To roll out its streaming services, The Walt Disney Co. will take majority control of BAMTech, a streaming arm of Major League Baseball spun off previous year from Baseball Advanced Media, for $1.58 billion. Before this, Disney already had a 33 percent stake after paying $1 billion in August of 2016. Once launched, Disney's streaming service will serve as direct competition to Netflix.
A dedicated ESPN streaming service should be up and running by early next year.
But analysts say the move is likely to have only limited impact on the Netflix juggernaut and represents an effort by Disney to keep pace with the industry shift to online television services.
But the big news in the release wasn't about earnings, it was that Disney was going to remove its movies from Netflix, Inc.
What Disney - and by association, Marvel - content exists on the European Netflix platform is going nowhere for now.
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It's not just millennials kissing their growing cable bills goodbye these days, and Disney's feeling the pain as it's shedding ESPN and Disney Channel subscribers with every passing quarter.
Disney's defection, announced on Tuesday alongside quarterly results showing continued pressure on sports network ESPN, is a calculated gamble that the company can generate more profit in the long run from its own subscription service rather than renting out its movies to services like Netflix. That would allow it to bypass the cable companies it relies on - and Netflix - to charge consumers directly for access to its popular movies and sporting events.
In a statement, the company explained Disney's move only affects its pay one output deal for theatrical films.
Instead, Disney plans to offer the surplus content from the collective rights portfolios of ESPN and BamTech. It also acquired Millarworld to make TV shows and movies based on that company's graphic novels. "Parents take their kids to see the next Disney movie, and sports fans will follow ESPN".
Disney signed a landmark deal with Netflix for it to become the exclusive distributor of its properties (Marvel, Disney, ABC) - that is until today.
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It does not undermine back-catalogue material, or the ongoing relationship whereby Netflix creates original content using characters owned by Disney.
"Monolithic, global exclusive deals with Netflix are troublesome", Fox Co-Chairman Lachlan Murdoch said Wednesday on a call with analysts.
It's a different story for channel-specific services. Olson predicted that the number of worldwide subscribers could be at 100 million by 2020. That's at a price point that's $3 a month less than Netflix for its commercial-saddled streaming service, and matches Netflix for the ad-free offering.
One can argue that Disney is making the right move here. However, cord-cutters are doing what they do because they want to spend less on video entertainment, and that trend won't change.
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