Why Disney Is Prepared to Cut the Cord
Disney to stop showing its movies on Netflix in 2019
After announcing its fiscal 3Q17 results on August 8, Walt Disney (DIS) announced that it would no longer stream its movies on Netflix (NFLX) starting in 2019. The world’s largest entertainment company wants to start a direct-to-consumer streaming service in 2019 that would show its movies exclusively.
The media giant also plans to start a streaming service for ESPN in 2018. The ESPN streaming service would include MLB, NHL, and MLS (Major League Soccer) programming.
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Cable companies and Netflix feeling the heat
Disney’s announcement is a blow for Netflix and cable providers. Netflix stock fell 7% in after-hours trading after the announcement. Disney’s Cable segment seems to be struggling, as the chart above shows. Its cable operating income fell 23% YoY. Media companies such as Disney continue to cut the cord, affecting cable providers negatively.
This move comes at a time when media companies are looking to reduce their reliance on licensing revenues from Netflix. Disney stated that it would offer sequels of hits like Frozen and Toy Story on its streaming service.
Disney plans to pay ~$1.6 billion to acquire another 42% of BAMTech in addition to the 33% stake it bought for ~$1.0 billion in 2016. BAMTech is a direct-to-consumer streaming technology company.