Netflix: Negative implications for NFLX of DIS/FOXA deal
Needham reiterates Hold. Firm notes that they believe DIS's announced acquisition of certain FOXA assets for $66B, including $52B of equity is negative for NFLX because it implies: a) more OTT competition; b) less hit content on NFLX; c) a deep-pocket competitor with a talent culture and great data and d) a more robust capital structure than NFLX. In addition to HULU, which is an existing competitor to NFLX, DIS has announced that it will introduce 2 new direct to consumer (DTC) services over the next 24 months, 1 for sports and 1 for entertainment. After DIS closes the Fox assets acquisition, these services should be more robust and both will directly compete with Netflix for viewers' time and OTT sub revenue. DIS's marketing skills are world class (our view), which implies DIS's new OTT services will give the dominant OTT service (NFLX) the biggest headache.