In the world of video content, consolidation over the last few years has been the order of the day. With the relatively recent success of the likes of Netflix, the subscription-based streaming industry is booming. Content owners such as Fox, Disney and MGM have begun to roll out their own streaming services.
Certainly, the Disney people know how to manage their intellectual property library. Decades of experience should prove their earnings to be reliable and predictable. However, there is risk that some pieces of the company occasionally won’t perform as well as expected. Every now and then, the machine sputters.
Disney’s machine did just that in the last fiscal quarter. Earnings were below market expectations.
A combination of factors led to the quarterly results and the subsequent stock drop (Disney). A marked decline in gate revenues at theme parks, and the failure of the film “Dark Phoenix”, all contributed. Not involved in the results is its new streaming service: Disney+.
These are rare quarterly results for the company. Disney has assembled a vast library of video titles and it comes on the heels of a massive $71.3 purchase of the bulk of the assets of 21st Century Fox. That acquisition increases the stable of consumer content which makes Disney+ a more formidable challenger for the likes of Amazon and Netflix.
MGM has entered this arena as well with a service called “Epix” insulating MGM’s vault of titles from other streaming platforms. In setting up the service, they entered into agreements with Epix’s parent company (MGM), Paramount and Lionsgate.
Netflix and Amazon do not want to be left with limited content to attract or retain subscribers. They are investing heavily in new content to thwart being shut down in this war.
Netflix itself spent $12 billion on new content in 2018 and analysts predict expenditures of $15 billion in 2019. This is showing on their balance sheet: the company will increase its debt to fund this expenditure. CEO Reed Hastings explained the spending is fueling a cycle of attracting subscribers.
Amazon is forecasted to spend $7 billion on video and music content in 2019. They have a wider list of competitors as they span not only video, but music as well.
The streaming wars battle is only beginning – and we’ll be watching.
