Disney to launch streaming service by 2019 when Netflix contract ends

Disney has enjoyed growth at its theme park in Shanghai
Disney has enjoyed growth at its theme park in ShanghaiEPA
Author

11 August, 2017

Now Netflix is producing more than 1 000 hours of original programming a year and signs up most of its new customers outside the U.S., where it doesn't even offer Disney movies.

Following a deal to acquire a majority stake in streaming tech business BAMTech for $1.58 billion, Disney will launch a direct-to-consumer streaming service in 2019, as well as an ESPN-branded sport video streaming service in early 2018. Netflix has attracted more than 100 million global subscribers by offering a vast catalog of TV shows and movies on demand, and undermined consumer interest in live TV. "What they talked about were things that looked inevitable, at some point", said Pivotal Research Group analyst Brian Weiser.

"Disney simply waited too long to make this critical decision", Greenfield said.

This is important as the decline in cable households and the shift to smaller, cheaper bundles pressures the profitability of Disney's cable networks. In the nine months through July 1, cable networks' operating income fell 13 percent from the year before, to $4.12 billion. There is also an upcoming live-action adaptation of "The Lion King". That could be hugely attractive for families with young children in the U.S.

"When historians look back on who is to blame for the rise of Netflix, we believe they will focus their attention, under the leadership of Iger", Greenfield said in a note to clients.

Media giants Disney, Viacom and Fox first began licensing TV shows and movies to Netflix as a way to replace shrinking DVD sales.

The new ESPN streaming service, by Iger's reckoning, offers an escape hatch as the traditional pay-TV bundle loses viewers to online upstarts. A broader Disney-branded offering should launch in 2019, just as its distribution deal with Netflix (NASDAQ:NFLX) expires. It's not meant to compete with the company's TV channels.

And its ESPN service may be limited to sports such as baseball and ice hockey, without the more popular professional basketball and National Football League games.

"Ultimately, we envision this will become a dynamic sports marketplace that will grow and be increasingly customizable, allowing sports fans to pick and choose content that reflects their personal interests", Iger said on a conference call with analysts.

To roll out its streaming services, The Walt Disney Co. will take majority control of BAMTech, a streaming arm of Major League Baseball spun off a year ago from Baseball Advanced Media, for $1.58 billion.

In a statement, the company explained Disney's move only affects its pay one output deal for theatrical films. We shall see as the streaming service's stock dropped more than 5 percent upon announcement of the news.

It's not just millennials kissing their growing cable bills goodbye these days, and Disney's feeling the pain as it's shedding ESPN and Disney Channel subscribers with every passing quarter.


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