Disney is having a remarkable year, on course for $3.5 billion in global box office. One major key to this success has been acquiring other companies with valuable IP and maximizing the growth and revenue potentials. Pixar, Marvel, and Lucasfilm all came into the Disney corporate fold. And soon, Fox may be brought into that fold as well. And all signs point toward the advisability of a couple of new big moves by Disney to further expand their holdings, build a bigger catalogue of new properties to exploit, have their own platform for sharing content with the largest possible audience as directly as possible, and finding a way to rescue ESPN from a slide that continues to be the one small drag on the company's stock and performance overall. The solution to all of these needs is simple but immense: Disney should buy Netflix, Paramount, and Sony.
Tall order? You bet it is, and I'm not saying it would be cheap or easy to accomplish, nor that I think it's destined to transpire. But if any company is positioned to pull it off in order to reap the enormous benefits, it's Disney. Let's look at the reasons why -- including some you may not have considered -- to see why this bold, big move makes sense...
While Disney's film and merchandising have enjoyed enormous success, lately ESPN has suffered declining viewership. ESPN lost 11 million subscribers over the last 6-year period, including more than 600,000 in October of this year. Granted, the Nielsen ratings data doesn't account for SlingTV and Playstation Vue, which also provide ESPN to subscribers, but the data and trends all point toward a decline for ESPN in the face of cord-cutting, new competitors, and other obstacles now and in coming years. Since ESPN is a major part of Disney's primary revenue stream (Disney Media Networks), it's going to be important to address these issues to boost the revenue stream, ease investors' fears, and improve Disney's stock valuation.
Without finding an option that provides a game-changing strategy, ESPN faces longterm trouble. Younger audiences increasingly care less for cable and rely more on multiple portable devices for viewing content. And inevitably, other sports viewing options will arise that provide streaming access and further undercuts ESPN's audience. Doing nothing, or attempting a half-measure, won't cut it. ESPN needs a big move, and soon, to get ahead of this situation and put it in the best position to take full advantage of the enormous potential of streaming to a huge, global, built-in audience.
Moving to a sustainable, stable streaming platform that allows live broadcast to a huge global audience is a good option. However, creating their own streaming service, or outsourcing the streaming to a third party, is far less appealing for Disney than getting hold of an existing, massive streaming service that serves many other needs while instantly putting ESPN in a completely new and ideal position.
Netflix has 83 million subscribers, and has enjoyed pretty constant growth. It has multiple deals with a wide variety of studios and production companies to stream content and create new exclusive content. And it's frankly the most recognizable name brand in content-streaming today.
The smart move for Disney, then, is to buy Netflix and move ESPN over to that platform. There are several options for the specifics -- make it an add-on service like the DVD option, or go for sheer quantity of subscribers by simply adding ESPN to the service at no extra charge (at first, anyway) to subscribers, and in either case providing advertising space during the streaming broadcasts. Keeping the games available for one month, for anyone wanting to save up a block of games to binge on (perhaps creating a new way of viewing sports programing) or re-watch them, would provided added advertising potential (albeit at a lower rate than during the live broadcast and subsequent first 24 hours of "rerun" streaming). And the fact this would make ESPN content more readily available on mobile devices via the Netflix app -- where ad revenue could again be generated to greater affect at higher rates, due to the large subscriber base -- shouldn't be forgotten.
Purchasing Sony and Paramount is another big move that Disney could and should consider, along with a big Netflix merger. The back catalogue of films and TV shows would be a boon in the aftermath of a Netflix purchase that would surely see some competitors ending their deals to stream content on Netflix, as well as providing a lot of new IPs to develop. Paramount has Mission: Impossible, G.I. Joe, Transformers, Terminator, Teenage Mutant Ninja Turtles, and Star Trek for example, while a purchase of Sony would bring Spider-Man fully under Marvel's control and add Men In Black, Jump Street, Underworld, Resident Evil, and Jumanji to Disney's list of franchises to exploit on film, television, and streaming.
I’d go for Paramount first, before Sony Pictures, just because it’s got more to offer. And I’d do that ahead of a Netflix deal, since having Netflix in-hand would make the “threat level” to other studios far more obvious. Which in turn means the Netflix and Sony deals would need to be either simultaneous or in quick succession, so nobody else steps in to gobble up Sony first instead.
