INTERNATIONAL BUSINESS TIMES: Disney’s Gains Against Netflix at a High Cost

May 12, 2022

Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by the International Business Times in an article—by Panos Mourdoukoutas PhD, “Disney Beats Netflix At A Big Cost—Blame ‘Dr. Strange’ And ‘Black Panther’”—regarding the battle between streaming giants Netflix and Disney. Disney may be winning, but at a high cost.

The following is an excerpt from that article:

“Disney revenue and earnings missed the expectations of Wall Street analysts largely based on higher TV and film content costs as well as the loss of $1 billion in licensing fees as it focused on its own streaming services of Disney+, Hulu and ESPN,” Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors, told IBT. “Although overall, Mickey Mouse performed relatively well across resorts, theme parks, and streaming service subscriber growth and has a promising pipeline of films, investors will question the sustainability of subscriber growth, the ability of Disney to rein in TV and film costs which are projected to be $32 billion, and their ability to turn a profit within their streaming services where losses doubled to a Dumbo-sized $900MM.”

Schulman points to additional factors that have negatively affected the company’s bottom line, like revenue hits from the closure of theme parks in Hong Kong and China. Then there’s the state of Florida’s decision to disband the Reedy Creek Improvement District, the location of the company’s Disney World Resort.

Schulman is optimistic about the future of Disney, both in its streaming services and the traditional theater business.

“Disney+ streaming service grew by nearly 8 million subscribers [versus the recent slump at Netflix] and will expand to 50 additional countries in 2022,” he said. “Also, Disney’s pipeline of theatrical releases including ‘Lightyear,’ based on Buzz Lightyear, an ‘Avatar’ sequel, and new MARVELous films ‘Dr. Strange in the Multiverse of Madness,’ ‘Black Panther’ and ‘Thor: Love and Thunder’ seem promising, although, without the promise of Chinese theatrical release, they have lost some sparkle.”

Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-22-22