It’s hard to believe a mega-brand such as Disney would be seen by investors as a growth stock. The company is nearly a century old, boasts some of the most entrenched franchises in entertainment and is already valued at more than $200 billion. But as it has in so many other ways, the internet age has changed the rules. And after making a big splash Thursday with details about its much-anticipated streaming service that will launch in November, shares of Walt Disney Co. DIS, +0.17% surged as Wall Street has started to think of this media king as a growth name once more. Streaming incumbent and growth icon Netflix NFLX, +0.20% had a very different reaction, however. Netflix shares fell about 5% Friday, while Disney’s stock surged more than 10%. The oversimplified reason is that investors feared Disney’s gain would be Netflix’s loss. Yet as the dust settles and Netflix approaches a crucial earnings report Tuesday, it’s worth challenging the notion that only one provider can be the winner in a zero-sum game. As a personal data point, my household uses three streaming services, and there are many other customers like me out there. Of course, not everyone will be a streaming winner. Since services are “unbundled,” consumers can decide what content is worth paying for but also what services simply aren’t worth it. Disney’s streaming efforts certainly don’t prohibit others like Netflix from succeeding. But given the company’s massive library and history of excellence, it does raise the stakes. Here’s what the Disney-Netflix war means for the streaming industry in the coming months, and which stocks are worth owning. Read:Disney launches $6.99 streaming service, but will Netflix fans go for it? Disney The biggest bullish case for Disney’s streaming service is the fact that it’s offering premium content at a relatively discounted rate — about $7 a month, around half that of Netflix and HBO Now. It’s not just the price, though. Disney is offering an amazing archive of films, from family faves like “Aladdin” and the “The Lion King” to content from its Pixar and Marvel franchises. And on top of that, on the heels of a massive $71 billion deal in 2018 to purchase Fox entertainment assets, the streaming service will also offer flicks from the Fox library that include “The Sound of Music” and “The Princess Bride.” The icing on the cake: Disney isn’t just charging for reruns. It has ambitious plans for 25 original series and 10 feature-length productions. Remember, this is a company that made a ton of dough decades ago on direct-to-VHS sequels that capitalized on established brands, and it will surely execute well in this digital reboot of that strategy. Oh, yeah, and it also has all those traditional TV properties like ESPN and Disney Junior it can bundle together with some or all of this stuff for subscribers who want the whole shebang. Long story short: Investors are right to get excited about Disney and this service’s November debut. A deep library, competitive price and ambitious production schedule means this newcomer to the space will quickly become a dominant force in streaming. Netflix It may be too early to ring the death knell for Netflix. After all, even though it is clearly an established name and has much of its growth in the rear-view mirror, Netflix just put up a great fourth-quarter earnings report in January that boasted 8.8 million new global subscribers. And even when you bake in the Friday dip, shares are up more than 30% in 2019 to handily top both the S&P 500 SPX, +0.19% and Disney’s stock this year. That growth is in large part because Netflix has embarked on an ambitious original-content strategy. Unlike Disney, which loves to create global smash hits, Netflix programming is more about singles and doubles based on keeping audiences involved in multiple episodes of multiple shows. In case you didn’t know, Netflix uses artificial-intelligence algorithms to suggest shows you may like based on your past history. It also records whether you binge, why you keep watching and how to keep you personally engaged. That’s why its genre-heavy originals such as “BoJack Horseman,” “13 Reasons Why” or its “Arrested Development” reboot may prompt shrugs among some people, but those shows have proven to be incredibly consistent viewing among others. Sure, Netflix has its troubles with valuation and volatility. And longer term, investors may get increasingly grumpy about big investments in content and overseas expansion that have yet to deliver results to the bottom line. But what Disney offers in star power, Netflix offers in first-mover advantage and a native digital platform that is in-step with how streaming-video audiences consume content. Maybe it won’t crank out blockbusters with big merchandising deals, but you can be sure that Netflix will keep you binging on stuff that connected with you personally. That adds up to staying power, and should support the recent price increase in its service. Read:Netflix is already over Apple and Disney as it prepares to launch this quarter’s earnings Roku If streaming is not a zero-sum game and both Disney and Netflix can be winners, it’s worth wondering who else is seizing the opportunities in this market. Near the top of the list of those options for me is Roku Inc. ROKU, +0.95% . You may think this brand is doomed, as its eponymous set-top boxes have already been replaced by on-board apps in phones and smart TVs. However, Roku is evolving to be more of a software platform — a kind of marketplace for streamers — than a hardware company. Big picture, that’s a great thing; just go ask Fitbit Inc. US:FIT