Tariffs and Media: Economic Impact Concerns Greater Than Direct Tariff Effects
The recent tariffs imposed by President Donald Trump, which have triggered a global market downturn, will also impact Hollywood’s film industry and the media sector in general. According to analysts, the damage won’t be so much direct as it will be a consequence of a potential economic slowdown.
“Tariffs won’t cause much direct harm to media and entertainment companies,” stated Matthew Dolgin, senior analyst at Morningstar. Unlike companies such as Roku, most firms in the sector “don’t rely much or at all on selling physical goods.” However, these businesses depend directly on consumer spending, so “economic weakness resulting from tariffs could impede business.”
Ripple Effects on Economy and Consumer Spending
The recent wave of sell-offs has hit some sector stocks hard, with Disney, Live Nation, Warner Bros. Discovery, and Roku recording losses equal to or greater than those of the general market. For Disney, parks and experiences generate most of its profits. A recession would likely depress tourism and reduce attendance at Disney parks. Beyond economic weakness, Disney risks receiving fewer international tourists in the US, particularly from Canada, due to cooled foreign relations. Live Nation has similar exposure, as concert attendance is a luxury that consumers could pull back from if needed. Warner’s underperformance is primarily related to its debt burden, as many stocks of highly leveraged firms are weak, perhaps due to fears of tightening credit. CJ Bangah, head of telecommunications, media, and technology practice at PricewaterhouseCoopers, emphasizes that “companies hit by higher tariffs won’t absorb those costs, which would mean higher prices for consumers. And among consumers, one of the first places they’ll spend less is on media and entertainment.”
Double Impact: Consumption and Advertising
An economic crisis would also translate into lower advertising spending, Bangah added, and advertising dollars “fuel a large part of the media and entertainment industry.” This could mean a “double hit” with declines in both consumer and advertising spending.
In such a context, according to the analyst, the “imperatives are simple”: “Absolutely do not reduce the quality of content and consumer experience” while being “very thoughtful” about areas to engage in and operate more efficiently. “Companies that don’t cut marketing during a crisis perform much better than those that do,” she concluded.
Potential Repercussions on the European Market
There could be other ripple effects. As European countries grapple with the economic effects of tariffs and the implications of the United States’ new approach to international conflicts, “sentiment surrounding American films and media could change among European audiences,” said Maggie Switek, economist and senior research director at the Milken Institute.
Outlook for Investors
Morningstar is not currently adjusting any fair value estimates for media and entertainment companies due to multiple areas of speculation about resulting economic effects. However, a recession would dampen near-term forecasts and could slightly lower fair value estimates for many of these companies.
Disney, with an estimated fair value of $125, should see its business cool in a recession, but according to Morningstar, the stock is already adequately pricing in this risk. At current levels, the improvement in the company’s streaming business offsets potential weakness in the experiences sector.
Warner’s recent streaming success should also persist, allowing the company to meet its obligations, with a fair value estimate of $20. Live Nation is currently trading at its fair value estimate of $130, which however does not account for recession risk.
Before Trump’s tariff announcement, US consumer confidence was already declining, with the Conference Board’s Consumer Confidence Index dropping 7.2 points in March, marking the fourth consecutive month of decline. The tariff announcement has “injected another round of turbulence into the markets, which will likely be further reflected in consumer sentiment.”
Source: Morning Star
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CinemaCon 2025: Luca Guadagnino and the Renewed Centrality of Theatrical CinemaRelated Posts
The recent tariffs imposed by President Donald Trump, which have triggered a global market downturn, will also impact Hollywood’s film industry and the media sector in general. According to analysts, the damage won’t be so much direct as it will be a consequence of a potential economic slowdown.
“Tariffs won’t cause much direct harm to media and entertainment companies,” stated Matthew Dolgin, senior analyst at Morningstar. Unlike companies such as Roku, most firms in the sector “don’t rely much or at all on selling physical goods.” However, these businesses depend directly on consumer spending, so “economic weakness resulting from tariffs could impede business.”
Ripple Effects on Economy and Consumer Spending
The recent wave of sell-offs has hit some sector stocks hard, with Disney, Live Nation, Warner Bros. Discovery, and Roku recording losses equal to or greater than those of the general market. For Disney, parks and experiences generate most of its profits. A recession would likely depress tourism and reduce attendance at Disney parks. Beyond economic weakness, Disney risks receiving fewer international tourists in the US, particularly from Canada, due to cooled foreign relations. Live Nation has similar exposure, as concert attendance is a luxury that consumers could pull back from if needed. Warner’s underperformance is primarily related to its debt burden, as many stocks of highly leveraged firms are weak, perhaps due to fears of tightening credit. CJ Bangah, head of telecommunications, media, and technology practice at PricewaterhouseCoopers, emphasizes that “companies hit by higher tariffs won’t absorb those costs, which would mean higher prices for consumers. And among consumers, one of the first places they’ll spend less is on media and entertainment.”
Double Impact: Consumption and Advertising
An economic crisis would also translate into lower advertising spending, Bangah added, and advertising dollars “fuel a large part of the media and entertainment industry.” This could mean a “double hit” with declines in both consumer and advertising spending.
In such a context, according to the analyst, the “imperatives are simple”: “Absolutely do not reduce the quality of content and consumer experience” while being “very thoughtful” about areas to engage in and operate more efficiently. “Companies that don’t cut marketing during a crisis perform much better than those that do,” she concluded.
Potential Repercussions on the European Market
There could be other ripple effects. As European countries grapple with the economic effects of tariffs and the implications of the United States’ new approach to international conflicts, “sentiment surrounding American films and media could change among European audiences,” said Maggie Switek, economist and senior research director at the Milken Institute.
Outlook for Investors
Morningstar is not currently adjusting any fair value estimates for media and entertainment companies due to multiple areas of speculation about resulting economic effects. However, a recession would dampen near-term forecasts and could slightly lower fair value estimates for many of these companies.
Disney, with an estimated fair value of $125, should see its business cool in a recession, but according to Morningstar, the stock is already adequately pricing in this risk. At current levels, the improvement in the company’s streaming business offsets potential weakness in the experiences sector.
Warner’s recent streaming success should also persist, allowing the company to meet its obligations, with a fair value estimate of $20. Live Nation is currently trading at its fair value estimate of $130, which however does not account for recession risk.
Before Trump’s tariff announcement, US consumer confidence was already declining, with the Conference Board’s Consumer Confidence Index dropping 7.2 points in March, marking the fourth consecutive month of decline. The tariff announcement has “injected another round of turbulence into the markets, which will likely be further reflected in consumer sentiment.”
Source: Morning Star
Share:
CinemaCon 2025: Luca Guadagnino and the Renewed Centrality of Theatrical Cinema
