a talent management and production company.

“This transaction reaffirms our longstanding belief in the value of premium content by enabling us to launch Lionsgate Studios as one of the world’s leading standalone, pure play, publicly-traded content companies,” Lionsgate CEO Jon Feltheimer and vice chair Michael Burns said in a joint statement. “It is an important step forward in the process of preparing strategically and financially for the full separation of our studio and Starz businesses that is designed to deliver incremental value to all of our stakeholders.”

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Netflix’s Stock Drops as Some Investors Fret About Ending Subscriber Data, Softer Revenue Forecast

Despite Netflix hitting another quarterly fiscal home run, Wall Street, early April 19, the day after the streamer’s first quarter results, saw the company’s stock drop more than 8% in value — the biggest decline since last July.

Investors were apparently spooked over current second quarter (ending June 30) revenue estimates of around $9.49 billion, below Street projections of above $9.5 billion, and the streamer’s decision to stop reporting subscriber numbers beginning in 2025.

Wall Street appeared to ignore the streamer’s $9.37 billion in Q1 revenue, which was ahead of the projected$9.28 billion; net income of $2.3 billion, which exceeded $1.98 billion in estimated profit; and 9.33 net new subscribers ahead of the projected 5.1 million new subs. Netflix’s earnings per share of $5.28 beat estimates of $4.50 per share.

And the streamer’s ad-supported subscription option continues to resonate with consumers, accounting for 40% all new subscribers.

“Netflix’s decision to phase out reporting quarterly membership figures caused uncertainty and a stock sell-off,” Michael Wiggins De Oliveira with Seeking Alpha, wrote in an April 19 post. “The lack of transparency in membership figures suggests the Company is no longer a growth stock.”

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, agreed that Netflix’s announcement to stop reporting subscriber data a year from now could be a surprise to investors.

“However, this decision is consistent with our oft-repeated assertion that Netflix would inevitably pivot from a high-growth, low-profit business to a slow-growth, high-profit business,” Pachter wrote in a note.

The analyst contends the stock price decline is a minor bump in the road considering Netflix outsized SVOD market domination. The streamer’s annual content spend is just 35% below the $26 billion bid Apollo Capital submitted to buy Paramount Global, which includes Paramount Pictures and Paramount+ streaming platform.

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“We think Netflix has reached the right formula with global content creation, balancing costs, and increasing profitability,” Pachter wrote. “We think Netflix will continue to expand profitability and generate increasing cash flow.”

Jeffrey Wlodarczak, CEO, internet, media & communications analystPivotal Research Group, in New York, dismissed Wall Street concerns as an overreaction.

“It is abundantly clear that Netflix is demonstrating massive scale as it continues to produce strong subscriber results and free cash flow with the ability to invest to accelerate that growth … while its streaming peers continue to generate substantial losses,” Wlodarczak wrote in a separate note.

Netflix Hits Another Fiscal Quarter Home Run, So Why the Stock Market Sell-Off?

NEWS ANALYSIS — Netflix hit another fiscal quarter home run in the second quarter (ended June 30), generating three-times the projected subscriber growth, and more free cash flow in the first six months than it had estimated for the full year. In short, the subscription streaming video behemoth remains the digital platform and media yardstick all others in Hollywood are measured against.

Yet, the stock was down nearly 9% in early trading July 20, with some investors worried about a lack of transparency regarding what exactly is driving sub growth: Paid sharing, the lower-priced ad-supported option, or actual sub growth? Netflix this year stopped issuing subscriber guidance, in part after last year’s Q2 debacle that saw the stock freefall in value after the service reported a subscriber loss against a company estimated gain.

Michael Nathanson, analyst with MoffettNathanson, and former host of Netflix’s fiscal quarter webcast, decried the streamer’s vagueness regarding specifics around subscriber growth. Paid sharing for non-subscribers is now active across 80% of Netflix’s operating territories, yet its actual fiscal impact remains largely unknown, with senior company executives saying only that the results are promising.

“Without company disclosure around the number of ‘extra members’ being added to accounts as part of the password sharing crackdown, the number of users that crackdown has even targeted so far or any insight into the number of subscribers on the standard-with-ads tier, the drivers underpinning Netflix’s revenue growth are more unclear than ever, giving us less confidence in our ability to accurately model this company,” Nathanson wrote in a note.

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To Michael Pachter, media analyst at Wedbush Securities in Los Angeles, the sell-off is nothing more than a classic example of more sellers than buyers in the market.

