The effect of increased competition on Netflix (NFLX), manifested itself in a net subscriber loss for the first time in 10 years. The net subscriber loss manifested itself approximately one year later than we thought it would.
Competition has never been greater on the streaming content side of the media world with Disney (DIS), Apple (AAPL), Amazon/MGM (AMZN) and the newly formed Warner Bros. Discovery (WBD). The way we see the media industry shaking out over the next decade-plus is that Apple, Microsoft (MSFT), Amazon and Google (GOOG) will be the content kingpins led by revenue generated from video games (both platform fees as well as games) and movie and episodic content to a lesser degree.
Microsoft has done an outstanding job of vertically integrating its Xbox platform with content acquisitions (Bethesda and Activision for example). Once the video game industry has further consolidated, movie studios will be next with Disney as the crown jewel given its various content properties. It would seem that a better use of Apple’s cash would be a large content acquisition rather than a large share buyback. A deal where Apple acquired Disney and subsequently sold off the parks business always made sense. Apple CEO Tim Cook however is not a large acquisition type of CEO. Perhaps if the MGM acquisition (owner of the James Bond franchise), generates upside to Amazon’s internal ROIC calculation we will see Amazon pursue the mouse next.
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- Netflix Should Acquire Video Game Companies