Disney and 21st Century Fox finally merge, and Netflix’s share price trends… up?
It says impressive things about the confidence investors have in Streaming Video on Demand (SVOD) market leader Netflix that the merger between 21st Century Fox and Disney hasn’t dented it’s share price. In fact, on the day that Fox and Disney’s mega-merger closed, Netflix’s share price traded up by more-than 6%!
Fox and Disney have a lot going for them, including every Marvel Comics movie made in the last twenty years. What’s more, with their plan to debut a streaming service later this year, they are clearly a threat – some would say an existential threat – to Netflix’s market dominance. So, what gives? Simple: Netflix has announced the next series of smash hit 80s throwback horror comedy Stranger Things.
Despite the closure of Disney and 21st Century Fox’s merger, Netflix’s share price rose this week as it announced series three of Stranger Things
Source: Yahoo Finance
If you really think about it, that’s an incredible show of faith in Netflix’s original content. Disney and 21st Century Fox are two of the world’s biggest and most successful entertainment companies. And they’ve been very clear that Netflix is in their sights as a competitor. Yet, the announcement of a single new series has not only compensated for news of the merger, but actually pushed the share price higher! Of course, the main question investors should be asking is: is this confidence justified?
Watch the trailer that sent the share price up below:
Many analysts think so. General consensus amongst those who cover the sector is that the threat of Fox and Disney’s merger has long been priced into Netflix’s stock. And the latter company hasn’t been slow on preparing for it. Netflix has sunk money into its original content (the latest budget figure this writer has heard is $15 billion for 2019), well aware that Disney would be pulling its Marvel Cinematic Universe shows (Jessica Jones, The Punisher, Iron Fist, and more). And it is almost impossible to overstate how successful Netflix’s content has been thus far.
Imperial Capital analyst David Miller says that this effect is global, as the company has been commissioning hit shows all over the world:
“Examples are Bodyguard, a crime drama filmed in Europe but which is playing well all throughout continental Europe; The Protector, a drama/fantasy series filmed and set in Turkey; and Baby, an Italian teen drama which is also finding cross-border appeal. Too many media investors think of Netflix’s international business as simply U.S. content that is dubbed in various foreign languages, but in many cases the inverse of that is starting to take hold.”
Dominion holds Netflix in its Global Trends Managed Fund.
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