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Can Netflix End DIS, CMCSA & VIAB's Theater Dominance?

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Netflix (NFLX - Free Report) has been one of the top performing stocks in the 10-year long bull run. Its ongoing evolution from being a pure play streaming company to a diversified media company is attractive from investors’ point of view. The company is reportedly showing interest in releasing movies, which have a unique appeal, at theaters ahead of its streaming platform.

However, Netflix will not find it easy to penetrate the space that is currently dominated by the likes of Disney (DIS - Free Report) , Comcast (CMCSA - Free Report) and Viacom (VIAB - Free Report) . Moreover, Netflix might have to have to relax the timeframe of the theatrical release window to adhere to traditional distribution policies set by theaters.

Meanwhile, the streaming platform continues to benefit from its robust content, well supported by aggressive spending.

Moreover, binge viewing and low cost plans have been a key catalyst for the company’s massive returns. These factors drove Netflix’s subscriber base to 139.26 million globally at the end of 2018.

10-Year Returns



 
Netflix’s Theater Push May Bring Laurels

Netflix’s global theatrical releases will help the company reach a wider audience.

Moreover, the popularity of the content is likely to encourage repeat viewing on its streaming platform and increase monetization in areas like merchandise, toys and video games.

Theatrical releases will also help Netflix easily qualify for the Academy Awards nominations. To be eligible for the prestigious Oscar nominations a film should have a theatrical window of at least one to three weeks. 

Netflix, Inc. Revenue (TTM)

Netflix, Inc. Revenue (TTM) | Netflix, Inc. Quote


The move will not only appease film maker Steven Spielberg, a governor at the Academy of Motion Picture Arts and Sciences of the director’s branch, but also improve chances of box-office success, adding another stream of revenues.

Notably, the company’s recent release Roma first released in theaters and went on to win the best foreign-language film at this year’s Golden Globes.

Disney Rules the Box Office

Disney, which has a solid IP, is a strong competitor. The strength of Disney Studios is evident as it dominated 2018 box office with global collections of $7.33 billion and domestic collections of $3.09 billion driven by successful run of Black Panther, Avengers: Infinity War and Incredibles 2 in global theaters.

The Walt Disney Company Revenue (TTM)

The Walt Disney Company Revenue (TTM) | The Walt Disney Company Quote


Moreover, Disney’s Captain Marvel broke a number of records following its release on Mar 8, 2019. The film became the highest grossing domestic movie in 2019 with collection of about $153 million as of Mar 11.

Additionally, Disney’s Studios received 17 nominations including the Best Picture nomination at this year's Golden Globes. Moreover, the acquisition of Twenty-First Century Fox entertainment assets are expected to strengthen Disney’s content slate as both companies’ combined received 37 nominations at the Golden Globes. Notably, Disney is expected to complete Fox acquisition by Mar 20, 2019, per Variety.

Comcast’s Content Gets a Boost With Sky Buyout

Comcast caused a major upset when its Green Book won the Oscar for best picture ahead Netflix’s Roma, which was the clear favorite.

Comcast Corporation Revenue (TTM)

Comcast Corporation Revenue (TTM) | Comcast Corporation Quote

Moreover, strength of the company’s content is depicted by the fact that it licenses popular series like The Office to Netflix. Notably, Comcast, Fox, Disney and Warner Bros. combined account for about 20% of Netflix’s content library, per an Ampere report stated by Recode.

Further, Comcast’s acquisition of Sky, the largest pay-TV operator in Europe, gave it access to the latter’s huge content library. Although Netflix is well ahead of its competitors with regard to the new European Union (EU) rule to have at least 30% of local content, it likely lags Sky’s regional content portfolio, giving Comcast a competitive advantage.

Paramount Turnaround Aids Viacom

The turnaround of Paramount with its continued box office success is benefiting Viacom. Paramount’s Bumblebee’s strong performance helped IMAX China deliver one of its best January performances. Notably, the film raked in about $59 million in its opening weekend at the Chinese box office.

Moreover, Mission: Impossible – Fallout contributed significantly to the company’s Theatrical revenues in 2018. Further, Filmed Entertainment revenues are expected to get a boost owing to Paramount’s strong slate of releases for 2019.

Viacom Inc. Revenue (TTM)


Conclusion

Netflix’s streaming service is anticipated to witness rise in publicity owing to increase in theatrical releases. However, intensifying competition in the streaming market is a headwind.

Also the theater releases of movies will no more make them exclusive to Netflix subscribers that might dent the streaming platform’s appeal and eventually subscriber engagement.

Moreover, the company is burning cash at a rapid rate, which is alarming for investors.

All the four stocks, Netflix, Disney, Comcast and Viacom currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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