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Yeah I agree that Disney won't be a serious issue for Netflix. You may see some users cut Hulu or Prime out and add Disney but Netflix is still in a good place.

Yeah I agree that Disney won't be a serious issue for Netflix. You may see some users cut Hulu or Prime out and add Disney but Netflix is still in a good place. > Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019. For share of streaming wallet yes; but they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition. Also - Netflix has the US mostly saturated so they have to create or sign content for the various international markets. While Disney already has great content with global appeal.

adventured 9y ago
> they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition That's not quite the context. Netflix is rapidly growing sales and plowing its potential income into content expansion. Disney has zero sales growth, with a large traditional investor base that expects profits to at a minimum not contract. That traditional investor base holds Disney to a particular standard that Netflix doesn't have to suffer (for now). Disney can't reinvest any more of their existing sales & profit toward content creation without subtracting from the profit figure they report. If they do that at any meaningful scale, the stock will crater. Disney's situation is actually even worse than that, as the erosion of cable is eating into their solidly profitable TV business (especially ESPN). So they're facing a declining context on sales, profit and margin, and they can't afford to redirect a meaningful share of their existing profit. Simply put, right now Disney has no sales growth to direct at new content investment. They have existing profit that is already allocated to placating investors that expect the net income statement to look great and expect the dividend to remain or increase. This is why Disney is looking to spend a vast sum to buy business expansion with Fox, to perhaps placate shareholders a while longer (how long will they tolerate zero growth otherwise?). Netflix gets to operate on different terms of shareholder expectations than what Disney does. Otherwise, Netflix would have a market cap about 90%-95% lower than it is right now, if Netflix (~220 PE) were being judged on a more near-term profit basis as Disney is (~14-15 PE). It's the exact same growth expectation benefit that is being given to Amazon ($3b net income) vs Walmart (~$14b net income).

adventured 9y ago

> they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition That's not quite the context. Netflix is rapidly growing sales and plowing its potential income into content expansion. Disney has zero sales growth, with a large traditional investor base that expects profits to at a minimum not contract. That traditional investor base holds Disney to a particular standard that Netflix doesn't have to suffer (for now). Disney can't reinvest any more of their existing sales & profit toward content creation without subtracting from the profit figure they report. If they do that at any meaningful scale, the stock will crater. Disney's situation is actually even worse than that, as the erosion of cable is eating into their solidly profitable TV business (especially ESPN). So they're facing a declining context on sales, profit and margin, and they can't afford to redirect a meaningful share of their existing profit. Simply put, right now Disney has no sales growth to direct at new content investment. They have existing profit that is already allocated to placating investors that expect the net income statement to look great and expect the dividend to remain or increase. This is why Disney is looking to spend a vast sum to buy business expansion with Fox, to perhaps placate shareholders a while longer (how long will they tolerate zero growth otherwise?). Netflix gets to operate on different terms of shareholder expectations than what Disney does. Otherwise, Netflix would have a market cap about 90%-95% lower than it is right now, if Netflix (~220 PE) were being judged on a more near-term profit basis as Disney is (~14-15 PE). It's the exact same growth expectation benefit that is being given to Amazon ($3b net income) vs Walmart (~$14b net income).