The streaming wars have been raging on for years, with Disney at the forefront as the undisputed leader among legacy entertainment companies. Despite this, Disney's stock price has remained stubbornly flat over the last five years, a paradoxical situation given the company's apparent dominance in the streaming wars. This has led to a provocative question from Wall Street analyst Steven Cahall: what if the key to unlocking Disney's stock price is exiting the streaming business?
Cahall's suggestion is that if Disney returned to its old business model of producing versus distributing, it could add a significant 40 percent to the company's share price. This move would also allow Disney to focus more intently on creating and managing its intellectual property, as well as its lucrative experiences business. The analyst estimates that Disney could be in line for nearly $4 billion annually from Netflix for a pay-1 movie output deal, with potential licensing revenues hitting $15 billion when pay-2 and Disney's unmatched library are factored in.
The implications of such a move are far-reaching. Cahall argues that the box office, experiences, and brand value would not suffer if the library were on a competing global streamer. In fact, investors would benefit from a de-risked business model where Disney is focused purely on content creation and distribution, rather than the complexities of streaming. This perspective is particularly intriguing given the current competitive landscape, where tech giants like Amazon, Google, and Netflix are all secure in their spaces, and a potential combined Paramount-Warner Bros. is on the horizon.
The idea of Disney exiting the streaming business is a stark reversal of its current strategy, but it raises an important question: what if the key to Disney's success lies in its ability to leverage its content in new and innovative ways? From my perspective, the streaming wars are far from over, and Disney's content is likely to become even more valuable as a licensed product than a streaming one. The company's intellectual property and experiences business are its strengths, and focusing on these could be the key to unlocking its stock price and future growth.
