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The Zacks Film and Television Production and Distribution industry is witnessing a surge in demand for digital entertainment due to operational constraints faced by movie theaters, theme parks and cruise lines. This increased consumption of online media, music and news, driven by the work-and-learn-from-home trend, has been a boon for industry players like Warner Music Group, News Corp., Lions Gate Entertainment and IMAX Corp. Companies in this sector are strategically investing in superior product offerings and prudent capital allocation. The gradual recovery in advertising expenditure and the resumption of production pipelines further bode well for film and television production companies.
Industry Description
The Zacks Film and Television Production and Distribution industry encompasses companies engaged in the creation, distribution and exhibition of film and television content. The core activities revolve around producing entertainment for theaters, television networks, video-on-demand platforms, streaming services and other outlets that showcase such works.
A notable company like Imax specializes in advanced motion picture technologies and immersive presentation experiences. Industry participants are involved in the production and dissemination of movies destined for theatrical releases, direct-to-video markets, as well as television programming. The financial performance of these entities hinges greatly on the global box office success of their films, coupled with the number of new releases and the viewership ratings garnered by their television shows.
3 Film and Television Production Industry Trends in Focus
Over-the-Top Services Gain Prominence: Content creators are increasingly distributing through over-the-top (OTT) streaming services to capitalize on the popularity of their franchises. Their aim is to provide exclusive content and a differentiated viewing experience. However, streaming companies themselves are producing more original, award-winning programming to reduce licensing costs and reliance on third-party providers, which could undermine traditional content distribution strategies.
Binge-Watching Drives Consumption: Phenomena like binge-watching, wider Internet adoption and advancements in mobile, video, and wireless technologies have led consumers to frequently view content on smaller screens. To adapt to these new viewing patterns, industry players are pivoting to digital content distribution.
The rise of digital capabilities provides easier access to consumer data, allowing production companies to leverage AI tools for better understanding audience preferences and creating resonant content. However, intense competition from streamers is forcing increased spending on content and marketing, hurting profitability.
Technological Advancement Aids Prospects: Exhibitors are adopting highly efficient, cost-effective laser projection systems to enhance image quality and the overall movie experience. Technologies like motion seating, immersive audio, interactive movies, AR and VR are expected to further elevate the viewing experience. Conversely, the growth of alternative distribution channels like home video, pay-per-view, streaming, VOD, Internet and broadcast TV is challenging traditional exhibitors.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Film and Television Production and Distribution industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #66, which places it in the top 27% of more than 246 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Jun 30, 2023, estimates for the current year have moved 8.7% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Beats the S&P, the Sector
The Zacks Film and Television Production and Distribution industry has outperformed the Zacks S&P 500 and the sector in the past year.
The stocks in this industry have collectively rallied 36.2% compared with the S&P 500’s return of 23.2% and the Zacks Consumer Discretionary sector’s increase of 4.2% over the same time frame.
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales (P/S), a commonly used multiple for valuing Film and Television Production and Distribution stocks, the industry is currently trading at 2.05X compared with the S&P 500’s 4.1X and the sector’s 1.87X.
Over the past five years, the industry has traded as high as 2.49X and as low as 0.92X, recording a median of 1.62X.
4 Film & Television Stocks to Watch Right Now
Lionsgate Holdings: This Zacks Rank #2 (Buy) company is benefiting from strengths in its Motion Picture and Media Networks segments. Robust viewership of content across all platforms, coupled with a rising subscriber base, is driving revenues for STARPLAY Domestic. Increasing domestic OTT and global subscriber count are expected to fuel top-line growth in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lionsgate enjoys a strong pipeline of content on Starz's platforms, boosting viewership and increasing the subscriber base of its OTT offerings. Management has been planning cautious content spending rather than chasing subscribers, therefore focusing on profitability. It will also explore bundling and packaging opportunities going forward.
The acquisition of global entertainment platform eOne from Hasbro for $375 million in cash has expanded Lionsgate's library by 6,500 film and television titles. The acquisition has boosted its portfolio of brands and franchises and is expected to strengthen its footprint in Canada and the United Kingdom.
Lionsgate shares have declined 28.9% year to date. The Zacks Consensus Estimate for fiscal 2025 earnings has remained steady at 93 cents per share over the past 30 days.
Warner Music Group: This Zacks Rank #3 (Hold) company is prospering from continued growth in Recorded Music licensing and Music Publishing synchronization revenues, including income from emerging streaming platforms. Furthermore, ongoing investments in international markets are anticipated to bolster its top line in the near term. Warner Music Group has shifted away from solely relying on celebrity influence and is now strategically targeting various elements of the value chain.
The company has invested in media platforms like HipHopDX, IMGN, Uproxx and several others, which possess significant potential to expand WMG's reach to a global audience of music enthusiasts. WMG is benefiting from its growing partnership with TikTok. This multi-year agreement grants TikTok, TikTok Music, CapCut, and TikTok's Commercial Music Library licenses to the repertoire of Warner Recorded Music and Warner Chappell Music.
