How the Disney-Branded Streaming Service Affects Its Deal with Netflix
Nature of Disney’s agreement with Netflix
During its fiscal 3Q171 earnings call, The Walt Disney Company (DIS) announced that it was launching two new streaming services. It announced the launch of ESPN’s direct-to-consumer service and a Disney-branded streaming service. While Disney expects to launch ESPN’s direct-to-consumer service in early 2018, it expects to launch the Disney-branded streaming service in 2019.
Disney stated during its fiscal 3Q17 earnings call that with the launch of its Disney-branded streaming service, it intended to end its SVOD (subscription-video-on-demand) distribution agreement with Netflix (NFLX) for its movies. This change would begin with its 2019 theatrical slate.
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Netflix entered into an agreement with Disney to distribute its movies for the Pay 1 and Pay 2 windows for Disney’s movies released from 2016 onward. However, Disney’s agreement with Netflix for the Pay 1 window of its movies is restricted to only the United States (SPY) and Canada.
When Disney was asked during its fiscal 3Q17 earnings call whether it intended to launch its Disney-branded service globally, the company did not rule it out completely. Disney noted that the international rollout of its streaming service would depend on its existing content distribution agreements and market dynamics in its international markets.
Disney’s streaming service and its impact on the Netflix–Disney deal
According to Disney’s current deal with Netflix, Netflix can also stream movies from Disney’s Marvel, Lucasfilm, and Pixar universes. Disney was asked during its fiscal 3Q17 earnings call whether the end of its deal with Netflix in 2019 would mean that the streaming service wouldn’t be able to stream movies from the Star Wars and Marvel universes.
According to a CNBC report from September 7, Disney’s CEO, Bob Iger, stated at the Bank of America Merrill Lynch Media, Communications & Entertainment Conference that the Disney-branded streaming service would exclusively stream movies from the Marvel and Star Wars universes.
- fiscal 3Q17 ended July 1, 2017 ↩