Disney Bolsters Streaming Service -- WSJ

By Ben Fritz Features Dow Jones Newswires

Marvel, 'Star Wars' assets to be offered, as deal with Netflix won't be renewed

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This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 8, 2017).

Walt Disney Co. intends to offer its Marvel and "Star Wars" properties through the subscription video service it is planning to launch in 2019, rather than renewing a deal with Netflix Inc., according to Chief Executive Robert Iger.

Disney said last month it would launch its own on-demand service in late 2019, on which it would offer animated and live-action family films that currently stream on Netflix after they run in theaters and are sold on DVD and in digital stores such as Apple Inc.'s iTunes.

However, Mr. Iger said at the time Disney wasn't certain whether the company would include Marvel and "Star Wars" movies on its own service or continue to license them to Netflix.

In deciding to retain the rights to two of its biggest franchises, including superhero movies such as "Avengers" and the annual "Star Wars" sequels and spinoffs, Disney is giving up the tens of millions of dollars per movie it receives from Netflix. However, it will bolster the amount of premium content available on its own digital service and thus, Mr. Iger is betting, its appeal to consumers.

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"We're going to launch big and we're going to launch hot," Mr. Iger said of the digital service, speaking at a media-business conference on Thursday.

Mr. Iger also said Disney's earnings per share for its fiscal 2017, which ends Sept. 30, would be roughly in line with those of fiscal 2016. Analysts polled by Thomson Reuters had been expecting Disney's earnings to rise 2.6%, to $5.88 a share, compared with $5.73 last fiscal year.

Among the factors Mr. Iger cited were higher costs for National Basketball Association rights; the lower performance of last December's "Rogue One: A Star Wars Story" at the box office and in consumer-product sales compared with December 2015's "Star Wars: The Force Awakens"; as well as the looming impact of Hurricane Irma. Disney already has canceled three cruise-ship itineraries and seen cancellations at Walt Disney World in Orlando, Fla., he said.

Separately, Comcast Corp. warned that its video subscribers would decline between 100,000 and 150,000 in the third quarter because of aggressive competition and adverse hurricane impact. The day's news put pressure on media stocks. Disney shares closed down 4% Thursday, while Comcast dropped 6%. Viacom Inc. fell 4% and 21st Century Fox Inc. was off 2%.

For Netflix, Disney's decision to hold on to rights to "Star Wars" and Marvel movies will add to the pressure to create appealing original content of its own to replace some of the high-profile franchise films Netflix will lose starting in 2019.

A Netflix spokesman declined to comment.

In addition to all of the movies Disney produces for theaters, typically around 10 a year, the company will produce four or five lower-budget movies exclusively for its new digital service, Mr. Iger said at the investor conference organized by Bank of America Corp.

The company also will make four or five original series and three or four "television movies" of the type that currently run on its Disney Channel, Mr. Iger said.

The service will be launched in the U.S. in late 2019 as movies that previously would have been on Netflix become available, Mr. Iger said, though it could be launched earlier in other countries.

Disney is just beginning work on the digital service, which would be offered directly to consumers over the internet, and has yet to announce how it would be priced. Mr. Iger said the company will share details on how much it would spend on the service later.

As a part of the strategy, however, Disney last month said it would spend $1.58 billion to acquire majority control of streaming-technology company BAMTech.

Disney next year also plans to launch a direct-to-consumer ESPN sports service. Mr. Iger gave no significant new details about it Thursday, reiterating that it would include about 10,000 annual events in sports such as baseball and hockey that currently don't run on live television and that it would act as a hub allowing fans to subscribe to other specific sports leagues or events.

Successfully launching the new digital services is one of Mr. Iger's two chief priorities in the remaining two years before his planned retirement in 2019, he said, along with lining up his successor.

Write to Ben Fritz at ben.fritz@wsj.com

(END) Dow Jones Newswires

September 08, 2017 02:47 ET (06:47 GMT)