Disney to End Netflix Deal, Sets Launch of ESPN and Disney-Branded Streaming Services

Toy Story 3
Courtesy of Disney/Pixar

Disney to acquire majority stake in BAMTech from Major League Baseball for additional $1.58 billion

Disney is ending its distribution agreement with Netflix for new movie releases, while it’s also buying majority ownership of BAMTech — the streaming-video company founded by Major League Baseball — in a $1.58 billion deal.

The moves set a clear course for the media giant to launch Netflix-style direct-to-consumer internet services from ESPN and Disney. Disney said will end its distribution agreement with Netflix for subscription streaming of new movie releases, beginning with the 2019 theatrical slate.

“This acquisition and the launch of 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,” Disney CEO Bob Iger said in a statement. The company announced the plans as part of reporting fiscal Q3 earnings, which included a 3% revenue decline in its cable networks group.

The media conglomerate said it will launch an ESPN-branded multi-sport video streaming service in early 2018, followed by a new Disney-branded direct-to-consumer streaming service in 2019. Those will be powered by BAMTech, in which Disney will hold a 75% stake. The current plan is for Disney and ESPN streaming services to be available for purchase directly from Disney and ESPN; in app stores; and from authorized pay-TV partners.

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Disney didn’t provide details on what the new over-the-top services are expected to cost.

The new Disney-branded service will become the exclusive home in the U.S. for subscription VOD access to new releases from Disney and Pixar beginning with the 2019 theatrical slate. Those are set to include “Toy Story 4,” the sequel to “Frozen,” and “The Lion King” from Disney’s live-action division.

Disney hasn’t yet determined streaming distribution for films from its Marvel Entertainment and Lucasfilm studios. Those movies could be licensed to a third-party subscription VOD service or stay in-house (either on their own dedicated service, or on the Disney-branded service planned for 2019).

In addition, Disney said it expects to make a “significant investment” in an annual slate of original movies, TV shows, short-form content and other Disney-branded exclusives for the service. The subscription service also will feature library content, including Disney and Pixar movies and shows from Disney Channel, Disney Junior and Disney XD.

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The revised plans for the ESPN-branded multi-sport service are much broader than the over-the-top play Disney originally had slotted for the end of 2016. The new service will include about 10,000 live games from leagues including Major League Baseball, the National Hockey League and Major League Soccer. It also will include collegiate sports and Grand Slam tennis coverage. Noticeably missing from the lineup in the forthcoming ESPN OTT service are NFL and NBA games — the two most popular pro sports in the U.S.

“For many sports fans, this app will become the premier digital destination for all their sports content,” Disney said in its announcement.

Even with the launch of ESPN’s subscription sports service, Disney said OTT packages for individual sports will also be available for purchase, including MLB.TV, NHL.TV and MLS Live. The new service will be based on an “enhanced version” of the current ESPN app, which will continue to offer pay-TV subscribers access the ESPN programming on an authenticated basis.

Under terms of the deal for BAMTech, Disney will pay $1.58 billion to acquire an additional 42% stake in the New York-based streaming and video infrastructure company from MLB Advanced Media, the interactive media and internet unit of Major League Baseball. A year ago, Disney acquired a 33% stake in BAMTech for $1 billion under an agreement that included an option to acquire a majority stake.

Disney’s acquisition of a controlling stake gives BAMTech a valuation of $3.75 billion. MLBAM will retain a 15% stake in the company.

“We’re very proud of the content distribution innovations driven by MLBAM and BAMTech over the past 15 years,” MLB commissioner Rob Manfred commented. “Major League Baseball will continue to work with Disney and ESPN to further grow BAMTech as it breaks new ground in technologies for consumers to access entertainment and sports programming.”

The BAMTech transaction is subject to regulatory approval. Once the deal closes, Iger will serve as chairman; MLBAM and NHL will continue as minority stakeholders in BAMTech, with seats on the board.

BAMTech CEO Michael Paull — a former senior video exec at Amazon who joined earlier this year — will report to Kevin Mayer, Disney’s senior executive VP and chief strategy officer. Disney said that John Skipper, ESPN president and co-chairman of Disney Media Networks, will manage the new ESPN-branded service.

“This is an exciting validation of our team, its achievements and the customer-centric platform it’s built,” Paull said in a statement. “Yet, we’ve merely scratched the surface of what can be accomplished in a future where we combine Disney and ESPN’s world-class [intellectual property] and our proprietary direct-to-consumer ecosystem.”

Currently, BAMTech designs, develops, and delivers direct-to-consumer streaming services for partners including HBO Now, MLB, NHL, MLB, PGA Tour, WWE Network, and Riot Games’ “League of Legends.” Through a partnership with Discovery Networks, BAMTech Europe will provide technology services on the continent, including Eurosport’s digital products.

