Content Recycling: Perpetual Payment for Past Success

Overview

My wife and I went to see the new release of Beauty & the Beast this weekend. Great movie! I never thought I would be admitting that in public. However, I am a bit of Disney nerd. It was not as good as the original but nothing ever really is, right? Anyways, as I was watching the movie, a thought kept recurring to me: how many times has Disney repackaged and resold this movie since the original release?

The thought was nagging at me. When we got home, I began looking up lists of Disney’s box office hits. What I found was a list of all Disney releases going back to the 1930s with associated inflation-adjusted gross numbers. It’s a great read if you get a chance to look at it.

Why Even Mention This?

Content recycling can be a very profitable venture. Disney stock has grown at 12.1% annually for the past 10 years. Much of the content released over the past decade has been repackaged stories from previous generations. I see many investors who chase the highest growth, most innovative and creative companies in the market. The success of these companies relies on being on the forefront of technological advancement. There is absolutely nothing wrong with having that as a strategy in part of your portfolio IF you know what you are doing. However, some of the most successful companies in the world have carved out large moats without having to consistently pioneer creativity.

This is an important concept for investors. These types of companies have less pressure to deliver on innovation to be successful. Management, research and development, and product management enjoy a larger margin of error because they can rely on the successes of prior management teams. Keep reading…


 

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