or GoPro Inc. GPRO, +4.18% investors how hard it is to generate reliable hardware sales on gadgets. The company is already near break-even on this model, and investors have very high hopes for Roku’s “free content” partnerships which integrates ads into third-party video. In an unbundled age, a streaming service without a monthly subscription is a concept with a ton of long-term potential. While shares have been volatile and the valuation is admittedly a bit stretched, investors clearly believe in Roku stock. Since its 2017 IPO at $14, shares have more than tripled, and this year Roku’s stock is up a jaw-dropping 80%. Who knows what the next 10 years will bring, but right now Roku is clearly a name in streaming worth owning. Amazon Lots of folks like to put Amazon.com AMZN, +0.19% and its Prime video up there with Netflix. However, I am less bullish on Amazon’s streaming outlook for a few reasons. For starters, Amazon has remained tight-lipped about Prime and related streaming metrics. CEO Jeff Bezos said last year the service topped 100 million paying subscribers globally, but beyond that all we have is conjecture based on analyst estimates and surveys. Furthermore, a few of those surveys show overall Prime membership growth is slowing or even at risk amid recent price increases. Lastly, those same surveys over the years have hinted that Prime Video is a perk but not a go-to reason for subscriptions; most members rank the savings on shipping as their biggest draw, and see the membership akin to the fee they pay to shop at Costco COST, +0.06% . It’s possible that there will be the resources and focus to ensure Prime originals continue to win awards or that Amazon fully capitalizes on video-game streaming with its Twitch property. But it’s quite possible Amazon instead focuses on high-profile corporate efforts like Alexa and Amazon Web Services, and worry less about whether it falls behind on streaming. After all, it can always offer third-party content for rent and sale via its e-commerce platform without the hassle of a studio. AT&T Didn’t know AT&T T, +0.10% is offering a streaming service? I don’t blame you. This is one of those corporate efforts that Wall Street tends to roll its eyes at — an incumbent mega-cap looking to remain relevant by keeping up with the cool kids. Over the past few yerars, AT&T has invested heavily in various video-content assets. In 2014, AT&T acquired DirecTV for $67 billion. Then with its 2018 mega-deal to purchase Time Warner, the telecom giant took control of Warner Bros. films and “Game of Thrones” creator HBO. The general plan has been to beef up alternatives to cable TV. But in typical fashion for a stodgy, not-so-tech company, AT&T’s business model prevents it from truly embracing the streaming age and has its highest hopes set on bundles that should debut in the coming months. According to reports, it will keep HBO Now — a niche product with a relatively thin library of content and a comparatively high price — but then try to layer on extra levels of content that include things like “Harry Potter.” There is admittedly a strong track record for HBO to build on, and a deep library of content from Time Warner. But given that “Game of Thrones” is about to wrap up, it’s hard to project that success into the future — and given the complexity of multibillion mergers, a fast-moving streaming category and the legacy leadership of sleepy telecom, it remains to be seen how effectively AT&T will compete. I wouldn’t count out this stock as a long-term player because of deep pockets, but in the next 12 to 18 months it could be a rocky road. Jeff Reeves writes about investing for MarketWatch. He holds no investments in any companies mentioned in this article.<doc-sep>Stifel analysts called the recent dip in Netflix's stock 'overdone' because of Disney's unveiling of its planned offering and reiterated their buy rating and price target on Netflix. Disney's (DIS) - Get Report just-announced new streaming video plan will undercut the pricing for Netflix's (NFLX) - Get Report most popular plan by almost half, and many have cited this aggressive pricing as a sign that the Mouse House's offering will provide stiff competition for Netflix. But Stifel analysts think the difference in pricing might actually not be as stark as Disney's $6.99 monthly pricing vs. Netflix's $12.99 cost for its Standard plan might suggest. Stifel analysts Scott W. Devitt and D. Logan Thomas reiterated their buy rating on Netflix and their $400 price target on its stock in a note on Sunday, and suggested that Friday's 4% decline in Netflix's share price following the unveiling of Disney's plans was "overdone." (Netflix shares were down another 1.7% to $345.13 on Monday, ahead of the release of streaming giant's first quarter earnings report on Tuesday). TheStreet will be live blogging Netflix's first-quarter earnings after the close April 16. Please check our home page then for more details. Stifel suggested that it would be better to compare Netflix's content and pricing to a bundle of Disney's services, rather than just Disney+. They cited the fact that the current pricing of Disney's three main streaming services -- Disney+, which is coming in November; ad-supported Hulu, and ESPN+ -- equals $18, while including ad-free Hulu raises this sum to $24. If Disney decided to discount the bundle of all 3 services by 18%, this would lower the price to $15 with ad-supported Hulu, and $20 for ad-free Hulu. That compares favorably to Netflix basic at $9 per month, Netflix standard at $13 and Netflix Premium at $16. "We see little risk to