Why Disney Is Already Winning the Streaming Wars
Consumers have limited time and capacity to soak up streaming content. For a while, Netflix (NASDAQ: NFLX) was the only game in town. Then Amazon added the ability to rent movies and started producing its own content. Apple followed suit. Throw in AT&T's HBO Max, Hulu, NBC's Peacock, and Paramount Global's Paramount+, and it's easy to see how the market is more saturated than ever.
Walt Disney (NYSE: DIS) launched Disney+ in November 2019. The service was praised in 2020 as a rare bright spot amid losses from Disney's parks and movie business. But the tune shifted in 2021 and 2022 as a slowdown in Netflix's subscriber growth and ongoing losses at Disney+ raised questions about the services' long-term viability.
After adding 7.9 million Disney+ subscribers last quarter, there's reason to believe that Disney is already winning the streaming wars. There's even an argument that Disney+ alone could be worth more than Netflix over the long term. Here's what makes Disney+ the best streaming service and why Disney stock is a good buy now.
Image source: Getty Images.
The franchise flywheel
To envision Disney evolving into the streaming industry leader, investors need to first understand why Disney's content creation engine is so efficient. At the heart of the well-oiled machine is what Disney calls its franchise flywheel.
It's hard to put a dollar figure on the value of Disney's brand and the franchises it has built. However, Disney CEO Bob Chapek described the company's franchise flywheel well during the company's second-quarter earnings call:
What sets Disney apart is our ability to reach people with our uniquely engaging content across an array of touch points to make our portfolio of businesses and brands a bigger part of their lives. .... One example of this is our Toy Story franchise, which was created almost three decades ago with the release of the first film in 1995 and which is now brought to life across distribution platforms, geographies, businesses and time. In our parks, we've built a portfolio of four immersive Toy Story lands with more than 20 attractions and live character interactions available around the world, as well as two themed hotels .... And nearly 30 years after the film debuted, Toy Story is still a key consumer products franchise, generating over $1 billion in annual retail sales. And in just a few weeks, Pixar's Lightyear will tell the origin story of everyone's favorite space ranger .... It illustrates our unparalleled ability to bring stories to life in more ways for more people in more places.
Disney has been around for longer than Amazon, Netflix, and Apple put together. It has been creating content for nearly 100 years. And over that long history of content creation, Disney has captured the hearts and imaginations of multiple generations.
So loyal is the Disney fanbase that Disney has been able to open several amusement parks around the world solely based on its characters and the universes they live in. This is something that no other media company has been able to do at the scale of Disney. And for that reason, Disney is unrivaled in what it does.
A competitive edge unlike any other
What separates Disney from other streaming companies is that the company isn't trying to make money merely by streaming content. Rather, streaming complements the different ways that the company uses to tell stories and create experiences and lasting memories.
It makes perfect sense why a company that got its start making movies and then shows would naturally want to have a streaming service. It provides a place for Disney to share its rich content portfolio, a way to debut new content, and an outlet to show movies after they air in theaters. Disney -- arguably more so than any other media company -- should invest in its streaming service.
That being said, investors should hold Disney accountable for keeping its word to bring Disney+ spending down over time and make the service consistently profitable. But given that Disney stock is roughly the same price today as it was five years ago, and the company has arguably grown so much since then, Disney stock looks like a great, long-term buy for patient investors.
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