Disney is to drop its streaming partner Netflix and enter the streaming market.
It’s not a surprise.
Disney gets a big chunk of revenue from its cable networks, such as ESPN. However, subscriber numbers have been declining and Disney’s net income fell by almost 10% last quarter. It believes this drop is down to changing viewing habits: consumers want to watch online, on-the-go and binge view a series. There’s also a big shift to app based viewing. These trends are something that traditional networks are struggling to keep up with.
Desperate to find growth, Disney has completed its acquisition of BAMTech, a streaming platform for $1.58 billion. Analysts are predicting that this could signal a turning point for the entertainment industry’s widespread adoption of direct-to-consumer streaming services.
However, there are risks.
Disney has lucrative deals with other cable networks which could be jeopardised.
Also, it’s now presenting itself as a direct competitor to Netflix, an established streaming behemoth.
For Netflix, this is a big disappointment.
Disney and Pixar productions are popular draws for their subscribers. And it doesn’t come at a great time: by continuing to grow its stable of own content, Netflix is building up a serious debt pile which is beginning to worry the markets.
Interestingly, the market didn’t respond well to the announcement: shares in both companies were down 4%.