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  1. paulurbahns says:

    Disney has a huge back library that they could put on the new service, but the kids that run the company would not consider the old black and white Disneyland shows with Walt as “marketable” material. I am disappointed with the quality of archival Disney DVD releases as they don’t include Walt’s introductions to the various Disney films as “extras” on the disks.
    Don’t expect anything except new productions on this service nor expect many people to leave Netflix or Amazon’s streaming services.

  2. Deshawn Anderson says:

    A similar over the top all-Disney service already exists in other markets and has been well received.

    Not sure why this caught everyone off-guard and what most comments seem to fail to consider in their calculation is the overwhelming affinity for Disney branded content among families and the ‘every-device’ distribution concept that marries up perfectly in a one-tablet for every child in the household scenario which dominates many American households.

    There will be some growing pains and I certainly understand the whole idea of subscription fatigue being expressed by others – but, factoring all things, in this is a long-game move which I believe will pay off for Disney.

  3. Ann Morgan says:

    I am a Netflix subscriber, but I am not personally upset to lose Disney as part of the package. But the flaw for me, when these companies depart to become a separate entity, is that they feel that their value is equal to their cost when they were part of a larger offering. I believe The Criterion collection has gone down the same road. Ten dollars a month ( or whatever each company charges) seems reasonable until you realize you are now going to pay out 300% more to recieve essentially the same content. People whose interests that are very specific may not mind, because they will not choose multiple subscriptions, but the generalist will be hit in the pocket.

  4. Lando says:

    More fractured streaming services. $10 to HBO, $10 to Disney $ 10 to Netflix $10 to Hulu $10 to Amazon. How much for NFL? How much for other movie channels? No wonder kids are watching You Tube all day and playing video games…oh wait gotta pay for YouTube too to get rid of ads. Maybe going back to cable is the answer, maybe I just subscribe to half of these and have no idea what the other streaming services are showing like I do now with Showtime and Starz.

    I still think Amazon is going to win in the end and probably buy up Netflix or someone big to get more content. People keep throwing money at their stock like it can’t lose and Netflix keeps growing…Amazon can cut everyone off at the pass and dominate viewers internationally with an Amazon-Netflix mega service.

    Disney has a problem in their stock is not as trusted, with sports fans being fed up with ESPN no longer focusing on the fun of sports but the manufactured drama of liberal issues, plus they’re down to the NFL, NCAA, and NBA as their only sports. Marvel is great but long term there’s trouble…how many times can you reboot your franchises before they wear thin like the recent Xmen reboot is close to?

    I don’t think Star Wars will save Disney either, but I bet a 10-12 episode Star Wars TV show is now on the table to get subscribers.

    • Grits says:

      Have to disagree with the sentiment here, a sentiment that holds water only if you believe that what consumers want is everything; I think that the erosion in the bundled cable model is evidence that they don’t. The fact that multiple content subscription services exist does not mean that the consumer experience is degraded, but rather, the consumer is given choice to pick they content that they will actually watch and ONLY that content. Doing so, means lower net cost to the consumer, not higher. The deeper fragmentation is ultimately affecting the content networks aversely, not the consumers. I for one, will not be subscribing to an ESPN/Sports anything and am glad to be able to shave it out of my choice of content bundle and save significant amounts of money, considering that it’s ESPN alone that’s contributed to cable/satellite subscriptions prices being as high as they are.

    • Lizzie says:

      Spot on Lando.

    • dee says:

      Lando, I completely agree with your comments. The only thing missing are separate charges for Showtime OTT and CBS All Access.

      • Grits says:

        You can get showtime for $8 per month with a Hulu subscription and CBS for free through an antenna though.

  5. Kent says:

    Disneys awesome level of greed is alive and well!!!

  6. Enrique says:

    Awesome, another overpriced streaming service that I won’t subscribe to. Netflix kinda won the war for movie streaming, and Disney doesn’t put out nearly enough quality content anymore to attract anyone but little kids and the creepiest of Disney-philes. All the real talent went to Pixar, and Disney proper never recovered in quality, even after acquiring them.

  7. saintkaze says:

    This is the problem when Disney owns all the IP.

  8. Larz Larzen says:

    I’m a veteran. I am an American patriot, first, last, and always. I have boycotted Disney and ESPN even before the forced their employees to train their own (foreign) replacements (which I thought was egregious). I’ll have nothing to do with them until they do an about-face.

  9. Bas says:

    And Dems/Liberal Groups are making noise that AT&T is buying Time Warner while Disney is pulling it contents from Netflix. It looks like Distribution and Content is the Future.

  10. Weary says:

    They appropriated some more of Scrooge McDuck’s billions.

  11. mu di says:

    +1 that!

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