Byron Capital analyst Rob Goff says the Netflix Disney deal is the latest and largest example of a trend. Goff says over-the-top-providers such as Netflix Hulu, Amazon and Google are making deals that allow them to rapidly build their resources and subscriber bases. On Tuesday, shares of Netflix were on fire, tacking on more than $10 to close at 86.64, after the company signed a reputed $300 million contract for exclusive access to new Disney movies.
The deal, which will begin in 2016, will give Netflix subscribers access to Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios and Disneynature titles.
Byron Capital analyst Rob Goff says the Netflix Disney deal is the latest and largest example of a trend. Goff says over-the-top-providers such as Netflix Hulu, Amazon and Google are making deals that allow them to rapidly build their resources and subscriber bases. The Byron analyst points to Amazon’s launch of its new Kindle FreeTime, an unlimited monthly children’s programming service from Disney, Nickelodeon, PBS, Sesame Workshop and other as another example of this.
Last week, Halifax-based DHX Media (TSX:DHX) partnered with Amazon’s European digital media subsidiary LOVEFiLM on a non-exclusive subscription video-on-demand U.K. licence that added nearly 1,000 half-hours of programming, including DHX’s children’s TV shows such as Inspector Gadget and Dennis the Menace.
Goff says traditional programmers are now looking to defend their losses against over-the-top-providers. He points to the recent deal DHX made with PBS, which paid $2-million to acquire a season of Caillou. Goff says he now believes DHX’s digital sales will exceed $15-million for the year ended June 30th, 2013, up from his previous forecast of $9-million. If DHX adds another $6 million in 2014, he said, that would equate to about $0.06 a share. Applying a multiple of 6x – 8x on this number, he points out, would equate to roughly $0.35-0.45 a share. Using these metrics, Goff on Thursday maintained his BUY rating on DHX Media and raised his target on the stock to $2.40, up $.30 from his previous $2.10 target.
Founded in 2006, DHX Media boasts a library of over 2,525 half-hours of film and television, including Animal Mechanicals, Rastamouse, Angela Anaconda and the hit Yo Gabba Gabba! The company has quietly become a leader in kids TV. DHX has signed more than 1,200 license deals with over 150 children’s networks worldwide, including the BBC, Cartoon Network, PBS, The Disney Channel and Nickelodeon. The company’s fiscal 2012 revenue of $72.7-million was up 31% from the $55.4-million topline the company posted a year prior.
Shares of DHX Media closed today up 1.1% to $1.87.
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I believe the DHX library is well in access or 8,000 half hours, which makes them the owner of the world’s largest kid’s library outside of the studios — a fan of the company, and a shareholder.