Streaming Wars: Rise of Disney

Hi ho, hi ho, it’s off to work Disney goes, but can its rise continue? And who are the main competitors to watch?

Article updated: 9 August 2019 11:00am Author: Michael Baxter

Disney shares took a knock on the latest results, but the big battle lies ahead. Netflix, Amazon and ITV are still worth watching.

Once upon a time, there was a princess. Her name was Disney, and she shone bright, her beauty with a line-up of characters from Mickey Mouse, seven dwarfs and Baloo dazzled kids the world over.

But nothing lasts forever and in the late 1990s, early 2000s she went into a deep sleep; back then, the boss was Michael Eisner, giant of Hollywood, but the movie side of the business wasn’t producing, the big success was Toy Story, but that wasn’t a Disney product, it merely distributed it.

Eisner didn’t get on well with the boss of Pixar, the company behind Toy Story; a bloke called Steve Jobs. Things looked bad for Disney, one wondered if the princess would ever wake-up.

The prince who saved Disney was Bob Eiger, with a little help from Roy Disney, nephew of Walt. Pixar got swallowed up by Disney, for a while, Jobs was the biggest shareholder and they all seemed set to live happily ever after.

At least the share price dazzled, up roughly four-fold since those times.

But this is where the story diverges from fantasy. In the story, the princess bit an an apple and fell into a sleep that could only be ended by love’s first kiss.

But in the story of Disney, the apple, or shall we say Apple, had a quite different impact.

The iPhone and Android, combined with advancing internet speeds created a whole new world, one that changed so fast, one daren’t close one’s eyes.

In the UK, the BBC and ITV didn’t so much close their eyes, as find themselves cast in chains by the regulator, which totally failed to spot how this whole new world was changing. The regulator was like Baloo, enjoying its time in the sun, relaxing, while its charge was being kidnapped.

Those three things, the iPhone, Android and faster internet, have changed everthing.

Netflix enjoys a market cap of $138 billion, shares up almost five-fold in five years. Alas, ITV’s market cap is $4.4 billion and shares have halved in five years.

In my view those responsible for holding ITV and BBC back from competing in the Netflix league should themselves be cast in chains and forced to watch re-runs of the Jeremy Kyle show until, as sobbing wrecks, they beg for forgiveness.

Yet Disney shares have taken a knock after the latest results. The theme parks are not doing as well as expected, revenue from the the Fox business was down. The problem was Star Wars and Marvel. The opportunity is Star Wars and Marvel. The force has not been with the new Star Wars theme park, and the latest X-Men/Marvel movie from Fox was a flop. On the other hand, Avengers: Endgame is the biggest box office hit ever and there is the final part of the latest Star Wars trilogy coming out at Christmas.

But Disney does have its problems. Sure its movie business is making money faster than the Millennium Falcon doing the Kessel Run, but originality is going back to sleep.

Sure, most of the Marvel films are pretty good, but Star Wars fans remain disappointed — no surprise, Disney was never going to re-capture the magic of the original trilogy. As for the traditional Disney movie business, most of the releases seem to be re-makes of originals, using modern effects.

So Disney has to compete with Netflix in the streaming business.

Meanwhile, Ofcom finds that in the UK, our time spent watching broadcast media is falling.

And in another galaxy, Jean Luc Picard is making a return, this time to the Amazon Prime service, and I for one, am looking forward to it.

But what is lacking is originality. Disney is just making clones of old hits, with the occasional surprise — such as Endgame, which for once lived up to the hype.

At least the BBC and ITV are still creating original content — Killing Eve, for example.

The battle to own steaming is a battle that promises great riches — although I think there is room for more than one player.

Disney should be the favourite, its catalogue is dazzling. But Disney can not win video streaming wars based solely on Marvel, Star Wars and re-makes of animated hits.

I still think Netflix is looking formidable, Amazon Prime, like all Amazon products, can never be written-off, and yet, bizarrely, I still think ITV/BBC Britbox could yet be a major contender — it’s content is neither too hot, nor too cold.

But what Britbox needs is money, a regulator that frees it up, a massive fund raising spree and a proper company created with a shareholding structure for the joint venture, with shares allocated in part from existing shareholding in ITV, in part shares allocated to TV licence holders and in part shares allocated to new shareholders bringing in new money.

If they did that, then such a venture could be worth more than Disney.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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