Disney (DIS) needs additional hit content for its Disney+ streaming platform. The streaming game is a scale game. Production houses that own their own streaming platform (Netflix, Disney, Comcast, Warner Bros. Discovery), need to ensure they have sufficient “hit” content to drive profitable streaming operations. Ideally those content producers want to achieve streaming profitability primarily by driving subscriber growth. However, many will lean on licensing content to competitors in order to achieve the desired level of Revenue growth and profitability.
Disney would be in a strategically stronger position vs. Netflix if it were to own Warner Bros. content portfolio.
- WBD’s Batman and Superman franchises would be a nice compliment to Disney’s Marvel and Star Wars franchises. Having WBD’s proven, popular content IP in the Disney portfolio would provide Disney with a hedge against the risk associated with developing new, original content (not every piece of new content will be popular with subscribers). Proven popular content translates to lower subscriber acquisition costs and higher profitability.
- The more hit content that resides on a particular streaming platform, the more gravitational pull that platform will have in terms of attracting and retaining subscribers. Also, the more hit content, the less that platform will have to rely on licensing content to competitors in order to achieve Revenue and EBITDA targets.
- Were Disney to acquire WBD, Disney CEO Bob Iger would solve Disney’s succession problem. WBD CEO David Zaslav is a high quality CEO that has turned around businesses (He’s in the midst of a turnaround now at WBD), and is well-versed in various business models from streaming content to linear TV to data-centric business models and more.
- Zaslav could run the combined DIS-WBD and eventually sell the asset to Apple.