Tariffs, recession fears cast pall over US media earnings

Dawn Chmielewski and Harshita Mary Varghese

Wed, Apr 16, 2025, 3:04 AM 4 min read

By Dawn Chmielewski and Harshita Mary Varghese

Los Angeles (Reuters) - Wall Street analysts offered a gloomy view of the first quarter for much of Hollywood, warning that economic uncertainty caused by President Donald Trump's erratic tariff plans has undermined consumer confidence and heightened fears of a recession.

The threat of an economic downturn would take a toll on an industry dependent on discretionary spending, squeezing TV advertising sales and theme park attendance, and spurring streaming service cancellations.

MoffettNathanson analysts estimate a recession could result in $45 billion in lost advertising spending this year, and risk advertising budgets permanently shifting away from traditional television to alternatives like streaming services or digital platforms.

“If we go through an economic downturn, the advertising business will be tough. More specifically, brand advertising platforms are likely to be hit harder than direct response platforms,” said John Belton, portfolio manager at Gabelli Funds, which owns shares in Paramount Global, Warner Bros Discovery, Fox and NBCUniversal parent company Comcast. Gabelli Funds also owns shares in Netflix, which is expected to report first-quarter results on Thursday, kicking off the earnings season for media firms.

Netflix, which dominates the streaming video market with a global subscriber base of more than 300 million, is expected to report that profit per share jumped more than 8% from a year ago, according to LSEG estimates. Revenue likely increased by more than 12% to $10.5 billion, reflecting growth across all regions.

An economic slowdown may prompt streaming subscribers to downgrade to more affordable plans, or cancel their subscriptions altogether. But Netflix is unlikely to see "a wave of churn" given its strong market position and popular content, wrote Bank of America media analyst Jessica Reif Ehrlich, though some cost-conscious subscribers may trade down to a cheaper price tier. Consumers have flocked to Netflix's ad-supported tier since its launch in late 2022.

Other streaming services, like Apple TV+ or NBC's Peacock, may not be as lucky.

A downturn could prompt marketers to cut spending on television advertising, in anticipation of reduced demand, taking a toll on media companies including Warner Bros Discovery, which derived more than a fifth of its revenue from advertising in 2024.

Advertising also represents a significant portion of revenue for Facebook parent Meta, Snap and Google parent Alphabet.

Some companies are likely to fare better than others in a downturn. Search advertising tends to do well during periods of uncertainty, said eMarketer analyst Ross Benes, because it captures consumers who are in the market to make a purchase.