Disney and Netflix

After yesterday's bombshell news that Disney has had talks about potentially buying Fox's movie and TV holdings, the majority of the discussion has been around what this could mean for the Marvel Cinematic Universe. For years, Fox's spotty record with its Marvel properties has had some fans both curious and hopeful that the X-Men and the Fantastic Four would someday find their way back to their comic book brethren. In theory, this potential deal paves the way for that. Regardless, as is often the case when large corporations buy each other, this news may not be good for everyone. This deal is not simply about making comic book fans happy. Make no mistake; if the announcement of Disney's standalone streaming service was a shot across the bow of Netflix, this is Disney's way of stockpiling ammunition. If this deal goes through, it should create challenges and increase costs for Netflix going forward.

To figure out what is going on in the corporate landscape, you need look no further than Comcast, a telecom company that purchased the Dreamworks movie studio last year in the type of deal that is becoming increasingly common. Giant media companies are creating their own content or buying existing entertainment companies. If Disney wants to make the billions it is hoping for off of its own streaming service, the company needs subscribers, and for subscribers to flock to the streaming service, the company needs content. Content is king. This isn't just about taking away content from Netflix, it's about driving consumers to Disney's service. Marvel, Lucasfilm, Pixar, these were all strong-value acquisitions, but why stop there? Fox has decades of film and television content that could enhance Disney's offerings beyond just the obvious Marvel windfall.

Per CNBC, this makes Netflix's road ahead more challenging. The price for the archival content that Netflix will need to bolster its service will increase. Netflix is already planning on spending an insane amount of money on content in 2018 and if this deal is an indication of the future, the streaming service will have to increasingly rely on expensive original content to drive subscribers.

Netflix and its 109.3 million global subscribers have been a disruptive force for both telecoms and entertainment companies in recent years. Cord-cutting wouldn't exist in its current and growing form if it weren't for Netflix. But now the boomerang is coming back around. Gone are the days when there were simply those who produced content and those who distributed it. Everyone wants to be both now. These companies want to own the train, the tracks and everything being delivered.

Having said all this, it is important to remember that the deal is not yet done and Fox may not be bought. It's also true that investors remain bullish on Netflix and Netflix isn't lacking in confidence. Perhaps there is room for all and competition will help drive better and better content.

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