Later, is there a big target on big tech . Google is the latest tech company to get caught up in a political firestorm. Jim vandehei says the drama is just Getting Started first, we start out with the big story. Disney announcing it will pull all of its movies from netflix to start its own streaming service. The news taking down both those stocks julia borstein is at disney headquarters julia. Well, that is just part of the story. Bob eooiger announcing what he called a strategic shift announcing another 42 stake in bam tech he announced theyre going to launch a new espnbranded Live StreamingSubscription Service that will launch early next year saying it will have 10,000 live sporting events. This move capitalizes on a few trends that weve seen the sports side, first of all, live sports continue to be very, very popular 94 out of the top 100 tv shows in 2016 in the United States were sporting events for instance secondly, the espn brand is still very strong. And, third, we have seen a fairly significant increase in appbased Media Consumption on services that are over the top or direct to Consumer Services so we felt that it was time for us to take a bigger step in that direction. Netflix shares declining as eiger announced in 2019 disney will pull its movies from netflix and launch its own direct to consumer disney Branded Service, saying theyll make a, quote, significant investment in original shows and movies for this new service. We had a deal that gave us the option to move our films from the netflix platform to somewhere else starting with the calendar year 2019 slate thats what were doing. So were creating a disney Branded Service that will have those movies on them, on it, and if you look at the 2019 slate, it includes frozen 2, toy story 4, and a live action remake of lion king. So its an incredible slate. Now, we reached out to netflix to see if they had any comment. They responded saying u. S. Netflix members will have access to disney films on the service through the end of 2019 including all new films that are shown theatrically thank yrough end of 2018 so making sure people dont panic about their Netflix Subscription no word on how disneys new Subscription Service will cost iger says todays announcement represents an entirely new growth strategy. You asked specifically about the marvel relationship. Do you know when that ends as well because he made it clear he would not pull the shows but perhaps the agreement ends, coincidentally, in 2019 when they launch the service. Well, they have no plans to include marvel into this service. This service is really designed to be disney and pixar branded its for families. And its really about those two strong brands. He did say its possible that eventually down the line they could potentially create another marvel Branded Service but for now, theyre maintaining their relationship with marvel they are contractually locked into that relationship with marvel because they are creating new shows for netflix that are those marvel shows for netflix so for now, no changes to those marvel shows, but well see what happens. Part of it may hinge on how well this new streaming Service Works thats disney branded. Just to be clear, we have no guidance, yet, right, that democrats come on the call . Disney doesnt give specific guidance they give general guidance what we knew is disney has said fiscal 2017 is going to be a Slower Growth year and stronger growth was going to return in fiscal 2018. That of course starts with a december quarter, which is when the next star wars comes out we havent heard any changes to that so far, but well be listening and let you know if anything happens. Julia, thank you. Julia borsten out at disney headquarters whats your take on why the stock is down on this news heres the thing. At some point estimates have been coming down all year long for disney and i think expectations werent particularly high. I think the fact of this strategic relationship coming up down is giving investors pause they know netflix has been their primary Distribution Channel ill just mention this she just said this is that next year, fiscal 2018, theyre supposed to see a significant bump in earnings and in sales eps growth is supposed to be double digits, again, for the first time in a couple years sales growth from 1 to 6 stock trading about 16 times next years expectations to me you have a level here, the stocks trading at 103 in the aftermarket. The stocks even cheaper if you believe in 2018, you believe in what theyre doing strategic, the stock is probably as cheap as its been in years in 2015, this stock was trading 22 times earnings. Well, they were in a different place though it probably should be trading that multiple. But i think what this deal tells me is just how predatory the environments going to get it makes you think about what goes on in the telco space if you talk about the commoditized portion of delivering services. If disney steps into the fray with their brand portfolios never been better. Lets be clear, i think disney, 17, 17 1 2 times 2018 is the best of the breed with the most insulation and what they announced today to me, its not great for the sector because it speaks volumes but for these guys, it means i think theyre kind of in charge. If disneys willing to hive off its properties, right, its Marquee Properties and marquee content and offer direct consumer in its own bundle, could others do the same of course they will you could totally go around netflix or around their distributor and saying im going direct to consumer too with my marquee content and marquee brand. I dont know how much room there is for so many acts or so many, you know, i dont know how maybe thats what they said about cable before there were 200 cable channels. How many of them ended up being not worth anything true. I applaud disney for making aggressive moves, thats great however, the landscape is really shifting i dont see the end of that right now. These are tectonic shifts its good company and good for them for doing what they have to do but i would wait it out. Disneys announcement is an acknowledge ment of how well netflix is going i make the argument netflix can go higher. I understand it wont but you can make that argument disneys now trading at about 15 1 2 times next years earnings their Media Business and their studio. The studio as well. Yes. The Media Business continues to decline so what is the right multiple for an industry granted, they should have a premier multiple whats the right multiple for a Media Business in decline . I dont think its 15 1 2. You can make an argument its closer to 14. What does it tell you both stocks are going down . Not that things are necessary binary in stock market land, oftentimes they are disney comes out with a big announcement direct to consumer streaming bundle the stock goes down. Netflix also goes down it means theyre going to spend more its bad for everybody be we see a lot of companies in growth phases where theyre spending. Investors dont like spending not at first. At this point, if theres tectonic shifts, you want to be the one forcing that shift at this point, they rode the wave of netflix as they went from zero to 100 million subs. Now theyre saying you mentioned parks, studios they want to control the relationship with their customer on all these Different Levels because they know now they have the most intimate way to actually communicate or to deliver content to their customers and thats through mobile cell phones, however app centered world i dont think its bad but to your point, 57 channels and nothing on