Disney ❤️ Netflix … or not ?

Rumors abound this week of a potential acquisition of Netflix by the House of Mouse. Could this be a brilliant strategic move propelling the combined entity far into the future ahead of the competition … or would it be doomed to become this generation’s AOL Time Warner ?

The press has some interesting opinions including a couple of completely contrarian opinions from Motley Fool and Forbes.

At Rerun HQ, we can see several reasons both for and against, so we thought we would jot down both sides.

Some reasons why it will work:

• Disney gets 80 million direct paid subscribers in 190 countries, cutting out the cable cos.
• Following on from Disney’s $1bn investment in BAMTech, a Netflix Acquisition would make Disney the de facto global leader in streaming technology, far ahead of rivals
• Disney gets into localised content, an approach to woo international markets that Netflix is taking seriously, recognising that there’s more to the world than the USA
• The Netflix platform gets an early release window on Disney properties, including the blockbuster Marvel, Pixar and the Star Wars movies. This would give Netflix’ somewhat mediocre movie catalog a boost from a continual flow of somewhat earlier releases. It would still have to wait behind TVOD players — unless of course it gets into TVOD supplements for early access to new releases
• The merger could bring sports to the Netflix platform along with a route to provide access to premium sports events at a higher subscription price
• The merger could also get Netflix into more general live content, including news, to make it a true globally distributed alternative to cable subscriptions

Some reasons why it will not work:

• It would make it harder for Netflix to do business because studios would be reluctant to provide content to a platform owned by a competitor
  [Rerun Team’s view on this: with Netflix already relying more and more on original content, and the fact that it would have Disney’s vast catalog with possible early release windows, the business of providing a long tail for other studios is perhaps something they’re willing to trade. Also, the money from Netflix distribution, at least globally, may not be so easy for other studios to walk away from, so this may be overblown as an issue]
• Investors might flee from concern that Netflix could dilute Disney earnings for years
  [Rerun team: earnings dilution often happens with mega buyouts — it’s a matter of whether investors can stomach some medium term turmoil in the belief that it will ultimately make Disney stronger — and whether they believe that the combined leadership will make the stronger Disney happen]
• Disney won’t fork out the $50 billion+ that NFLX shareholders will expect
  [Rerun team: Disney might come up with the $$$ if it sees this as a long term strategic way to jump far ahead of rivals into a digital-first, direct to consumer future — and if it can raise the required loans, since it only has $5bn cash to hand]
• “Disney and chill” doesn’t have quite the same feel to it 😂 😂 😂
• We don’t see Reed Hastings working for anyone. This, more than anything else, could be the real deal killer — or at least the downfall of the ambition. If Hastings leaves, he will take with him the vision that got Netflix to the place it is now and he may be followed out by others unwilling to work for a new overlord, no matter how sweet the deal.

At Rerun, we’d love for it to happen in order to see a future that we really believe in brought forward, though we appreciate that there are many hurdles to overcome in order to get there … of course we could just wait a few years and we might see Netflix buy Disney.