Walt Disney Co will stop providing new movies to Netflix in the United States starting in 2019 and launch its own streaming service, the company said on Tuesday, as it tries to capture digital audiences who are ditching traditional television.
The new Disney-branded streaming service will follow a similar ESPN service that will be available starting in 2018, the company said.
A statement from Netflix reads: “US Netflix members will have access to Disney films on the service through the end of 2019, including all new films that are shown theatrically through the end of 2018. We continue to do business with the Walt Disney Company globally on many fronts, including our ongoing relationship with Marvel TV.”
Shares of Netflix fell 3.7 per cent in after hours trade, and Disney stock fell 3.1 per cent. It is unclear if this will affect Disney content in international markets, including Canada.
The streaming services will give Disney “much greater control over our own destiny in a rapidly changing market,” Chief Executive Bob Iger told analysts in a conference call, describing the moves as an “entirely new growth strategy” for the company.
Disney has some experience with the direct-to-consumer model in Britain and could make more money in the long run from its own service, but the move could be “financially less advantageous” in the near term, said Pivotal Research Group analyst Brian Wieser.
Disney said its new services would be based on technology provided by video-streaming firm BAMTech, and announced it would pay $1.58 billion to buy an additional 42 percent stake in that company, which it took a minority stake in last year.
The announcement came as Disney reported a near 9 per cent fall in quarterly profit, pulled down by higher programming costs and declining subscribers at its flagship sports channel ESPN.
The company’s revenue fell marginally to $14.24 billion in the third quarter ended July 1 from $14.28 billion a year earlier.
Net income attributable to the company fell to $2.37 billion, or $1.51 per share, from $2.6 billion, or $1.59 per share.