The Walt Disney Co. (NYSE:DIS) is in a death spiral. This will have important implications for DIS stock holders.
Bob Iger can’t fix it. Nelson Peltz can’t fix it. It’s inevitable.
How can I say this? I am not a financial analyst, not a TV pundit. I am just a print journalist. But I have followed the Internet since 1985, before many of you lot were born.
I have seen this movie before.
Almost 30 years ago, I hid behind a pillar at an Atlanta Press Club Christmas Party. I listened to a newspaper publisher confidently predict he would win the new World Wide Web by “repurposing content.” He even had a domain for his entertainment page – yall.com.
It was both the loudest and most bitter laugh of my life. He was, like we young folks said back then, clueless.
The Competition is Cloud
Over the last decades, the Internet has destroyed the newspaper business. About one-third of the nation’s newspapers have died, and most of the rest are dying.
The reason was obvious. I could have explained it 30 years ago if someone had let me. The Internet destroyed the cost-per-thousand (CPM) model of news advertising with systems like Doubleclick. Doubleclick was bought by Google in 2007 for $3.1 billion. But it was founded in Atlanta, a few months before my laughing fit. Doubleclick lets Google sell you any set of readers you want at the rate you’d pay buying the whole network.
The papers’ solution was paywalls, but paywalls make the problem worse. When the truth is behind a paywall it can’t get its pants on. Free sites built as political patronage and building traffic through social media are how most people get their news today.
Reading news has become an elite activity, and that model has now come for Disney.
The Gating Factor is Time
It’s not just that Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), Amazon.Com (NASDAQ:AMZN) and Meta Platforms (NASDAQ:META) are worth anywhere from 5-20 times more than Disney.
The Cloud Czars’ financial strength means they can outbid Disney for anything they want. The Cloud has replaced cable and broadcast as the distribution medium of choice, and the Cloud Czars own it.
But that’s just half of it.
The new villain among the nattering classes is “screen time.” We spend too much time behind screens, we’re told, as much as 7 hours per day.
But what are we doing with that time? Only half of it is spent on video. Almost as much time, over 3 hours per day, is spent on social media and gaming. Most of the rest goes to browsing, chatting, and reading. Only 14 minutes per day is spent creating anything.
Who owns social media and gaming? The Cloud Czars do. Microsoft Gaming is huge. Amazon has Twitch. Alphabet has YouTube and Meta Platforms was Facebook. Apple is how we get to it all.
The content companies don’t have a chance against this lot. Walt Disney has never done anything in gaming. It has no social network. There’s a social component to gambling, now being enabled by ESPN. The parks are immersive experiences. But that’s not enough to grow on.
Most of the company is dead weight.
The Bottom Line
Peltz wants to fire Iger and, maybe, break up DIS stock.
I don’t see him getting his money out.
DIS stock is currently selling for twice its revenue, but all its content is going behind paywalls. That’s what streaming is. It’s a monthly subscription replacing the free and bundled broadcast and cable channels.
This is what the newspapers tried 20 years ago. It didn’t work because only an elite would commit to the subscription. The newspapers never even tried to sell their product by the day. At least I can rent a movie!
Break it up. Give it to Peltz. Make it un-woke as you like. Build it all with Artificial Intelligence (AI), I don’t care. Just don’t buy the stock if you’re interested in making money.
TV is the newspaper of the 2020s. https://www.danablankenhorn.com/2024/01/tv-become-newspapers.html
As of this writing, Dana Blankenhorn had LONG positions in AAPL, MSFT, GOOGL, and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his free Substack newsletter.