Disney Chooses Netflix As Its Exclusive Distributor Beginning In 2016

from the mouse-in-the-house dept

Wed, Dec 5th 2012 2:51pm — Timothy Geigner

Shock generally isn't an emotion I feel when I come across a story to write for Techdirt. Anger? Sure. Sadness? Of course. Dismay? You know it. But not shock. I can't say that's true in this instance. Recall two recent stories we've had about Netflix. The first is a piece I wrote about Disney opting out of their Netflix streaming deal, resulting in so-called Disney knock-offs to spring up to fill the void. The second is a story Leigh Beadon covered in which one television analyst somehow looked at parents having the ability to provide their children with more entertainment choices via Netflix and decided that was a bad thing, urging companies like Disney to veer away from Netflix altogether.

It would appear that Disney is now reversing course and embracing the ever-living hell out of Netflix as the future of its distribution model.

If you’re a Netflix subscriber and you have kids, you’re about to make those kids happier. Netflix and Disney just inked a new deal, making the former the exclusive American subscription TV service for “first-run live-action and animated feature films from The Walt Disney Studios.”

This marks the first time that a major Hollywood studio decided to side with a digital distribution rather than a traditional TV provider. The deal is also a high-water mark for a company that some were speculating was ripe for takeover as recently as last month.

According to the press release by Netflix, Disney's releases, and those of its subsidiaries (including, presumably, LucasFilm), will be available on all platforms beginning in 2016. Ostensibly, this would include Netflix's streaming platform, which is a break from Disney's previous dropping of streaming through NetFlix. Perhaps even more impressive, Disney is releasing at least a portion of their back catalog through NetFlix as well, as early as this coming year.

The article goes on to note that if you think this is a dagger in the heart for pay-TV, there's still another massive hurdle to leap.

“The pay TV business as we know it is on really safe grounds until sports distribution changes,” Cryan added. “It’s technically difficult to distribute that stuff online at scale. In addition to that, the business is stacked up so you pay a lot for ESPN and other sports channels not available elsewhere. Until that changes, the core of the pay TV business is on relatively safe ground.”

Now, I happen to think that sports streaming isn't the challenge Dan Cryan makes it out to be, but he's right that the barrier is still there and it's massive. Still, keep in mind that ESPN, unfortunately the king of cable sports, is a Disney owned operation. If the house of mouse is beginning to shift the aim of its movie distribution towards a digital provider, it isn't a huge leap to bring sports streaming along with it.

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Filed Under: distribution, movies, streaming
Companies: disney, netflix

30 Comments

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Christopher Best (profile), 5 Dec 2012 @ 1:54pm

2016 is a long way off...
3-4 years is an eternity in Internet time.

This makes the recent announcement of the shutdown of Disney Movies Online suddenly make a lot more sense.

What's Disney Movies Online you ask?
http://disneymoviesonline.go.com/

Disney had their own streaming service. No one used it, though, probably because no one ever heard of it.

I recently observed to my wife that our daughter was probably going to be the first kid in two or three generations of our families that didn't grow up actually watching Disney films, since we don't buy DVDs and don't have cable... Guess that's about to change!

Wish it wasn't an exclusive deal, though. Those are inherently anti-consumer... But it's still an improvement, nonetheless. And being a geek with kids, having Disney films on NetFlix does significantly increase the odds of me keeping a subscription permanently.
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Anonymous Coward, 5 Dec 2012 @ 3:10pm

Disney will mever see any of my money, even if they do a 5 cent per movie stream, Disney is Boycotted at my house.
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Shmerl, 5 Dec 2012 @ 3:21pm

Step in the right direction. Let's wait for the second step - i.e. for Netflix to drop all DRM. I wonder how long we'll have to wait.
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Anonymous Coward, 5 Dec 2012 @ 3:29pm

...Is it wrong that I dreamed this story up about three months ago for a sarcastic response?
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Anonymous Coward, 5 Dec 2012 @ 3:34pm

I was surprised that Disney owns ESPN, so I looked up just how much Disney owns. Kind of staggering.
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silverscarcat (profile), 5 Dec 2012 @ 3:39pm

Wait...
They had their own movies online?

...

Wow... Just wow...

How bad does it have to be that I only hear about something AFTER it's been closed down?
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Anonymous Coward, 5 Dec 2012 @ 3:45pm

Disney tried everything, their own offerings all failed miserably in the market.

