Deciphering Disney’s Destiny
Media profits down 22%
The writing has been on the wall for a long time that regular pay-TV companies including Walt Disney (DIS), Charter Communications (CHTR), and Comcast (CMCSA) will struggle to grow their media revenues as the appetite for online videos grows.
Disney is beginning to read the writing on the wall, which now seems more legible after the feeble performance of its Media Networks unit. Disney’s Media Networks division, which houses ESPN, registered a 1.0% drop in sales and a 22% plunge in operating profits in fiscal 3Q17 (ended June 2017).
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Join them if you can’t beat them
But in trying to limit disruptions in its media business, Disney is embracing the disruptor. The company has said that it will launch its own Internet video streaming service similar to the video services of Netflix (NFLX), Hulu, and Amazon.com (AMZN).
But Disney is also launching an online version of ESPN. The ESPN streaming service is expected to launch in early 2018, while the standalone on-demand video service that mimics Netflix is expected to launch in 2019.
Reclaiming movies from Netflix
As part of its online video push, Disney is pulling its movies from Netflix in order to offer them exclusively on its own platform. With its planned Internet video moves, Disney is joining the race for control of the rapidly growing SVOD (subscription video-on-demand) industry.
According to Future Market Insights, the global SVOD market will be worth $108.6 billion by 2026—up from $45 billion in 2014.