Disney has done it again, Apple and Amazon are at it, Netflix has mastered it. Now I read that ITV is having a go. Is it time for investors to take a look at the movie and subscription TV market?
There’s no business like show business, but is it time for investors?
Globalisation and the hegemony of the English language may be the reason. The market may be less fragmented than it used to be. There are perhaps a smaller number of dominant players, but some of these key players do look, from an investment point of view, exciting.
The latest Marvel movie, Avengers Infinity War, is breaking all kinds of records. First to a billion dollars, best ever opening weekend, best ever first week. And it’s not even launched in China yet.
Given this success, it’s tempting to say that ‘you have left it too late to buy into Disney. Its success is too obvious for the markets not to have noticed it yet’.
Surprisingly, the Disney share price is down on a year ago, and that despite three extraordinarily successful movies in the last 12-months.
In fact, the price is down on the level in 2015 too, although it has doubled over the last five years.
There’s more to Disney than a few Marvel and Star Wars flicks and its sports coverage arm is not doing so well.
But I don’t think the markets have grasped the value of the assets Disney is creating.
And by the way, the latest Marvel film was constructed in such a way that the next few movies in the franchise are guaranteed hits.
In this globalised market, with China now part of the Marvel circuit, with the merchandising value, the theme parks, with the massive ongoing success of the Marvel and Star Wars films, it is just going to keep on making money.
Of course, the Disney assets also have value in the subscription TV business. Once, and if, the takeover of 21st Century Fox goes ahead, the result will be a new giant in town, with muscle to become perhaps ‘The’ player in the subscription TV business.
I note with some surprise that Disney and Netflix - with its 195 P/E ratio - have similar valuations.
Don’t read too much into my comment above about the Netflix P/E, I do think this company has plenty of potential.
It is just that Disney has got so much going for it, I can’t help but feel the markets have mis-priced the company relative to Netflix.
It would not take much for Netflix to turn its 125 million subscribers into a profit stream that would justify its $130 billion or so valuation, but I think it would take even less for Disney as, in addition to all its other assets, it goes head to head with Netflix.
Apple and Amazon
Meanwhile, Amazon, with 100 million subscribers to its Amazon Prime service, of which TV content is a key component, and Apple, which has sold more than a billion iPhones, are waiting in the wings.
Amazon splashing out a billion dollars on a Lord of The Rings TV series, Apple is reportedly turning Isaac Asimov’s Foundation series into a TV series.
For Amazon and Apple, this is another string to their bow, for Netflix this is their bow. For Disney, it too has lots of strings, but they complement each other in a way that makes the bow hum with the release of each arrow.
The British contenders
For me, I have always felt a little sad concerning how the British players have been left behind.
It is with pleasure, then, that I can report that ITV, BBC and Channel Four are in talks to create a streaming service to take-on Netflix.
They have tried before.
But the potential rewards from such a combo are huge. Between them, the three channels already have enough content to give Netflix a battle. If they got together and somehow find a way around the BBC’s and Channel Four’s current status, to set up a company that could go out and raise money, the result could be a $100 billion plus company, considering ITV is currently worth 15 billion pounds, that would be quite the opportunity.
When David Cameron once gave a talk in China, when he finished, one audience member asked ‘when the next season of Sherlock was coming out?’ Mr Cameron was reportedly taken back by the realisation that the UK’s perception in China related to its TV content. This story shows two things: the value of the UK’s TV content and how this business is global - the three UK broadcasters have got to become more globally focused. If they do, the result will be a company to take-on the world’s biggest.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.