Despite increasing competition, Walt Disney (DIS) maintains or nears the top of the streaming, broadcast, cinema, and theme-park industries.
The Mouse House is a member of the Mouse House, and its two biggest competitors are Netflix (NFLX), its competition for streaming dominance, and Comcast (CMCSA), Disney's only real competitor for theatrical releases and in the streaming industry.
Other film studios and broadcast networks have fought Disney for things such as sports rights. But in fact Netflix and Comcast's Universal stand out above all others -- largely because it has a first-mover advantage, and Comcast because it is the only company that has intellectual property competing with Disney's.
As Disney is at the top of the IP world, Comcast has several big franchises, including "Fast & Furious," "Jurassic Park," "Minions," "Shrek," and "Secret Life of Pets," as well as its famous monster films. It's not comparable to "Star Wars," Pixar, or Marvel, but it's a close enough second to at least challenge Disney on release dates.
Disney has a major plan to catch up to Netflix and maintain its box office dominance over Universal. That strategy involves spending a lot of money.
The Disney Content Budget Is Huge
Netflix intends to spend roughly $17 billion on content in 2022, compared to $20 billion previously projected. During the company's second-quarter earnings call, Chief Financial Officer Spencer Neumann noted that about 60% of that budget goes to original content, with the remainder going to licensing.
According to a Deadline story, "we are expecting to spend about $17 billion this year, and we are in the right Zip Code." We have come through a fairly substantial business change. We have improved how we allocate our money to the greatest benefit.
Given that Netflix does not produce films for theatrical distribution, that's a lot of money.
Disney plans to spend more than half the amount on all of its content platforms.
TheStreet Recommends Certain Websites
Disney's stock rises as Activists Buy a Third Point stake in ESPN, Demand For ESPN Spinoff, and Make Board Changes
Eyes Turn to Ethereum's 'Merge' for a Crypto Price Check
Walmart Earnings Preview: Can Falling Gas Prices Increase Second Half Spending?
During the second-quarter earnings call, Disney CEO Christine McCarthy stated that cash content expenditure across the company will now reach approximately $30 billion.
"This is a bit lower than our previous estimates, mainly due to timing differences. We expect annual cash content expenditure to be roughly in the low $30 billion range in the next couple of years."
There are a lot of films, Disney+ shows, and content for Disney's other platforms. However, the huge budget comes with far less dangers per dollar spent than its competitors.
Disney Down On What Works
Comcast has a few realistic hit franchises, but not enough to power a full box office slate or to make its Peacock streaming service a hit.
It's forced the company to continue to produce films that might not be hit, while also investing heavily in WWE (WWE) archive programming and special events as well as risky sports wagers such as the Olympics.
Outside of "Stranger Things," Netflix has little valuable IP. Its biggest successes have been series that don't easily lead to "universes" or even sequels. That puts both companies at a significant disadvantage to Disney, which can simply build on what already exists.
According to CEO Bob Chapek, it's a strategy that works to keep fans of its franchises engaged and to instill new ones.
Disney+ is still a young business, and we are learning more every day about the service's ability to engage existing Marvel customers. Each new Disney+ original Marvel series has attracted new viewership and new subscribers who hadn't previously engaged with the service's content, thanks to the episodic format, which allows us to broaden our fan base.
The content of Disney transcends just broadcast platforms; it connects customers to theme parks and other businesses. Comcast/Universal might follow that in some ways, but mostly it lacks the resources to do that, and Netflix does not have those other businesses.
Yes, Disney has a huge budget, but it also gets more for its money than its competitors, and that should help the business gain ground over Comcast/Universal.