Warner Music India has expanded its partnership with Global Music Junction (GMJ), the music and entertainment subsidiary of JetSynthesys. The move will establish Warner Music India as the largest player in the central Indian music market.
Warner Music Group shares have declined 17.5% year to date. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings has remained steady at 99 cents per share over the past 30 days.
IMAX: A robust slate of upcoming releases is expected to fuel IMAX's top line for the remainder of 2024, driven by gross box office collections of local language movies in markets like China, Japan, India, and South Korea. Strengthening partnerships with leading multiplex chains in regions such as France, the Philippines, Turkey and India presents a significant upside. The flurry of international deals will allow this Zacks Rank #3 company to deliver its premium sight and sound technology to more global audiences and stay relevant as it faces increasing competition from streamed content.
The recovery in the pace of theater system installations and higher IMAX maintenance sales are major positive factors. Moreover, a steady cash balance and flexible business model position the company well for expansion and market share gains.
The Zacks Consensus Estimate for IMAX’s 2024 earnings has moved south by a penny to 90 cents per share over the past 30 days. IMAX shares have risen 0.7% year to date.
News Corporation: This Zacks Rank #3 company is benefiting from prudent strategic efforts, including the ongoing digital transformation of its business and investments in the Digital Real Estate Services, Dow Jones and Book Publishing segments. News Corporation has been diversifying its revenue streams through strategic acquisitions and operational enhancements. It is optimistic about the acquisitions of the OPIS and Base Chemicals businesses, which are likely to bolster Dow Jones' information services offerings.
News Corporation is well-positioned to capitalize on opportunities arising from technology sharing across geographies and businesses, as well as bundled offerings of enriched content to consumers and advertising partners. Robust momentum in the Digital Real Estate Services segment, driven by higher Australian residential revenues at REA Group, is expected to fuel top-line growth in the upcoming quarters.
News Corporation shares have rallied 10.8% year to date. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings has moved south by 5.6% to 67 cents per share over the past 30 days.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Warner Music, News, Lions and IMAX
For Immediate Release
Chicago, IL – June 11, 2024 – Today, Zacks Equity Research discusses Warner Music Group (WMG - Free Report) , News Corp. (NWSA - Free Report) , Lions Gate Entertainment (LGF.A - Free Report) and IMAX Corp. (IMAX - Free Report) .
Industry: Film & TV
Link: https://www.zacks.com/commentary/2285775/4-film-television-production-stocks-to-watch-on-solid-industry-trends
The Zacks Film and Television Production and Distribution industry is witnessing a surge in demand for digital entertainment due to operational constraints faced by movie theaters, theme parks and cruise lines. This increased consumption of online media, music and news, driven by the work-and-learn-from-home trend, has been a boon for industry players like Warner Music Group, News Corp., Lions Gate Entertainment and IMAX Corp. Companies in this sector are strategically investing in superior product offerings and prudent capital allocation. The gradual recovery in advertising expenditure and the resumption of production pipelines further bode well for film and television production companies.
Industry Description
The Zacks Film and Television Production and Distribution industry encompasses companies engaged in the creation, distribution and exhibition of film and television content. The core activities revolve around producing entertainment for theaters, television networks, video-on-demand platforms, streaming services and other outlets that showcase such works.
A notable company like Imax specializes in advanced motion picture technologies and immersive presentation experiences. Industry participants are involved in the production and dissemination of movies destined for theatrical releases, direct-to-video markets, as well as television programming. The financial performance of these entities hinges greatly on the global box office success of their films, coupled with the number of new releases and the viewership ratings garnered by their television shows.
3 Film and Television Production Industry Trends in Focus
Over-the-Top Services Gain Prominence: Content creators are increasingly distributing through over-the-top (OTT) streaming services to capitalize on the popularity of their franchises. Their aim is to provide exclusive content and a differentiated viewing experience. However, streaming companies themselves are producing more original, award-winning programming to reduce licensing costs and reliance on third-party providers, which could undermine traditional content distribution strategies.
Binge-Watching Drives Consumption: Phenomena like binge-watching, wider Internet adoption and advancements in mobile, video, and wireless technologies have led consumers to frequently view content on smaller screens. To adapt to these new viewing patterns, industry players are pivoting to digital content distribution.
The rise of digital capabilities provides easier access to consumer data, allowing production companies to leverage AI tools for better understanding audience preferences and creating resonant content. However, intense competition from streamers is forcing increased spending on content and marketing, hurting profitability.
