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Disney to ditch Netflix in 2019 and launch its own streaming service

Though it will face initial pain, their content is expected to pull them through in the long run

Reuters 

File photo of the logo of the Disney store on the Champs Elysee is seen in Paris, France. (Photo:Reuters)
File photo of the logo of the Disney store on the Champs Elysee is seen in Paris, France. (Photo:Reuters)

Walt Disney Co's plan to plunge into a crowded market, dominated by pioneer Inc, could bring some initial pain, but the strength of the company's content is expected to help it pull through in the long run.

Shares of the world's biggest company were down 6 per cent in premarket trading on Wednesday, a day after Disney said it would stop providing new to starting in 2019.

"With best in class copyrights and brands, and with IP rights to a plethora of sports content, it seems management has decided to play offence," Evercore analysts wrote in a client note.

The company's empire stretches from Disney and animation studios, home to blockbusters such as "Frozen" and "Jungle Book", to "Star Wars" producer Lucasfilm and Marvel - the studio behind "Iron Man" and "Spider-Man". It also includes theme parks, resorts and

The plan to go online marks an aggressive stance even as the company struggles with subscription losses as users defect to online such as and Time Warner Inc's

Disney said the new services would be based on technology provided by video-streaming firm BAMTech, in which the media company is increasing its stake to 75 per cent by paying $1.58 billion.

While most analysts said the move was encouraging, it is expected to affect results in the near term.

"This may initially create angst with as DIS gives up a 'bird in the hand' from (easily $100+mm per year), invests in BAMTech, content and probably accelerates pay TV subscriber declines," RBC Capital Markets analysts wrote in a client note.

Disney's 2019 slate of such as "Frozen 2" and "Toy Story 4" will not be available to subscribers, but other Disney-produced content such as the Marvel Defenders series will stay with

The new Disney-branded streaming service will follow a similar offering from that will be available starting in 2018. would be a mix of streaming and pay TV.

This strategy likely attempts to balance ESPN's strong pricing power as it enters a with this quarter, while capitalising on rising consumer demand and access to streaming content, Morgan Stanley analysts said.

ESPN's growth prospects were a cause for concern for as the unit had been steadily losing amid rising expenses for

"We view the announcement as probably Disney's best chance of at least limiting, if not reversing, the margin pressure on its business from subscriber and viewership attrition," Cowen and Co analysts said.

As is becoming increasingly ubiquitous, it was only a matter of time before Disney launched its own service, analysts said.

"The future of the media business is clear and Disney's strategic pivot will better position the company for the long-term," Morgan Stanley analysts said.

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