Pachter said the stock increased from $400 per share at the beginning of June to $475 yesterday. Shareholders for a year or more have seen a huge profit, while short-term investors have seen a “nice profit,” according to the analyst.

“[The fiscal] results were great, but guidance a bit wimpy,” Pachter said in an email. “The guidance wasn’t good enough to attract a lot of new money at $475, and was not good enough to keep shareholders with huge profits from selling. Nothing more than that.”

Netflix Upgraded on Wall Street Optimism for Higher-Priced Subscription Tiers, Advertising, Writers Strike

Heading into the end of the second fiscal quarter, Netflix is getting a boost on Wall Street, with two firms upgrading their outlook on the SVOD behemoth and its forays into ad-supported streaming, clampdown on password sharing and lower-priced ad-free subscriptions.

Analyst Jason Helfstein, with Oppenheimer, added that the streamer’s removal of its lower-priced basic subscription plan (limited to one concurrent ad-free stream at a 720p resolution) to new subscribers in Canada could be emulated in other markets, including the United States.

Helfstein said he believes Netflix could increase annual revenue by $4.4 billion in by eliminating the basic option.

“While we expect a gradual rollout [elimination of the basic plan] by geography into next year, we think investors can start to discount the additional revenue today,” the analyst wrote in a note.

Notably, Helfstein contends that the ongoing writers strike could turn out to be a boon for Netflix (in the short-term) given what he calls the streamer’s programming lead-time on new content.

“Extended writers strike would disrupt back-to-school TV calendar, likely pushing more users/viewing to Netflix,” he wrote. “[Netflix] benefits from a deep backlog as well as international content that is unaffected by strike. Additionally, Netflix is likely benefiting from media job cuts, as competitors struggle amid ad market weakness and subscription services cash drain.”

Separately, Citi opened a 30-day “catalyst watch” on Netflix, citing the streamer’s newly-launched lower-priced ad-supported option, which will be in effect for two months at the end of June.

“We would expect shares to respond positively to any incremental positive commentary on the firm’s ad-tier roll-out, which we believe will give investors incremental confidence in the progress of this initiative,” analyst Jason Bazinet wrote in a note.

Netflix reports Q2 fiscal results on July 19, with Wall Street consensus suggesting the company will generate $8.26 billion in quarterly revenue.

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Analyst: Disney CFO Departure Could Extend Bob Iger’s Reign Past 2024

Following the sudden departure of CFO Christine McCarthy due to a family medical leave, the employment term for CEO Bob Iger could be extended, according to a Wall Street analyst.

In a June 16 note to clients, Alan Gould with investment firm Loop Capital, wrote that McCarthy’s scheduled June 30 exit, and Kevin Lansberry’s planned July 1 takeover as interim CFO, could mean that Iger remains at the top executive position at Disney beyond his current two-year contract drawn up following the abrupt firing of previous CEO Bob Chapek last December.

Disney has said it would initiate a search for a permanent CFO.

“The [Disney] board is now in a position where it will be performing both CFO and CEO searches almost simultaneously,” Gould wrote, adding that the searches come as Disney faces increasing fiscal pressure to cut overhead costs in relation to its all-in streaming video strategy, while also dealing with political challenges in Florida, among other issues.

“Given … one of the most disruptive periods [in the company’s history], we speculate whether the board might ask Iger to remain CEO for an additional year,” Gould wrote.

Since reassuming the CEO position, Iger has given greater authority and accountability to business unit leaders, including Dana Walden and Alan Bergman at Disney Entertainment, Jimmy Pitaro at ESPN, and Josh D’Amaro at Disney Parks, Experiences and Products.

Cinedigm Looking for Nasdaq Extension of Company Stock Listing

Cinedigm April 11 disclosed it is looking for a second reprieve from Nasdaq regarding its listing as a publicly traded stock. The Los Angeles-based streaming video network operator and home entertainment distributor had been given 180 days to raise its stock price above the mandatory minimum $1-per-share price by April 3.

That deadline passed with Cinedigm unable to increase its share price to the mandatory minimum threshold.

The company is now requesting a hearing before the Nasdaq panel at which it will present its plan of compliance and request a further extension. The panel has the discretion to grant Cinedigm an additional 180 calendar days from April 5 to regain compliance. This request will automatically stay any delisting or suspension action pending the issuance of a final decision by the panel and the expiration of any further extension granted by the panel.

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Should Cinedigm’s stock be delisted, the company could have more difficulty obtaining outside funding, including issuing new shares to the market to establish new financial initiatives.

Cinedigm’s share price closed April 11 at 45 cents per share. The company ended its most-recent fiscal period with net income of nearly $5 million on revenue of almost $28 million.

