Disney shares rise as focus turns to streaming commitment

This post was originally published on this site

(Reuters) – Walt Disney’s shares rose 3 percent on Friday, as Wall Street shrugged off poor financial results and focused instead on the media giant’s commitment to build a service that will compete aggressively with video streaming pioneer Netflix.

Disney’s sharper focus on streaming comes amid subscriber losses at its legacy cable networks that include ESPN and ABC, which many viewers are deserting for cheaper, on-demand streaming options.

On Thursday, Disney Chief Executive Bob Iger talked up his commitment to streaming, calling it the company’s “highest priority this year.”

In a step that will further cement Disney’s strong position as a content powerhouse, Iger also unveiled a deal to develop a new “Star Wars” trilogy.

Perhaps more importantly, Iger said Disney’s planned streaming service would be “substantially” cheaper than Netflix.

Analysts said the lower price likely reflected Disney’s relatively smaller content slate but that the move could help the service gain subscribers quickly.

“We think Disney wants strong uptake early on and that this move recognizes that the equity market rewards strong (streaming) subscriber growth,” RBC Capital Markets analyst Steven Cahall said.

To compete better with Netflix and other streaming services, Disney has also said it will keep new Disney releases out of Netflix, starting from 2019.

Disney was making all the right strategic decisions as it builds out the streaming business, Evercore ISI’s Vijay Jayant said.

The company is developing family-friendly streaming services that will sell directly to consumers. It will launch a sports-focused service called ESPN Plus in early 2018.

According to news reports, Disney has held talks in recent weeks about a potential acquisition of most of Twenty-First Century Fox’s media assets including FX, National Geographic and its movie studio.

While Iger declined to comment on the speculation on Thursday, analysts said a deal could help Disney expand its content library as it prepares to launch the streaming service.

Disney’s shares have been a laggard on the Dow Jones industrial average, having fallen about 1.5 percent this year through Thursday, compared to the 18.7 percent gain the index has seen.

Netflix’s stock, which has climbed 52 percent this year, was down 2 percent on Thursday morning.