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Disney Is Dumping Netflix And Launching New Streaming Apps

For now, no Marvel or Lucasfilm movies will be part of the app, but Disney’s CEO says the company has also considered a “Star Wars” streaming service.

Disney Is Dumping Netflix And Launching New Streaming Apps
[Source Images: Ideas_Studio/iStock (pattern)]

Sorry, Netflix: Disney is going over the top.

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During a mixed third-quarter earnings call on Tuesday, Disney CEO Bob Iger announced that the company is ending its licensing deal with Netflix and will start offering Disney and Pixar movies on a Disney-branded subscription service starting in 2019. Iger also said that Disney is launching an ESPN OTT service as the company moves aggressively into the direct-to-consumer space.

Making this pivot possible is a $1.58 billion investment by Disney in BAMTech, the streaming company founded by Major League Baseball. Last year, Disney acquired a 33% stake in BAMTech for $1 billion, but its new stake makes Disney the majority owner.

“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,” said Iger.

The news captivated analysts on the earnings call and steered conversation away from Disney’s uneven financial report for the third quarter. Disney reported quarterly revenue of $14.2 billion, about $180 million less than Wall Street expected, mainly due to the still-ailing ESPN. But profit was $1.58 per share, three cents more than anticipated in part due to better-than-expected performances from the international parks business, namely Shanghai Disney Resort and Disneyland Paris, which is celebrating its 25th anniversary this year. Company shares fell 3% in after-hours trading.

In the U.S. the new Disney app will be the exclusive, subscription video-on-demand home to upcoming releases such as the Frozen sequel, Toy Story 4, and the live-action version of The Lion King. It will also offer access to Disney’s library of TV shows and movies, as well as new, original Disney shows and movies that will be created for the service.

Notable Exceptions

For now, no Marvel or Lucasfilm movies will be part of the app as Disney determines how best to position them to the consumer. Iger said the company had “talked about” launching separate Marvel and Star Wars apps, but that “we have to be mindful of the volume of product. We want to be careful.”

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As for the ESPN-branded, multi-sporting app, it will launch in early 2018 and will include about 10,000 live games from major sporting leagues as well as collegiate sports. So far, there’s no word yet as to whether NFL or NBA games will be on the service. The new app is an “enhanced” version of the current ESPN app, which will continue to allow pay TV subscribers access to ESPN programming.

Iger would not specify how much either of the new services will cost. But he said that these two moves were a “huge priority” for Disney as well as “a strategic shift in the way we distribute our content.” It’s long been anticipated that Disney would follow in the footsteps of media companies like HBO and CBS and begin to offer its content directly to consumers, but the abrupt divorce from Netflix came as a surprise. The 2012 licensing deal between the two companies was seen as a huge coup for Netflix (though Disney benefited as well, and was richly compensated), for which kids programming is a key selling point. Shares for Netflix dropped 4% in after-hours trading.

Meanwhile, the country’s top cable and satellite TV providers are watching customers flee in favor of streaming and on-demand services, according to a new research note from MoffettNathanson. Combined declines for the second quarter of 2017 came close to a million subscribers, the firm estimated, with Dish Network, DirectTV, and AT&T hit especially hard.

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About the author

Nicole LaPorte is an LA-based writer for Fast Company who writes about where technology and entertainment intersect. She previously was a columnist for The New York Times and a staff writer for Newsweek/The Daily Beast and Variety.

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