On Tuesday, Disney announced their intention to pull its content from Netflix, ending its distribution agreement with the streaming service in 2019. Disney also announced they will be launching their own streaming services; one for sports, and another for films and television series’. Following the announcement Netflix shares fell 4 percent in after hour trading, on top of the 1.6 percent loss during regular trading. Disney announced its streaming plans while reporting quarterly earnings.
Losing Disney’s library, which provides a variety of new and nostalgic content, has the potential to hurt Netflix’s subscribers. There is also concern other Netflix partners could follow suit, especially if Disney shows success in its solo venture.
Disney is said to be planning to acquire a majority of BAMTech, a streaming technology company owned by MLBAM. Disney acquired a 33% stake in BAMTech for $1 billion last year, but is looking to acquire an additional 42 percent; paying ~$1.58 billion.
Disney’s CEO Bob Iger was a bit vague in his announcement saying that if a movie is Pixar, or Disney branded, it will probably appear exclusively on the new service. There are also plans to include movies and shows made specifically for the service. Iger called the plans “a strategic shift in the way we distribute our content.”
The sports streaming service, which will hold the ESPN-brand, will be launched in 2018. Recently, ESPN has struggled with drop in subscribers and ad revenue. Disney has said ESPN’s problems stemmed from higher programming costs, lower ad revenue, and costs associated from the numerous departures of employees. According to data from Nielsen, ESPN has lost more than 10 million subscribers since 2010.
ESPN has made the company hefty earnings in the past. However, as viewers change the way they consume content Disney has now been forced to change its approach to reaching the average consumer. The ESPN streaming service is expected to offer about 10,000 events a year; including live broadcasts of regional, national and international games.
“No one is better positioned to lead the industry into this dynamic new era, and we’re accelerating our strategy to be at the forefront of this transformation,” latimes reported Iger saying during a conference call with analysts.
Over the last decade, Disney has made some big name acquisitions, which include Pixar Animations Studio, Lucasfilm, and Marvel Entertainment; giving them a large variety of valuable intellectual property.
“It’s been clear to us for a while [that] the future of this industry will be forged by direct relationships between content creators and consumers,” Iger said.
Netlfix themselves seems to realize this shift in content creation and has been attempting to find ways to reduce its rapidly growing content budget. Netflix has said they are committed to spending $16bn on the production and licensing of films and TV series’ over the next five years.
The Disney branded film and TV offering would include original content developed by Walt Disney Studios, and is set to debut sometime in 2019.
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