$DIS’s Competitive Advantage Is Its IP

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During his recent interview with Tobias, Alex @TSOH_Investing discussed $DIS’s Competitive Advantage Is Its IP. Here’s an excerpt from the interview:

Tobias: Let’s talk about some of the other names you’ve got in there. Disney, you said you got that in the Fox spinoff?

Alex: Yeah, I got it. When doing Disney bought the majority of Fox’s assets, you had the option to to take stock, cash or some combo. I took shares as part of that deal. I think part of the thinking now in my mind is, obviously, they’ve released Disney+ and a couple of their other D2C assets they’ve had significant growth. It’s super early, but they’ve had significant growth so far in terms of signups.

For me, I keep coming back to the idea that having really great IP and a really great monetization engine is– I’d rather approach the direct to consumer video problem or figuring out the business there, I’d rather approach it from that angle than having really great technology, like Netflix unquestionably has. And granted, they have a huge user base and that will lend itself to stuff like Cobra Kai and You that they license or buy from others, and then they increase the audience 5X or 10X or 20X. So, those are certainly very real advantages. But as I keep coming back to it personally, I like the idea of owning the parks business, of owning just really great IP.

Now, with that said, Disney didn’t own Pixar 20 years ago, they didn’t own Marvel 20 years ago, they didn’t own Lucasfilm 20 years ago, so– and Berkshire did own in the late 90s and they sold, I think part of the reason is recognizing that reality that this business is, in my mind, definitely not foolproof, it requires continued nurturing of those key brands, that key IP, and potentially adding stuff over time. I think that people they have in charge of Marvel right now, my friend, Francisco Olivera, can talk about this a lot more than I can, but the people that haven in charge are the right people, and they’re nurturing those franchises and I think it continues showing the results.

Tobias: It was sort of a meme in the late 90s that a lot of the value migrates from the owners of the distribution to the content producers, because content tends to be unique, whereas distribution tends to be– there is a little bit more distribution, and I think that I couldn’t agree more. It’s a content game and they have been very good at producing it, but there was that notable period before they bought Pixar where they just hadn’t had a Disney Princess worthwhile for a little while. No criticism of the Disney Princesses they had, but that’s sort of the business where that they get a young– my daughter, she falls in love with the Princess of the day and that’s what gets her into that ecosystem. And if they miss, then she’s not part of that ecosystem. It’s hard to get them back in as they get older. But their purchases have been quite good, though, Star Wars, and, Pixar, Marvel, all great acquisitions.

Alex: Yeah. Former CEO, Bob Iger, said in his book, he went before the board– And this is very early after he became CEO, and he essentially told them, “If we don’t do this Pixar deal, this could be the end of this company.” Might not have been that drastic, but he said, “This a very important deal. We have to do this because we’ve lost that animation. We’ve lost that IP engine that we have to have for this company to work.” And him doing that deal and then subsequently, Lucasfilm and Marvel are obviously masterstrokes that– we’ll see how Fox turns out, but he certainly bought himself a bit of cover by doing those three deals at what turned out to be incredibly good prices.

Tobias: They looked expensive. I think they looked optically expensive at the time. Pixar looked expensive, I think.

Alex: Right. Yeah.

Tobias: But ultimately, worthwhile.

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