Why Disney Is Going To Become The Biggest Company On Earth
When people think of the largest company on earth, they don’t think movies or amusement parks. They think oil companies which do shallow rebranding out of an oil spill. They think software companies founded by awkward 20 somethings who now are acclaimed philanthropists. They think higher margin healthcare companies selling viagra. However, with Microsoft killing it as the current number one, Amazon bouncing up and down and Berkshire holding a constant top five status, my call is in the next ten years, the world will have a new company holding the highest market company on Wall Street. And that company has a mouse as its mascot.
Disney despite currently being in the top 25 for market cap companies globally has rarely ever hit Wall Street under the idea it could ever rise to number one. A few decades ago, it was fighting to hold Fortune 500 status. However, now with the management of Bob Iger, the last twenty years have completely revolutionized the company. Pixar being a buyout of a post Apple Steve Jobs startup gave them an edge in technology going forward. Marvel was a buyout where they took the bankrupt comic brand and made it the most relevant entertainment franchise of the 2010s with the Avengers series. Lucas Film being bought and Disney turning Star Wars which Hollywood marked as a concluded franchise and made the four billion invested into buying it back in under four years. Closing the buyouts, they went for one of the largest purchases in history on the 70 billion dollar acquisition of Fox Studios getting the Simpsons, a mountain of movies and more. This all leading to the birth of Bob Iger’s greatest creation for his legacy, Disney+.
Disney+ being an attempt for the mouse to go after the HBO & Netflix market where they’ve leveraged tens of thousands of hours of content from the purchases of the last two decades and decades of work prior to make a seemingly endless war chest of content. A warchest which to Disney is unlike Netflix very low cost to maintain. Also, something where the new shows they invest into the site such as Mandalorean can be paid for with merchandise kingpins such as Baby Yoda. Disney+ is doing this and at a low $7 a month and now almost 50m users hitting their five year goals in under five months is making a strong case for this company heading to number one.
With Disney+, there is the fact that prices will eventually rise. The company will always focus on outpricing Netflix, but $10 a month will likely be their future this decade. With a bigger warchest of content and extremely fast growth, there’s no reason that they can’t exceed the 160m users Netflix has. It’s even possible judging on how Disney+ isn’t even 100% globally accessible yet that it’s practical to say 200-300m users could be built. At that point Disney+ will hit a steady revenue of 2-3b a month on this project and hold it in a heavy profit margin. And judging how unlike Marvel, Disney+ is investing in higher merchandise assets such as Star Wars, Marvel and Pixar, it’s possible the long term revenue could far exceed just subscriptions.
Writing this and bringing up the value Disney+ brings, it’s just one question now. Is it enough? Is this new asset alone enough put Mickey Mouse & Friends above Bill Gates, Jeff Bezos and Warren Buffet.
And in short, the answer is… Yes & no.
Disney+ produces a lot of revenue. Disney currently stands at about 50-60b in revenue yearly in a moderate margin business. This is half of the current number one Microsoft at a heavy margin business model of 110b a year with strong IP & growing. This is also far less over multiple oil companies, Apple, Amazon, berkshire and more. However, market cap rarely ever is judged by the biggest revenue in the room, but often on potential. With Disney+ being this constantly growing and high margin concept, it could take the 50-60b Disney is making now and easily increase it 50% in one year. It could also add a solid 10-20b in profit to the company yearly.
This puts them in two options which both could make them number one.
One, they go the way of Apple and put that money back with stockholders. Putting a high dividend or buyback to their pockets could easily take Disney from top 25 and put them in the top ten.
But number two could also work very well and is the more likely approach. They buy more brands or companies. Which recent examples of companies such as Amazon gaining over 100b in stock value after the 13b purchase of Whole Foods can show how market caps explode on simple things.
This just takes the question for Disney and ask which companies they could purchase.
The first look is going into tech and software. Get Wall Street into the idea Disney can go beat Facebook or Google similar to how they are now beating down Netflix. For this an acquisition such as Twitter or Snapchat would feel like a good idea. Only point though is Disney was offered Twitter before and made a pass there. This to me presents a case that it’s unlikely to present further.
Next up, is buying more brands. An obvious one would be buying Pokémon. Go from starting a mega company with America’s favorite mouse and buy Japan’s favorite mouse with Pikachu. The idea of Disney owning Nintendo and allowing Mario, Kirby, Pikachu, Zelda and more to join the Disney family seems like a genius idea. The issue however is just Nintendo being unlikely to ever say yes. While I’m 100% positive Disney could take Nintendo’s warchest of content and triple the revenue on it overnight bringing it to new mediums, the century long company pride of Nintendo makes this unlikely.
Third and final obvious one again is also Japan buying out Sony & Sony Pictures. This one seems at least half possible. Spider-Man being a multi billion dollar franchise in Sony’s hands, but part of the Avengers has them already partnered in some form. For Fox and the 70b deal that happened there, Disney got the rights to X Men & Fantastic Four to expand marvel, and went clearly much bigger. For Sony, it might just be worth it to buy the entire thing. The only question though is where does that take Disney in terms of being a hardware company. Do they now manufacture blu ray players and TVs? Do they take over PlayStation and make that the only console willing to do content with Star Wars, Pixar, Marvel and more? A lot of questions on how this would work.
However, it’s going to happen. The boom of Disney+ will give them the title very soon of largest streaming service. It will likely give them a chance to claim the title of largest paid subscription service for anything globally. It’s going to be 200m emails and phone numbers. 200m credit or debit cards. And above all, maybe a billion people having data on when they watch stuff, what they watch and more. This taking Disney+ for a ride at potentially doubling their current profit or tripling it in under three years will speak heavily to Wall Street. Is it disney the media giant owning all assets? Is it Disney now being a software giant competing with Facebook or YouTube? Is it Disney now being in the hardware business ready to have a phone or laptop with exclusive content for it?
Regardless, all of this is still not even the most powerful asset Disney has for its future where I believe it will in under ten years be able to sit as number one on Wall Street. And that’s at the end of the day DisneyLand. DisneyLand has something attached to it with kids and even adults no other company has ever achieved. It is the universal number one desired place for children around the world regardless of race, religion or income bracket. If a teacher asked kids where they’d want to be right now in any classroom in the world at least one kid will happily say DisneyLand or Disney World. And that unbuyable power that took decades to do has lead them to every part of media. It makes teenagers look to Disney for Marvel and the avengers. It’s older adults looking to them for the future of Star Wars. It’s 20 somethings wanting to see live action versions of childhood classics. It’s moms waiting for a Pixar movie to have something they’d enjoy taking their kids to see. Disney as a brand is this powerhouse Apple, Microsoft and Amazon just can’t beat.
Closing this up, my confidence in Disney stems from the Imagineers they are now doing documentaries on with Disney+, the discipline the staff has built, the visible success of buying brands and expanding them and now a new future for Disney where I see them becoming a successful technology company that owns the greatest vault of content in the history of media.
I’m Succeed.com founder Charles Peralo, we are a Career Site, not a job site, thanks for reading and I’m going to buy Disney stock.