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Will Disney's Daring Move Pay Off?

28 Aug, 2017 By: Stephanie Prange

In the battle over whether content is king, The Walt Disney Co. has just thrown down the gauntlet, pulling its movies from Internet goliath Netflix and planning to distribute them on its own service.

It was a daring change of strategy by the studio that had previously been a key partner to the subscription video-on-demand leader, satisfied with collecting lucrative licensing fees while helping to build the library of a digital platform that is increasingly eating into the profits of the entertainment establishment. Having built its service on the content of traditional entertainment companies such as Disney, Netflix in recent years has been creating its own — in effect, becoming a studio itself. Surely, studio executives — including Disney CEO Bob Iger — have taken seriously this existential threat.

At the moment, Disney has a corner on some of the best content Hollywood has to offer, despite the increased investment of Netflix, Amazon Prime and others in original content. That makes the studio perhaps the best content owner to meet the challenge of creating its own service.

Still, is Disney’s Iger crazy to take on Netflix — or is he crazy like a fox?

While I’m not in on the deal that Disney signed with Netflix in 2012, it may be that the studio was getting more out of the agreement than hundreds of millions in licensing fees. The deal may have given the studio key knowledge about the SVOD business, knowledge that it can leverage in building its own service.

Some analysts note that SVOD leader Netflix is so far ahead in the SVOD market that Disney is too late to the party. That may be true, but with SVOD eating into content owners’ bottom lines more and more each quarter, I applaud Disney for attempting to take a bite out of the SVOD business.

"We felt that having control of a platform we've been very impressed with … would give us control of our destiny,” Iger said.

Indeed, Disney’s move could help content remain king.

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