Disney expects to take a $150 million hit as it cuts ties with Netflix — and that's okay - Southern Business Review


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Tuesday, February 5, 2019

Disney expects to take a $150 million hit as it cuts ties with Netflix — and that's okay

Disney is going to lose $150 million in operating income as it makes the move to launch its own streaming service and ceases its licensing deals with Netflix — but that's always been the plan and it's not necessarily a bad thing.

By the end of 2019, Disney+, a streaming service filled with the company's library of movies and original programs, will become available to consumers. The platform will feature content from Star Wars, Marvel, and Disney's classic films as well as titles from its pending $71.3 billion acquisition of Twenty-First Century Fox.

Currently, Disney licenses its films and television shows to Netflix and Hulu. While some of those titles may remain on Hulu, as Disney will own a 60 percent stake in the streaming service after the Fox acquisition closes, it will likely begin phasing out much of its lexicon on Netflix.

"'Captain Marvel,' which is coming out in the second quarter, is the first film that we will withhold from our output deals," Christine McCarthy, chief financial officer at Disney, said during its first-quarter earnings conference call Tuesday. "So that's where you can see the foregone licensing revenue begin."

Disney knew that it would take an initial hit from ended these licensing deals, but its upcoming slate of content for Disney+ and its archive of films and television programs are expected to entice customers to sign up for its streaming service.

So far, Disney has announced a "Star Wars" television series called "The Mandalorian" as well as a season seven of the animated "Star Wars: The Clone Wars." It has also planned a slate of spinoff television series featuring Marvel characters like Loki, Scarlet Witch and Vision, and Winter Soldier and Falcon.