The Queen’s Gambit on Netflix and Disney’s Mickey Mouse
Netflix; CNBC
Disney and Netflix are proud to tell stories. Now they’ve switched places with respect to the stories they’re telling Wall Street.
Netflix said on Tuesday that it would consider repurchasing shares for the first time since 2011. After nearly a decade of $ 15 billion in loans to finance the original content, Netflix said on Tuesday that it planned to have cash flow after 2021 and would no longer need external resources to finance its operations.
Meanwhile, Disney temporarily suspended its dividends last year and heard calls from activist investor Dan Loeb to permanently end its $ 3 billion annual payment to shareholders. Loeb wanted Disney to channel that money into original content, using as a model the surprising rise of Netflix from a $ 11 billion company to a $ 220 billion media giant.
Although Disney has not yet paid its dividends, the company is focusing its operations on streaming. Disney plans to release dozens of Star Wars, Marvel and Pixar films and series in the coming years for its main streaming service, Disney +. The service won over 86 million subscribers in one year, well above Disney’s original expectations, and the company now expects between 230 million and 260 million subscribers by 2024.
“It is super impressive what Disney did,” said Netflix co-CEO and co-founder Reed Hastings during the Netflix earnings conference call. “It’s an incredible execution for an incumbent to pivot to face the insurgent. It shows that members are willing and interested in paying for more content because they are hungry for great stories. And Disney has great stories.”
But while Hastings still refers to Disney as the owner, investors see a different picture. There is a reason why Disney shares rose more than 2% after hours with Netflix news, which made Netflix shares rise more than 12%. Investors don’t see the battle as Disney versus Netflix. They realize that 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.
But in the world of video streaming, Netflix is the leader and Disney the newcomer.
The student became the teacher.
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