Netflix growth plans and pricing power against this new offering given Netflix's most popular price point should remain lower than the Disney bundle while Netflix is on track to materially outspend Disney on content," the analysts wrote. The two noted the big disparity in the amount of spending on content, especially original content, that the two companies are expected to make. "In 2020, Netflix will be outspending Disney by 6x on content. By 2024, Netflix will still be outspending Disney by 4x on content," they wrote. Disney shares were up 0.4% on Monday to $130.55, close to an all-time high. They rocketed 11% on Friday following the announcement of details about its streaming plans on Thursday evening. Stifel concluded its note by saying "Disney is a great company with a sound product strategy and an iconic brand. That said, we expect Netflix should have a good quarter. Further, we expect Netflix should have a solid year. In closing, we expect Netflix should have a great decade ahead." Disney is a holding in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells DIS? Learn more now.<doc-sep>
Will Disney's soon-to-launch direct-to-consumer platform succeed in stealing some of Netflix's thunder? Here's what investors need to know. Investing in Disney (DIS) - Get Report right now offers investors a strong upside potential with minimal downside. For now, despite the strong rally on Friday of more than 11%, and Monday's additional rise of 1.4%, the stock's risk-reward balance remains skewed to the upside. Here's why. Disney+ - Is It Meaningful? In contrast with Apple's (AAPL) - Get Report big "It's Show Time" event in early March, which was heavy on glitz but light on details, Disney's came out swinging on Thursday on its Investor Day. Disney not only told a strong narrative that investors had been craving to hear, but backed its narrative up with plenty of numbers. Arguably, one of the most meaningful numbers that Disney shared was an expectation of its global subscriber number hitting somewhere between 60 million and 90 million. To which readers should immediately raise eyebrows and ask when? Well, that's the thing. Nearly all of Disney's targets were focused on delivering meaningful shareholder value over a five-year horizon -- by 2024. On the one hand, starting from scratch and then dangling this carrot years out seems like a stretch for investors. On the other hand, right now investors are not being asked to pay much, if anything, for the potential that Disney succeeds here. Stepping back slightly, after Disney's strong rally on Friday, in which the volume of shares bought was amongst the highest in the past five years, and an additional gain on Monday, its market cap stands at about $237 billion. Netflix (NFLX) - Get Report , on the other hand, has a current market cap of around $150 billion (the company reports its first-quarter earnings on Tuesday after the close; TheStreet will be live blogging the earnings report and video interview). If Disney delivers a strong platform and gains significant share, some portion of Netflix's market cap could be added onto to Disney's current market cap. Just how much? It's hard to say, but it could be significant, with relatively little downside. Downside Protection? Here are some other interesting comparisons between these two juggernauts. Disney is guiding analyst and investors that its original content investment is going to ramp up from above $1 billion in fiscal 2020 to mid $2 billion in 2024. Netflix on the other hand, spent roughly $12 billion on content in 2018 and is expected to spend $15 billion in 2019. Put another way, Disney is mostly looking into releasing its treasure trove of previously released titles, whereas Netflix has to create its content from scratch. There is a lot more risk involved in creating original content versus releasing titles that have already proved themselves to be blockbusters. One could argue about the freshness of outdated content. However, titles like Lady and The Tramp or The Lion King are timeless. Conversely, if we think about Netflix's strategy with the Will Smith vehicle Bright, Netflix spent $90 million on that movie, but user responses were truly appalling, with Rotten Tomatoes rating it at just 25%. And now, Netflix has announced it will shoot a sequel. Why, you may ask? Because Netflix's strategy is about making a splash and generating buzz, and keeping its platform sounding fresh, as word of mouth makes for outstanding marketing. For Netflix, this strategy of spending large sums on uncertain projects like Bright might have worked back in 2017 when its platform held a dominant position in the market. Going forward, when Netflix has to compete with some many different offerings, such as Disney+, this makes for an expensive and risky undertaking. Will Consumers Choose Disney+? Netflix, once regarded as the low-priced streaming platform, is now priced at $13 per month for the Standard Plan, its most popular. Disney+ is going to be launched at $6.99 per month. Historically, Netflix argued that there was plenty of viewing time in the day for consumers to subscribe to more than one streaming service. Of course, those statements were made back in 2017-2018 when Netflix was seen as this industry's disruptor. Disney's CEO Robert Iger has made it clear from the start that if Disney wishes to gain market share it has to offer something differentiated from Netflix. Disney+'s strategy is focused on quality versus Netflix's quantity. It's important to note, though, that where Netflix has succeeded is in developing original content that resonates with users.