At the end of 2012, Netflix announced that they had acquired exclusive U.S. rights to movies from Walt Disney Studios. Five years later, Disney announced that it was exercising an option to move its content off the Netflix platform. Among the Disney properties affected are ABC Television Group, ESPN, Marvel Entertainment and Lucasfilms Ltd.
In an interview published on August 8, 2017, Disney CEO Bob Iger told CNBC’s Julia Boorstein that Disney had a “good relationship” with Netflix, but will move Disney and Pixar movies off the platform at the end of 2018. Marvel TV shows will remain on Netflix. Iger went on to say that Disney will launch a new streaming service in 2019 which will become the future home for all Disney movies going forward.
This news can not make the people at Netflix happy. Why? The answer is simple. Disney has always had content, but lack the delivery system to compete with Netflix and Amazon. That problem was solved last year when Disney bought majority ownership in BAMtech for $1.6 billion. BAM Tech was a spinoff technology company of MLB Advanced Media, the digital media company of Major League Baseball. With this acquisition, Disney now has the content and the delivery system and becomes a potential competitor in an already crowded video streaming arena.
On the other hand, Netflix has always had the delivery system, but had to rely on others for content, i.e., Paramount, Disney, Lionsgate, MGM, Warner Bros., etc. Yes, in recent years, Netflix has started developing content in-house, but that is really expensive compared to leasing content from major studios. For example, Netflix produced the 23 episode show, Sense8. The episodes were filmed in 23 cities and 13 countries. The average episode was $9 million, with a total production cost being more than $207 million for the series. That’s the cost of a major motion picture and in my opinion, it is unsustainable for Netflix.
It should be noted that, on August 7, 2017, Netflix acquired Millarworld, the comic book imprint founded by writer Mark Millar, with plans to develop the properties for film and television. Millarworld will continue to publish new stories under the Netflix banner. Millarworld’s franchises include Kingsman, Kick-Ass, Wanted and Reborn, but since Kingsman and Kick-Ass have separate movie deals, the only noteworthy properties Netflix will get to develop will be Wanted and Reborn.
The bottom line is that Disney exercising it option to walk away from Netflix will ultimately hurt Netflix regardless of whether or not Disney’s media delivery system is successful or not.
