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As Disney Cuts Ties With Netflix, the Real Battle for Streaming Supremacy Begins

As TV marches closer to an a la carte future, competition will get more intense – and pricey.




Disney’s plan to launch a streaming service in 2019 will end its deal with Netflix, depriving it of titles like “Toy Story 4,” the live-action “The Lion King,” and the “Frozen” sequel. Instead, Disney will seek its own subscribers — and that’s as good as a call to arms.

Everyone knows the future of distribution is in streaming video on demand, and the real money lies in doing it for yourself. Once again, content is king — but content also demands a kingdom.

“It’s high time we got in this business,” Disney CEO Bob Iger told analysts Tuesday. “The profitability, the revenue-generating capability of this initiative is substantially greater than the business models we’re currently being served by.”

Netflix knows this, of course; there’s a reason it spends $6 billion annually on original programming and just acquired Millarworld. As its library goes away, all of that in-house content and IP will be essential —  especially as it needs to continually refresh its library to keep customers paying $9.99 per month.

And will Netflix content be good enough? While they have a handful of popular originals, much of Netflix’s viewership is believed to favor repeats of popular broadcast shows past and present. If Netflix loses that privilege, consumers will face subscribing to multiple over-the-top services, cherry picking the two or three that best satisfy their interests.

An ESPN-branded multi-sports service and a Disney-branded service are likely to be high on the list for sports fans and families. ESPN’s new service will boast 10,000 live sports events a year, while the Disney service will include Disney and Pixar libraries, as well as programming from Disney Channel, Disney Junior and Disney XD. (ABC and Freeform shows will continue to be found on Hulu, of which Disney owns a stake).

CBS already has CBS All Access. HBO has HBO Now; FX and AMC have announced plans to test the premium streaming marketplace with ad-free VOD channels that cable subscribers can purchase for an extra fee. Those services are seen as insurance for the future, when more viewers shift to a direct-to-consumer model, and networks like FX decide it’s time to bypass cable, wireline, and satellite. This is also why merger-and-acquisition activity is on the rise, as Discovery/Scripps and Lionsgate/Starz look to bulk up – and then bulk up again.

Netflix is now perhaps too big – and found in too many territories – to fail. But in an a la carte future, it will be just one of many options. And consumers, who cut the cord to save money, aren’t going to necessarily go back to paying $100 a month for too many OTT plays.

Disney plans to produce original programming for its new streaming service, which raises another question: Once studios go direct to consumer, will they continue producing for rival platforms? So far, the existence of CBS All Access hasn’t stopped CBS TV Studios from producing for other networks or services. But as the ecosystem evolves, that may change — and a company like Disney may have limited interest in seeing competitors like Netflix benefit from signature properties like Marvel and Lucasfilm.

As consumers pull the plug, the real sparks are about to begin.

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