Disney Likely to take a $150 Million hit as it Ceases Licensing Deals with Netflix

Disney is expected to lose roughly $150 million in its operating income as the entertainment provider is set to launch its own streaming service and pulls its licensing deals with video-streaming giant Netflix, CNBC reported Wednesday.

By the end of this year, Disney’s streaming service ‘Disney +’ – filled with the company’s collection of original programs and movies – will be made available to the consumers. The new platform will feature an attractive variety of content from ‘Star Wars’ to Disney’s as well as Marvel’s classic films. It will also feature titles from its pending acquisition of Twenty-First Century Fox in a $71.3 billion deal.

Currently, Disney licenses out its television shows and movies to Netflix and Hulu. While several titles continue to stream on Hulu, as closing of the Fox acquisition will earn Disney a 60 percent stake in the streaming service, it will possibly start phasing out much of its programs from Netflix.

‘Captain Marvel’, coming out in the second quarter this year, will be the first movie that Disney will withhold from their output deals, CNBC reported, citing Disney’s chief financial officer Christine McCarthy during the company’s first-quarter earnings call on Tuesday. That’s where the foregone licensing revenue begin, she added.

The company was aware that it would take an initial hit from ceasing these licensing deals, however, Disney’s upcoming slate of content for its own streaming service and a vast library of television shows and movies are anticipated to attract customers to sign up for Disney+.

So far, the entertainment provider has announced the seventh season of the animated ‘Star Wars: The Clone of Wars and Star Wars television series called ‘The Mandalorian’. Further, it has planned a list of spinoff TV series featuring Marvel characters such as Falcon, Winter Soldier, Scarlet Witch and Vision, and Loki.

Disney has not announced a launch date for its brand new streaming service, but to offer more details on the company’s expenditure for Disney+ and other streaming initiatives, it has scheduled an Investor Day presentation for April 11.

While some Wall Street analysts and industry figures have questioned Disney’s ability to go up against Netflix, the company’s CEO Bob Iger maintained an optimistic tone on the cost front. He said that the company has both executive talent and production relationships that enable them to scale up to a great extent and not invest too much in overhead to do that.

Author: Nikhil Kaitwade

With over 8 years of experience in market research and consulting industry, Nikhil has worked on more than 250 research assignments pertaining to chemicals, materials and energy sector. He has worked directly with about 35 reputed companies as lead consultant for plant expansion, product positioning, capacity factor analysis, new market/segment exploration, export market opportunity evaluation and sourcing strategies.