Disney and Netflix pride themselves in storytelling. Now they’ve switched places when it comes to the tales they’re telling Wall Street.
Netflix said on Tuesday that it would consider buying back shares for the first time since 2011. After nearly a decade of borrowing $15 billion to fund original content, Netflix said Tuesday it planned to be cash-flow positive after 2021 and would no longer need outside financing for its operations.
Disney, meanwhile, temporarily halted its dividend last year and has heard calls from activist investor Dan Loeb to permanently end its annual $3 billion payment to shareholders. Loeb wanted Disney to funnel that money into original content, using Netflix’s startling runup from an $11 billion company to a $220 billion media giant as a model.
While Disney hasn’t ended its dividend yet, the company is focusing its operations around streaming. Disney plans to roll out dozens of Star Wars, Marvel and Pixar movies and series in the coming years for its flagship streaming service, Disney+. The service has gained more than 86 million subscribers in a year, way ahead of Disney’s original expectations, and the company now expects between 230 million and 260 million subscribers by 2024.
“It’s super impressive what Disney has done,” Netflix co-CEO and co-founder Reed Hastings said during Netflix’s earnings conference call. “It’s incredible execution for an incumbent to pivot to take on the insurgent. It shows members are willing and interested to pay for more content because they’re hungry for great stories. And Disney does have great stories.”
But while Hastings still refers to Disney as the incumbent, investors see a different picture. There’s a reason Disney shares gained more than 2% after hours on Netflix’s news, which sent Netflix shares up more than 12%. Investors don’t see the battle as Disney versus Netflix. They see that Disney wants to be like Netflix, and there’s room for both.
Netflix was founded in 1997. Disney has been around for nearly 100 years.
But in the streaming video world, Netflix is the incumbent and Disney the upstart.
The student has become the teacher.
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