Disney’s decision to pull movies from the streamer “arguably reduces the consumer value of Netflix,” says one analyst, while another says Disney faces a period when earnings growth “will be diluted by investment.”
The stocks of Walt Disney and Netflix fell more than those of their peers in early Wednesday trading as Wall Street observers discussed the impact of late Tuesday’s news from the Hollywood giant that it would end its Disney and Pixar movies licensing deal with the online video giant and launch a streaming service of its own.
U.S. and global stocks opened lower Wednesday after U.S. President Donald Trump warned North Korea about facing “fire and fury” if it doesn’t stop threatening the U.S. The broad-based S&P 500 stock index opened about 0.3 percent lower.
The stocks of Disney, which also posted weaker-than-expected quarterly revenue after Tuesday’s market close, and Netflix fared worse though. Netflix’s stock in early Wednesday trading was down 3 percent at $173.01, while Disney’s stock was down 4.6 percent at $102.10.
Amazon, whose streaming service is also affected by a new Disney competitor, saw its stock drop only 0.6 percent in early trading. Among other entertainment giants, Viacom shares dropped 2.5 percent, 21st Century Fox’s lost 2.0 percent, CBS Corp.’s stock fell 1.6 percent and Time Warner’s stock was down only 0.1 percent.
Analysts said Netflix’s stock was under pressure given the popularity of Disney films and the potential that more entertainment companies could stop licensing their content to the streaming giant. Disney’s decision to end its licensing deal “arguably reduces the consumer value of Netflix, which remains the biggest strategic challenge to linear networks in the expanded basic bundle long term,” said Credit Suisse analyst Omar Sheikh in a report.
SOURCE: Georg Szalai
The Hollywood Reporter