Investor Ross Gerber on Undervalued Media Stocks

Ross Gerber, the long‑time money manager who has watched Hollywood’s fortunes rise and fall, stood on a stage at TheWrap’s Grill business conference, eyes fixed on a screen that flickered with the logos of Paramount, Warner Bros. Discovery and other giants. The room hummed with anticipation, but the mood was not celebratory. Instead, the atmosphere carried the weight of a market that, according to Gerber, was treating entertainment stocks like a house of cardsundervalued yet fragile, poised to tumble if interest rates climb further. He did not mince words: “I don’t see deals getting done right now,” he told the audience, underscoring a reality that even the biggest merger, Paramount’s $80 billion acquisition of Warner Bros. Discovery, feels the sting of higher borrowing costs.

When the Federal Reserve’s rate hikes accelerate, each percentage point adds a staggering $800 million in debt servicing for Paramount. Gerber’s point is stark: taking on such debt in a climate of rising rates is “insanity.” He reminds us that the cost of capital is not just a number; it is a lever that can pull a company’s growth trajectory into a different orbit. The market’s valuation of large‑cap entertainment firms reflects this uncertainty, with many shares trading below the intrinsic value that once seemed assured.

Gerber’s critique extends beyond balance sheets. He argues that the industry’s “outdated business models” are a liability in a world where content consumption is shifting toward creator‑driven platforms and video gaming. He points to Take Two Interactive as a prime example, noting the company’s new “Grand Theft Auto” release and its potential as a takeover target for streaming services like Netflix. In his view, the only way for legacy studios to thrive is to embrace artificial intelligence, adopt new technologies, and pivot toward businesses that attract younger audiences.

The shift toward creator content is not merely a trend; it is a cultural movement. Young viewers now seek authenticity and interactivity, favoring platforms that allow them to co‑create and curate their entertainment experience. Gerber sees this as an opportunity for traditional media houses to reinvent themselves, but only if they are willing to let go of entrenched hierarchies and invest in emerging ecosystems. The same logic applies to gaming, where interactive narratives and immersive worlds are redefining storytelling.

Despite the optimism of some analysts, the market’s reaction has been muted. Large‑cap entertainment stocks remain undervalued, suggesting that investors are wary of the high cost of capital and the uncertain return on potential mergers. Gerber’s stance is clear: the industry must stop relying on big‑deal growth and instead focus on incremental innovation and strategic acquisitions that align with the new media landscape.

Watching Gerber speak, I felt the same tension that many creators feel when their craft is caught between tradition and disruption. The entertainment world is at a crossroads, and the stakes are high. If the industry does not adapt, it risks becoming a relic of a bygone era, much like the silent film studios that once dominated the screen.

Looking ahead, the next wave of transformation will likely come from the intersection of AI and content creation. As studios begin to harness machine learning to personalize narratives and streamline production, we may see a new generation of media companies that blend the storytelling prowess of Hollywood with the agility of tech startups. The question remains: will the giants rise to meet this challenge, or will they be eclipsed by nimble newcomers who have already begun to write the future of entertainment?