Should Walt Disney Co (NYSE:DIS) Buy Netflix, Inc. (NASDAQ:NFLX)
Analysts see growing pain for Walt Disney Co (NYSE:DIS) and they believe the only the entertainment company can redeem itself is by buying Netflix, Inc. (NASDAQ:NFLX). That would be an expensive deal costing about $100 billion, but it would pay off in the end, analysts say. But not everyone agrees that Walt Disney’s woes have reached a crisis level.
It has been noted that Walt Disney Co (NYSE:DIS)’s ESPN is bleeding subscribers thanks to the cord-cutting movement. Walt Disney reportedly lost as many as 7 million ESPN viewers by the end of 2015 and there are worries the subscriber loss trend could continue this year. The exit of Thomas Staggs, who was once seen as DIS’s next-in-line CEO, has also heightened investor concern about the future of the company.
Buying Netflix could right the ship
Netflix’s strategy of selling video subscription over the Internet has proven success. Therefore, buying Netflix could help Walt Disney attain its dream of delivering ESPN in a direct-to-consumer fashion.
According to Richard Greenfield of BTIG, Walt Disney Co (NYSE:DIS) and Netflix already have a symbiotic relationship and tying companies won’t because much disruption for either of them. Netflix rents content from Walt Disney studios, although it has recently been working on its own original shows as a way of differentiating its offering from the competition.
Access to established studio
As for Netflix, joining forces with Walt Disney would give it access to a top-tier production studio to enable it churn out high quality content.
A huge price
However, buying Netflix won’t come cheap for Walt Disney Co (NYSE:DIS) if it is interested in such a deal. It is estimated that DIS would have to put with about $100 billion to add Netflix to its portfolio.
The other potential risk area in combining Walt Disney with Netflix is the new leadership structure. Walt Disney’s CEO, Bob Iger has seemed to be a larger-than-life business leader and Netflix’s Reed Hasting isn’t an underdog either.
All is not wrong with Walt Disney
While some analysts believe that the only viable way for Walt Disney Co (NYSE:DIS) to remain relevant is by acquiring Netflix, not everyone agrees. Steven Cahall of RBC believes that while ESPN is bleeding subscribers, there are several ways for DIS to offset the losses.
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