The Walt Disney Company, despite being the undisputed leader among legacy entertainment companies (especially with everyone else seeming to be a buyer or seller), has been dealing with a stock price that has remained flat over the past five years.
This is despite Disney’s place in the streaming wars seemingly assured: Paramount+, HBO Max, Peacock and the rest are all fighting for a piece, though most observers say Netflix and Disney are the only two players with the widespread subscription to actually compete.
But one Wall Street analyst, Steven Cahall of Wells Fargo, poses a provocative question in a research note issued Sunday: What if the key to unlocking Disney’s stock price is getting out of the streaming business?
Cahall points out that if Disney returns “to its old business model of production versus distribution,” it could add 40 percent to the company’s stock price, and tighten management’s focus on creating and managing intellectual property, as well as its profitable experiences business.
If Sony gets $1 billion a year from Netflix for its $1 pay-per-view movie production deal, Disney could be in line for nearly $4 billion, a Wells Fargo analyst said. When we take into account Payment 2 and Disney’s unparalleled library, licensing revenue could reach $15 billion.
“We do not believe box office, experiences, or brand value would be affected if Library were on a competing global channel,” Cahall wrote. “Investors will benefit from a risk-free business model with DIS that focuses solely on content versus distribution. Josh D’Amaro is probably considering all options.”
The report caused a stir on Monday, with Disney shares rising 1.75 percent in early trading.
Of course, such a move would be a stark reversal in strategy, especially in light of Disney’s relative success compared to its peers. But with tech giants like Amazon, Google, and Netflix secure in their space (although Netflix may see pressure, as we’ve seen recently) and with the Paramount-Warner Bros. merger likely. On the horizon, competitive pressure may only escalate, which could make Disney content more valuable as a licensed product than streaming content.
