It's just over four years since Netflix's qwikster goof.
People cancelled subscriptions, the Internet lit up with eulogies and pre-obituaries that pilloried CEO Reed Hastings and Netflix over what was perceived as a fatal arrogance. A few other voices pointed to the fearless culture at Netflix as a strength and how solving its content problems was the only real strategic problem Netflix had.
Hasty Hastings Conclusions
Now that most conversations about Netflix revolve around its soaring valuation and its ever-growing library of original and exclusive content that just keeps getting better (House of Cards, Orange is the New Black, Narcos, Marvel's Jessica Jones, and so many more), it's fair to say that Hastings' critics overreached in their doomsaying. Moreover, they completely overlooked the strategic and tactical advantages Netflix had in place to become a multifaceted, cross-industry leader that has media, financial and technology execs everywhere following it.
Netflix stock trajectory over the last two years (source)
Now that Netflix is shining like a diamond it begs the question: What's next?
While I'm not a financial analyst and can't speak to the practicality of the following scenario, if Disney were to acquire Netflix the strategic blending of those two powerhouses would make for one hell of a show to the delight of binge watchers everywhere.
What's In It For Netflix
If watchers experience guilty pleasure binging now on Netflix, the guilt would be doubled if this media merger were to happen, adding the catalog owned by Disney to Netflix. Nearly 60 years of Disney films would be the opening act for a mega show that would include:
- The full Pixar catalog
- Almost every Marvel film (some properties are owned by Fox and Sony)
- The catalog of ABC studios
- The catalog of the Disney reinvigorated Lucasfilm
The only questions here are:
- whether the government would view this as anticompetitive or
- if other content enterprises would withhold content from a distributor that has become a competitor
Given that neither Disney nor Netflix own any physical telephony or cable assets, this would probably pass the sniff test from regulators who seem to pay little mind to almost any merger these days. As to withholding content, it would seem this is not a real concern given that this appears to not be a barrier for Time Warner, which both produces and distributes content via HBO.
What's In It For Disney
Aside from the obvious content distribution play (which may actually be the critical asset given the trend in cord cutting), Disney gets something it has long lacked: a world-renowned Internet and cloud technology capability.
Netflix, for those who do not know, is one of the top innovators in open source software for the cloud. Netflix's creation of the industry leading microservices framework made up of Zuul, Eureka, Ribbon, Hystrix and several other open source tools has set the bar for what it means to be a world class engineering shop.
Disney, on the other hand, has literally been stumbling since the word go. Do you remember go.com? Disney would like you to forget its failed attempts at building an Internet portal. Both the incoherent sprawl of the Disney web properties and the clunkiness of the functions on the sites would make Walt cringe.
Imagine pairing the sustained creative media excellence of Disney with the always innovating Netflix. It may be just a dream from fantasy land, but it would make for one great media attraction.
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