Disney leaving Netflix to start its own streaming service

Emilio Banks
August 12, 2017

NFLX, -1.46% and pull its movies from the service and launch a Disney branded streaming service in 2019. That will start to erode in 2019, when Disney will stop allowing Netflix the rights to any new movies.

Disney has not discussed its plans with its pay-TV partners, but said these services will be available via authorized pay-TV providers as well as online from Disney and ESPN, and via their apps. The move could accelerate the trend toward "cord cutting" in which consumers drop extensive cable TV bundles in favor of streaming services such as Netflix.

ESPN has faced the decline of TV subscribers in recent years and as a result, it was very much on the cards that it will have its own stand alone product but disclosure of a distribution agreement with its old associate Netflix has been hard on the investors.

"The media landscape is increasingly defined by direct relationships between content creators and consumers, and our control of BAMTech's full array of innovative technology will give us the power to forge those connections, along with the flexibility to quickly adapt to shifts in the market", said Robert A. Iger, chairman and CEO, The Walt Disney Company. Raymond James analyst Justin Patterson said if Netflix survived the loss then, the company should be fine, having added much more content in the meantime.

Executives said Tuesday that it would launch a Disney-branded over-the-top service in 2019 that will exclusively stream Disney and Pixar films, as well as a selection of Disney Channel programming.

"This lays the groundwork for the company to do a number of things", Iger said, speaking in a post-earnings interview with CNBC. While no one else now has the IP might of Disney, we are already seeing this stream-based channel approach adopted by Netflix's other big rival, Amazon.

The change of heart comes as Disney sees a need to take the industry, now dominated by Netflix, head-on. One of the biggest draws of Netflix content was its suite of Disney films.

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One final note on Disney: It's not clear yet if this deal also covers future Marvel and Star Wars movies.

While not the best omen for a direct-to-consumer service from Disney, there are some notable differences compared to the service announced yesterday.

And, of course, this announcement has only been made possible by Disney's investment in BAMTech, which, according to Iger, appealed because of its advanced technological capability.

Evercore analyst Vijay Jayant views the Disney-branded service as potentially disruptive as a subscription video-on-demand platform.

This is not Disney's first attempt to go directly to the consumer.

To be honest, how many people are going to purchase another subscription just to watch Disney content?

Other reports by TheSundaySentinel

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