Disney Announces: No Happy Ending In 2017

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What's going on?

Walt Disneys CEO said on Thursday that profits in 2017 will roughly be in line with last year (instead of being higher as investors were expecting) and the stock fell 4% on the day.

What does this mean?

Disney has been under pressure on several fronts: its TV business has been facing competitive threats from streaming services like Netflix, its flagship sports channel (ESPN) has been seeing significant declines in subscribers and its movie unit is expected to perform worse than last year.

To help tackle these challenges, Disney said that it will double down on its strengths by making movies from the popular Marvel and Star Wars franchises available exclusively on the upcoming Disney streaming service, rather than letting them remain on Netflix.

Why should I care?

For markets: It was a bad day for media stocks, suggesting investors are worried about their traditional business models.
Also on Thursday, Comcast, the owner of NBC and various other media outlets, saw its stock fall 6% after it warned of declining cable video subscribers. Investors are continuing to question the business model of traditional media companies as viewers shift to streaming. Media stocks fell across the board on the day: CBS was down 2%, Twenty-First Century Fox down 2%, Viacom down 3%, Discovery Communications down 2% and AMC Networks down 3%.

The bigger picture: In the streaming business, exclusive content is king.
Exclusive content has become very important as streaming platforms try to attract the next generation of viewers. For example, Netflix used flagship shows like House of Cards and Orange Is The New Black to attract new users (and its now vastly expanded its original content). The same pattern can be seen in music streaming, with exclusive content being a key differentiator for services like Tidal and Apple Music as they compete with Spotify. Now, Disney is hoping Star Wars and Marvel will be one of their main competitive advantages in video streaming.

Originally posted as part of the Finimize daily email.

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