During today’s earnings call, Disney announced that it intends to pull its movies from Netflix and instead start up its own streaming service. The direct-to-consumer streaming service is expected to launch in 2019. A separate streaming service will launch to focus on ESPN branded sports content in early 2018.
“Today we announced a strategic shift in the way we distribute our content. 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 Bob Iger, Chair and Chief Executive Officer, The Walt Disney Company. “This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the Company, one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands.”
Earnings per share are down for The Walt Disney Company. The company is being heart by a decrease in advertising revenue and higher programming costs. However, there was revenue growth, which implies a demand for the product is still there.
Disney is not alone in having to deal with the shift of advertising revenue from broadcast and cable to the internet. As cord cutting behavior continues to grow, Disney is well suited, however, to leveraging its brands to create content where consumers wish to find it. And now they’re starting to answer how they plan to monetize that relationship.
No word on what will happen with the Marvel branded TV shows currently airing on Netflix.
Disney’s agreement with Netflix will end at the beginning of the 2019 calendar year theatrical slate of movies. It sounds like any existing contracts for Disney content will be good, for however long that contract runs.
To make this happen, Disney is investing $1.58 billion to buy the majority ownership in BAMTech – a direct-to-consumer streaming service with analytics and commerce management capabilities. They currently handle streaming for Major League Baseball.
The ESPN-branded multi-sport service will offer a wide selection of sports programming, including approximately 10,000 live regional, national, and international games and events a year. This includes leagues like Major League Baseball, National Hockey League, Major League Soccer, Grand Slam tennis, and college sports. Individual sport packages will also be available for purchase, including MLB.TV, NHL.TV and MLS Live.
The new service will be accessed through an enhanced version of the current ESPN app. In addition to the multi-sport service, the ESPN app will include the news, highlights, and scores that fans enjoy today. Consumers who are pay TV subscribers will also be able to access the ESPN television networks in the same app on an authenticated basis. For many sports fans, this app will become the premier digital destination for all their sports content.
The new Disney-branded service will become the exclusive domestic home for subscription-video-on-demand viewing of the newest live action and animated movies from Disney and Pixar, beginning with the 2019 theatrical slate, which includes Toy Story 4, the sequel to Frozen, and The Lion King from Disney live-action, along with other highly anticipated movies.
Disney also plans to make a significant investment in an annual slate of original movies, TV shows, short-form content and other Disney-branded exclusives for the service. Additionally, the service will feature a vast collection of library content, including Disney and Pixar movies and Disney Channel, Disney Junior and Disney XD television programming.
This deal is subject to regulatory approval. Upon closing Bob Iger will become chair of the BAMTech board.
In the Q&A portion of the call Iger clarified that Marvel and Lucasfilm movies maybe be licensed separately or available on the streaming service. That’s to be determined. Same for TV shows from ABC.
This move is a bit of a pivot for TWDC after just a few years ago saying they weren’t interested in a streaming service. Now, that looks like the way to go. Luckily you don’t have to choose between Netflix and Disney, you can have both. But if you had to choose, which would you pick?