The next big step forward in streaming content is going to come from Walt Disney Co (NYSE:DIS). Disney’s streaming service is not expected to launch until late next year, but we should expect that it will impact how consumers view content in a significant way. What is means for Disney stock may be another story altogether.
CEO Bob Iger indicated that Disney, Marvel, Lucasfilm, and Pixar content is going to be a driving factor when the streaming service launches, emphasizing quality over quantity.
Disney’s streaming service is likely to generate more revenue on its own then by Disney licensing its content to third parties, even if those deals are exclusive.
Moves to Boost Disney Stock
The reason for the delay is that Disney has a theatrical output deal with Netflix Inc. (NASDAQ: NFLX) and that the most recent Disney content will have a pay-TV window that opens just as the service does.
However, Iger also suggested that there will be original content in addition to existing content. More information on that content will be coming by the end of this year.
It’s looking more and more like Comcast Corporation (NASDAQ: CMCSA) is going to put up a counter bid for the assets of 21st Century Fox Inc. (NASDAQ: FOXA), challenging Disney for the assets of the 20th century Fox movie studio, FX networks, regional sports networks, and National Geographic networks.
Management is not relying on that content to launch Disney’s streaming service, but Disney shareholders would certainly love to have all of those assets under the same umbrella to push out over Disney’s streaming service. That would certainly be better for Disney stock than not.
Disney’s streaming service is also going to put pressure on the existing large bundle distribution model of the cable networks. By purchasing a majority stake in BamTech, Walt Disney Co. has sent a message that it believes consumers will go after small bundles with supplements going forward. It recently launched ESPN+ as the first step in that process.
ESPN+ is going to have some growing pains. ESPN was already losing subscribers and lost about 1/2 a million of them in April alone. At the moment, existing subscribers seem content to remain with ESPN programming as part of their cable networks.
ESPN+ will need to grow and become a kind of à la carte sports programming marketplace in the long run to really work. There has to be enough attractive sports programming on the streaming service to get people to cut the cable cord. Executives did pull off a rather neat deal, a five-year contract with UFC, the mixed martial arts league.
The Bottom Line on Disney Stock
The macro picture here is that Disney streaming services are essential for Walt Disney to be in control of its own destiny.
Skinny bundles, individual streaming services, tons and tons of original content being produced by multiple outlets, and a young generation that doesn’t care how or where consumes content, is going to change the face of entertainment consumption for years to come. Disney needs to be on top of it, and all indications are that it is moving in that exact direction.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.
