Disney, the world’s largest entertainment company, outlined plans Tuesday to sell some of its premiere content directly to consumers online starting next year. It’ll offer live sports and animated films including “Toy Story 4,” sidestepping partners from Netflix to pay-TV providers like Comcast and DirecTV.
“If you look at Disney’s businesses, except for the theme parks, virtually all of the businesses touch consumers through third parties, everything from big box retailers to the owners of motion-picture theaters,” Disney’s chief executive officer said in an interview on Bloomberg TV. “This is an opportunity to reach the consumer directly.”
The need for Disney to act was underscored by the company’s fiscal third-quarter financial results, which were also announced Tuesday. Sales and profit fell because of weakness in the company’s big cable TV division, especially ESPN, where subscribers and ad sales shrank. Still, Iger’s decision shocked investors, sending shares of both Disney and Netflix lower in late trading.
Disney’s plans include a new online ESPN service next year that would broadcast more than 10,000 live sporting events, including major league baseball, hockey, soccer and tennis for what Iger called a “reasonable” monthly fee. In 2019, the company will launch a Disney video service, featuring live-action films, Disney Channel TV shows and Pixar movies.
In the process, the Burbank, California-based company said it’s ending a deal to offer its newest films online through Netflix, the video-streaming pioneer. That will stop in 2019. Consumers, Iger said, are moving rapidly online and Disney needs to move with them. Shares of Disney fell 3.5 per cent to $103.28 in early US trading. Netflix, which is losing a key supplier, was down 3.6 per cent to $171.90.
Iger, 66, has shown a willingness to make big bets in the past. To revive the company’s flagging film business, he spent $15.2 billion over almost a decade buying a trove of movie ideas: Pixar Animation, Marvel Entertainment’s cast of comic superheroes and Lucasfilm’s “Star Wars” franchise. Now, he’s focusing on Disney’s biggest business, television, where cord cutters and cord shavers threaten two crucial sources of revenue — advertising and subscriber fees.
The immediate fallout for Netflix looks minimal, though investors may fear other Hollywood studios will move against the company and further restrict what they sell to the online service. Netflix will spend more than $6 billion on programming in 2017, much of it from other media outlets, and has a long term budget of $15.7 billion, with a significant portion dedicated to the company’s own original productions.