Netflix, Inc. (NFLX), Comcast Corporation (CMCSA): The Walt Disney Company (DIS) May Be Making a Big Mistake

The Walt Disney Company (NYSE:DIS) investors cheered last week’s announced buyback, where the family entertainment giant will buy back as much as $8 billion in stock starting next year.

“We just worked our way through a huge capital cycle,” CFO Jay Rasulo told attendees at an investing conference, arguing that The Walt Disney Company (NYSE:DIS) will now experience a surge in free cash flow.

He’s right. The Walt Disney Company (NYSE:DIS)’s done doubling the size of its cruise fleet to four ships, and that should be good enough for several years. The Cars Land addition in California last summer and the more recent New Fantasyland expansion in Florida will keep the turnstile clicking on both coasts. There are no immediate plans to enter a new timeshare market after opening a resort in Hawaii two years ago.

There is also some healthy visibility on future inflows. Striking a lucrative streaming deal with Netflix, Inc. (NASDAQ:NFLX) will provide a steady flow of capital from the leading video service, and that in turn helps lower its risk exposure to new theatrical properties. After spending billions on Pixar, Marvel, and Lucasfilm, it should be getting a healthy return on its next few years of movie releases.

However, what if this isn’t enough to give The Walt Disney Company (NYSE:DIS) the wiggle room to earmark another $6 billion to $8 billion in buybacks?

I’m not the first to voice my concerns here. Fellow Fool Chad Henage was all over this last week. He was concerned that The Walt Disney Company (NYSE:DIS) was gearing up to borrow to buy back shares at a time when competition is heating up and when the repurchase may not substantially move the needle in terms of increasing profitability on a per-share basis.

Let me key in on the theme park challenge, specifically in Florida.

The Walt Disney Company (NYSE:DIS) may think that capital cycle is largely over in Florida, but try telling that to the competition. SeaWorld Entertainment went public earlier this year, making it easier to tap the public markets to raise money to expand its SeaWorld Orlando and Busch Gardens Tampa that compete with Disney for tourists. Early anecdotes indicate that SeaWorld is actually scaling back instead of charging forward to produce acceptable quarterly results, but that can change in a hurry.