Disney (NYSE: DIS) is part of a group that is slowly carving out the market segment that Netflix (NFLX) previously had all to itself. Streaming certainly competes with other forms of entertainment. So the There is no question of a competitive gap that would unequivocally resist competition of all kinds. Rather, the entry of more streamers enriches viewer choice in ways that were unimaginable just a few years ago.

Apple (AAPL) had a winning movie for the best picture. Such an event had been Netflix’s only territory in the past. It will take time, but there will be many possibilities rather than just Netflix in the future.

The whiff of profits seems to be attracting far more competitors than the growth of the market can support in the future. Therefore, consumer variety is likely to increase while consumer cost continues to decline. There have been clear efforts by some streamers to establish a “premium” subscription. This tactic is unlikely to succeed unless the streamer has incredibly long lineup time and good luck. A more likely path to success is to reduce costs to consumers while allowing some advertising.

The other part is that streaming will likely be part of a diverse company’s arsenal to win over customers. Often, the accounting for these activities is determined by a market value allocation. Therefore, it is possible for a diversified company’s streaming business to show a loss as the company’s profits grow from this “losing business”. Accounting can be very confusing this way in a diversified business.

Such a situation also limits the ability of a standalone streaming company like Netflix to compete in the streaming business. It has no affiliated divisions with which to share production or purchasing costs. This likely puts Netflix at a competitive disadvantage as more diverse companies enter the market.

While some would measure the Disney value of a streaming customer using the figures above, which is likely to turn out to be a big mistake. Disney has of course worked to improve streaming customer value, as noted above. But a diversified business that captures a customer in any division often captures a potential customer that other divisions can sell to. Thus, the improvement shown above may not be as significant as the additional divisional benefits of these streaming clients.

I’m hoping that at some point Disney management will talk about this and roughly quantify the benefits, because it’s extremely important in projecting the company’s earnings. There’s a decent possibility that Disney will never have to show a streaming profit because other divisions would benefit so much from streaming that the company’s overall profitability would materially benefit.

This makes Disney management’s projection of declining losses less of a priority than increasing enrollments. It can certainly be a slippery slope that can lead to less profitability. But Disney has been known for some excellent management for quite some time. It is therefore very likely that management can navigate this slippery slope for the benefit of shareholders.

The above possibilities also mean that Disney may not hesitate to grow the streaming business as that business shows a bigger loss when customers are added. The above growth is likely to be healthy for some time to come. Any declining quarter may result in additional marketing costs, as any customer gained through streaming is likely to become a Disney customer of other services. Note that the reverse is also true. A Disney theme park customer is more likely to become a streaming customer.

For a standalone company like Netflix, this situation is very bad news. Netflix has to justify its extravagant stock price with adequate earnings and cash flow that competitors may not need. The upcoming Q1 report will be important for many competitors in this market.

Disney can offset bad news in the streaming business with good news elsewhere in society. The second quarter report will likely feature easy comparisons as the company recovers from the 2020 shutdowns. Business is returning to normal and one-time start-up costs are declining.

Most likely, all low-cost competitors will be able to grow the most assuming the necessary quality of the product meets the necessary level. Sooner or later, the market will mature because the consumer has little time for fun projects (and there are only a limited number of consumers even though the number is slowly increasing). This means that the current entry of competitors for streaming will at some point cause upheaval.

Most analysts agree that Disney has additional cash flow online because the parks are now open. There are exceptions and there will likely be more as the coronavirus becomes less prominent. But the fact is that open theme parks will be a cash flow boost. The same will be true for planned film releases.

Movies also return to normal. Disney has long been a cash flow generator. Now it’s becoming a bigger cash flow generator as things get back to normal.

The result of the statements above is that there will be a lot more free cash flow in the current fiscal year. The simple explanation is that free cash flow from movies went down because movies needed to be made before they were released to the public after the 2020 shutdown. It’s a similar story with theme parks.

The company’s first quarter had a good amount of cash uses. This money will come back as the costs are recovered in the various divisions. Hopefully there will be a lot more money on top of cost recovery, as is usually the case.

Disney free cash flow is obviously somewhat seasonal as some businesses have peak seasons. Therefore, cash flows do not occur evenly throughout the year. Certainly, a blockbuster movie (for example) could potentially change this scenario in any given year. But it should be a whole movie because Disney is a huge company.

All of this means that Disney will have the cash to increase competitive pressure in whatever division management chooses to do. Netflix, throughout its history, has rarely generated cash flow and never sustained free cash flow. Therefore, the best scenario is probably the sale of shares to be able to finance increasing competitive pressure. Lessor choices for Netflix would include more debt (but already, as of Q4, had negative cash flow. So he really can’t afford that option.) or a steady decrease in programming budget as competition intensifies (or at least not increases).

The market is likely to have a different view of how it values ​​all of these stocks. A diversified business like Disney may not suffer much from a lower market valuation of streaming, as other divisions will take into account Disney’s market view and valuation. A company like Netflix, has nowhere to hide and will be valued solely on a streaming business that is likely to decline in value with more competition.

Like Disney, Apple and Amazon (AMZN) have proven that it is quite easy for big companies to get into this business in search of profits. Investors can bet that other competitors are on the way in addition to all the large and small companies already there. These big entrants can easily handle whatever is going on, because this latest business is a relatively small part of the business. The worst case scenario would be a delisting followed by a change of direction to a more profitable strategy. Again, a standalone pioneer like Netflix doesn’t have that flexibility.

Therefore, the odds favor Disney stock which will eventually climb to a much higher price as a result of this diversification attempt. Large companies entering the market are likely to be survivors. Other survivors would include those who manage to find some sort of profitable specialty niche. That would be hard to imagine in the streaming industry. But that would certainly be an imaginative (and speculative) possibility.