Disney is taking a majority stake in BAMTech, the online video technology company spun out of Major League Baseball. It will launch new standalone apps for the ESPN and Disney brands and will then cease distribution of new movie releases on Netflix.
The Walt Disney Company said it has agreed to acquire majority ownership of BAMTech, which powers Major League Baseball and other services, including HBO Now. Disney will launch is own ESPN-branded multi-sport video service in early 2018, followed by a new Disney-branded consumer service in 2019.
Disney is paying $1.58 billion to acquire an additional 42% in BAMTech, having previously acquired a 33% stake in two instalments for $1 billion. It values BAMTech at $3.75 billion, with Major League Baseball Advanced Media retaining a 15% stake in the company, alongside other partners including the National Hockey League.
“The media landscape is increasingly defined by direct relationships between content creators and consumers, and our control of BAMTech’s full array of innovative technology will give us the power to forge those connections, along with the flexibility to quickly adapt to shifts in the market,” said Bob Iger, the chairman and chief executive The Walt Disney Company.
The new ESPN service will cover multiple sports. Individual sports packages will also be available, including MLB.TV, NHL.TV and MLS Live, for baseball, hockey and soccer respectively. Authenticated pay-television subscribers will also be able to access the ESPN television networks in the same app.
ESPN generates around $4 billion a year in cash for Disney, accounting for two-fifths of the profits of its parent company. The estimated cost of the channel has risen to over $7.50 a month per subscriber. However, number of homes paying for ESPN has fallen by more than 12 million from its peak of 100 million in 2011.
The new Disney service will have exclusive subscription online viewing of new live action and animated movies from Disney and Pixar from 2019. Disney will end its distribution agreement with Netflix for the subscription streaming of new releases from 2019.
While not necessarily a major blow to Netflix, it shows how traditional producers and distributors are reappraising their relationship to the platform.
Although popular with users, with over 50 million subscribers in the United States, Netflix now has $20 billion in long-term debt. On $2.78 billion dollars of revenue in the second quarter of 2017, Netflix reported a relatively modest $65 million in net income.
Disney reported quarterly revenues of $14.24 billion, with a net income of $2.34 billion.