The Queen’s Gambit on Netflix and Disney’s Mickey Mouse
Netflix; CNBC
Disney and Netflix are proud to tell stories. Now they have changed places when it comes to stories they tell on Wall Street.
Netflix said Tuesday it would consider buying shares for the first time since 2011. After nearly a decade lending $ 15 billion to fund the original content, Netflix said Tuesday it would plan to have a positive cash flow after 2021 and no longer would need outside financing for its operations.
Meanwhile, Disney temporarily halted its dividend last year and listened to calls from activist investor Dan Loeb to finally end the $ 3 billion annual payment to shareholders. Loeb wanted Disney to headline that money in original content, using as a model Netflix’s startling surprise from a $ 11 billion to $ 220 billion business.
Although Disney has not yet finalized its dividend, the company is focusing its streaming operations. Disney plans to release dozens of Star Wars, Marvel and Pixar movies and series in the coming years for its flagship streaming service, Disney +. The service has gained more than 86 million subscribers in one year, well ahead of Disney’s original expectations, and the company now expects 230 to 260 million subscribers by 2024.
“It’s super impressive what Disney has done,” Reed Hastings, co-CEO and co-founder of Netflix, said during the Netflix earnings conference. “It’s an incredible execution for a headline operator to pivot to face the insurgent. It shows that members are willing and interested in paying for more content because they’re hungry for great stories. And Disney has great stories.”
But while Hastings still refers to Disney as the headline, investors see a different picture. There’s a reason Disney shares gained more than 2% after hours on Netflix news, which caused Netflix shares to rise more than 12%. Investors don’t see the battle as Disney against Netflix. They see that Disney wants to be like Netflix and there is room for both of them.
Netflix was founded in 1997. Disney has been around for nearly 100 years.
But in the world of streaming video, Netflix is the headline and Disney the first.
The student has become the teacher.
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