Walt Disney Co., once again shaking up the media industry, announced it will stop selling movies to Netflix Inc. and begin offering ESPN sports programming and family films directly to consumers over two new streaming services.
Starting next year, an ESPN-branded service, which the company had said was in the works, will feature 10,000 live events a year, including Major League Baseball, hockey, soccer and tennis, as well as college sports, Burbank, California-based Disney said Tuesday in a statement. Individual sports packages will also be available.
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The ability to stream some of Disney’s most valuable sporting events and shows without a cable TV subscription underscores how rapidly the business is changing in the wake of online services from Netflix Inc. and Amazon.com Inc. — and how seriously Chief Executive Officer Bob Iger views the threat. Disney also reported a drop in sales and profit.
“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,” he said in the statement.
In 2019 the company will introduce an online service featuring Disney films already scheduled for release, as well as new programs and content from the company’s library of Disney Channel and other content. A current deal to stream newly released movies with Netflix will end.
Shares of Disney fell as much as 2.6 percent to $104.25 in extended trading after the announcements. Netflix lost 3.5 percent $172.15. Netflix said in an email its relationship with Marvel television would continue.
To jumpstart the services, Disney is buying control of BamTech, the streaming arm of Major League Baseball, in which it previously held a one-third stake. The company is paying $1.58 billion to raise its stake to 75 percent.
As if to underscore the growing threat to its media business, Disney on Tuesday also reported fiscal third-quarter sales that missed analysts’ estimates, because of shrinking ad sales at ESPN and lower results from its film division.
Sales were little changed at $14.2 billion in the period ended July 1, Disney said, and trailed analysts’ estimates of $14.4 billion. Profit fell to $1.58 a share, beating the $1.55 average of analysts’ projections.
Profits at the company’s cable networks division fell 23 percent to $1.46 billion, due to higher programming costs and lower ad revenue.
Disney warned last year that fiscal 2017 would be difficult, hurt by rising costs to televise National Basketball Association games and fewer films being released by its studio.