Netflix shares took a small hit in after-hours trading Tuesday after The Walt Disney Company announced it would end its distribution agreement with Netflix for subscription streaming of new releases, starting with the 2019 calendar year theatrical slate.
Netflix shares were down $4.58 (2.57%) to $173.78 each at last check.
Disney said that deal was to come to an end as it pushes ahead with an aggressive plan to offer a wide range of direct-to-consumer services and a deal to nab a majority stake in BAMTech LLC, which will provide the streaming platform that will underpin those new OTT services.
Disney plans to launch its ESPN-branded multi-sport video streaming service in early 2018, promising about 10,000 live regional, national and international games and events a year and delivered through an “enhanced” version of the ESPN app, and follow with new Disney-branded direct-to-consumer streaming services in 2019.
The new Disney-branded service will become the exclusive U.S. home for SVOD viewing of new live action and animated movies from Disney and Pixar, beginning with the 2019 theatrical slate, which includes Toy Story 4, and the sequel to Frozen.
Notably, the new Disney and ESPN streaming services will be offered for direct purchase as well as from authorized MVPDs.
Jordan Cohen, chief marketing officer at Fluent, noted in a statement that “losing Disney content is a blow to Netflix,” but added that Netflix still has a dominant lead in the OTT/SVOD sector, as 48% of Americans already get the service. He also stressed that Fluent’s research shows that affordability and convenience of streaming video, rather than original content, remains the key consumer driver for streaming services.
“So, it will be interesting to see how Disney prices their service and if it will be low enough for a large enough number of Americans to sign up for it in addition to their core Netflix subscriptions and the growing number of people getting on Amazon Prime,” Cohen added, contending that the ESPN announcement is “possibly the bigger announcement here” amid a belief that “nearly a quarter of Americans would sign up for a service allowing them to watch live sports on any device, with football being the biggest opportunity.”
Regarding the BAMTech transaction, Disney chairman and CEO Robert Iger will become chairman of the BAMTech board, with MLBAM and the National Hockey League continuing as minority stakeholders in the multiscreen video technology company.
BAMTech CEO Michael Paull will report to Kevin Mayer, Disney’s senior EVP and chief strategy officer. John Skipper, ESPN president and co-chairman, Disney Media Networks, will manage the new ESPN-branded service.