Netflix, Inc. is in “hand-to-hand combat” with traditional media firms, but the battle isn’t doing Reed Hastings’ firm any favors on the stock market. Rich Ross, the head of Discovery US said that his network, and the rest of the cable world, was in a direct physical battle with the streaming firm. That’s been hurting shares in new and old media in recent days.
In a broad market sell off that arrived on the back of weak data from China and a confused response to the latest note from the Federal Reserve, media stocks have been the hardest hit. It’s not just Walt Disney Co that’s been hurting, however. Netflix shares lost more than 15 percent of their value last week.
Old media meets new
The sell-off in media stocks appeared to hinge on a report authored by Bernstein analyst Todd Juenger. In a report that mainly concerned Walt Disney Co and Time Warner Cable, Mr. Juenger said that the decline of old media in the face of Netflix and other rising streaming services would lead to lower multiples on their stocks.
Walt Disney Co, which Jim Cramer said was a bellwether for the way the whole market was going, sold off strongly after the report. Shares in the Frozen maker lost more than 7 percent of their value last week. That’s a hard hit for those with shares, but it’s nothing like the pain that Netflix shareholders have been through in recent days.
The “hand-to-hand combat” that Mr. Ross says his channel and Netflix are involved in with each other appears to have made Wall Street suspicious of both. Shares in Discovery Communications Inc. lost more than 4 percent in the last week.
After renewed weakness in China was revealed early on Monday morning, shares in, Discovery, Walt Disney Co and Netflix are down in pre-market trading.
Netflix is the media
The reason for the fall in Netflix stock may be separate from the sell-off in Disney and Time Warner. Netflix fell in line with tech and web shares last week.
As the clouds from China, and the Federal Reserve, moved in over the market last week shares in strong tech firms like Apple Inc. started to collapse. Weaker firms, or those with high growth in recent times like Netflix, were hit even more harshly.
It seems that the stock market is discounting future growth, not just in Disney and the old media as Todd Juenger noted, but also in the new media of Netflix and Twitter.
For those with shares on wither side of that divide, the battle between the old and the new looks less like “hand-to-hand combat” than it does a grapple off the edge of a cliff. Mr. Ross is hopeful. however, though he doesn’t seem to be offering much to investors.
He says his job is to “‘Make what people want to watch and the rest goes with it’. I don’t think that has changed at all. My job every day is to make what people want to watch.” That’s not helping Netflix, Discovery or Disney on the stock market on Monday morning.