Disney's Twitter Idea Is Troubling

| About: The Walt (DIS)
This article is now exclusive for PRO subscribers.


Disney probably won't buy Twitter.

The idea that Disney was even considering buying Twitter makes one wonder where the company sees itself in the next decade.

If Disney is worried about future growth and wants to continue acquiring assets, it has to think more carefully about what it wants to buy.

At the time of this writing, it's still up in the air as to whether or not Disney (NYSE: DIS) wants to buy Twitter (NYSE: TWTR). I am going to predict that Disney will not buy Twitter (or has announced that it will not do so by the time this is published). I'll go out on a limb and say that it is 100% certain that Disney will not (has not) buy (announced an acquisition of) Twitter.

If Disney does buy Twitter, then I suppose I'll be embarrassed, but probably not too embarrassed; shame on CEO Robert Iger if he actually bought the short-burst-communication social network. Come to think of it, shame on him for even considering it. Yes, Jack Dorsey is on Disney's board, but...come on, is that a reason? It is not.

There have been plenty of articles discussing why Disney should not buy Twitter. I can't really add too much to them. Succinctly put: Twitter is hard to monetize, and it probably should do its own thing before putting itself on the block; that'd be the polite thing to do.

More seriously, I have in the past argued that Twitter should itself get into the original content business. One might take that article and use it to counter what I am saying in this piece: if I still stand by that article -- and I do -- then why not give Disney/Twitter a chance?

Disney doesn't need Twitter to tell stories or distribute content; Twitter, on the other hand, needs to tell stories and distribute content. Disney's acquisition strategy in the past has focused on storytelling; those buys have turned out to be successful. They were risky, but they generated profits for the company. The Twitter platform is just that -- a platform, a piece of complicated software...a technology. When Disney buys technologies, it sometimes doesn't work out. See the company's past video-game strategy. See its purchase of Maker Studios (yes, there's still time for that one, but so far, I haven't been too impressed).

Here's the salient point, expressed in question-form: What is going on with Disney? Why would it even think to buy Twitter? That's the bigger point of this whole debate. I think shareholders who are worried about Disney taking over Twitter need not worry at all because it won't happen; they should worry, though, about how the company intends to use an acquisition strategy on a go-forward basis to take their stock on another bull run.

There just may not be anything out there to buy right now. Disney has already purchased a lot of IP; it owns Iron Man, Luke Skywalker, all those known quantities. Instead of panicking because of ESPN issues and buying Twitter to solve it (didn't the company already invest in BAMTech?), there are other, more sensible ideas to consider.

Such ideas would simply be sourced to making the best with what the company already owns until some attractive, logical asset comes along. I've said in the past that Disney should consider expanding the movie output of the brands it already has; maybe a month shouldn't go by without some sort of big-bet Disney movie in theaters and/or on one of the many digital platforms out there. The company could also put some large amount of money into the aforementioned Maker Studios division; I'm still unsure of exactly how the company is using that platform and talent pool (yes, there is the access-to-analytics argument, but still, I remain skeptical; as Peter Kafka mentioned at the end of his piece on Disney/Twitter, data can always be purchased). Maker could certainly benefit from new marketing/content initiatives. Other suggestions: invest in lower-budget films, invest in new programs for consumer products at the retail level, etc. Disney seems unsure about its intended path of corporate evolution over the next decade; if something like Twitter is believed by execs to be necessary for that evolution, then count me as one of the confused.

I've read that Twitter might want $30 billion. That's a significant amount of money/debt, even for Disney. The acquisition would make no sense considering the company already has its content on some great distribution channels (ABC, Netflix, etc.). Considering that 1980s culture is on the popular culture's collective mind because of Netflix's Stranger Things, let me end this by quoting Joshua the Computer from the film WarGames. As far as this acquisition is concerned, the only winning move is not to play...

Disclosure: I am/we are long DIS, NFLX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.