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Evan Shapiro Unveils the Q4 Truths for Sony, Nintendo, Disney, Meta, and More

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Major media and entertainment companies’ quarterly earnings calls ought to pull back the curtain on what’s really happening in the industry, but they routinely bury unflattering numbers in expert spin, and the press on hand rarely asks questions tough enough to draw out the real story.

With 4Q earnings calls putting a bow on 2023, M&E industry cartographer Evan Shapiro pulls no punches in this real-time response for his Streaming Media Connect 2024 opening keynote, digging deep into the data to hold the spin doctors accountable, giving Streaming Media Connect attendees an unvarnished view of the industry that they won’t get anywhere else.

Read Part Three of our highlights from his keynote presentation below, and click here to watch the full keynote video.

In case you missed it, read Part One and Part Two of our highlights from Shapiro's presentation.

Why Sony should spin off its non-PlayStation electronics division

Shapiro said that he loves to track Sony because its valuation never fluctuates too much. However, he believes that they should spin off their non-PlayStation electronics division, as it is holding them down too much.

“Their net income is down over 9% because their electronics division is down 3%,” he said. “Yes, film and television didn't have as good a year last year as it should have, but it had a really good fourth quarter. The problem is their old-school electronics business and their addiction to it. I think Sony's going to get into the buying game. There's major competition with Microsoft that they need to keep up with, and there are a ton of companies out in the ecosystem in the gaming sphere that Sony might acquire in 2024. I think they're ripe for a major move because now more than ever with the Activision acquisition, they feel a threat.”

Why EA is facing headwinds and a flattening net income

Shapiro noted that EA, like many smaller gaming companies, will face many headwinds in the coming years from the major players in the gaming ecosystem.  

“EA had a really good fourth quarter and then a kind of a meh year,” he said. “Their live game business is growing pretty well, but their full game business is not really going to make it long term. This business has been declining year-on-year for the last couple of years. Their revenues are up, but their net income is basically flat because these games cost so much and take so long to develop. It's hard to cut overhead in order to get to a net income number that you like. That said, their market valuation is up 27%.”

Why the Mario Bros. movie gave Nintendo an off-cycle boost

Shapiro observed that while Nintendo had a great 2023, that was bolstered mainly by the $1.5 billion worldwide box office gross of the Mario Bros. movie. He said it was “the greatest marketing tool their game platforms ever had, both in games and in consoles, and so they sold more consoles and games last year than they anticipated and outperformed all their projections.” However, this was essentially a fluke because 2023 was an “off-cycle” year for them, as they did not release a new console.

“I don't think you can count on that to happen every time out of the box,” he said. “I also don't think you can necessarily affect the strategy that their CEO spoke of during their earnings call, which is to sell multiple consoles per home. I think this is a specialized product that takes about 10% of the overall gaming ecosystem, which is not a lot, and I think this really lousy 2022, 2023 that they have had is just one bad gaming cycle or one bad movie launch away from happening, which is why I think Nintendo is also a buyer in the gaming ecosystem in 2024 and 2025, and I think there's a lot of small gaming companies that are ripe for acquisition.”

Why Roblox is ideal for acquisition

Shapiro suggested that one company Nintendo should consider acquiring is Roblox. “They are a massive platform for people under 25 worldwide, but they've never been profitable, and they're losing more money now than they have in the past,” he said. “I, at one point, thought that Disney should buy them. Disney instead invested in Epic and Fortnite, which I thought was a pretty smart move relative to the whole because they only had to spend $1.5 billion versus $20 or $30 billion to buy Roblox. But I don't think Roblox, in an ecosystem with Tencent and Microsoft and Sony and Nintendo, can survive as a standalone business while they're losing billions of dollars year-on-year. There's a tremendous amount of upside here, most notably from advertising, but I also think Nintendo's IP in this ecosystem would be amazing.”

Additionally, he noted that Roblox cannot be played on Switch at the moment. “Imagine the increase in sales of Switches if you could,” he said. So, I do think there's a major opportunity here, either for Sony or for Nintendo. I hope one of them takes it soon. Roblox actually had a pretty good year relative to its own historical record, and its market cap is up.”

Disney’s cutbacks are paying off more than other M&E players

Shapiro noted that Disney’s large and painful cuts have paid off more for them than the big cutbacks did for other major M&E players. “You can see here is that, unlike some other players in the media apocalypse, Disney has been able to turn those cuts into massive operating income growth in some segments, especially in sports and direct-to-consumer streaming,” he said. “You top that with the Epic $1.5 billion investment and Spulu, the sports bundle that they announced, and it feels like Bob Iger may be getting a handle on the navigation system of this new Disney. We'll see, it will be a really interesting year for them across the board and one of the most notable generators of their income."

However, an area of trouble can be seen for Disney in its film franchises. “The Marvel franchise is in real trouble, as is the Star Wars franchise, except if you look at their television shows,” he said. “I don't think there was one commercial for the Marvel franchise during the Super Bowl, for the first time I can remember for a decade. So, Iger looks to have a better handle on things, but it still remains to be seen whether his cut-to-grow strategy is going to work long-term. That said, Disney's market cap is up 23% just this year.”

Meta bounces back big

Shapiro called Meta a “year-on-year champ.” While Meta had a terrible 2022 and it is not difficult to look good in comparison to that, he noted that they were able to make cuts without cutting to the core of their revenue generation.

One area of potential risk for Meta is that it is a “99% ad business,” he said. So, in the next ad downturn, Meta is going to have a very difficult time, just like they did the last time. This business is not yet protected as much as they like to talk about [with] Metaverse and AI. But they are at an all-time high market valuation, up 175% year-on-year.”

Why Snap didn’t impress Wall Street despite improving numbers

Even though Snap dramatically upped revenues and net income in Q4 (due to a combination of the digital ad economy coming back and also making cuts), Wall Street was not enthused.  

“That's because the revenues for the full year are not up here,” he said. “This is going to be a very tough business against the big tech death stars for any digital platform, including TikTok, by the way, which doesn't do earnings reports the way that we do. So this stock has been punished just year to date, down 30%.”

Why The Trade Desk reflects the true state of the healthy ad economy

Shapiro observed that The Trade Desk is one of the best examples of improvement in the ad economy.

“They are absolutely on fire right now,” he said. “Net income in the fourth quarter is up 37%, and revenue is up 23%. This company invested heavily in the evolution of advanced audiences and advertising, and it's really paying off for them. They also invested heavily in retail media, so the Trade Desk is standing everywhere the ball is going. They are heavily playing in the retail ad economy in a way that few companies outside of Amazon and Walmart are really cutting the course of how the new economy is going to be played. They're at the center of more deals than I think a lot of people are necessarily comfortable with, but on the other hand, there's not necessarily that much choice out there with regard to the power of this platform. They had a great 2023, and they're going to have an amazing 2024 because they are where the ad economy is going.”

Watch full sessions from the February Streaming Media Connect here

We'll be back in person for Streaming Media NYC on May 20-22, 2024, with Evan Shapiro hosting and presenting his closing keynote, "Next Is Now: The State Of The Streaming Media Industry." Click here to see the full program and to register. 

All infographics courtesy of ESHAP.

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