Will the Walt Disney Co (NYSE:DIS) Streaming Plans Create Shareholder Value?

November 14, 2017, 09:26 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

The Walt Disney Co (NYSE:DIS) recently announced its third quarter results, which did not meet analysts’ expectations, causing the company’s stock price to fall. However, the company’s CEO, Bo Iger revealed during an earnings call that the company would fast-track the launch of its two streaming services in order to compete with Netflix, which triggered a rally in the company’s stock price.

Article Summary

Disney is set to launch two streaming services by 2019.

The company is set to compete directly with Netflix.

The company has many opportunities for future growth including video games.

Here’s the trading report on DIS.

The company is poised to go head-to head with Netflix, Inc. (NASDAQ:NFLX) as they compete to gain new subscribers with the latter struggling to maintain its dominant position in the market. Disney is set to withdraw some of its most popular shows marketed under the Marvel franchise from Netflix even as it launches its new streaming service, which will feature most of its popular shows as well as new original content.

Both firms are facing major challenges with Netflix facing stiff competition from new entrants offering streaming services at cheaper prices. Netflix has embarked on a major drive to create original content, but this strategy was dealt a massive blow after the company was forced to cancel its signature show, House of Cards.

On the other hand, Disney has been struggling with falling subscriber numbers to its ESPN cable service, which has led to the service losing 12 million subscribers since 2011. However, the company has increased the revenue per subscriber over the same period, which has cushioned it from the full impact of the lost subscribers.

The launch of the ESPN streaming services is likely to boost Disney’s revenues given the emerging trend of consumers watching majority of content online. If successful, the new ESPN streaming service is likely to generate revenues that could replace the lost revenues from the cable segment.  

Disney was also involved in talks to acquire Twenty-First Century Fox Inc (NASDAQ:FOX), but many analysts deem this move as being unnecessary. Many believe that Disney would be better served by acquiring the Avatar franchise from FOX, or by acquiring the DC Comics franchise from Time Warner Inc (NYSE:TWX).

Given that Disney is set to enter the streaming market by 2019, the company has a set of aces up its sleeves, which it is yet to play. For example, the company could venture into the video game publishing market by acquiring a major player in this field such as Activision Blizzard, Inc. (NASDAQ:ATVI).

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