Disney has had some remarkable success at the box office lately, and the coming years are shaping up to continue that trend, but ultimately they need their own streaming service for their large library of content, and they need to solve their ESPN problem before it grows worse. Netflix provides the answers to those problems, and opens new doors for Disney as well. All of their content in one place, a global streaming sports option, a subscriber base of nearly 100 million, and the chance to introduce advertising options into that already valuable equation. If Disney isn't going to sell or trade ESPN, then Netflix is the right call, and the sooner they make it the better.
Here's a reason why Disney buying 4 companies would be cool:
1. Sony Animation and Nickelodeon Movies would also be bought by Disney and they would make more animated movies a year because Sony's animation division is in trouble too right now.
2. Disney would help all the bad directors and writers make their first great movie, like Kevin Munroe, Paul W.S Anderson, Michael Bay, just to name a few. That way they can finally find their way to critical acclaim and great stories just like how every MCU director make Marvel movies their best movie ever.
3. Disney can navigate the laws to buy these 3 companies, regarding mergers, especially the AT&T and WB merger. Look at all the massive corporate mergers that have already taken place, and the huge conglomerates that already exist, and the Marvel, Lucasfilm and Pixar acquisitions were bigger deals actually than acquiring Sony probably would be. I think Paramount would be the first of these hypothetical options for Disney to consider pursuing, since it's a much cheaper company to get at perhaps $10 billion. But Sony's value is in trouble right now, and if things don't improve this year, it could wind up seeing its potential sale price drop to $25 billion or less, and if it dips below that level, then the moment a major slide starts to pause is a time for another company to swoop in and try to potentially buy it for a bargain price. And in this purely hypothetical scenario, consider that a Sony price tag in the $24-or-less range means it's possible to acquire Sony & Paramount - in theory, of course - for around $34 billion. The IP they own and back catalogues should make that a tremendously tempting opportunity. Netflix would probably cost Disney $70 billion according to Todd Juenger, so that's a harder "get", but still worthwhile, and the total package deal for Sony-Paramount-Netflix is just a bit north of $100 million - steep, but the payoff is enormous for Disney since they'd instantly have the dominant streaming service with a massive library of content past and present to fill up that service, as well as the glaringly obvious best way to save ESPN.
4. A Netflix buy makes more sense than starting a brand new solo streaming service and Mark Hughes doesn't think we'll see 50-100 million subscribers leap into it instantly. That's why he always said part of a Disney-Netflix deal would probably, inevitably include buying Paramount and Sony as well, in a big spending spree by Disney, to have access to those 2 additional large libraries of film and TV content to add to Netflix along with the Disney, Pixar, Marvel and Lucasfilm content that could be placed on the platform. And Disney would have to renegotiate a bunch of contracts with other studios to try to retain a lot of the current Netflix content as well. But Disney is great that stuff, the negotiations, building content and promoting it, plus ESPN would be a massive draw as well and create a instant global streaming service of sports content unlike anything that currently really exists, smashing models and opening the door to Netflix expansion into other countries in even bigger ways. And Disney are also great at cutting costs and streaming services and business, so I think they'd quickly make changes to Netflix's debt model and turn the service into something slightly different from what it is now, but still a mammoth streaming service content provider that breaks boundaries and serves Disney's longterm goals very nicely. I think this would be all be great for customers, because it would help speed up the move from traditional cable to modern streaming service, disrupt sports content providers and force a rethinking of how to consumes and provide the most popular mainstream content, and would help provide a far larger and more agile platform for Disney's library of content and brands around the world. Disney tends to do great things with content and brands they get their hands on, so I can only imagine this would all be great for fans of that content, provide consumers with new options and break down more barriers in tech and content.
and so much more, Disney would even make a new Darkhorse division so they can get back into the R-Rated movie business by making sequels to Pineapple Express, Sausage Party and This is the End and make all of Nickelodeon's terrible IPs become great again by making new TV shows and movies so they can increase their popularity.
Disney has made billions of money over the years, so if they purchase Sony, Paramount and Netflix as well, they would save Sony and Paramount's films from further mismanagement.