What 11,000+ Netflix subscriber fail to understand...
http://www.marketwatch.com/story/netflix-depends-less-and-less-on-licensed-content-from-the-likes-of-disney-2017-08-21
Netflix depends less and less on licensed content from the likes of Disney
Trey Williams
When Walt Disney Co. said a couple of weeks ago that it would stop licensing
its movies and TV shows to Netflix Inc. in favor of launching its own service,
investors were predictably concerned.
However, Netflix should be just fine.
According to Monness, Crespi, Hardt & Co. analyst James Cakmak, films and TV
shows Netflix licensed from distributors such as Disney were the foundation
that helped Netflix generate the cash flow that allowed it to build its
original programming library.
But it’s Netflix’s original content that now drives subscriber growth.
“Third-party content has diminishing relevancy when evaluating Netflix’s
future,” Cakmak wrote in a note to investors. “Taking a higher level view, we
think the story should be less about Netflix and more about Amazon, especially
when evaluating Disney’s prospects.”
In Cakmak’s view, deep-pocketed Amazon is by far the bigger foe. Netflix is
spending $6 billion on original content annually, while Amazon.com Inc. is
spending $4 billion and Time Warner Inc.-owned HBO is spending $2 billion. That
compares with Apple Inc.’s recent plan to compete in content acquisition with
an initial $1 billion investment.
Amazon, however, has the potential to increase its spending and compete on a
bigger scale.
“Amazon has shown a willingness to pay for sports and its cash flow can
certainly accommodate more aggressive deals,” Cakmak wrote. “In addition, we
believe Amazon is poised to become the single largest investor in original
content in the market.
“When it comes to flywheels, the retail giant is unmatched... we don’t see any
company going tit for tat with Amazon in a sustainable fashion.”
Netflix shares have gained 33% in 2017, while Amazon has gained 27% and Disney
is down 2.8%. The Dow Jones Industrial Average has gained 9.7% in the period,
while the S&P 500 has gained 8.4%.
