Disney Pullout Sends Netflix Shares Down

disney-pullout-sends-netflix-shares-down

Shares of Netflix Inc lost more than 4% during Tuesday’s trading session after Disney announced that it will now be pulling out all of its content from Netflix.

Disney who also delivered their quarterly earnings report on Tuesday announced that it is planning to come up with its own streaming service by the year 2019 which also happens to be the time the deal between the two companies will end.

Netflix currently holds the rights to stream Disney movies and content such as Finding Dory, Rogue One, and Moana. Disney who now owns Marvel, however, will still be leaving the shows to be available for streaming on Netflix. Exclusive Disney content such as Pixar content and Disney movies will be available on its new platform before the end of 2018.

In the earnings report, Disney Chief Executive Bob Iger announced that the plan is part of the company’s strategic shift in the way they distribute their content. Disney also has current plans to come up with its own video streaming service for ESPN next year which will show around 10,000 sport events every year and will feature content from leagues such as MLB, NHL, MLS, collegiate sporting events, as well as tennis Grand Slam events.

The announcement from Disney worried investors since the content from the company has been one of Netflix’s highest streamed content during the past couple of years. The company is set to buy a majority stake in BAM Tech at around $1.58 billion. Last year, the company bought a 33% stake in the company. According to Iger, this will give Disney a better control of the platform following its move to buy 33% of stake last year.

Disney’s new platform will then be used to stream upcoming Disney movies which is yet to be released like the announced live-action The Lion King, Toy Story 4, and Frozen 2. Disney also announced that it intends to shell out a significant investment for movies and series that will be shown exclusively in their upcoming new platform.

Disney shares were down for 2% during Tuesday’s after-hours trading after its reported revenue missed most Wall Street expectations. Disney posted a quarterly revenue of $14.2 billion shy of most expectations by $180 million. For the third quarter, Disney’s revenue from its media networks declined by 1% year over year to $5.9 billion. As Disney’s ESPN continuously lost subscribers, the operating income of the company also slumped by 22% to $1.8 billion.

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