I think I saw a recent news about Disney closing up shop on one of their numerous internet failures, they don't understand the market.

This is not shocking, the alternative is to see piracy of Disney content sky rocket.

Plus Disney is one of those types that try to use the latest "uncrackable DRM schemes" LoL
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Anonymous Coward, 5 Dec 2012 @ 4:03pm

This may have something to do with Disney shutting down its own streaming service. Cheaper to outsource to a company that already has the infrastructure and customer base.
I would not be surprised though if the contract contains some kind of per customer/view fee as well as a blanket license fee.

Now if Disney would produce Netflix exclusive content? That could change the face of everything!
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sehlat (profile), 5 Dec 2012 @ 4:16pm

Re:
Netflix exclusive? That'll happen only if the pakhtash buy Netflix. What they can't control they destroy.
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Wally (profile), 5 Dec 2012 @ 4:32pm

I'm actually glad to see Disney is finally opening the damned vault..at least somewhat open. What a way to get people excited :-)

Sorry to take any thunder here DH, but there's even more shocking news...
http://www.theregister.co.uk/2012/12/05/us_votes_against_itu_internet_control/
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Anonymous Coward, 5 Dec 2012 @ 4:35pm

Re:
At the time a dystopian fantasy-world goes exothermic to the point of solidification?
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Colin, 5 Dec 2012 @ 5:11pm

Re:
Just between classic Disney films/franchises, Pixar, Marvel, ESPN, and Star Wars (not to mention everything else), Disney owns a good deal of the 20th/21st mainstream pop culture. Which is impressive, but also worrisome.
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Keroberos (profile), 5 Dec 2012 @ 6:51pm

I've been wondering lately if Disney has been seeing any drop in profits from the movies that they keep re-releasing from the vault and the other traditional sources of revenue (cable/satellite/DVD). A move like this makes me think that maybe they are. It might be small at this point in time but it will only grow as more people consume their content from other sources. This could be disastrous for them in the future. My children watch very few Disney movies--not on Netflix, may as well not exist (cut the cable 6 years ago, and don't buy/rent DVDs anymore). What movies do you think they will be showing to their children in the future? Some Disney movie they never heard of or seen? Not likely.
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Bengie, 5 Dec 2012 @ 7:12pm

Re: 2016 is a long way off...
Netflix already has a lot of Disney movies now listing. I don't mean small ones either and more are showing up by the hour.

I am racking up a lot of instant queue movies, much faster than I cant watch them.
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Anonymous Coward, 5 Dec 2012 @ 7:36pm

Re:
I dislike Disney greatly, but I can live with them getting 5 cents per movie stream (or thereabouts). Paying less than 1% of the theater ticket price is enough "screw Disney" for me.
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Mesonoxian Eve (profile), 5 Dec 2012 @ 7:43pm

By this math, the movie studios will finally come on board in 2021.

It's like watching a person drowning, desperately clinging to life, and seconds before they drown, unable to grasp the ring of life on their own, the laughter dies down and Mickey Mouse says, "Okay, Donald. Go ahead and toss out the rope. We've had our fun."

Screw you, Disney. Just. Screw. You.
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Dave (profile), 5 Dec 2012 @ 8:40pm

The "challenge" of sports streaming is economic.
Could ESPN set up an online-only service, charge $19.95/month for it, and find millions of customers? Absolutely.

Will ESPN do that? No. And there are tons of reasons why.

1.) Subscriber fees. ESPN and ESPN2 alone are in 100 million homes, and ESPN receives $5.31/month from every subscriber. That adds up to about $6.37 BILLION/year. This money covers the TV rights to pretty much all the pro and college sports ESPN shows, and they still have about $2B left for production costs -- to say nothing of advertising and merchandising income.

Do 100 million people in the U.S. watch ESPN? Of course not. But they're all paying for it just the same. How many of those people would cut the cord for a stand-alone WatchESPN service? Probably not the 26.6 million or so they need to equal what they rake in from subscriber fees.

Which brings us to reason #2.

2.) Distribution. Pay-TV has a ready-made, high quality distribution network already in place. Setting up an online-only service of similar quality would cost a LOT of money. Why spend extra to duplicate what's already been done?

And speaking of distribution...

