Walt Disney Co. will stop providing new movies to Netflix Inc. starting in 2019 and launch its own streaming service as the world’s biggest entertainment company tries to capture digital viewers who are ditching traditional television, Reuters reports.
Disney’s defection, announced alongside its quarterly results on Tuesday, is a calculated gamble that the company can generate more profit in the long run from its own subscription rather than renting out its movies to services like Netflix.
In turn, Netflix and rivals such as Amazon.com Inc and Time Warner Inc’s HBO are pouring billions of dollars into buying and producing their own content and streaming it straight to consumers.
Investors worried that Disney’s entry into a crowded “over-the-top” subscription market and the cost of technology to support its own streaming services would weigh on earnings.
Disney stock fell 4 percent in after-hours trade. Shares of Netflix fell 2.89 percent.
The new Disney-branded streaming service will follow a similar ESPN plan that will be available starting in 2018, the company said, although the ESPN app will not have the main live sports content available on ESPN’s cable offering.
The streaming services will give Disney “much greater control over our own destiny in a rapidly changing market,” chief executive Bob Iger told analysts on 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.
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