Wall Street Rejoins Netflix Bandwagon Following Streamer’s Strong Q3 Results

What a difference a day makes. Netflix’s year-long stint in Wall Street’s doghouse came to end Oct. 18 following the streamer’s joyful third-quarter fiscal results. The company’s stock is up almost 15% in Oct. 19 trading — the biggest share price increase since January 2021. The stock price had declined 60% through the first nine months of the fiscal year.

Wall Street firms JPMorgan Chase & Co., Deutsche Bank, Wedbush Securities, MoffettNathanson and KGI Securities Co. all upgraded their share price projections for Netflix after the streamer added 2.4 million subscribers in the quarter, with plans to add 4.5 million in the current fourth quarter, ending Dec. 31.

“‘Crawl, walk, run’ seems to be management’s mantra here,” JPMorgan Chase’s Doug Anmuth wrote in a note regarding the streamer’s pending ad-supported subscription plan.

Notably, Wedbush Securities’ media analyst Michael Pachter, a longtime bear on Netflix’s stock, contends the streamer is doing the right thing introducing a lower-priced subscription tier.

“We think Netflix made a great decision to launch an ad-tier, as growth had stalled in [North America] and was heading toward full market saturation in Europe, the Middle East and Africa,” Pachter wrote in an Oct. 19 note. “Its ad-tier should limit churn going forward, while its content strategy appears to be smoothing out with greater discernment and a higher mix of original titles.”

That said, Pachter doesn’t believe that Netflix’s stock price will return to its 2021 halcyon levels for many years, but the analyst is raising its share price target to $325 from $280.

“Our primary takeaway from the webcast is that even if ads are not directly accretive (and we think they will be increasingly accretive over time), the ad-tier should reduce churn,” Pachter wrote. “This will drive a re-acceleration of subscriber growth and contribute increasingly to free cash flow generation as Netflix continues to improve its content quality and lower overall spend per subscriber.”

Michael Nathanson, with the research firm MoffettNathanson in New York, contends Netflix is out of choppy waters for now, but that challenges remain as the streamer launches an ad-supported consumer option and attempts to reign in non-paying users.

“To the company’s credit, we are witnessing a rise of a new version of Netflix,” Nathanson wrote.

Post-Netflix AVOD Announcement: Everybody’s Got an Opinion

NEWS ANALYSIS — In the hours following Netflix’s announcement of an official debut date and pricing for its much-anticipated ad-supported subscription option was revealed, Wall Street analysts and media observers jumped upon the growing bandwagon of opinion on the news.

Netflix’s ad-supported tier is set to start Nov. 3 in 12 countries, and priced at $6.99 monthly in the United States.

“Netflix understands the streaming consumer incredibly well,” Ashwin Navin, co-founder/CEO of Samba TV, said in a statement. “The sweet spot for streamers looking to move to an ad-supported model is one that offers five minutes or less of advertising per hour and reduces the cost of their subscription by half. This new tier threads that needle nicely.”
 
Netflix’s first-mover advantage launching an ad-supported plan, comes more than a month ahead of a similar option on Disney+.
 
While Netflix will be able to better monetize existing subscribers transitioning to the lower-priced plan, industry estimates suggest 90% of current non-Netflix subs watch other ad-supported streaming content.
 
“This massive addressable market has no aversion to watching ads in exchange for free or reduced priced content and are prime candidates to turn to Netflix’s new ad-supported tier,” Navin said.
 
Michael Pachter, media analyst with Wedbush Securities in Los Angeles, said a recent company-conducted survey of Netflix subscribers found that the new ad-supported tier would keep them around the service.
 
“Our survey demonstrates that Netflix has an opportunity to limit churn in the coming months by offering its ad-supported tier to those looking to quit the service,” Pachter wrote in an Oct. 14 note. “In fact, of our respondents, those most likely to opt into the ad-supported tier are those who would have otherwise quit. The group of respondents that said they were unlikely to pause or cancel their subscriptions were much less likely to switch to ads.”
 
Analyst Brian White with the investment firm Monness, Crespi, Hardt, contends the announcement could reverse what has been a nightmare of fiscal year for Netflix. White, who believes Netflix added 1 million new subs in the third quarter (ended Sept. 30), says the new ad-supported tier will help the service adapt to a more challenging market.
 
“Although Netflix continues to deliver a strong slate of content, and the stock’s valuation has become unassuming after a sharp decline, the company’s business is under siege on multiple fronts,” White wrote in a note. “[Whether Netflix has] the time necessary to successfully monetize new initiatives is unclear, and we believe the darkest days of this economic downturn are ahead of us.”
 
