Disney turns down Netflix billions to start Disney+

Disney will lose billions in the first year on Disney+. They turned down more than $300 million from Netflix by ending their licensing agreement early.

Disney+ will officially launch on Nov. 12, 2019, and while its details are all the rage online right now, it’s important to keep in mind that this is a very expensive venture for Disney.

According to a report from recode, Disney will lose billions by entering the streaming race. Experts are projecting the streaming service, along with Hulu and ESPN+, will cost the company almost $4 billion this year. It’s expensive to build a new streaming service and create content at unprecedented rates to keep up with Netflix.

With that said, Disney will likely be able to make some money from Disney+, but it’s not going to happen for a while. Obviously, if there’s a conglomerate who can make this work and make it profitable, it’s Disney. They are making billions every year, and they control some of the biggest franchises and brands in TV and movies. The sky is the limit for their potential.

So, why are they losing billions by starting the streaming service?

Well, first of all, it’s just expensive to build out the platform for this streaming service and make it accessible to millions of people all over the world. The content they are making, especially the Star Wars and Marvel shows, are very expensive and require a high production value to build these worlds.

Most importantly, though, Disney is now losing all that money from licensing their shows and movies to other streaming services, like Netflix. According to the report, they had a great partnership going. Netflix, in order to be competitive, was overpaying, basically, for their content, along with Marvel, Star Wars and Pixar content.

According to the report, Netflix was paying more than $300 million per year for that content. That would have been $1.2 billion over the course of the four-year agreement, which Disney opted out of a year early. And, if that agreement continued, Netflix would have paid even more to basically rent all those great movies for an 18-month period. Another four years of the deal would have been for another $1 billion at least, and probably closer to $2 billion, and maybe more. We’ll never know.

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Looking at the lineup of Disney movies coming in 2019 with Captain Marvel, Avengers: Endgame and a lot more, it’s obvious why they stopped this agreement early to stop all those new movies from heading to Netflix.

Disney might overperform and get more subscribers this year. To make up that loss of Netflix’s $300 million in 2020, they need more than 4 million subscribers to sign up for the year. They should be able to do that, but again, it’s a lot more expensive than that to run a streaming service.

I think we’ll look back at this time and imagine what could have been. Of course, they were destined to be competitors as Netflix grew and grew, but they both benefitted from this relationship with the great Marvel-Netflix shows and Netflix giving Mickey Mouse and co. big checks for streaming rights.

Depending on how well it goes for their streaming service, we also might look back at a missed opportunity for the House of Mouse.

Let’s not forget Netflix paid $100 million to keep Friends for a year! They would have overpaid for more great content. They could have been great partners into the future and made it that much more difficult for another streaming service to enter the race and gain ground. Instead, they went their separate ways, and now they will be battling (sort of) for subscribers, although I think it’s more likely that people will stay subscribers for both streaming services rather than choose one.

Ultimately, I think Disney+ is a good idea, and it should be successful. Continuing to have their content on Netflix and watched by millions of people every day and cashing Netflix checks for years also would have been a good idea.