Walt Disney (NYSE: DIS) has been a dominant player at the box office, and it's poised to become one in another field when it launches a streaming service designed to take on Netflix (NASDAQ: NFLX).
That's because among the company's many strengths, it has a foundation of intellectual property to build its business on. Disney has found a formula that largely removes risk from the box office equation that can be used to create demand for its streaming service, which is scheduled to launch in late 2019. With its plethora of well-known characters and franchises, the company can drive people to its theme parks, launch video games, and sell every manner of merchandise imaginable.
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People often call Disney the "Mouse House," but in reality, Marvel Studios, Pixar, Star Wars, and more are driving the company's business, while its classic characters play a smaller role. Consider Mickey Mouse the front-person, but Black Panther, Dory, Rey, Elsa and so many other new characters have become the drivers of its ongoing success.
What can Disney do?
Disney has built a film business where its biggest risk is whether its latest Marvel movie will be a hit, a big hit, or a blockbuster. That's a bit of an exaggeration, but the company's slate is filled with low-risk movies.
In any given year, the company fills much of its schedule with films for familiar brands -- roughly three Marvel movies, a Star Wars film, a Pixar title or two, a Disney animated film, and a live-action movie based on one of its classic features. It's a formula that led Disney to top the domestic box office in 2017 with $2.4 billion in ticket sales. It's also one that will grow even stronger if its deal to buy certain Twenty-First Century Fox (NASDAQ: FOX) assets goes through.
It's not that Disney doesn't take any risks; the upcoming huge-budget A Wrinkle in Time is certainly not a sure thing. But the company takes fewer swings where it might miss than its rivals do. That approach has led to first- or second-place domestic box office finishes every year since 2013, according to data from BoxOffice Mojo.
How does this apply to streaming?
Disney has already shown the value of its content library in the streaming world through its partnership with Netflix. That deal led to The Defenders family of shows, including individual series for each member of that hero group (Daredevil, Jessica Jones, Luke Cage, Iron Fist) as well as a standalone series for The Punisher. Those have all been hits for Netflix (although Iron Fist was not as well received), and these are not Marvel's most well-known characters.
When Disney launches its own streaming service, it can bring out the top-tier players. The service will almost certainly include a live-action Star Wars show -- the first of its kind -- and other series from its intellectual property library.
What's next for Disney?
All attention is on the Fox deal, which would add Avatar, The Simpsons, Alien, Predator, Die Hard, Kingsman, Planet of the Apes, and even Alvin and the Chipmunks to the mix. It will also reacquire the rights to Marvel's X-Men franchise, which creates instant crossover potential.
While not every Fox franchise is as revenue-driving as Star Wars, in a streaming world where a sequel to Full House is a valuable property, every recognizable property has potential. Ice Age, for example, may have petered out at the box office, but it could be rebooted as a TV series or after time be brought back in theaters.
Even without Fox, Disney has the intellectual property to protect its box office market for years to come. That, along with its existing content library, will help it launch a viable Netflix competitor, and continue to bolster its theme parks.
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