Netflix has been around for 20 years in the entertainment industry. It delivers video-on-demand and streaming media in various forms, primarily online, but they still have a legacy DVD rental service. At this time, Netflix has become the de facto leader when it comes to streaming services. But now, a much bigger player wants to do the same. Disney removing content from Netflix is a head start for this competition.
Iger said, “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.”
Walt Disney Company hardly needs introduction, there is scarcely anyone alive who hasn’t heard of their theme parks or movies. But this is just the tip of the iceberg, Disney is a multinational entertainment and mass media corporation, it is one of the largest producers of content and media-driven products in the world. Disney is not only the home of Mickey Mouse and the Little Mermaid, it is also the parent corp of ESPN and dozens of other properties.
The $167 billion titan announced that at the beginning of 2019, it will start streaming not just television shows and films, but sports coverage as well.
In September 2016, Netflix started streaming Disney exclusives from their subsidiaries, such as Pixar, Lucasfilm, and Marvel. Abruptly, Disney decided to take a different route. The action sparked a shock in the media industry. This may be the beginning of a battle for control of content and pricing. Disney took a bold action, which will have impact throughout the industry.
According to Robert Iger, the Chief Executive of Walt Disney Company, “Disney had a good relationship with Netflix, but decided to exercise an option to move its content off the platform. Movies to be removed include Disney as well as Pixar’s titles.”
Iger said they might continue to license Star Wars and Marvel to services like Netflix.
The growth of Netflix has been fast, creating a large following of 103.95 million subscribers. The Los Angeles Times claims that the streaming giant appeals to younger audiences who are turning away from the traditional cable media and other digital platforms. Netflix growth has spurred upheaval and led to fears of dominance, such as happened to the publishing industry under the onslaught of Amazon, which now exerts strong control over pricing and contracts.
In fear of losing control over pricing and subject matter of content, Disney chose to part with Netflix. The continuous popularity of the streaming giant threatens the Disney business model. Disney is particularly well-positioned to make a bid to protect sovereignty over content, as they have long experience in broadcast and distribution. Delivery of content is not necessarily their primary business, but it is not uncharted territory either.
But profit is certainly the primary driver for Disney’s sudden move. The company had weak third-quarter earnings, at $2.37 billion, down by 9%.
Streaming sports like Major League Baseball games and other 10,000 sporting events will also attract people to subscribe to Disney’s new streaming platform. The service of ESPN, which has been a long profit engine for Disney, is expected to be available.
Disney vs. Netflix
The decision of Disney to remove its films from Netflix is not the only problem that the company is facing right now. Netflix is burning through cash at an astounding rate and needs continuous cash infusions just to keep operating. They have high debts, and while they have become the consumer go-to for cheap streaming services, it has been called an insult to the film industry and is making enemies of high-quality content providers almost as quickly as it gains new customers.
It raises the question of the long-term viability of Netflix.
Ted Sarandos, the Chief of Content for Netflix, stated that “Netflix knew there would be fallout from studios like Disney and Fox, who began pulling its shows from the service earlier this year.”
Sarandos knew the split was in the offing and began to invest heavily in original content back in 2015. Netflix is prepared to spend $5 billion on original movies and series this year. Original content can shield them from the departure of Disney and other major studios.
Netflix Original Content
Netflix has a line-up of shows and series that may give the company staying power. Many of them are targeted to niche markets, while others have had wide appeal.
- Master of None
- BoJack Horseman
- Unbreakable Kimmy Schmidt
- Dear White People
- Grace and Frankie
- Orange Is the New Black
- Lady Dynamite
- Wet Hot American Summer: First Day of Camp
- Stranger Things
- Mystery Science Theater 3000: The Return
- One Day at a Time
- The OA
- Jessica Jones
- House of Cards
- W/Bob & David
- The Get Down
- The Characters
- A Series of Unfortunate Events
- 13 Reasons Why
- Friends From College
- Haters Back Off!
- Santa Clarita Diet
- The Ranch
- Luke Cage
- Marco Polo
- The Crown
- Hemlock Grove
- Fuller House
- F Is for Family
Disney Streaming Strategy
Unlike Disney that is just starting the streaming service, there are other media companies that have already sailed their way into streaming different shows. Showtime, Starz, CBS, HBO and even the Tennis Channel has their own digital channels.
Disney has been more reliant on its legacy cable channels for distribution. But they have a relationship with BAMtech, a streaming company that is essentially owned by MLB Advanced Media.
Disney will purchase majority ownership of BAMTech for $1.58 billion, giving them chops in the streaming service industry. Iger said, “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.”
Either because of profit loss or the sudden change of traditional media, one thing is for sure, that Disney intends to be a leader in a diversified media landscape. The company will directly cater to both cable and internet services, and avoid the trap of becoming subservient to streaming services like Netflix. This will allow Disney to continue to focus on high quality content that has been its hallmark over almost a century.
It’s a bold move for Disney, but the time to do it is now.