Disney Leaves Netflix: A Big Mistake

-The music industry tried to cling to an obsolete business model far too long and suffered gravely for it.

-Spotify finally dragged the labels into a new era and revitalized the industry.

-Disney - and the other media companies - didn't learn their lesson from their adjacent industry's troubles.

-Netflix is the movie industry's Spotify. Cripple it, and you'll unleash a crushing wave of piracy.

-Almost all media stocks fell Wednesday; this is a lose-lose decision for Disney, Netflix, and third parties.

Shares of both Disney (DIS) and Netflix (NFLX) fell in after-hours trading on Tuesday, and those losses extended into Wednesday's trading. That followed Disney's decision to pull its movies from Netflix going forward and greatly expanding its own digital distribution ambitions.

And, let's get it out of the way right at the beginning of this article. I think this is a bad decision, and the market is correct to be sending shares of both firms downward. Here's why - let's examine the parallel of what happened with music in the digital era.

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