During the pandemic of 2020-21, people stayed at home during the lockdown. This drove media corporations to accelerate their bets on streaming services. The higher expenditures also weakened cash flow and added to debt levels.
The higher interest rates will increase interest on debt costs. However, markets are betting that rates are near a peak. Investors are betting that Disney (DIS) and Warner Bros. Discovery (WBD) will gain the most subscribers.
Disney stock continued its rebound after the company brought back its ex-CEO, Bob Iger. The firm may lean on its theme parks business to offset billions in losses from the streaming unit. The firm also increased the rates of Disney+ Premium with no advertisements. At $3 a month more, the 38% increase will lower quarterly losses.
WBD stock rebounded after 2022 tax-loss selling ended. The firm, which has around $50 billion in debt, might sell its music library. In addition, it raised its ad-free HBO Max cost to $15.99 a month.
Markets applauded the 7% price hike. So long as streaming firms are raising prices at the same time, consumers will not switch to alternatives.
Risks are rising that the rebound in WBD and DIS stock may stall. Investors who missed the 2023 gains may wait for a dip before starting a position.
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