November 6, 2024

Disney will solve its Netflix problem

Disney #Disney

NEW YORK, Nov 8 (Reuters Breakingviews) – Walt Disney (DIS.N) boss Bob Chapek is knee-deep in the video-streaming money pit. The $182 billion entertainment empire reported on Tuesday that operating losses in the division housing its Disney+, ESPN+ and Hulu services ballooned another $1.5 billion in the quarter ending Oct. 1, bringing the fiscal year tally to $4 billion, or more than twice as much as the previous year. New subscribers keep signing up, too: Disney+ counts 164 million, a 39% jump from 12 months earlier. With investors now prioritizing costs over growth, however, Disney shares fell 10% in after-hours trading.

It’s a myopic reaction. Netflix (NFLX.O), which started streaming 12 years before the Magic Kingdom, eventually paid the price for the sums it spends on programming by losing its super-premium valuation. Co-Chief Executive Reed Hastings is starting to turn things around, however. Netflix generated $5 billion of operating profit over the first nine months of 2022. Disney’s theme parks, which delivered record quarterly operating income of $8 billion, can tide the company over as the online strategy takes shape. If the Netflix enterprise commands 18 times expected EBITDA, per Refinitiv data, Disney will find enough fairy dust to warrant a multiple higher than 12 times. (By Jennifer Saba)

Follow @Breakingviews on Twitter

Capital Calls – More concise insights on global finance:

Primark’s price freeze is risky inflation gambit read more

Japan baulks at U.S. car credits read more

Starbucks waits stubbornly in China queue read more

Uniper’s gory details point to bigger German bill read more

Elon Musk’s Twitter runs into subscription fatigue read more

Editing by Jeffrey Goldfarb and Amanda Gomez

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

Leave a Reply