3.) Backlash. Pay-TV companies would tear ESPN apart if they introduced an online-only service -- starting with Comcast, which owns NBCU, which owns NBC Sports Network. You think Comcast wouldn't start breaking the bank to outbid ESPN for every TV rights contract up for renewal? You think Comcast wouldn't have its engineers do some dirty throttling tricks to make WatchESPN nigh-unwatchable -- and demand much lower subscriber fees in exchange for "clogging up our network"?

Those three reasons alone are why sports on TV is here to stay. Pay-TV has us sports fans by the balls, man.
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AConsumerNotACitizen, 5 Dec 2012 @ 9:07pm

What a deal!
I can't wait to pay for movies and shorts that would have been in the public domain if not for a retroactive expansion on a otherwise draconian monopoly clause.
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Anonymous Coward, 5 Dec 2012 @ 9:30pm

Re: Re: 2016 is a long way off...
Yes, they're starting at the back end of their sizable portfolio, and adding them in, oldest first. We've been watching them, ourselves.
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Anonymous Coward, 5 Dec 2012 @ 9:44pm

Maybe you guys will finally lay off the "studios are going to die" meme now. It's been stale for a while, but now you'll really look silly if you try and pull out that old chestnut.
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jupiterkansas (profile), 5 Dec 2012 @ 10:13pm

Netflix added Aristocats, Pocahontas, Alice in Wonderland, Dumbo, Fox and the Hound and some others just a couple days ago.
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PaulT (profile), 6 Dec 2012 @ 12:55am

Re:
While I respect the sentiment, I can't help but wonder how closely you're able to stick to that. OK, not watching the Disney Channel, Pixar or their other animated movies might be easy. But, do you really manage to avoid all content by all of their subsidiaries (including Marvel, Buena Vista, Touchstone, ABC, among hundreds of others) and those partly or majority owned by them (Hulu, ESPN, A&E)?

If so, well done as it must take a lot of work to filter all that content to get a Disney-free entertainment line-up. If not, I'm afraid your gesture is meaningless as they're still getting your money.
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PaulT (profile), 6 Dec 2012 @ 1:12am

Re:
No, we won't. We'll continue saying "if studios continue to make horrible, counter-productive mistakes, they'll go out of business and be replaced with people who understand their marketplace", but we'll only say that when they're making said mistakes. They will be applauded when they make decisions that actually help them in the modern marketplace and address the needs of both consumers and the modern business world.

Now, will people like you stop pretending that those of us here who address reality are one-sided or single minded, and actually accept that we're merely addressing what's really happening? It's been stale for a while, but now you'll really look silly if you try and pull out that old chestnut.
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Anonymous Coward, 6 Dec 2012 @ 3:11am

Re:
Disney didn't add all of those at www.megafilmes.net but they are there.
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Anonymous Coward, 6 Dec 2012 @ 3:39am

Re:
Why?

It is obvious that Disney gave up on their own offering, which they just closed one that nobody knew about it or cared to use it.

http://www.dailyfinance.com/2012/11/20/disney-movies-online-video-streaming-business-shuts-do wn/
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Pinstar, 6 Dec 2012 @ 5:12am

Happy Kids? Happy parent too!
As the father of a 2 1/2 year old and an 8 month old... by the time this goes into effect...my kids will be the prime age for really enjoying Disney animation. This makes me very happy.
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Antonio, 6 Dec 2012 @ 6:54am

I hope the need for bandwidth to stream these videos affects US ISP data caps in a positive way for consumers. Parents tend to play children's films over and over again when they find something a kid likes.
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jupiterkansas (profile), 6 Dec 2012 @ 1:26pm

Re: Re:
Yeah, so?
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Anonymous Coward, 6 Dec 2012 @ 7:41pm

Re: The "challenge" of sports streaming is economic.
Um, ESPN3/WatchESPN already exists, and it appears to stream all the live events on their cable channels, as well as other games that don't make it to the channels. Free access does seem to be ISP-dependent, though.
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Dave (profile), 7 Dec 2012 @ 4:25am

Re: Re: The "challenge" of sports streaming is economic.
WatchESPN is a TV Everywhere package that requires you to have a cable TV subscription with ESPN in order to access it. It is NOT a stand-alone service, and for the reasons I put forth here, it probably never will be. As for ESPN3, it's a supplement to the mothership networks, not a replacement.
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