Key Points:

• Disney’s streaming services struggle with profitability and intense competition.
• Netflix and Amazon dominate the market, making it hard for Disney to compete.
• Recent gains are minimal, with low margins and high customer turnover still a problem.
• Forget Disney, instead look at ‘The Next Nvidia’ as the stock to propel your portfolio higher in 2025

Douglas and Lee discuss the ongoing challenges facing The Walt Disney Company (NYSE: DIS), particularly under the leadership of Bob Iger. After stepping down and then returning as CEO, Iger has struggled to turn around the company’s fortunes, especially in the streaming business. Disney+, which was launched by Iger, has been losing billions of dollars and only recently turned a slight profit. However, the streaming market is highly competitive, with dominant players like Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN) making it difficult for Disney to gain significant traction. They also discuss how Disney’s streaming services are at a disadvantage compared to Netflix and Amazon, which have diversified their revenue streams and subscriber benefits, making it challenging for Disney to compete in a price-sensitive, churn-heavy market. Additionally, they express concerns about the future profitability of Disney’s streaming business, given the intense competition and the shift towards ad-supported models by other giants in the industry.

Transcript:

The Walt Disney Company.

So what a tale of woe.

God.

Iger, longtime CEO.

Finally, they get a successor for him.

The guy lasts about a year and a half.

Yeah.

Iger, who I guess can’t stand being home alone or playing golf.

He comes back and the thing gets worse.

I mean, it’s sort of like you’d hope that if you got the superstar to come back in, it would get better.

And really, the thing that really, really hurt them was streaming.

Now, he was the guy who invented Disney Plus.

He then left.

Disney Plus lost billions of dollars while he was gone.

When he came back, he kept losing billions of dollars.

In the last quarter, it made money.

But made money is like the net margin was like a half a percent or something.

Yeah, it was.

They’re streaming the Hulu money, all that.

I mean, it was positive, but…

Again, for a company that size, it was basically, you know, a rounding error.

Yeah.

And what I still don’t like about Hulu, Disney+, their whole streaming businesses…

I don’t like being in a business where Netflix and Amazon are the dominant guys.

They’ve got the amount of content they produce is unbelievable.

They’ve got, you know, over 200 million subscribers by a lot.

They’re very efficiently run.

The Amazon video is part of the whole prime experience where it’s them with free shopping.

And I mean, it isn’t just you can buy the video, but it’s really it’s part of a much bigger experience and selling point.

So I don’t like Disney streaming business.

I don’t care if it made a nickel.

It’s that this is a churn business.

It’s a price-sensitive business.

You bring rates up, your churn goes up.

People cancel all the time.

They get the introductory offer.

Yeah, and they cancel.

Some people are smart enough to, you know, two months later when there’s something on they want to see, they sign up and then they cancel again.

Right, right, right.

And those kind of over-the-top streaming services, whether it’s Fubo or Hulu or Sling or, you know, you name it, YouTube, whatever.

They’re basically commoditized assets so you can gain basically what was cable, you know, so you can get all the cable channels that you’re looking for.

Because again, that’s really not Netflix nor Amazon’s forte.

They don’t care about delivering CNN or Fox Business or whatever.

But again, that comes down to an issue where you’re going to fight price on that so heavy that it could be that they just barely make money on it indefinitely.

So it’s never going to be something that’s going to push the needle.

The other thing I don’t like about this business is that particularly Amazon and Netflix have gotten into the advertising business.

Okay.

You can get a lower price point, but you have to watch ads.

Yeah, these guys have so much inventory, a ludicrous amount of inventory.

So that what they’re making a lot of money on advertising because it’s basically it’s almost found money.

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