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Let it go: Disney’s Direct-to-Consumer Move Away from Netflix

By: Jason Nyhus
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Disney’s bid to own the customer experience through its own channels shows the power of direct-to-consumer distribution.

Disney CEO Bob Igor recently announced the company will be launching two streaming services: ESPN for sports and Disney for movies. Igor’s reasoning: rather than depend on Netflix for distribution, the entertainment giant wants to control the customer experience for viewers streaming its content. Starting with the slate of new movies for 2019, Disney will end its distribution agreement with Netflix, reports That means if you want to stream movies like Toy Story 4 or the sequel to Frozen, you’ll have to do it through Disney’s branded channel.

“Disney wants to move away from selling some of its most valuable content, like movies and live sports, to middlemen, and move toward selling them directly to customers,” Igor noted in the call, according to Recode. “We’ve got this unbelievably passionate base of Disney consumers worldwide. And [in] virtually all of our businesses except theme parks we’ve never had the opportunity to even connect with them directly and know [who] they are.”

Direct-to-consumer opportunity

With this move, Disney is taking a page from the playbook of leading-edge brands building out their own direct-to-consumer online channel. These companies understand that the power of selling direct-to-consumer goes beyond the potential revenue stream from selling exclusively through retailers or third-parties. Owned channels allow brands like Disney to engage directly with their audience in a way that’s not possible through third-party distribution platforms. The direct-to-consumer model also puts control of the entire customer experience in the hands of the brand.

For Disney, owning the entire customer experience takes on a special imperative. After all, this is the company that’s built on creating immersive experiences for generations of starry-eyed kids and theme-song-humming parents the world over. Their digital commerce experience must rise to the level expected by a fan base accustomed to amazement at every turn.

Subscription models beckon

With its new streaming service, Disney also will reap the benefits of a subscription model. Not only does a subscription service provide another recurring revenue stream, it also creates a platform to continue to add value to fans for life. Subscription models for content producers are nothing new. But with back-end technology that provides invaluable insights on consumer behavior, a subscription model creates the opportunity to surprise and delight consumers over and over again—something Disney excels at in the movie theater and will no doubt achieve through its streaming channels.

Disrupting the disruptors

The irony here is that Netflix, the great disrupter of entertainment distribution models, is now getting a taste of its own medicine. It remains to be seen what impact Disney’s move will have on the giant third-party distributor. Many of the brands creating their own direct-to-consumer digital commerce channels have maintained their presence on Amazon as well, straddling the line between the two channel types. In contrast, Disney will be going it alone on digital distribution for new releases after 2018.

Disney has already successfully created deeply engaging, direct customer experiences through its theme parks. There’s no doubt it’ll have similar success with its streaming channels. Disney is taking an epic leap into new territory. Anyone who’s watched the company’s creative evolution over the years knows that epic leaps are nothing new to Disney.

What do you think? Is pulling away from Netflix to build its own streaming channel a smart move for Disney? Tell us in the comments.