Both companies offer a wide selection of video for a convenient price: while Netflix, Inc. (NASDAQ:NFLX) charges a flat a $7.99 per month for unlimited consumption, Amazon Prime subscribers pay $79 a year for unlimited streaming and free two-day shipping on Amazon.com, Inc. (NASDAQ:AMZN) products. With more than 75,000 movies and TV titles, Netflix has a bigger library, but Amazon has been closing the gap over the last months, aggressively bidding for content and building its own collection with more than 40,000 titles.
In December, Disney and Netflix made an agreement giving Netflix the rights to stream new releases, including those from Pixar and Marvel, starting late 2016. Financial terms of the agreement were not disclosed, but analysts estimate that Disney will be receiving something in the area of $300 million per year from this deal.
Disney content is very valuable to Netflix, especially after it lost key programming to Amazon when its deal with Viacom, Inc. (NASDAQ:VIAB) expired in late May. Children are crucial when it comes to streaming subscription, according to Amazon, kids’ shows are one of the most watched TV genres on Prime Instant Video, and parents usually give a lot of consideration to children’s content when choosing a subscription service.
Viacom, Inc. (NASDAQ:VIAB) owns popular characters like Dora the Explorer and Sponge Bob, and Nickelodeon is Disney Channel´s biggest competitor. Players like Disney and Viacom are in a comfortable position to negotiate with streaming companies like Netflix and Amazon knowing that their children’s programming is a key strategic asset, so the streaming revolution may actually turn out to be very profitable for high quality content producers.
Bottom line
Disney is a high quality company with irreplaceable strategic assets, powerful brands and an enormous catalog of unique characters. The company keeps producing successful content, and acquisitions over the last years should provide plenty of growth opportunities in the middle term. The online streaming revolution is not looking like a problem for Disney, so the House of Mouse is in a position of strength to continue delivering solid returns for years to come.
Andrés Cardenal owns shares of Disney, Amazon and Netflix. The Motley Fool recommends Amazon.com, Netflix, and Walt Disney (NYSE:DIS). The Motley Fool owns shares of Amazon.com, Netflix, and Walt Disney.
The article This High-Quality Company Is Firing on All Cylinders originally appeared on Fool.com and is written by Andrés Cardenal.
Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
