While there has been speculation that Walt Disney Co. might be a viable option to purchase streaming service giant Netflix, the latest reports have indicated that this is a deal that is not likely to happen.
Earlier this week, Bernstein’s Todd Juenger shared his thoughts on the acquisition, and seemingly supported it. According to CNBC, here’s what Juenger had to say:
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“Our initial reaction to almost any proposed acquisition is skepticism. In this case, we’re talking about a huge ($70bn?), dilutive, transformational event. And to the extent Disney accelerated the success of the company being acquired (which is usually the point of an acquisition in the first place), the faster it would cause the demise of Disney’s core TV network businesses. But then we reminded ourselves – we believe the demise will happen anyway. From that POV, it is better, then, to own the winning the solution. Imagine the appeal of a Disney/Netflix-branded SVOD service. Some argue Netflix would even bring with it the next Disney CEO.”
Juenger makes valid arguments, but Fox Business‘s Rick Munarriz pointed out that there would be definite conflicts of interest for Disney in buying Netflix.
In the event that Disney wanted to create a streaming video platform that could challenge Netflix, it would be extremely difficult and expensive to compete given the market share that Netflix already has. However, if Disney bought Netflix, there would be a conflict of interest with the company promoting its own material.
Given that Netflix courts content from all studios and content creators, it would virtually impossible for Disney to do the same. Disney would understandably prefer to have its own shows and movies on the streaming service, and if the company ever did that, other studios would be reluctant to license content to a rival competitor.
Therefore, the best long-term decision for Disney would be not to buy Netflix. The streaming service would be extremely expensive to buy, but then would immediately lose value in Disney’s hands.
Do you think it is smart for Disney not to purchase Netflix?
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[H/T Fox Business, CNBC]
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