Streaming services shouldn't count on consolidation as an industry fix - Rosenblatt's Barton Crockett
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Amid weakening macroeconomic conditions, Rosenblatt Securities analyst Barton Crockett said Tuesday that consolidation among streaming platforms, which has become an increasingly popular suggestion amid stagnant subscriber numbers among some of the industry's biggest players, doesn't necessarily represent a "great equity play."
Speaking to CNBC, Crockett said that economic softness will weaken ad markets and impact subscriber growth. A downturn could also lead to job losses, further hurting consumer spending.
As an argument against consolidation as a panacea, the Rosenblatt analyst pointed to Warner Bros. Discovery (WBD), which he noted lost more than 60% of its value since its merger earlier this year.
"So theoretically it makes sense for those two businesses to be together from an operational perspective, but from the leverage put on it to make the deal happen, it's not a great setup in this environment," he said.
Asked about streaming bundles, Crockett predicted that layering streaming platforms like Amazon (AMZN) and Apple (AAPL) will do better than pure streaming platforms in 2023. On Netflix (NASDAQ:NFLX), the analyst predicted that the company will see subscriber growth based on a lower-priced ad tier plan, which will also add to volume in ad space selling.
Looking at specific stocks, Crockett favors Live Nation Entertainment (LYV), The Liberty Braves Group (BATRA), Formula One Group (FWONA), Netflix (NFLX) and Disney (NYSE:DIS).
Streaming platforms' past 6 months action: DIS -7%, WBD -35.6%, NFLX +68.3%, PARA -31.6%.
Earlier in the day, the Wall Street Journal reported that Netflix's ad-supported tier has seen slow subscriber growth.
For more on WBD long term prospects, see why Seeking Alpha contributor Livy Investment Research says, "WBD shares are positioned for further turbulence ahead. But despite near-term execution risks on righting its ship, the stock continues to exhibit favorable upside potential on the long-view in our opinion."