Disney looks strong ahead of streaming launch

Posted November 8, 2019 7:04 a.m. EST

— Happy Friday. A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here.

Disney will join the streaming wars from a position of strength. Netflix, beware.

The entertainment giant — buoyed by the release of "The Lion King" and "Toy Story 4," as well as its theme parks — beat Wall Street's expectations when it reported earnings after the bell on Thursday. Shares are up 5% in premarket trading.

The company's profits slumped as it spent big ahead of the launch of its Disney+ streaming service in the United States, Canada and the Netherlands next week. But investors aren't overly concerned. They're already looking ahead.

"With the launch of Disney+, we're making a huge statement about the future of media and entertainment and our continued ability to thrive in this new era," CEO Bob Iger told analysts.

Disney has built up a massive content library to support its streaming strategy. Marvel, Mickey Mouse, Pixar, Star Wars and 21st Century Fox titles like "The Simpsons" are now all part of the Disney family.

Adding to its muscle: Iger announced Thursday that Disney and Amazon reached a deal to bring Disney+ to Amazon's Fire TV devices. He said the company also has distribution deals with Apple, Samsung, LG, Google and Microsoft.

The competition is fierce. Apple launched its Apple TV+ service last week. CNN parent AT&T and Comcast will soon follow suit.

Disney is poised to dominate among new entrants. In a recent survey conducted by Bank of America Merrill Lynch, 17% of respondents said they were most likely to subscribe to Disney+ when it went live, a much higher percentage than for Apple TV+ and AT&T's HBO Max.

Netflix is in a strong position, too. Per Bank of America, Netflix could lose some customers as a result of the Disney launch, but the churn will be modest. Only 5% of US consumer surveyed said they were likely to cancel Netflix to switch to Disney+, and that probably includes some subscribers who were likely to cancel anyway. Disney will need to play the long game.

Investors wait for more details on trade

Markets are coming off euphoria about a "phase one" US-China trade deal on Friday, and the reasons are clear: More details are needed, and nothing is set in stone.

What happened: A spokesman for China's Ministry of Commerce told reporters Thursday that US and Chinese negotiators have discussed rolling back tariffs, saying the relief could happen even before a deal is signed. That sent US stocks to more record highs.

Since then, comments from the Trump administration have helped bring traders back down to Earth.

"There is no agreement at this time to remove any of the existing tariffs as a condition of the 'phase one' deal," White House trade adviser Peter Navarro said Thursday on FOX Business. "The only person who can make that decision is President Donald J. Trump."

Iris Pang, China economist at ING, thinks there's more work to be done. The size of the rollback could be particularly contentious, in her view.

"If it's too big, China could be more reluctant to return to the negotiating table later on," she said. "If it's too small, China may see the move as an insignificant concession that will do little to help its economy."

Companies run by billionaires are better for investors

Billionaires tend to be good at making money for themselves. Buying into the companies they control could make the rest of us richer, too — at least according to a new report.

Shares in companies controlled by billionaires have significantly outperformed the global market average over the past 15 years, per UBS and PwC.

Researchers analyzed the stock performance of 603 public companies in which billionaires have considerable sway and to which most of their wealth is tied, Hanna Ziady reports for CNN Business. The result? Companies' annualized gain over the 15-year period was nearly 18%, versus 9% for a broad stock index that tracks shares in 47 countries.

The billionaire-controlled companies were also more profitable. Stock pickers, do with that information what you will.

Up next

Earnings season is beginning to wind down. Honda, Madison Square Garden, Revlon and Scripps report before US markets open.

Also today:

The University of Michigan's consumer sentiment survey for November arrives at 10 a.m. ET.

Coming next week: Walmart results will serve as a barometer for the health of the US consumer.

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