Disney’s latest attempt to ensure relevance in the digital age could include laying down a big chunk of change to acquire Netflix, according to rumors on Wall Street.
This isn’t the first web-based company Disney has sought out. Just last week, news broke that Disney had entered into talks with Twitter, seeking to acquire the social media platform.
For Disney, the main appeal of both companies is their streaming capabilities. As more people cancel cable subscriptions in favor of online streaming, Disney, one of the largest entertainment companies in the world, is searching for ways to boost its digital brand.
But not everyone thinks the media conglomerate needs to stock up on extra features.
“Disney needs to buy nothing,” Michael Nathanson, an analyst at MoffettNathanson, told The New York Times last week. “I don’t think Disney is incomplete at all.”
Since Disney CEO Roger Iger took over the company in 2005, he has set a precedent for aggressive acquisitions and high profits, with the company’s annual earnings rising from $3.4 billion to $8.4 billion as of last year. That reputation, and the success of various franchises under Disney’s ownership, makes the company appealing to investors and smaller companies looking to sell.
Rumors of a possible Netflix sale began to circulate Monday, causing the streaming service’s stocks to jump 6 percent, Fortune reports.
Because Twitter's growth in both users and ad revenue have stagnated, it is a riskier, if cheaper, buy. But Netflix, boasting subscriber loyalty and brand recognition, could cost Disney as much as $45 billion.
While Twitter has moved in more experimental directions with streaming, featuring NFL games and the presidential debate last week, the service has only dipped its toes into the realm, and its streaming influence is in some ways untested. Analysts say Netflix, a much larger and proven service, could allow Disney to establish a streaming market much more quickly. Plus, the two have an established business relationship.
Netflix is already slated to serve as the exclusive pay-TV host for new Disney movies, including its franchises Pixar, Lucasfilm, and Marvel.
But Netflix has financial worries of its own. Subscriber growth has slowed, possibly because of the company’s attempt to move customers to the $9.99-per-month standard. The streaming service may see a solution in Disney’s deep pockets, which could fund Netflix’s foray into original content, a feat that is estimated to cost more than $6 billion this year alone.
That kind of spending could be tricky for Netflix to maintain, making a Disney acquisition look like an appealing option to the streaming service.
Swallowing Netflix would be a big task, and investment, even for a large company like Disney, whose market cap currently rests at $150 billion. Still, past leaps into new territories have proved successful for Disney, from Pixar to the Muppets.