Losing Disney might sting Netflix in the short term, but it shouldn't change things for investors

Business Insider | 8/10/2017 | Nathan McAlone
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On Tuesday, Disney announced that it would break its exclusive movie streaming deal with Netflix in 2019, and launch its own streaming service.

On Disney's earnings call, CEO Bob Iger clarified that exactly how much Disney content will go on the new service is still being discussed — Disney and Pixar branded movies, definitely; Star Wars and Marvel movies, maybe.

Shift - Disney - Disney - Future - Entertainment

But the general strategic shift for Disney is clear. Disney thinks the future of entertainment will be defined by "direct relationships between content creators and consumers," it said in the release.

Disney owns the most compelling intellectual property franchises in Hollywood, from Marvel to Star Wars to Disney’s animated masterpieces. Now, as the internet remakes video distribution, it wants to feed those directly to customers.

Term - Netflix - Fact - News - Netflix

In the short term, this sounds bad for Netflix. In fact, the news pushed Netflix stock down about 3%. Netflix is one of the middle men that Iger wants to cut out of the equation. And Disney was a special piece of Netflix’s movie strategy that really performed well. But if you look at the long game, this news really should have no effect on Netflix's prospects.

In December, Netflix content chief Ted Sarandos explained that the company was still trying to figure out the best way to differentiate itself in movies.

Lot - Money - Studio - Movies - Needle

In short: Paying a lot of money for amazing major studio movies doesn’t really move the needle for Netflix, as it stands currently. Those rights used to be cheap, but everyone has wised up, and they are no longer an incredible value proposition.

“The rare exception to that is Disney,” Sarandos said in...
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