Disney to pull movies from Netflix, plans
own streaming service
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[August 09, 2017]
By Lisa Richwine and Aishwarya Venugopal
(Reuters) - Walt Disney Co <DIS.N> will
stop providing new movies to Netflix Inc <NFLX.O> starting in 2019 and
launch its own streaming service as the world's biggest entertainment
company tries to capture digital viewers who are dumping traditional
Disney's defection, announced on Tuesday alongside quarterly results
showing continued pressure on sports network ESPN, is a calculated
gamble that the company can generate more profit in the long run from
its own subscription service rather than renting out its movies to
services like Netflix.
In turn, Netflix and rivals such as Amazon.com Inc <AMZN.O> and Time
Warner Inc's <TWX.N> HBO are spending billions of dollars to buy and
produce their own content and stream it straight to consumers.
Disney's entry into a crowded subscription streaming market and the cost
of technology to support its own online services could weigh on
earnings, Wall Street analysts said.
Disney stock fell 3.8 percent in after-hours trade. Shares of Netflix
fell 3 percent.
The new Disney-branded streaming service will follow a similar offering
from ESPN that will be available starting in 2018, the company said.
The streaming services will give Disney "much greater control over our
own destiny in a rapidly changing market," Chief Executive Bob Iger told
analysts on a conference call after earnings, describing the moves as an
"entirely new growth strategy" for the company.
Disney has some experience with the direct-to-consumer model in Britain
and could make more money in the long run from its own service, but the
move could be "financially less advantageous" in the near term, said
Pivotal Research Group analyst Brian Wieser.
The new ESPN service will feature about 10,000 live games and events per
year from Major League Baseball, the National Hockey League, Major
League Soccer and others, Disney said. It will not offer the marquee
live sporting events shown on its cable channels.
STREAMING TECH DEAL
Disney said its new services would be based on technology provided by
video-streaming firm BAMTech, and announced it would pay $1.58 billion
to buy an additional 42 percent stake in that company, which it took a
minority stake in last year.
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The characters of Judy Hopps and Nick Wilde pose at the premiere of
"Zootopia" at El Capitan theatre in Hollywood, California, U.S. on
February 17, 2016. REUTERS/Mario Anzuoni/File Photo
The BAMTech deal will modestly dent earnings per share for two
years, the company said.
Disney is one of the most recognized names on Netflix, but it is not
the company first to pull away. Starz Entertainment in 2011 pulled
roughly 1,000 films in the Starz catalog on Netflix at the time.
By ending the Netflix movie deal, Disney will keep movies such as
"Toy Story 4" and "Frozen 2" for its own offering. The company has
not yet decided where it will distribute films from superhero studio
Marvel and "Star Wars" producer Lucasfilm after 2018, Iger said.
Netflix said it would continue to do business with Disney globally,
including keeping its exclusive shows from Marvel television.
"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 through the end of 2018," the company said in a
The announcement came as Disney reported a near 9 percent fall in
quarterly profit, pulled down by higher programming costs and
declining subscribers at ESPN, as viewers ditch costly cable
packages in favor of cheaper online offerings.
The company's revenue fell marginally to $14.24 billion in the third
quarter ended July 1 from $14.28 billion a year earlier.
Net income attributable to the company fell to $2.37 billion, or
$1.51 per share, from $2.6 billion, or $1.59 per share.
(Reporting by Aishwarya Venugopal in Bengaluru; additional reporting
by Peter Henderson in San Francisco; Editing by Savio D'Souza and
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