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Disney Ending Movies on Netflix for Proprietary Streaming Service

8 Aug, 2017 By: Erik Gruenwedel

The Walt Disney Co. Aug. 8 announced it would pull theatrical releases from Netflix in order to launch its own subscription streaming service by 2019. The move will affect venerable Disney brands such as “Lion King,” “Star Wars,” “Frozen” and “Toy Story,” among others.

The news dropped Netflix shares 5% in midday trading.

In a fiscal note, Disney CEO Bob Iger said Disney movies would remain on Netflix through 2018. Marvel-branded TV shows would remain as well.

“The media landscape is increasingly defined by direct relationships between content creators and consumers, and our control of BAMTech’s full array of innovative technology will give us the power to forge those connections, along with the flexibility to quickly adapt to shifts in the market,” Iger said in a statement. “This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy … one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands.”

Disney and Netflix established a landmark pay-TV deal for theatrical movies on the SVOD service in 2012. That agreement ended Starz exclusive digital rights to Disney movies. Netflix does not have global streaming rights to Disney movies.

"We'll rollout the [SVOD] service in multiple markets outside the United States, but it will vary from market to market based on existing distribution agreements and different market dynamics. I think you have to think about a Disney branded direct-to-consumer subscription service as a global product, even though we are being more specific today about launching a domestic product in the latter part of 2019," Iger said on the fiscal call.

Iger hasn’t been shy about Disney’s over-the-top video plans, saying the company would aggressively move into the space — notably with ESPN and other brands. He said a decision on Marvel and Lucasfilm movies continuing to Netflix hasn't been decided.

The media giant last year acquired majority interest in BAM Tech for $1.58 billion, which was a subsidiary of MLB Advanced Media.

"This represents a big strategic shift for the company," Iger told CNBC. "We felt that having control of a platform we've been very impressed with after buying 33% of it a year ago would give us control of our destiny."

Separately, home entertainment revenue declined due to lower unit sales driven by the performance of Star Wars: The Force Awakens in the prior-year quarter compared with Rogue One: A Star Wars Story in the current quarter. Other significant titles in the current quarter included Beauty and the Beast and Moana, compared with Zootopia a year ago.

Notably, Moana and Rogue One: A Star Wars Story remain the two top-selling DVD/Blu-ray Disc titles in 2017, according to The-Numbers.com. The titles have combined revenue of $159 million on disc sales of more than 6.6 million. By comparison, Zootopia has sold $100 million in discs, while The Force Awakens has sold $180 million worth of discs.

About the Author: Erik Gruenwedel

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