Disney, Ditching Netflix, Grabs a New Key to the Kingdom
The company said it was buying 42 percent of the internet distributor BamTech for $1.6 billion (bringing its stake to 75 percent), creating its own direct-to-consumer streaming service,
and severing its lucrative licensing deal with Netflix for Disney-branded content in the United States.
Disney will be losing substantial licensing revenue, betting
that it can build its own direct-to-consumer model, capture the full value of its programming and find a new path to revenue growth as cable channels decline.
But as internet streaming disrupts channels like cable
and broadcast, Disney now appears to have set its sights on distribution — and a potential new revenue source.
Fifteen percent of a big number is a lot better than 100 percent of nothing.”
As Mr. Creutz put it in a research note, Disney’s move is putting “a very settled
and successful part of the business model” at risk and “more aggressively pushes the traditional content business into terra incognita
When AT&T announced its plan to take over Time Warner 10 months ago, Disney’s chief
executive, Robert A. Iger, said the deal proved yet again that “content is king.”
So Disney’s abrupt strategic shift just two weeks ago sent shock waves through Hollywood, Silicon Valley and the telecommunications industry.
As long as Netflix was primarily a distributor, it posed no threat to Disney,
and offered a revenue source to complement Disney’s cable channels and movies.
