“May you live in interesting times.” This past year calls to mind that old saying, allegedly an ancient curse directed at one’s enemies.

But 2020, with all its tumult and terror, isn’t one to forget for media and entertainment companies. It marked a pivotal year when the sector’s biggest companies made tough decisions to reorient themselves to the streaming age.

“It’s a transitional year, without a doubt. 2020 was a reset,” says Chris Vollmer, MediaLink’s head of strategy consulting for media and entertainment. The trend pointing to the need for media conglomerates to quickly adapt to direct-to-consumer streaming was already clear before the pandemic struck — “but it’s in Technicolor relief now,” he adds.

Wall Street mostly reacted positively to the reorganizations (and thousands of layoffs) by the likes of Disney, NBCUniversal, WarnerMedia and ViacomCBS — and investors remained solidly bullish on incumbent powerhouse Netflix. “They see a growth story,” Vollmer says.

Investors rallied behind Disney’s narrative, as the conglomerate flexed its massive content and operational muscles to push Disney Plus to new heights. Disney Plus reached nearly 87 million global subscribers less than 13 months after debuting, and the company ratcheted up the 2024 forecast for the flagship streamer to a whopping 230 million-260 million. At its investor day event this month, Disney announced it would add 105 movies and TV series, 80% of which are pegged for direct-to-consumer streaming outlets. That overshadowed the pandemic-stricken theatrical and theme park businesses: Through Dec. 22, Disney shares were up 18% for the year.

Pure-play streaming stocks were a Wall Street darling. Three of the biggest gainers for the year were Netflix (+63% year to date through Dec. 22), audio giant Spotify (+115%) and streaming gatekeeper Roku (+165%). On the other hand, despite WarnerMedia’s dramatic moves, including the news that it will use Warner Bros.’ 2021 slate to rev up the HBO Max engine, owner AT&T saw its shares stay in negative territory, given its heavy long-term debt load ($153 billion as of Sept. 30).

2020 Stocks: Gainers & Losers

* As of Dec. 22, 2020

To put those stock swings in context, the Dow Jones Industrial Average was down most of the year. But after plunging 35% in March, the index recovered late in 2020 to climb more than 5% year-to-date after Joe Biden’s election win and hopeful coronavirus vaccine news.

The tea leaves auguring Hollywood’s digitally disruptive year were laid out before COVID-19 turned everything upside down. In January 2020, consulting firm EY released a study finding that 50% of media and entertainment executives said they believed they could “no longer rely on” traditional business models to drive future growth.

Large media companies are struggling with the pivot from massively profitable linear-TV businesses (with margins of 40%-50%) and have had to rationalize their cost structures for much lower-margin DTC streaming, says John Harrison, EY Americas media and entertainment leader. They also have to account for lost licensing and box office revenue.

“This is brand-new territory for them,” Harrison says. “It’s basically trading short-term cash flow for the opportunity for long-term value creation.”

On the M&A front, industry observers expect 2021 to be an active year in media and entertainment. With the thirst for content, production companies and midtier studios and networks could be ripe for the picking. Speculation has focused on potential deals for MGM, Lionsgate and Discovery.

Debt remains cheap, and there’s a lot of private capital looking for acquisitions, says Scott Kessler, global sector leader for tech, media and telecom at investment research firm Third Bridge: “The conditions are in place for more large transactions.”

Meanwhile, media companies have shed noncore assets to fuel the streaming pivot, another trend expected to extend into the new year. In 2020, ViacomCBS sold CNET (for $500 million) and book giant Simon & Schuster (for $2.2 billion), while AT&T offloaded anime streamer Crunchyroll to Sony Pictures Entertainment (operator of rival Funimation) for $1.2 billion. And for more than a year, AT&T has been said to be looking to get rid of DirecTV, a $49 billion deal that now looks like an albatross with the satcaster’s deep cord-cutting erosion.

“The point is to monetize the pieces that don’t fit, and throw that money back into the streaming growth engine,” Vollmer says.

But don’t expect any flashy deals by Big Tech. The internet behemoths benefited from the year of COVID, with skyrocketing usage of their digital services filling their already mighty coffers. However, they’re in the crosshairs of governments and regulators worldwide for alleged monopolistic practices. Facebook and Google, specifically, are facing several U.S. federal and state antitrust lawsuits aimed at curbing their power.

“At best, Google and Facebook are going to have to be more conservative in terms of investment and M&A — and that could increase opportunities for competitors in the space,” says Kessler.

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