The US stock market has seen better days and the US is locked in a trade war with China. Investors are being more cautious and fear of a recession is in the air. The media and entertainment industry has long weathered financial storms better than other industries but media companies have become increasingly conglomerated. Most movie studios are part of a bigger enterprise affected by the economic downturn. As seen in the recession of 2009, advertising is the first to go when the economy slides. This is a problematic loss for media giants because broadcast and cable business relies on effective marketing.
As disposable income decreases for people, lower-cost streaming services are preferred over expensive cable. Hence why Disney and AT&T’s WarnerMedia will launch streaming services in 2019. Even so, media and telecom corporations are adopting dangerous amounts of debt. According to The Hollywood Reporter, Netflix has about $10 billion worth of debt from buying content and producing various films. Disney owes a lot after purchasing 20th Century Fox. Referencing CreditSights, AT&T has a net debt of $177 billion. Hal Vogel, a media analyst and head of Vogel Capital Management, tells Variety, “It may be that all these companies that kept adding more and more debt will wake up to find that they’re no longer getting much bang for the buck.”
Since the days of the Great Depression, people retreated to the cinemas in times of economic hardship. Going to the theater is still considered a relatively affordable form of entertainment. However, ticket prices aren’t as cheap as they were in the olden days. They cost about as much as a monthly subscription to Netflix or other streaming services. Unlike periods in the past, a recession might just shake up the so-called “recession-proof” film industry for the worst.