Asked about the estimated loss in incremental profits which Disney could see as a result of forgone licensing fees, Iger said he wasn’t worried.
“I think there are platform economics which trump license fees to third parties. We can start with the affinity which people have to the brand, they want to be connected to the idea,” he told Faber. “however obviously, the ability to have a direct relationship with the consumer gives us — I think — an opportunity to, in having which relationship with them, to monetize much more effectively.”
“If you look at the Disney consumer, they’re going to movies in movie theaters. They’re renting or downloading movies in their homes. They’re buying consumer products. They’re visiting our parks. They’re sailing on our cruise ships. along with I could go on along with on,” the CEO added.
however beyond the ending of its lucrative relationship with Netflix, Disney has gone to even greater lengths to ensure the success of the direct-to-consumer platform. In 2018, the idea flexed its financial arm to spend $71.3 billion to buy assets coming from 21st Century Fox, including National Geographic along with the Fox movie studio. which deal closed at the end of March.
The addition contributes to an already-impressive cast of entertainment studios, including Marvel, “Star Wars” producer Lucasfilm, Pixar along with Walt Disney Animation.
“I realize which we could license the idea to third parties along with make money on the idea. however the idea’s much more efficient for us to do the idea This specific way along with contain the idea be part of a service which’s also creating fresh content,” Iger said to CNBC. “Which, by the way, the content which we’re creating – which’s original due to This specific – also will create longer-term value.”
The fresh venture will also likely mark a pivotal moment inside fierce streaming wars, an all-out competition for customers between Netflix, Hulu, Amazon Prime Video along with others. Young along with old companies alike — including Apple — are scrambling for a piece of the business as an increasing number of viewers expect high-quality programming at their fingertips.
The growing battle has sent the major rivals tinkering with their designs in an effort to maximize revenue along with strike a happy medium between number of subscribers along with cost per subscription. Hulu, for example, cut the cost of its most favorite plan to $5.99 per month in January, while Netflix — hoping to leverage its original content along with larger library — raised the cost on both its cheapest plan along with its HD service.
To be sure, a direct comparison between $210 billion Disney along with preexisting streaming services like $159 billion Netflix might be far coming from a fair comparison. Netflix, though a leader in streaming with about 140 million paid subscribers, simply doesn’t contain the same global presence as Disney.
Disney boasts enormous theme parks on multiple continents, generates hundreds of millions of dollars each year in merchandise sales along with its legacy business operates under an entirely different framework than streaming content.
Still, many on Wall Street are eager to see if the latest offering will be able to lure subscribers away coming from established streaming companies along with goad Disney shares higher.
After all, Netflix — though the idea claims to be more a media company than a technology company — incorporates a 2020 forward cost-to-earnings ratio of about 57 compared to Disney’s 16.6. Netflix stock is usually up 258% over the last three years, Disney is usually up 21%, along with the S&P 500 is usually up 41%.
Disclosure: Comcast, which owns CNBC parent NBCUniversal, is usually a co-owner of Hulu.