Disney cuts ties with Netflix to launch its own SVOD

Amid declines in its Q3 cable and broadcasting earnings, Disney is set to launch its own, untitled streaming service and will stop providing Netflix with movies.
August 9, 2017

In a blow to Netflix, the House of Mouse has announced it will pull its movies from the streaming behemoth and offer its own direct-to-consumer SVOD service in 2019.

Marking a new growth strategy for the company, the move will see Disney end its first window pay-TV deal with Netflix for new releases when the seven-year agreement expires in 2019. All of Disney’s future live-action and animated movies—beginning with the 2019 theatrical slate, which includes Toy Story 4, the sequel to Frozen and The Lion King from Disney live-action—will then stream on the currently untitled platform exclusively in the US. An international rollout and pricing is yet to be announced.

In addition, Disney will invest in an exclusive annual slate of new original movies, TV series and short-form content for the service produced by its studio, Disney Interactive and the company’s Disney Channel teams. Library content will also head to the platform including Disney and Pixar movies and Disney Channel, Disney Junior and Disney XD television programming.

There’s no word yet on whether Disney’s Marvel Universe and Lucasfilm features (Star Wars franchise) will head to the service or not.

Prior to the platform’s launch, Disney has also announced it will offer an ESPN-branded multi-sport video streaming service in early 2018.

To help get the service off the ground, Disney has acquired an additional 42% stake worth US$1.58 billion in direct-to-consumer streaming company BAMTech from Major League Baseball’s interactive media and internet subsidiary, MLBAM. With Disney’s previous 33% stake, the company is now the majority stakeholder in BAMTech and upon the closing of the deal, Disney CEO Bob Iger will serve as chairman of the board.

The new services don’t officially mark Disney’s first foray into the SVOD space, as its DisneyLife platform has been available in the UK as an iOS and Android streaming app and in China as an OTT service since late 2015. Until Disney announces a global strategy for its new kids and family service, its impact on DisneyLife is unknown.

The Disney news arrives just days after CBS revealed its CBS All Access SVOD service will launch internationally next year beginning with Canada.

While Disney’s move is a loss for Netflix, the streaming giant has its own plans for original content growth, having just acquired comic book publisher Millarworld in a deal that marks the company’s first-ever acquisition.

Disney’s new SVOD distribution strategy comes amid a 2% drop in the company’s Q3 2017 earnings from US$1.62 billion a year ago to US$1.58 billion this quarter. The results follow a 15% earnings increase to US$2.39 billion in the fiscal second quarter, which was driven by global box-office hits Beauty and the Beast and Rogue One, along with the successful opening of Shanghai Disney Resort.

For Disney’s Studio Entertainment division, Q3 revenue fell 15% to US$2.4 billion and operating income dropped 17% to US$639 million. The operating income decline was due to lower theatrical and home entertainment distribution results, partially offset by TV/SVOD distribution growth and lower film costs.

As for Disney’s Media Networks segment, revenue decreased 1% to US$5.9 billion, while operating income dipped 22% to US$1.8 billion. Revenue for Cable Networks and Broadcasting decreased 3% and 4%, respectively, to US $4.1 billion and US$1.8 billion.

Looking at Parks and Resorts, revenue went up 12% to US$4.9 billion driven by international increases at Shanghai Disney Resort and Disneyland Paris. Disney has high hopes to boost its domestic parks and resorts revenue when its Star Wars: Galaxy’s Edge opens at Disneyland Park in Anaheim in 2019.

About The Author
Jeremy is the Features Editor of Kidscreen specializing in the content production, broadcasting and distribution aspects of the global children's entertainment industry. Contact Jeremy at jdickson@brunico.com.



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