A Love Affair’s Ending: Disney Breaks Up with Netflix

Disney will pull all of its content from the world’s current top streaming platform to release its own service by 2019

A Love Affair’s Ending: Disney Breaks Up with Netflix

Disney announced that it will no longer be working with Netflix. Netflix had a hard hit with this decision. The distribution deal for the Disney and Pixar films will conclude in 2019. Therefore, Netflix will be under a lot of economic pressure: Wall Street analysts have pointed out that its stock is overvalued by its earnings.

The company has more than 100 million subscribers, and around half of them are in the United States. However, the company has a long-term debt of $20.54 billion dollars, which is made up of payment obligations for content distribution rights according to a report made by the Los Angeles Times.

Netflix's main problem is that their most acclaimed television shows such as "House of Cards" or "Orange is new black" are not their own productions, even though they are marketed as their original series. Netflix allocates the majority of its expenses to paying for the rights of distribution of content of television series, animation programs, and movies. Industry experts say the danger is that Netflix will not be able to produce enough success stories to attract new subscribers.

Company executives want to change this trend. Their goal is to increase its own content production by 50%. They estimate they will spend $6 billion creating content or licensing in 2017. In contrast, HBO will spend about $2 billion. Netflix has several alternatives to reverse this situation. They could raise service prices, but this might lead to a reduction of subscribers, which would affect their cash flow.

According to Reed Hastings, Netflix executive, the difficulty is centered on the rapidity with which the level of subscribers grows and as they increase their own production, thus affecting the cash flow of the company. Prior to the Disney decision, Netflix announced the acquisition of comic book publisher Millarworld, renowned for the film adaptations of its comic books, such as Kick-Ass and Kingsman. Netflix dominates the competition in streaming. The real concerns are the programming costs and the valuation of stocks in a stock market in the coming years. But they will remain winners for some time.

 

Latin American Post | Francisco Martínez

Copy edited by Susana Cicchetto

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