Is Netflix a Mickey Mouse Operation?

By Rick Aristotle Munarriz
March 5, 2009 | Comments (3)

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Everybody wants to be Netflix (Nasdaq: NFLX) these days. Given the company's recent breathtaking results and recession-resistant shine, I can't say that I blame them.

Family entertainment giant Disney (NYSE: DIS) became the latest company to ponder a Netflixesque model. Speaking at Deutsche Bank's 17th Annual Media and Telecommunications Conference in Florida this week, CEO Bob Iger proposed a Disney-centric offering. According to Reuters, Disney's subscription-based online rental plan would allow Disney fans to "access content from Disney's massive film and TV library by mail or online delivery."

Oh, I saw this coming.

"What is to stop the movie studios from cutting out the middlemen in the future?" I asked two years ago, when Netflix was first dipping its feet into digital delivery:

There are obvious reasons why studios never built out retail chains to push their movies. It's cheaper and easier to reach more people by stuffing every retail channel possible. That is not a roadblock to digital delivery. Sure, the studio will want in on every digital-distribution outlet available initially, but it's really just a matter of time before they want a direct line from content creator to connoisseur.

This doesn't mean that I think Netflix is doomed, or that Disney will strike it rich with such a service. Consumers aren't about to cherry-pick between studio-specific subscriptions, as long as companies like Netflix, Blockbuster (NYSE: BBI), and Apple (Nasdaq: AAPL) offer them the full selection of cinematic offerings. Apple succeeded in musical delivery because it was a one-stop shop, shortly after labels like Warner Music Group (NYSE: WMG) and Sony (NYSE: SNE) failed with their fractionalized efforts.

However, if any studio can pull this off, it's Disney, with its decades of content and family-trusted brand. It would be easy for Disney to pad a video rental service with such exclusive offerings as:

  • Concert footage of its fleet of young stars, such as The Jonas Brothers, Selena Gomez, and Miley Cyrus.
  • Disney Channel show episodes before they air on television.
  • Live broadcasts of in-park and Disney Cruise entertainment.
  • Dedicated social-networking sites and other community-building diversions.

Netflix doesn't have to be worried by any of this. In fact, Disney and Netflix memberships are unlikely to be mutually exclusive. So don't worry about Netflix. Get excited about Disney.

Other Netflix-ish headlines:

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Disney is a Motley Fool Inside Value recommendation. Netflix, Disney, and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. He's owned Disney even longer! Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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  • Report this Comment On March 05, 2009, at 1:16 PM, taojoness wrote:

    this is a long way from the Disney that resisted the color broadcast of "Fantasia" in the 1950's because the executives at disney were concerned that they had no way of knowing how many people were watching each set and after all they were getting 2 bucks a ticket in the movie theaters. (a little slow on the uptake when new marketing ideas roll by ) Some things never change .

  • Report this Comment On March 05, 2009, at 2:48 PM, Rasbold wrote:

    Netflix needs to keep their current model of doing business and only augment with the streaming downloads. A lot of people don't have high speed, but we all get mail. I think they will be okay. Cheap entertainment is in high demand right now and will get more play in the near future. Unlimited movies for 20 bucks a month? It doesn't get much better than that. I have had them since they began in West Sacramento around 2002 or so, never dissatisfied.

  • Report this Comment On March 05, 2009, at 4:47 PM, mattack2 wrote:

    They've been around far longer than 2002. I'm not sure I'm parsing your comment right though.

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11/30/2009 4:00 PM
NFLX $58.63 Up +0.78 +1.35%
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