Walt Disney Co. (NYSE: DIS) and Twenty-First Century Fox Inc ( FOXA) are reportedly in the final stages of finalizing a deal for Disney to acquire Fox’s film and TV production assets. The deal could have major implications for both Fox and Disney, but it may also be bad news for Netflix, Inc. ( NFLX).
According to GBH Insights head of technology research Daniel Ives, Disney could take a major stride in closing the streaming video content gap with Netfix if it can close the deal for Fox’s assets.
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“With the potential sale of many of Fox’s entertainment assets including its movie studios, National Geographic, and importantly its stakes in Sky and Hulu to Disney we believe this would create a much more content rich competitor on the streaming front,” Ives says.
Hulu is currently one of only a handful of serious competitors for Netflix. Disney already holds a 30 percent ownership stake in Hulu, and acquiring Fox’s 30 percent ownership stake would give Disney majority control of the company.
Ives says the centerpiece of the proposed deal is Fox’s content as Disney prepares to go head-to-head with Netflix when it launches its own over-the-top streaming service in 2019.
Disney CEO Bob Iger specifically mentioned Netflix when asked about the pricing of Disney’s streaming service during the company’s third-quarter earnings call. “It will be substantially below Netflix because we’ll have substantially less volume,” Iger said.
Ives says Disney still has a steep hill to climb to compete with Netflix. However, if Disney can snatch up Fox’s assets, Ives says Disney could be on the path to being a major long-term market share gainer in streaming video.
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“Disney with this Fox acquisition in its back pocket would create a fiercer landscape for content and thus put itself in a much healthier position to gain market and mind share vs. the likes of technology stalwarts such as Netflix and Amazon when it officially launches in 2019,” Ives says.
However, Netflix investors should rest assured that it has built a formidable competitive moat in recent years and has shown no signs of slowing down. Netflix plans to spend between $7 billion and $8 billion on content in 2018, and GBH projects the company will gain between 30 and 40 million additional international subscribers by 2020.
GBH Insights has a “highly attractive” rating and $235 price target for Netflix stock.
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Walt Disney Co. (DIS) Deal With Fox Is Bad News for Netflix, Inc. (NFLX) originally appeared on usnews.com
