The Stock Is Down The Most in 21 Years!

Disney (DIS.US) just suffered its worst one-day plunge in 21 years, the Smart Money APP has learned, with Disney falling 13 percent on Wednesday, its biggest one-day decline since Sept. 17, 2001. Meanwhile, shares of Warner Bros. Discovery(WBD.US), Lions Gate Entertainment (LGF.A.US) and AMC Theaters (AMC.US) all fell below $10. Paramount Universal (PARA.US) has lost half its value this year.

As the months passed, Hollywood's feel-good streaming story became a horror show.

Consumers are increasingly streaming movies and shows and watching fewer of them in theaters and on traditional channels. To encourage this shift and attract subscribers, media companies are putting some of their best shows online. But even as viewers are abandoning traditional channels in droves, the new services are losing money. Companies that promised a smooth transition to the digital age are being punished on Wall Street, with streaming stocks heading for their biggest annual decline since at least 1990.

"The media and entertainment industry is going through a major transformation," says Porter Bibb, a long-time observer of the industry. They have entered the tunnel and no one knows where they will come out."

The shift is evident in the number of consumers cancelling their pay-TV subscriptions. Cable giants Comcast Corp (CMCSA.US) and Charter Communications (CHTR.US) together lost nearly 800,000 TV subscribers last quarter. At that rate, that would mean fewer millions of consumers who would be paying for MTV, CNN and ESPN.

The only bright spot in the quarter was Netflix (NFLX.US), whose subscriber losses in the first half of the year prompted a reassessment of the industry's business model and stock value. The streaming bellwether reported that it added a better-than-expected 2.41 million subscribers last quarter. The stock is still down 57 percent this year.

Losses at Disney's direct-to-consumer division more than doubled to $1.47 billion in the fiscal fourth quarter, driven by its Disney+ streaming service, due to higher programming expenses and higher costs to promote the service in new countries. And like other media giants, the company's results have been hurt by weak cable advertising revenue.

It wasn't all Hollywood entertainment companies that suffered in media stocks. The biggest loser in the S&P 500 media and entertainment index this year has been Facebook parent META (Meta.US), which gets nearly all of its revenue from advertising. Meta shares are down 70% so far this year.

MoffettNathanson analyst Michael Nathanson noted that the deterioration in Disney's traditional TV business may be the more shocking factor in this week's earnings report. The company expects single-digit profit growth next year, well below his expectations. "Rarely have we been so wrong about Disney's earnings," Nathanson wrote in a research note Wednesday. The negative economic impact of 'cord-cutting' (coupled with a weak advertising market) finally seems to be starting to show up in Disney's fiscal 2023 results."

Disney's fiscal fourth-quarter sales of $20.2 billion fell about $1 billion short of analysts' expectations. Earnings excluding certain items fell to 3 cents a share, below the 51 cents average estimate of analysts surveyed by Bloomberg. However, Disney told investors this week that its streaming losses had peaked.

On Wednesday, Disney CEO Bob Chapek acknowledged Wall Street's frustration with its massive investments in online TV, including ESPN+ and Hulu.

Chapek notes that the company will celebrate its 100th anniversary next year; Especially when trying a new business model, he says, there are deceleration phases.

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