Netflix can withstand a $52 billion mouse-and-fox attack. Walt Disney is creating a direct-to-consumer entertainment giant with its acquisition of film and television assets from Twenty-First Century Fox. That puts Reed Hastings’ streaming outfit in the crosshairs. But Netflix’s big content investments are already paying off, and unlike Disney won’t be distracted by integration or antitrust issues.
The combination of Disney and Fox will pack plenty of programming clout. The two companies’ film studios accounted for just over half of U.S. cinema receipts so far this year, according to Box Office Mojo. Disney also is getting Fox television series including “The X-Files” and “The Simpsons.” And the company run by Bob Iger will gain control of the streaming service Hulu. That will enhance its ability to deliver over-the-top entertainment to cord-cutting consumers.
Yet Netflix has become an $80 billion heavyweight by anticipating viewing trends, and its been positioning for this kind of onslaught for years. The Silicon Valley company got into programming in a big way with “House of Cards,” the ruthless political drama that first aired in 2013.
Hastings plans to spend as much as $8 billion on content in 2018, and expects original programming to make up half of its offerings by the end of 2019. Earlier this month Netflix received nine nominations for Golden Globe awards, with “The Crown” and “Stranger Things” both short-listed for Best TV Drama. Only Time Warner’s HBO did better with 14 nominations. That strategy is winning over more consumers. Global subscriber numbers hit 109 million in the third quarter, up 25% in just 12 months. Streaming revenue rose 33% year-on-year in the quarter, and net income more than tripled to $130 million.
Investors are buying into the Netflix narrative. Its stock took a hit back in August when Disney announced it would end its distribution agreement with Netflix in 2019 in favour of its own direct-to-consumer initiative. But the stock has rallied since, and is up a little more than 7% since before the announcement, outpacing Disney’s 2% rise. That included a bump of more than 2% on Thursday following the Disney-Fox deal. The emerging television marketplace has room for more than one happy ending.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
