Instead, the Mouse House is going off on its own, launching two separate streaming services by 2019 that will exclusively feature highly-anticipated films such as "Toy Story 4" and the coming "Frozen" sequel. With Disney comprising 30% of all Netflix viewing in the U.S. currently, some are wondering whether the move might jeopardize Netflix's dominance.
Not everyone is that worried, however. Netflix can rely on its growing library of original series and movies, as well as numerous other deals it has with content providers, to fill the noticeable hole left by Disney, analysts said. Having the rights to Disney content is good for any platform, but several analysts contend Netflix can survive without it. Further, Disney programming was only available in the U.S., so it shouldn't affect Netflix's global services and prospects, said Cantor Fitzgerald analyst Kip Paulson.
"Unlike traditional pay-TV networks (HBO, Showtime, Starz, etc.), Netflix has an exceptionally broad array of films and TV programming in its buffet," said Jeffrey Logsdon, managing director of JBL Advisors, by email.
Netflix has been more than willing to shell out large sums of money to build original content (it has a $6 billion budget for content, including licensing, in 2017) and may ramp that up even further to help respond to the loss of Disney content. Jefferies analyst John Janedis said he expects Netflix will invest more in original kids programming to limit any potential impact to subscriber growth or churn. Netflix seems laser-focused on creating original content, Janedis said, as evidenced by its planned acquisition of comic book publisher Millarworld, which was announced on Monday.
The company has also made some inroads in the original film space (titles like "Okja" have been well received). JPMorgan analyst Doug Anmuth estimated that original movies account for about 5% of Netflix's total spending on original content, but that budget looks likely to increase. "We believe licensed content will always be an important part of Netflix's service, but Netflix is clearly becoming less dependent on 3rd-party content over time," Anmuth added.
A scene from Netflix's "Okja."
It remains unclear, however, whether Disney will be removing only Disney and Pixar films from Netflix, or if it will also be bringing over Marvel and Star Wars films. Disney CEO Bob Iger said on the company's earnings call on Thursday that Disney hasn't decided yet on streaming distribution plans for its Lucasfilm and Marvel titles, but noted that Disney's own streaming service will include "all Disney content." The decision could wind up having a big impact on Netflix.
Disney's Media Networks group also includes ABC, ESPN, Freeform and the Disney Channel.
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"The [question] is, does all Disney content content include all Disney content licensed by Netflix -- which is a lot of shows?" said Wedbush analyst Michael Pachter. "We're left to guess. So my guess is Netflix gets everything yanked and there's nothing left from Disney on Netflix."
"If Netflix wants to have a service that looks more like HBO, then everything Disney is going to have to be exclusively on the Disney service," Pachter added.
Anmuth noted that even if the Marvel films eventually go to Disney's direct-to-consumer service, Netflix will still have some Marvel TV series originals, including "Daredevil," "Jessica Jones" and "Iron Fist," among others.
Disney's decision on Tuesday has some precedent. In 2012, Lions Gate Entertainment's (LGF.A) Starz lost the rights to Disney films to Netflix, which many interpreted at the time as a huge blow to the pay channel. However, Bernstein analyst Todd Juenger argues that it didn't have much of a visible impact on Starz or its subscriber growth because the rest of the service remained appealing to consumers. There's been no real impact on Starz subscriber acquisition, churn or net paid subscribers since Disney moved over to Netflix, he added.
"If losing Disney movie output hasn't impacted Starz, then it shouldn't impact Netflix," Juenger wrote in a note to clients on Wednesday. "In fact, we'd go so far to say yesterday's announcement of six new David Letterman episodes coming to Netflix in 2018 is a bigger good guy for Netflix in the U.S., than the Disney announcement is a bad guy."
Netflix will also have a decent amount of time to build a plan for "life after Disney/Pixar," Juenger pointed out, since the current contract expires at the end of 2018.
The bigger threat to Netflix may lie in what Disney's move means for other companies that license their content to Netflix. CBS (CBS) rolled out its direct-to-consumer offering, CBS All Access, earlier this year, alongside similar offerings from 21st Century Fox (FOXA) . Unlike Disney, CBS and Fox still have content available for streaming on Netflix. But that could change soon, starting a worrisome trend for Netflix, Pachter explained.
"Is this the first card in a house of cards?" Pachter said. "If the house of cards comes tumbling down, the next most likely is CBS because they have a standalone service. If you're CBS and you don't want people to get your content cheaper, quit giving it to Netflix."