In the U.K., where Netflix is also launching ad-supported service, Bridget Hall, planning director for the Americas at M&C Saatchi Performance, said the bar has been set high in online advertising and its ability to offer marketers targeted audiences.
 
“Advertisers expect robust targeting and advanced measurement for cross-device conversion tracking,” Hall wrote. “Initial speculation is that the Netflix CPMs are high, and the targeting may not be as advanced.”
 
Stefan Lederer, founder/CEO of Bitmovin, contends consumers won’t be as willing to pay for content with commercials.
 
“Our recent research suggests that in a paid subscription model, the majority (67% among 18- to 35-year-olds) would rather pay that little bit extra to remove ads,” Lederer said. “Most viewers (60%) are happy to tolerate ads when it comes to free streaming services, however it seems if paying for a subscription, no matter the cost, they expect ad-free content.”
 
Not so fast, says Tej Rekhi, VP product at Peach, who argues Netflix’s entrance into ad-supported content with significantly up the AVOD market profile among consumers.
 
“Netflix’s ad-supported tier has come at a really good time,” Rekhi wrote. “As consumers start to feel subscription fatigue, they now have an ad-funded model option for their wallets. This is going to accelerate the [connected TV]/AVOD landscape, creating bigger opportunities for more addressable content.”
 
Netflix reports third quarter (ended Sept. 30) fiscal results Oct. 18.

NEWS ANALYSIS: Redbox’s ‘Meme Stock’ Rollercoaster Ride Continues

Another day, another premarket rally for Redbox Entertainment shares, which surge and drop like a rollercoaster amusement ride. The legacy kiosk disc rental company’s shares have become a meme stock, subject to the whims of mob rule among day traders and short squeezers transacting more than 20 million shares daily — and little to do with the company’s fiscal fundamentals.

The ongoing drama plays out against the backdrop of a corporate merger that would see AVOD operator Chicken Soup for the Soul Entertainment acquire Redbox for $375 million. With Redbox shares up more than 12% in June 16 trading, the company’s market cap is approaching $500 million — making the deal appear undervalued on paper.

Earlier this month, Redbox, in an effort to raise funding for capital expenses, issued a regulatory filing for separate warrants to acquire millions of new Class A Common stock. The move resulted in a modest bump in the share price and was seen as a positive by B. Riley Eric Wold.

“Given our continued belief in the opportunity for the Redbox kiosk network to address the ongoing content needs of the target demographic (e.g., late technology adopters and price-sensitive consumers) — especially in an environment where SVOD platforms are beginning to hit a subscriber wall — we saw the value of additional financing to help [Redbox] get past the current content drought,” Wold wrote in a note.

Wold contends the extra financing could expedite the “digital growth strategies that have been put on hold or delayed as management sought out additional liquidity options.”

Regardless, six days later, Redbox disclosed it would be giving separate bonuses of $550,000, $300,000 and $250,000 to CEO Galen Smith, chief digital and strategy officer Jason Kong, and chief operating officer Michael Chamberlain, respectively, should they remain with the company following consummation of the Chicken Soup for the Soul Entertainment deal.  The executives still get the bonuses if they are terminated post-ownership change.

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Goldman Sachs Puts Netflix Stock Rating Up for ‘Sale,’ Citing Recession and Competition

Wall Street powerhouse Goldman Sachs June 10 shifted its “neutral” rating on Netflix shares to “sell,” lowering its price-per-share target on the subscription streaming pioneer to $186 from $265.

Netflix shares closed June 9 at $192.77 per share. The stock, which is down more than 10% in pre-market trading, has declined 72% since a market high of $690.31 per share on Oct. 21. 2021.

Sachs analyst Eric Sheridan, writing in a note, cited ongoing inflationary concerns and rising competition from Disney+, HBO Max and Paramount+, among others, for putting the brakes on Netflix’s stock.

“We [also] have concerns … on demand trends (both in the form of gross adds and churn), margin expansion, and levels of content spend and view Netflix as a show-me story with a light catalyst path in the next six to 12 months,” Sheridan wrote.

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The analyst said he is lowering Sachs’ 2022-23 revenue estimates for Netflix to incorporate a greater probability of a weaker macro environment going forward, which includes greater subscriber losses.

“More specifically, we modestly lower our paid streaming subs across every region but incorporate higher [average-revenue-per-user] levels in the U.S. in 2024 and beyond to reflect Netflix’s initiatives around its ad-supported tier and password sharing,” Sheridan wrote.