Walt Disney Co. (NYSE: DIS) announced that they will stop providing new movies to Netflix Inc. starting in 2019 and plans to launch their own streaming service as they try to capture digital viewers who are leaving traditional television. The company expects to generate more profit in the long run from their own subscription service rather than renting out their movies to services such as Netflix.
However, other streaming services such as Amazon, Time Warner Inc., and HBO are spending billions of dollars to buy and produce their own content and stream it to consumers. Disney’s supply of their own online services could also weigh their earnings. Their stock dropped 3.8% while shares of Netflix fell 3%.
The new streaming service would be based on technology provided by a video streaming firm called BAMTech and Disney would pay $1.58 billion to buy an additional 42% stake in that firm.
Ending the Netflix movie deal will allow Disney to keep their movies such as “Frozen 2” and “Toy Story 4” and the two companies would still do business globally.
Disney reported a 9% drop in quarterly profit where revenue totaled to $14.24 billion in the third quarter which ended on July 1 from $14.28 billion last year. Net income also fell to $2.37 billion.