Netflix Is More Valuable Than Disney (Again). Why This Will Continue

Netflix Is More Valuable Than Disney
Variety Intelligence Platform

The battle for supremacy between old and new media has no better personification than the heavyweight value clash between Netflix and Disney that has been unfolding through 2020. The two companies have traded places several times since April over who is most valuable, with Netflix again closing ahead of Disney on Tuesday night, $189.7 billion versus $189.0 billion.

For Netflix, this is a considerable uptick in fortune. Since April 1, they’ve traded the most valuable pure entertainment company mantle seven times (AT&T remains more valuable than both, but is propped up by substantial non-entertainment businesses). Prior to this, Disney’s market value was higher than Netflix’s for 92 consecutive weeks as the market reacted to their purchase of 20th Century Fox and launch of Disney+.

Those times look to be over, thanks to COVID-19. Disney gave a preview of what’s likely to happen to their income over the summer with their quarterly earnings call on May 5. The company reported a drop in total income, excluding eliminations, of $1.279 billion versus the same period in 2019, and estimated that COVID-19 had a $1.4 billion impact in revenue.

That impact is currently ongoing, and looks to be so for at least the near future. The next few months will be especially hard for Disney, as U.S. parks stay shuttered, with no guarantee crowds will return once they reopen, and the bountiful summer blockbuster season is effectively cancelled. Add on top that the majority, if not all, of the current quarter (April-June) will have no live sports across Disney’s networks, and the looming production drought impacting new content for their TV networks and streaming services– not a single Disney business is unscathed by the virus.

In contrast, Netflix is booming, and is relatively unscathed by the pandemic (at least in the short-to-mid term). Speaking at their quarterly earnings call on April 21, Chief Content Officer Ted Serandos said that the streaming giant had no plans to delay content releases due to COVID-19, and that they had enough new content to release throughout 2020. This appears to be in stark contrast to Disney, who earlier this week announced the release of “Hamilton” would be pushed from a theater release in 2021 to a Disney+ release in July, with analysts speculating this is due to the subscription service lacking new content that’s not for children.

With the considerable coronavirus roadblocks ahead of Disney’s next earnings call, VIP’s view is that the share price will dip from the $100-$110 range it has been trading at recently, and fall below $100. This will cause the market cap to decline further; in contrast, we expect Netflix to continue to be seen as valuable given it is not impacted by declines in ad spend and has a content pipeline to keep subscribers happy. Should the production shutdown begin to impact 2021 releases, the story may change, but in the short-term, get used to seeing Netflix being worth more than the old giant.