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The Walt Disney Company (DIS), Time Warner Inc (TWX): What’s New In This Space?

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Owning content is an increasingly important aspect of the media world. Companies have been working over time to bulk up, usually through mergers and acquisitions. That makes a rumored deal between Time Warner Inc (NYSE:TWX) and CBS Corporation (NYSE:CBS) sound all the more likely.

An Upstart Changes Everything

Although the intrusion of cable companies unsettled things, the media industry managed to include that once new technology into its cozy little world. The basic model of selling content didn’t really change. However, the Internet is turning things on its head.

The culprit here is none other than Netflix, which allows users to pay a relatively low monthly fee for the privilege of watching what they want, when they want, how they want. The big push back from the media world has been Hulu, which is saddled with so many of the old ways of doing things (commercials, for example) that it hasn’t been able to gain a lot of traction.

What’s New?

The big shift that Netflix, Inc. (NASDAQ:NFLX) has engendered is in how to value content versus distribution. Time Warner Inc (NYSE:TWX), for example, has moved to get out of the distribution business completely. First it jettisoned AOL, Inc. (NYSE:AOL) and then it spun off its cable assets. It’s even looking to get out of its namesake printed publications.

Essentially, management has come to the realization that its video assets are its most important properties. Comcast (NASDAQ:CMCSA), interestingly, has bulked up its media assets with the purchase of NBC. That makes Comcast look a lot like Time Warner Inc (NYSE:TWX) did before it spun off its cable arm, and hints at the possibility of a future content/cable split.

Comcast Corporation (NASDAQ:CMCSA) shares have responded well to this notable acquisition and are now near all-time highs. That makes them much less compelling as an investment than before the media bulk up.

The Mouse

The Walt Disney Company (NYSE:DIS) is another media company bulking up fast. Adding Marvel and its massive collection of comic book stars was big news. Backing that up with the purchase of Lucas Films, owner of Star Wars and Indiana Jones, only goes to show how serious the company is about content.

DisneyBoth of those acquisitions speak to a desire to attract more boys, a good thing since a focus on princesses has been a long knock against the company. However, the moves also highlight the value of good content. Both the Marvel and Star Wars brands have huge appeal across a broad spectrum of consumers. They notably strengthen The Walt Disney Company (NYSE:DIS)’s already impressive position when negotiating content deals.

Neflix Getting Picky

Focusing on quality is likely to be increasingly important, too. Netflix has openly stated that it no longer wants to buy content in bulk deals, taking anything and everything offered up. For example, it is set to let a Viacom, Inc. (NASDAQ:VIAB) deal lapse, instead looking to buy the right to stream only select shows. It is also looking to get exclusive rights to the content it streams.

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