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Disney Burned $1 Billion into Streaming Last Year, but Is It Ready to Face Netflix?

Last Updated March 4, 2021 2:30 PM
Jimmy Aki
Last Updated March 4, 2021 2:30 PM

Walt Disney Co., which has a stake in streaming services Hulu and BAMtech, has reportedly seen a loss of over $1 billion in the last fiscal year.
The loss was revealed in an SEC filing  made by Disney on January 18, where the company provided its financial status and details on business structure, amid expected changes in the future.  For instance, the company’s direct-to-consumer division lost $738 million, with $3.4 billion revenue for the financial year that ended on September 29.

The company also stated in its filing that its investment in Hulu was the major contributor to the loss of $580 million in equity investments for 2018. Its investment in BAMtech, the streaming service that serves major stations like ESPN+, was also blamed for the additional $469 million loss in the direct-to-consumer segment. All of this would amount to a loss of over $1 billion in streaming, a segment where Disney’s CEO Bob Iger seems to be focused on.

Disney+: Another Streaming Service

In addition to its financial report for last year, Disney also announced that it would be offering a preview of its much anticipated Disney+ streaming service. The new service, which the company has stated is expected to provide a direct challenge to Netflix Inc. and Amazon, will be shown at an investors’ meeting scheduled for April 11, 2019.

Possible Pricing and an Opportunity to Enter the Market

Disney+ will provide TV shows and original movies from the brands owned by Disney, including Marvel Entertainment and Pixar. At the start, the company should be priced at a much lower fee than Netflix due to the size of its inventory compared to its competitors.
Disney could also set lower rates to lure subscribers and capitalize on the recent hike in subscription prices by Netflix, which the streaming giant revealed was necessitated by the need to raise capital for the production of new Netflix Originals, as well as to ward off expected threats to its dominance from tech giants like Apple and Amazon.  Rates on Netflix  were increased by 13% on January 15, with its basic plan rising from $8 to $9.
Amazon Prime, which is seen as Netflix’s leading contender, offers a basic subscription fee of $10.

Disney+ Expected to Impact Netflix

While Netflix’s price increase saw its stocks rise by 6.5 percent, the launch of Disney+ should affect the company soon.
When Disney+ launches, it effectively means that all Disney movies and shows will disappear from Netflix. The two companies have enjoyed a reasonably profitable relationship over the past four years, but Disney opted against renewing its deal with the streaming giant to develop Disney+.
Starting with Disney’s 2019 roster of movies, all products of the company will be exclusively headed to Disney+.

Big Things Coming For Disney’s Streaming

Disney is making large bets on streaming. It should be wrapping up its $71 billion acquisition  of 21st Century Fox Inc.’s entertainment assets soon, allowing it to leverage on more movies and TV show franchises that can be exploited on TV, in theaters and online as well.
Also, the release of movies like Captain Marvel  (March 6), “Avengers: Endgame” (April 14), “Aladdin” (June 20), and “The Lon King” (July 19) should give Disney sufficient exclusive content to drive new subscribers to Disney+.