Netflix Gets a Wake-Up Call After Disney Says It Will Pull Content

  • Disney plans own online service for hit films like ‘Toy Story’
  • ‘Everyone has been stuck on the Netflix drug for too long’

Disney’s Iger Won’t Say If He Looked at Buying Netflix

Netflix got a wake-up call from Walt Disney Co.

Disney, the world’s biggest entertainment company, said Tuesday it will stop supplying new Disney- and Pixar-brand movies to Netflix starting in 2019 and launch an online product of its own, going directly to consumers with films like “Toy Story” and “The Lion King.”

The actions, which include the launch of an ESPN online service by Disney, mark Hollywood’s biggest move yet against Netflix Inc., which has become a major buyer of movie and TV shows but also a huge source of subscriber losses for the pay-TV industry. Disney on Tuesday also reported lower sales and profit, led by lower earnings at mainstay networks ESPN, the Disney Channel and ABC.

“Everyone has been stuck on the Netflix drug for too long,” Rich Greenfield, an analyst at BTIG LLC, said in an interview. “It might be the right thing to do but withdrawal is painful.”

Shares of both companies fell in late trading Tuesday. Disney lost 4 percent to $102.70, while Netflix was down 2.8 percent to $173.35.

Once Netflix was a welcome buyer, pushing up prices for movies and TV shows that were sold by independent filmmakers or major studios. But as the company’s budget and library grew, the online service gave consumers more reasons to cut the cord from cable companies, creating a threat to the entertainment industry.

Hollywood “has done too much licensing,” Greenfield said.

The company isn’t losing all Disney content. Netflix will continue to carry TV series from Disney’s Marvel division and the current movie deal has a while to run.

“U.S. Netflix members will have access to Disney films on the service through the end of 2019, including all new films that are shown theatrically through the end of 2018,” Los Gatos, California-based Netflix said in a statement. “We continue to do business with the Walt Disney Company on many fronts, including our ongoing relationship with Marvel TV.”

Disney isn’t alone is taking steps to create its own consumer service. In March 21st Century Fox Inc., the media and entertainment group controlled by Rupert Murdoch, introduced a single app where pay-TV subscribers can watch many of its TV networks and shows, a step toward more direct ties to consumers. Time Warner Inc.’s HBO and CBS Corp. also sell services directly to viewers online.

Netflix has lost content before, including pictures from Sony, Paramount, MGM and Lions Gate. Yet its subscribers have continued to grow and the company has amassed a $15.7 billion long-term programming budget that includes funding for exclusive shows and movies.

In some cases Netflix has outbid traditional movie studios for independent films. More recently it’s spending millions of dollars on original movies such as “War Machine,” featuring star Brad Pitt, and received critical acclaim for the futuristic Korean movie “Okja.”

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