Welcome to the weekly dispatch from Entertainment Strategy Guy, The Ankler’s top secret anonymous showbiz data guru and analyst.
I don’t want to start off with a complaint, but I will. I hate it when business coverage tends to simply follow a company’s moment.
Take, for example, how the business press celebrates companies on their way up (think: WeWork) and then almost uniformly celebrates their demise (again: WeWork). One example not enough? I’d toss in Zoom and Peloton in this bucket too. March 2020: articles predict we’ll never leave our houses after the pandemic. Shares soar! December 2021: meh, we’re kind of over this isolation thing. Prices came back to earth. Ride the momentum up and then back down, baby! Particularly yesterday, where performance of NASDAQ stocks really started to resemble the Omicron curve itself.
So let’s play out a longer curve on the graph now. If, in 2015, you started hyping Disney due to its growing box office dominance (think movies The Force Awakens, Avengers: Age of Ultron and Inside Out), well, that strategy worked out pretty well through 2019. Same for Netflix, in its game of adding subscribers in the 2010s.
Of course, staying with the herd had its advantages: mainly, if you’re wrong, and everyone else is wrong, who cares? It’s much harder to accurately identify why a company is growing and if those trends are continuing. One of my favorite tools to help this analysis is to imagine the best and worst case of a given company’s future, then weigh which scenario is more likely.
I’ll leave the upside case to the rest of the entertainment press, filled with breathless announcements about Marvel this, Squid Game that. Today I want to explore the Dark Side. The worst case scenario. The suboptimal outcome.
I plan to write one of these for each of the behemoth companies in entertainment (so sorry, no Lions Gate analysis).
And we’ll start with Disney, the entertainment conglomerate darling of the 2010s. Because Disney utterly conquered the box office in the last decade:
Box office supremacy begat a boom Wall St. decade
Yet things feel tense in the House of Mouse. I can’t open my inbox without reading an article about discontent at Pixar, concerns about Bob Chapek’s leadership, or fears for Disney’s streaming subscriber growth. (Not to mention all the other forces buffeting entertainment, and Disney specifically…)
So this is what I’m offering today: the worst case scenario for Disney in the next five-10 years. Let me caveat this: This isn’t a scenario I think is likely to happen. I would say it’s a one in 10 disaster case. But as we’ve learned in the last few years, there is enough upheaval and chaos lurking behind corner that no one could never say never.
1. Alpha Risks and Industry-Wide Ailments
In finance, there are two crucial terms for evaluating a stock’s risk in the equity markets. “Alpha risk” is the exposure to the general market. Meaning if the general market is increasing, most stocks increase with it (a.k.a., this is the backbone of the basic index fund your financial planner parks you in). Some stocks reverse those trends (for example, Dollar Stores go up during recessions), and other stocks have even more exposure. Roughly, all entertainment stocks have about the same alpha risk.
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The Optionist is coming! A new Ankler newsletter about available intellectual property for the entertainment community debuts tomorrow, January 21. Written by Andy Lewis, The Optionist aims to do the reading for you by highlighting the best material with rights still available from book publishing, journalism and podcasts. As the publishing-to-Hollywood superhighway expands in the streaming age, the hours in the day have not. We hope The Optionist makes your work life just a little bit more productive through our legwork. For a limited time, you can sample The Optionist for free here.
Ankler Hot Seat Podcast: What to Expect at Sundance Our podcast is increasing frequency this week in honor of Hollywood’s big festival.
Hollywood’s China Grovel is Failing Writer Sonny Bunch dives into the absolute mess stemming from the studios’ decades of capitulation to the Chinese government. The Chinese government was badly embarrassed following American outrage over the revelations that Disney’s live-action Mulan filmed on location in Xinjiang province — where as many as a million Muslim Uyghurs have been detained in concentration camps designed to destroy their ethnic identity. Disney has paid a price ever since. None of Disney’s new Marvel Cinematic Universe films received a theatrical release in China. Not Black Widow, not Shang-Chi and the Legend of the Ten Rings, which used Chinese iconography and Chinese actors in the hopes of appealing to Chinese audiences and winning approval of Chinese officials, and not Eternals, which was directed by the best director-winning, China-born Chloe Zhao, who has her own baggage with Chinese audiences after old interviews resurfaced in which she said China was a “place where there are lies everywhere.”
Broadway’s Crisis: It’s ‘Las Vegas on the Hudson’ As Broadway suffers its lowest attendance in a decade, omicron wreaking havoc, and audiences rejecting one new production after another, longtime entertainment critic and journalist Frank Scheck writes about Broadway’s risk of becoming Vegas-on-the-Hudson, a place defined only by longstanding mega-hits: “If the producing doesn’t get smarter, the gap between the blandly commercial and artistically pretentious flops will continue to widen.”
ESG Report: Uh-oh, Streaming Musicals Keep Bombing Netflix’s Tick, Tick…Boom! from Lin-Manuel Miranda was NOT another Hamilton — and the problems kept mounting from there for the category.
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