Walt Disney Co (NYSE: DIS) has been around for 95 years and continues to be one of the most diversified and powerful media and entertainment companies in the business.
It certainly helps when you have built so many iconic characters that are then put through the Disney marketing machine and turned into television shows on Disney-owned stations, products and clothing sold at Disney stores and live entertainment at Disney parks.
Disney is one of the most efficient and best multi-channel marketing machines in the world. And the DIS brand is one of the visible and beloved around the globe as well.
The thing is, Disney’s diversification, while allowing this powerful vertical integration of its intellectual property, and creating a strong root structure for its long-term success, can also be its biggest challenge.
For example, its television properties, ABC and ESPN are fighting for relevancy in the current shift from cable views to streaming. Since DIS owns major studios like Touchstone, LucasFilm, Marvel and Pixar, it has stables full of content producers that are also deployed on its television property.
Just like the talent it deploys in its parks can be used to entertain customers on its cruise ship line and vacation club. But finding the right niche for ESPN has been very difficult. And advertising dollars are drying up for traditional broadcast channels.
Disney Needs to Continue to Diversify
What’s more, its strategic partnerships with newer content juggernauts like Netflix Inc (NASDAQ: NFLX), have had to be renegotiated and in some cases terminated as these partners have become competitors.
And a company like NFLX isn’t only competing for viewership, but also for the talent that develops all this content.
At the end of this year, DIS will leave NFLX and start its own streaming service with its content. The Marvel series that NFLX has developed will remain on NFLX, but the Marvel movies will be migrated to DIS.
This move comes because DIS realizes that it has to make its mark in the new frontier of streaming services on its own and not depend on some other company to license its content.
The Bottom Line on DIS Stock
The parks are certainly a money maker for DIS, but this content is where the real riches lie, and by not featuring it on its own platform means DIS is leaving money on the table.
The real challenge however is whether a standalone Disney channel is really going to get the kind of numbers that DIS expects. And whether the channel is built to meet the needs of its prospective audience. These are significant risks in a sector where a stumble or two can leave a once-mighty leader a humbled follower.
My Portfolio Grader gives DIS a B rating and NFLX an A rating, even after the market’s recent shenanigans. DIS has demonstrated that it takes the long view, and has endured plenty of challenges over its life.
NFLX is a focused, dynamic force in the streaming industry. It’s also building one of the most powerful content libraries on the planet. After the selloff this week, NFLX has a slight edge on DIS.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
