The Walt Disney Co., despite being the undisputed leader among the legacy entertainment companies (especially with everyone else seemingly a buyer or seller), has been dealing with a stock price that has remained stubbornly flat over the last five years.
That’s despite Disney’s status in the streaming wars seemingly secured: Paramount+, HBO Max, Peacock and the rest are fighting for a piece, even as most observers say that Netflix and Disney are the only subscription players with the scale to compete already.
But one Wall Street analyst, Wells Fargo’s Steven Cahall, is asking a provocative question in a research note released Sunday: What if the key to unlocking Disney’s stock price is exiting the streaming business?
Cahall suggests that if Disney returned “to its old biz model of producing vs. distributing,” it could add 40 percent to the company’s share price, and tighten management’s focus on creating and managing intellectual property, as well as its lucrative experiences business.
The Wells Fargo analyst that, if Sony is getting $1 billion annually from Netflix for its pay-1 movie output deal, Disney could be in line for nearly $4 billion. When pay-2 and Disney’s unmatched library is factored in, licensing revenues could hit $15 billion.
“We don’t think the box office, Experiences, or brand value would suffer if the library were on a competing global streamer,” Cahall writes. “Investors would benefit from a de-risked biz model w/ DIS focused purely on content vs. distribution. Josh D’Amaro may be considering all options.”
The report was making waves Monday, with Disney stock rising by 1.75 percent in early trading.
Of course, such a move would be a stark reversal in strategy, especially given Disney’s relative success compared to its peers. But with tech giants like Amazon, Google and Netflix all secure in their space (though Netflix may be seeing pressure, as we’ve seen recently) and with a potential combined Paramount-Warner Bros. on the horizon, the competitive pressure may only ratchet up, potentially making Disney’s content more valuable as a licensed product than a streaming one.
