The Queen’s Gambit on Netflix and Disney’s Mickey Mouse
Disney and Netflix pride themselves on storytelling. Now they have switched places when it comes to the stories they tell Wall Street.
Netflix said Tuesday it would consider buying back shares for the first time since 2011. After nearly a decade of borrowing $ 15 billion to fund original content, Netflix planned on Tuesday to generate positive cash flow beyond 2021 that no longer needs funding for its operations.
Meanwhile, Disney temporarily suspended its dividend last year and received calls from activist Dan Loeb to permanently suspend paying shareholders $ 3 billion a year. Loeb wanted Disney to convert that money into original content, modeled on Netflix’s startling venture from a $ 11 billion company to a $ 220 billion media giant.
While Disney hasn’t finished its dividend just yet, the company is focused on streaming. Disney plans to release dozens of Star Wars, Marvel, and Pixar films and series for its flagship streaming service Disney + in the coming years. The service gained more than 86 million subscribers in one year, well above Disney’s original expectations, and the company now expects between 230 and 260 million subscribers by 2024.
“It’s very impressive what Disney has done,” said Reed Hastings, co-CEO and co-founder of Netflix, during the conference call on Netflix’s results. “It’s an incredible accomplishment for an incumbent to face the insurgent. It shows that members are willing and interested to pay for more content because they’re hungry for great stories. And Disney has great stories.”
While Hastings still refers to Disney as the incumbent, investors see a different picture. There’s a reason Disney shares rose more than 2% after hours on the Netflix news, which caused Netflix shares to gain more than 12%. Investors don’t see the battle as Disney versus Netflix. You see Disney wants to be like Netflix and there is room for both.
Netflix was founded in 1997. Disney has been around for almost 100 years.
In the streaming video world, Netflix is the incumbent and Disney is the upstart.
The student has become a teacher.
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