Disney Should Buy Netflix or Roblox, Says Analyst. It Must First Sell Hulu.

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Disney Should Buy Netflix or Roblox, Says Analyst. It Must First Sell Hulu. Disney (ticker: DIS) has owned two-thirds of Hulu since 2019, when - esenlerbocekilaclama

Netflix app


Dreamstime


Walt Disney

could be crowned one of the big winners of the streaming wars. But to claim its crown, the company may just have to trade in Hulu for


Netflix

or


Roblox
,
according to this analyst.

Disney (ticker: DIS) has owned two-thirds of Hulu since 2019, when


Comcast

(CMCSA) agreed to hand over operational control and continue licensing content, all while maintaining a 33% ownership share. Under the agreement, Comcast could require Disney to buy out its interest in Hulu as early as 2024.

The decision to buy a stake in Hulu was a strategic one for Disney. It allowed the company to provide mature audiences a streaming alternative and the option to bundle the subscription with ESPN and Disney+.

“We don’t really want to go to market with an aggregation play that replicates the multichannel environment that exists today because we feel consumers are more interested in essentially making decisions on their own in terms of what kind of packages that they want,” then-CEO Bob Iger said in 2018. “If a consumer wants all three, ultimately, we see an opportunity to package them from a pricing perspective.”

But according to Lightshed Partners’ Richard Greenfield, the benefits of the current arrangement may be coming to an end, given that Comcast already has announced it will be moving its content to Peacock starting this fall. Disney also seems to be shifting away from its stance on maintaining three separate products, with the company experimenting with ways to allow access to mature content on Disney+ through parental controls, Greenfield added.

Selling the company’s 66% stake in Hulu could give Disney at least $18 billion in cash, and nix a business that is losing money as competition among streaming platforms intensifies, he said.

That money could then be reinvested into buying Netflix, Greenfield wrote.

“Disney and Netflix are truly complementary pieces in the streaming puzzle that would dominate the global war for time spent with video,” he wrote. “While linear TV is undoubtedly in secular decline as streaming TV takes over, this combination would be like entering warp speed on the transformation.”

The acquisition could help Netflix turn around its operations and shore up its subscriber loss problems, while giving Disney access to Netflix’s scale, visibility, and international content.

Another strategic move for Disney would be to make a bid for Roblox (RBLX) — a more digestible asset with a market cap of $13.7 billion, compared with Netflix’s $78.9 billion, Greenfield added. Roblox could be an important stepping stone in helping Disney wade into gaming, and eventually, the metaverse.

Disney reports earnings after the stock market closes on Wednesday. Wall Street is fearing that the company’s steaming operations could suffer the same fate as Netflix, with subscriber additions slowing amid rising competition. On average, analysts expect Disney+ to end the period with about 135.1 million subscribers, up by about 5.3 million. Hulu is expected to add 1 million subscribers during the quarter.

Shares of Disney were down 1% Wednesday afternoon.

Write to Sabrina Escobar at [email protected]

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