when was that song written 20 years ago now we have 300. A lot of them bad. Look at a e, look at discovery. Pushing forward, making these shifts possible for all intents and purposes. In terms of disney owning that relationship. Imagine the data they will also have, be privy too now they will know very intimately the habits, when its consumed, how long its consumed Consumer Products their Consumer Products division loves this. Again, theyre the most diversified player theyre a Media Company but theyre an entertainment company. Theyre a Consumer Products company. And i just think this speaks to youre right, theyre going to spend more money. Suddenly, like, hey, were going to develop new content disneys been developing new content on their own forever it makes you think its going to get into a place where you start to have four or five guys that are a choice for people to throw down on the Subscription Service. I think it starts to speak to the environment. For more on disney earnings, were bringing in James Stewart, a New York Times columnist and author of the fabulous disney war. And now who knows, his next book could be called streaming war. At this point. Whats your take on whats going on i think first of all this netflix decision is a huge strategic move for them. When iger said strategic shift, he was understating it all the years, decades, ive watched disney, they said over and over again content is king we are platform agnostic we will let our content go to the highest bidder suddenly, they are turning their back on that, saying were going to create our own platform that is huge now, why is the stock down i think, you know, theyre going to lose some revenue by cutting off netflix. Theres going to be a period they dont have a builtin, you know, Global Subscriber base this is a gamble i understand it. In a way, i think its bold, its decisive. Its the only real path for growth even if it does work, theres going to be a time where revenues goes down, investment goes up, before the growth if they can pull that often with the next fiscal year, id be shocked. Maybe. You have to take a longer term view on that. What does it mean for netflix . Is this a signal others will follow in disneys foot steps . Good question i mean, disney has the strongest brands if anybody look, theyve got the disney brand, theyve got pixar, theyve got espn. If anybody can go direct to consumer with their own platform, they can do it i dont know how many others have even the luxury of that option not a whole lot come to mind in my view. For netflix, i mean, netflix is a must, you know, have app without disney i think the decline there is a little exaggerated i think your point earlier, like how many of these blocks do you want to see when you turn on your tv. Like what do we get now, eight, nine, ten . Again, is it going to be 100 i dont think Consumers Want that i dont think theyre going to pay for that independently but for disney, the problem so i think netflix will be fine probably theyre way out ahead on this. Theyre doing fabulous creating their own content. Disney will now be in head to head competition with them theyre not going to be partners anymore. That is going to be a war. So let me go back to something you said earlier, so if you were in disneys shoes and you were trying to navigate these changing waters, are you saying you would do exactly what theyre doing . I probably would. I like to think i might have done it a little sooner. Before the early movers had gotten quite so far ahead. You know, thats water under the bridge its easy with benefit of hindsight. Ive been saying this for some time i still think it disney is a huge company it is doing great. Again, the theme parks are great. The movie studio is better than anybody ever could imagine how do you dobetter . How do you grow . And then youve got this giant Cable Network thing. It is shrinking, shrinking, shrinking. And the Cable Companies who were your great partners have basically turned their back on you because theyre letting people get skinny bundles and theyre cutting the cord so that isnt going to grow if you dont do something dramatic. I dont see any alternative to what theyre doing here. Were going to leave it there. Thanks so much for coming by always great to get your analysis James Stewart of the New York Times. We should note that disney shares in the afterhour session, lows right now ill bring it back to netflix. At one point you said disney buys netflix. Ive said it a number of times. Now what . Off the table . I guess this yes, i would imagine its off the table because i actually think listen, i understand its a pipe dream. I also think what this means now, bob iger now stays through 2019 potentially into 2020 if you think about it is actually a positive for disney as well. I was going to say, what jim just said is he would have liked to have seen them make this shift earlier. Remember when tom stagsleft an it was a debate about who would take over . Because this is what he wants to do this is his legacy, his positioning this company he already made the marvel, the pixar and lucas films, right theyve got espn is maybe turning a corner we know whats going on with the parks. Lets fix distribution im going to put this to you right now, right here. Whoa, whoa. Would you rather disney or netflix, fresh money today disney in a heartbeat and i will probably be doing it tomorrow morning somewhere between 100 and 103. All day long, i totally agree. Disneys Free Cash Flow positive right here doing great on all cylinders nobody else can come to market with their own offering like these guys i dont see anyone who has this musthave content. Disney all day long on val cation ive been negative on netflix and wrong so this is more of a reason to say id double down. Would you buy disney on this dip . Over netflix, absolutely. So many of their cylinders are hitting. The big one obviously isnt. But its a great company. Now theyre in netflix arena and netflix has proven they can do this better disney has to prove themselves in the arena theyre about to get into over the next 18 months were assuming this is going to work but netflix is trying to play in disneys arena. Netflix is going to content. Thats where i have a problem. So so . The answer is i think disney trades several hundred i think netflix will bounce from the selloff weve seen right now. Coming up, well have much more on the disney bombshell pulling its movies from netflix sending both stocks lower in the afterhours session. Plus, it is the two words from President Trump that took down the market today. Fire and fury. How serious a threat is north korea to the rally and later, a retail resurgence a number of beaten down retailers soaring. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. 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The likes of which this world has never seen before. Those comments were seen as far from a deescalation of the current back and forth between the two countries. Some recent threats, developments in this situation, include the north Korean Foreign minister yesterday saying the Nuclear Program in north korea exists solely because of threats posed by the u. S and then today, the Washington Post reported that now north korea can make a Nuclear Warhead small enough to fit inside a missile. Thats significantly upping the ante of a potential ability of north korea to reach large cities in the mainland United States at a briefing here down the road in bridgewater, new jersey, kellyanne conway, the senior counselor to the president , only called the comments by the president