3 Media Stocks to Watch From a Challenging Industry

The Zacks Media Conglomerates has been grappling with waning broadcast television ratings and diminishing demand for home entertainment sales of theatrical content. Furthermore, advertisers' tepid spending amid rampant inflation and elevated interest rates poses a formidable concern for industry players. Conversely, industry players are reaping the benefits of consumer shift toward over-the-top (OTT) content. Major players like Disney DIS, Paramount Skydance Corporation PSKY and Starz Entertainment Corp. STRZ are aggressively investing in developing original music, shows and fresh content to captivate and retain Gen Z and millennial subscribers. Moreover, the industry's prospects are bolstered by the availability of cost-effective alternative packages, such as skinny bundles, designed to entice consumers with lower prices compared to traditional offerings.

Industry Description

The Zacks Media Conglomerates industry encompasses companies engaged in creating and distributing various content forms, from entertainment to educational materials. These firms also offer travel and consumer products. The industry is adapting to the shift toward OTT content, both subscription-based and ad-supported. Advertising remains a key revenue source, while the metaverse presents new opportunities. Subscription price increases, driven by growing subscriber numbers, offer potential revenue growth. However, the industry faces challenges that include declining broadcast TV ratings, reduced demand for home entertainment versions of theatrical releases, and increasing cord-cutting trends. Despite these obstacles, media conglomerates continue to evolve, leveraging new technologies and consumer preferences to maintain their market position.

3 Trends Shaping the Future of the Media Industry

Original Content Driving Growth: Media companies' capacity to generate advertising revenues beyond traditional TV platforms, such as websites and other digitally consumed channels, unlocks increased opportunities for targeted advertising. The growing consumer preference for subscription services over linear pay-TV and rental or outright purchases has compelled industry players to adapt their business models. Media companies are innovating with original content to attract and retain subscribers.

High-Speed Internet Demand Acting as a Key Catalyst: The burgeoning demand for high-speed Internet, including broadband, has benefited media industry participants. Improving Internet speed has fueled the demand for high-quality videos and the trend of binge-watching. Furthermore, a strengthening broadband ecosystem in international markets, coupled with the proliferation of smart TVs, is expected to drive growth.

Cord-Cutting and Mature PayTV Industry Hurting Prospects: The media television industry is undergoing a rapid evolution of distribution platforms, embracing new players and advanced technologies. The declining profitability of residential video services due to rising programming costs and retransmission fees has made survival challenging for traditional companies. Additionally, the heightened demand for on-demand content has led to the mushrooming of streaming service providers, making it increasingly difficult for traditional media television companies to maintain their viewer base.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Media Conglomerates industry is housed within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #154, which places it in the bottom 37% of more than 245 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since Oct. 31, 2024, the industry’s earnings estimates for 2025 have moved down 4.8%.

Despite the gloomy industry outlook, a few stocks are worth watching as these have the potential to outperform the market based on a strong earnings outlook. But before we present such stocks, it is worth first looking at the industry’s shareholder returns and current valuation.

Industry Outperforms the Sector, Lags the S&P 500

The Zacks Media Conglomerates industry has outperformed the broader Zacks Consumer Discretionary sector but lags the S&P 500 composite over the past year.

The industry has returned 16.8% in the abovementioned period against the broader sector’s growth of 11.8%. The S&P 500 has risen 20.5% during the same time frame.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month P/E, a commonly used multiple for valuing media companies, we see that the industry is currently trading at 19.61X compared with the S&P 500’s 23.99X and the sector’s 19.1X.

Over the past five years, the industry has traded as high as 46.69X and as low as 16.04X, with a median of 20.52X, as the charts below show.

Forward 12-Month Price-to-Earnings (P/E) Ratio

3 Media Stocks to Watch

Disney is set to report its fiscal 2025 earnings on Nov. 13, 2025, presenting a compelling near-term catalyst for investors. The company raised its fiscal 2025 profit outlook to $5.85 per share, up 18% from fiscal 2024, demonstrating robust operational momentum. This Zacks Rank #3 (Hold) company's DTC unit achieved profitability of $346 million in the fiscal third quarter, with a full-year target of approximately $1.3 billion, marking a critical inflection point as the direct-to-consumer business transitions from cash drain to profit engine. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Disney+ prices increased 20% to $11.99 monthly on Oct. 21, supporting margin expansion. The theme parks segment shows resilience, while box office successes bolster entertainment revenues. With streaming profitability accelerating, improving parks performance, and management projecting double-digit earnings growth through fiscal 2027, Disney merits close attention as it approaches a multi-year earnings growth trajectory.

The Zacks Consensus Estimate for the company’s fiscal 2025 earnings has remained steady at $5.87 per share over the past 30 days. DIS shares have risen 0.3% year to date.

Price and Consensus: DIS

Paramount Skydance's merger completion in August 2025 positions the company to capitalize on identified synergies with a focus on modernizing content creation and storytelling. This Zacks Rank #3 company is investing for growth through intellectual property, creators, and sports despite linear TV headwinds. Strategic moves include securing a seven-year UFC media rights agreement, making premium events available on Paramount+ at no additional cost to drive subscriber growth.

The new distribution partnership with Legendary Entertainment strengthens theatrical ambitions. Management targets $2 billion in annualized cost savings while increasing theatrical releases. Recent board additions include AI expertise, signaling technological modernization. The company combines Paramount's extensive library with Skydance's production capabilities. Investors should monitor the execution of the integration strategy and streaming growth metrics.

The Zacks Consensus Estimate for the company’s 2025 earnings has moved south by 0.1% to $1.47 per share over the past 30 days. PSKY shares have gained 55% year to date.

Price and Consensus: PSKY

Starz Entertainment presents an intriguing opportunity following its May 2025 separation from Lionsgate, now trading as a standalone streaming-focused entity. The company achieved its fiscal 2025 target of $200 million in Adjusted OIBDA despite strike-impacted content, demonstrating operational resilience. Management has reiterated expectations for sequential revenues and OTT subscriber growth in Q3 and Q4 2025, signaling momentum ahead. Digital revenues now represent 70% of total revenues, reflecting a successful transformation from linear to streaming.

This Zacks Rank #3 company's content strategy shows promise, with Outlander: Blood of my Blood achieving strong premiere viewership. With manageable leverage at 3.2x and a strategic content portfolio realignment underway, Starz appears positioned to capitalize on its focus as a premium destination for underrepresented audiences. The company’s third-quarter earnings scheduled for Nov. 13 will provide crucial insights into its standalone trajectory.

The Zacks Consensus Estimate for the company’s 2025 earnings has remained steady at a loss of $1.37 per share over the past 30 days. STRZ shares have declined 1.2% year to date.

Price and Consensus: STRZ

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This article originally published on Zacks Investment Research (zacks.com).

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