Disney ends deal with Netflix

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The Walt Disney Company has just become one of the biggest cord-cutters Hollywood has ever seen, as the company’s third quarter report revealed a major announcement about its latest growth strategy plan for the next two years.

Starting 2019, Disney announced it would opt-out on its distribution deal with Netflix for new movie releases, while also acquiring majority ownership of BAMTech – the streaming-video company founded by Major League Baseball – in a 1.58-billion-US-dollar deal.

“This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the company, one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands,” Disney CEO Bob Iger said in a statement.

Bob Iger attends the World Premiere of Lucasfilm's "Rogue One: A Star Wars Story", in Hollywood, California, on December 10, 2016. / AFP Photo

Last year, Disney acquired a 33-percent stake in BAMTech for one billion US dollars under an agreement that included an option to acquire a majority stake.

With the new plan roll-out, Disney will hold a 75-percent stake and the streaming services to be available for purchase directly from Disney and ESPN, in app stores and from authorized pay-TV partners.

The new Disney-branded service

The new online streaming service has plans to become the exclusive video on demand (VOD) portal for subscribers to access the latest releases movies from Disney and Pixar beginning with the 2019 theatrical slate.

Those are set to include “Toy Story 4,” the sequel to “Frozen,” and “The Lion King” from Disney’s live-action division.

It remains to be decided where co-productions by Marvel Entertainment and Lucasfilm studios will be distributed.

Variety magazine reported that these films could be licensed to a third-party subscription VOD service or stay in-house, either on their own dedicated service or on the Disney-branded service planned for 2019.

ESPN streaming services

The revised plan for ESPN on demand streaming platform will include 10,000 live games from leagues including Major League Baseball, the National Hockey League, Major League Soccer, college sports and Grand Slam tennis coverage, Disney said in the statement.

“For many sports fans, this app will become the premier digital destination for all their sports content,” a spokesperson said.

The Netflix company logo at Netflix headquarters in Los Gatos, California. Netflix / AFP Photo

How will this affect the bottom line?

Shares of the conglomerate were falling 3 percent in after-hours trading after it reported quarterly revenue of 14.2 billion US dollars, around 180 million US dollars less than Wall Street expected.

Profit, though, came in at 1.58-US-dollar per share, 3 cents more than projected.

The companies studio entertainment division saw revenue fall by 16 percent to 2.4 billion US dollars and operating income fall b y17 percent to 639 million, thanks in part to a decrease in home entertainment because "Star Wars: The Force Awakens" last year outsold "Rogue One: A Star Wars Story" this year, reported the Hollywood Reporter.

Profits at the company’s parks and resorts were a bright spot, as revenue rose by 12 percent to 4.9 billion US dollars and operating income grew by 18 percent to 1.2 billion, with Shanghai Disney Resort and Disneyland Paris contributing to the growth.

Disney plans to focus on a “significant investment” in an annual slate of original movies, TV shows, short-form content and other Disney-branded exclusives for the service.

The subscription service will also feature library content, including Disney and Pixar movies and shows from Disney Channel, Disney Junior and Disney XD.