Media and entertainment giant Walt Disney Company on Tuesday announced a move to bolster its subscription and streaming empire as it plans to end its relationship with Netflix and ramp up its online ESPN offerings.
Disney said no new releases will be available on Netflix after 2019. Instead, Disney will launch its own video streaming service that year for consumers to directly access the company's movies and shows. To help its cause, Disney announced it was buying a majority ownership in BAMTech, a streaming video company, for more than $1.5 billion.
“Today we announced a strategic shift in the way we distribute our content,” said Robert A. Iger, chairman and chief executive, the Walt Disney Company in a statement. “The media landscape is increasingly defined by direct relationships between content creators and consumers.”
The company announced the shift as it reported flat revenue growth and 9 percent decline in profit for its most recent quarter.
Disney said the new ESPN streaming service would offer much of the same content that it offers now through cable television following other networks that are trying to appeal to so-called cord cutters.
On the company conference call, Iger reaffirmed his belief in ESPN, saying that it remains a profitable entity.
Disney reported that cable network revenue declined 23 percent largely due to troubles at ESPN. The company attributed the slide to higher programming costs, lower advertising revenue, and severance and contract termination costs. ESPN recently laid off a number of its employees, including prominent on-air talent, as it continues to see customers drop their cable service and flee to rival streaming services. ESPN was also hurt by a decrease in average viewership and the impact of two fewer games of the NBA Finals.
Studio entertainment declined 16 percent for the company, which is partially because of the lack of big movies Disney released this year compared to the same time last year. In 2016, the company was carried by a number of movies
such as “Captain America: Civil War,” “The Jungle Book,” and “Alice Through the Looking Glass.” The past quarter, major hits such as “Guardians of the Galaxy Vol. 2,” “Pirates of the Caribbean: Dead Men Tell No Tales” and “Cars 3” did not fare quite as well. Still, studio entertainment should finish the year off strong with major movies like “Thor: Ragnarok” and “Star Wars: The Last Jedi” set to hit theaters, the company said.
Meanwhile, tourism at its theme parks boosted revenue for the quarter by 12 percent to nearly $5 billion. Revenue from the company's international theme parks in Paris and Shanghai helped Disney see its sales increase in the busy summer tourism season.
In describing the new streaming services, Iger said on a conference call with investors Tuesday night that the company would create TV shows and movies exclusively for its own branded offering.
“It's not just a defensive move, it's an offensive move,” he said.