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Disney Announces It Is Pulling Movies From Netflix; Will Launch Streaming Service

Courtesy of ZeroHedge. View original post here.

Disney served a big surprise moments ago when it reported reported Q3 revenue of $14.24 bn that missed the average analyst estimate, $14.42, even as Q3 EPS of $1.58, above the $1.55 expected.  That was not the surprise: what was is that Bob Iger's entertainment giant just made what was until recently a simmering war with Netflix, hot when the firm announced it would end its streaming act with Netflix, pulling its new release movies starting in calendar 2019, and instead it would launch it own ESPN direct-to-customer video streaming service in 2018.

The platform which will feature about 10,000 sporting events each year, will have content from the MLB, NHL, MLS, collegiate sports and tennis' Grand Slam events.

The announcement from Disney, which is now hoping to become more of a streaming company like Netflix, comes at a time when Netflix is spending billions of dollars on content, and is hoping to become more of a programming company like Disney.

From the press release:

The Walt Disney Company today announced that it has agreed to acquire majority ownership of BAMTech, LLC and will launch its ESPN-branded multi-sport video streaming service in early 2018, followed by a new Disney-branded direct-to-consumer streaming service in 2019.

Under terms of the transaction, Disney will pay $1.58 billion to acquire an additional 42% stake in BAMTech—a global leader in direct-to-consumer streaming technology and marketing services, data analytics, and commerce management—from MLBAM, the interactive media and Internet company of Major League Baseball. Disney previously acquired a 33% stake in BAMTech under an agreement that included an option to acquire a majority stake over several years, and today’s announcement marks an acceleration of that timetable for controlling ownership.

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,” said Robert A. Iger, Chairman and Chief Executive Officer, The Walt Disney Company. “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.”

The ESPN-branded multi-sport service will offer a robust array of sports programming, featuring approximately 10,000 live regional, national, and international games and events a year, including Major League Baseball, National Hockey League, Major League Soccer, Grand Slam tennis, and college sports. Individual sport packages will also be available for purchase, including MLB.TV, NHL.TV and MLS Live.

With this strategic shift, Disney will end its distribution agreement with Netflix for subscription streaming of new releases, beginning with the 2019 calendar year theatrical slate.

Plans are for the Disney and ESPN streaming services to be available for purchase directly from Disney and ESPN, in app stores, and from authorized MVPDs.

The announcement has sent both its and NFLX's shares tumbling.

Meanwhile, for those interested, this is what else DIS reported, courtesy of Bloomberg:

  • 3Q Cable Networks operating profit $1.46 billion, estimate $1.59 billion (Bloomberg News, average of 3)
  • 3Q Cable Networks revenue $4.09 billion, estimate $4.16 billion
  • 3Q media networks revenue $5.87 billion, estimate $5.88 billion
  • 3Q parks & resorts revenue $4.89 billion, estimate $4.83 billion
  • 3Q studio entertainment revenue $2.39 billion, estimate $2.34 billion
  • 3Q consumer/interactive revenue $1.09 billion, estimate $1.23 billion
  • 3Q media networks operating income $1.84 billion, estimate $1.96 billion
  • 3Q parks & resorts operating income $1.17 billion, estimate $1.11 billion
  • 3Q studio entertainment operating income $639 million, estimate $642 million
  • 3Q consumer/interactive operating income $362 million, estimate $376 million

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