When I first read on Tuesday that The Walt Disney Co. (DIS) won't renew its movie-licensing deals with Netflix Inc. (NFLX) when it expires at decade's end, and instead put its films on a rival streaming service, my first thought was, "this is a bit like pulling the plug on Skynet after it's become self-aware."
In hindsight, that was a little off. It's more like pulling the plug after Skynet is self-aware, and then waiting another two years to react to Skynet's moves. The market's realization of how belated Disney's move will be explains why Netflix fell a mere 1.5% in response to it -- shares are still up 42% on the year -- much less than the 3.9% drop Disney recorded in the wake of a disappointing June quarter report.
There was a point in Netflix and Amazon.com Inc.'s (AMZN) history as streaming providers where a concentrated effort by Disney and other media giants to avoid licensing popular movies and shows to third parties in favor of only airing them on their own streaming services may have succeeded in preventing Netflix and Amazon from becoming monsters (admittedly, Amazon's resources and Prime bundling strategy would've made it tougher to thwart).
Now, Netflix and Amazon have reached a point where the likes of Disney and Time Warner Inc.'s (TWX) HBO can merely hope that consumers will buy their streaming services to complement what they're getting from Netflix/Amazon. And in the process, they'll only serve to heighten the long-term pressures faced by legacy revenue streams.
Disney says its company-branded streaming service, due at some point in 2019, will be the exclusive home of Disney and Pixar films starting with its 2019 theatrical slate. Disney will also supply the service with original shows and movies, and library content that includes "Disney and Pixar movies and Disney Channel, Disney Junior and Disney XD television programming." The service, along with an ESPN service launching next year, will rely on streaming infrastructure provider BAMTech -- Disney just paid $1.58 billion to up its stake in BAMTech to 75% from 33%.