Walt Disney Co., once again shaking up the media industry, announced it will stop selling movies to Netflix Inc. and begin offering family films and ESPN sports programming directly to consumers over two new streaming services.
Starting next year, an ESPN-branded service will feature 10,000 live events a year, including Major League Baseball, hockey, soccer and tennis, as well as college sports, Disney said Tuesday in a statement. Individual sports packages will also be available.
The ability to stream some of Disney's most valuable sporting events and shows without a cable TV subscription underscores how rapidly the business is changing in the wake of online services from Netflix Inc. and Amazon.com Inc. -- and how seriously Chief Executive Officer Bob Iger views the threat.
"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," he said in the statement.
In 2019, the company will introduce an online service featuring newly released Disney films, as well as new programs and content from the company's library of Disney Channel and other content. Its current deal to stream newly released movies with Netflix will end.
Disney shares fell as much as 2.6 percent in extended trading after the announcements. Netflix shares fell 3.5 percent. Netflix said in an email that its relationship with Marvel television, which is owned by Disney, would continue.
To jumpstart the services, Disney is buying control of BamTech, the streaming arm of Major League Baseball, of which it previously held a one-third stake. The company is paying $1.58 billion to raise its stake to 75 percent.
"The media landscape is increasingly defined by direct relationships between content creators and consumers," Iger said in the statement. "This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the company."
As if to underscore the growing threat to its media business, Disney on Tuesday reported fiscal third-quarter sales that missed analysts' estimates because of shrinking ad sales at ESPN and lower results from its film division.
Sales were little changed at $14.2 billion in the period that ended July 1, Disney said, and trailed analysts' estimates of $14.4 billion. Profits fell to $1.58 a share, beating the $1.55 average of analysts' projections.
Profits at the company's cable networks division fell 23 percent to $1.46 billion, attributed to higher programming costs and lower ad revenue.
Disney warned last year that fiscal 2017 would be difficult, hurt by rising costs to televise National Basketball Association games and because fewer films were being released by its studio.
Information for this article was contributed by Brooks Barnes of The New York Times.
Business on 08/09/2017