Technological Advancement Aids Prospects: Exhibitors are adopting highly efficient, cost-effective laser projection systems to enhance image quality and the overall movie experience. Technologies like motion seating, immersive audio, interactive movies, AR and VR are expected to further elevate the viewing experience. Conversely, the growth of alternative distribution channels like home video, pay-per-view, streaming, VOD, Internet and broadcast TV is challenging traditional exhibitors.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Film and Television Production and Distribution industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #66, which places it in the top 27% of more than 246 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Jun 30, 2023, estimates for the current year have moved 8.7% north.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Beats the S&P, the Sector
The Zacks Film and Television Production and Distribution industry has outperformed the Zacks S&P 500 and the sector in the past year.
The stocks in this industry have collectively rallied 36.2% compared with the S&P 500’s return of 23.2% and the Zacks Consumer Discretionary sector’s increase of 4.2% over the same time frame.
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales (P/S), a commonly used multiple for valuing Film and Television Production and Distribution stocks, the industry is currently trading at 2.05X compared with the S&P 500’s 4.1X and the sector’s 1.87X.
Over the past five years, the industry has traded as high as 2.49X and as low as 0.92X, recording a median of 1.62X.
4 Film & Television Stocks to Watch Right Now
Lionsgate Holdings: This Zacks Rank #2 (Buy) company is benefiting from strengths in its Motion Picture and Media Networks segments. Robust viewership of content across all platforms, coupled with a rising subscriber base, is driving revenues for STARPLAY Domestic. Increasing domestic OTT and global subscriber count are expected to fuel top-line growth in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lionsgate enjoys a strong pipeline of content on Starz's platforms, boosting viewership and increasing the subscriber base of its OTT offerings. Management has been planning cautious content spending rather than chasing subscribers, therefore focusing on profitability. It will also explore bundling and packaging opportunities going forward.
The acquisition of global entertainment platform eOne from Hasbro for $375 million in cash has expanded Lionsgate's library by 6,500 film and television titles. The acquisition has boosted its portfolio of brands and franchises and is expected to strengthen its footprint in Canada and the United Kingdom.
Lionsgate shares have declined 28.9% year to date. The Zacks Consensus Estimate for fiscal 2025 earnings has remained steady at 93 cents per share over the past 30 days.
Warner Music Group: This Zacks Rank #3 (Hold) company is prospering from continued growth in Recorded Music licensing and Music Publishing synchronization revenues, including income from emerging streaming platforms. Furthermore, ongoing investments in international markets are anticipated to bolster its top line in the near term. Warner Music Group has shifted away from solely relying on celebrity influence and is now strategically targeting various elements of the value chain.
The company has invested in media platforms like HipHopDX, IMGN, Uproxx and several others, which possess significant potential to expand WMG's reach to a global audience of music enthusiasts. WMG is benefiting from its growing partnership with TikTok. This multi-year agreement grants TikTok, TikTok Music, CapCut, and TikTok's Commercial Music Library licenses to the repertoire of Warner Recorded Music and Warner Chappell Music.
Warner Music India has expanded its partnership with Global Music Junction (GMJ), the music and entertainment subsidiary of JetSynthesys. The move will establish Warner Music India as the largest player in the central Indian music market.
Warner Music Group shares have declined 17.5% year to date. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings has remained steady at 99 cents per share over the past 30 days.
IMAX: A robust slate of upcoming releases is expected to fuel IMAX's top line for the remainder of 2024, driven by gross box office collections of local language movies in markets like China, Japan, India, and South Korea. Strengthening partnerships with leading multiplex chains in regions such as France, the Philippines, Turkey and India presents a significant upside. The flurry of international deals will allow this Zacks Rank #3 company to deliver its premium sight and sound technology to more global audiences and stay relevant as it faces increasing competition from streamed content.
The recovery in the pace of theater system installations and higher IMAX maintenance sales are major positive factors. Moreover, a steady cash balance and flexible business model position the company well for expansion and market share gains.
The Zacks Consensus Estimate for IMAX’s 2024 earnings has moved south by a penny to 90 cents per share over the past 30 days. IMAX shares have risen 0.7% year to date.
News Corporation: This Zacks Rank #3 company is benefiting from prudent strategic efforts, including the ongoing digital transformation of its business and investments in the Digital Real Estate Services, Dow Jones and Book Publishing segments. News Corporation has been diversifying its revenue streams through strategic acquisitions and operational enhancements. It is optimistic about the acquisitions of the OPIS and Base Chemicals businesses, which are likely to bolster Dow Jones' information services offerings.
News Corporation is well-positioned to capitalize on opportunities arising from technology sharing across geographies and businesses, as well as bundled offerings of enriched content to consumers and advertising partners. Robust momentum in the Digital Real Estate Services segment, driven by higher Australian residential revenues at REA Group, is expected to fuel top-line growth in the upcoming quarters.
News Corporation shares have rallied 10.8% year to date. The Zacks Consensus Estimate for the company’s fiscal 2024 earnings has moved south by 5.6% to 67 cents per share over the past 30 days.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.