The Walt Disney Co. said it plans to begin launching Disney and ESPN branded direct-to-consumer products.
Disney said it acquired a majority ownership in BAMTech LLC to serve as the technology backbone for the new products.
The announcements came as the company announced lower profits in its third quarter.
Related: Disney Earnings Drop as Profits at ESPN Plunge
Disney said it will pay $1.58 billion to acquire an additional 42% stake in BAMTech, the interactive company set up by Major League Baseball.
The first direct to consumer products will be an ESPN-Branded multi-sport video streaming service that will launch in early 2018. It will be followed by a Disney braded streaming service in 2019.
Disney will be pulling movies from Netflix as it launches the new products.
Disney CEO Bob Iger was early in pointing the industry’s attention to the decline in pay-TV subscribers. That drop was particularly threatening to ESPN, which garners the largest subscriber fees in the cable business.
Despite pressure from Wall Street, until now Disney has resisted the call to go direct to consumers.
"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 Iger.
"This acquisition and the launch of our direct-to-consumer services mark an entirely new growth strategy for the Company, one that takes advantage of the incredible opportunity that changing technology provides us to leverage the strength of our great brands,” Iger said.
Related: CBS To Launch Streaming Over-the-Top Sports Network
The ESPN-branded multi-sport service will offer a variety of sports programming, featuring approximately 10,000 live regional, national, and international games and events a year, including Major League Baseball, National Hockey League, Major League Soccer, Grand Slam tennis, and college sports. Individual sport packages will also be available for purchase, including MLB.TV, NHL.TV and MLS Live.
The new service will be accessed through an enhanced version of the current ESPN app.
The new Disney-branded service will become the exclusive home in the U.S. for subscription-video-on-demand viewing of the newest live action and animated movies from Disney and Pixar, Disney said.
The ESPN streaming servcie will be ad-supported. The Disney service will be ad free, Iger said.
Iger said duirng Disney's earnings call with analysts that he has not discussed the new streaming services iwth cable operators and other current distribution partners. But he told the analysts that he was confident that Disney would still be able to negotiate good deals with distributors because of Disney's strong brands and content. "ESPN is still a must-have service," he added.
In addition to movies including Toy Story 4 and the sequel to Frozen, the new Disney streaming service will have original movies and TV shows, plus access to Disney Channel, Disney Junior and Disney XD television programming.
In adopting a direct-to-consumer strategy, Disney said it would be ending its distribution agreement with Netflix for Disney and Pixar films beginning with the 2019 calendar year theatrical slate. The future disposition of Marvel and Star Wars films is still to be decided. Iger said he hoped Disney would continue making origianal Marvel series for Netflix and that the streaming service would continue to license ABC shows.
