The Disney-Netflix Partnership Was Never Going to Last

The implied rationale behind Netflix’s ever-hastening clip of original content is that it’s a race against time. When the service’s stand-alone streaming site began in 2007, it was made up entirely of entertainment licensed from other providers; Netflix paid studios for streaming rights, and then subscribers paid Netflix for the ability to access that content from their computers or smart TVs. But since Netflix began offering exclusive shows in 2012 and films in 2015, third-party products have occupied a smaller and smaller slice of its total library. That’s not just because there’s been such an uptick in Netflix-minted movies and shows, though there has been, but because more competition from other streaming services also means more competition for those streaming rights — or in some cases, producers simply cutting out the middleman and building a streaming service of their own.

Enter Disney, which just used its latest earnings report to announce its plans for an ESPN streaming service in 2018 and a Disney service in 2019. While the former won’t directly affect Netflix, the latter spells the end of the deal that currently puts everything from Rogue One to Lilo and Stitch to the live-action Jungle Book just one click away from House of Cards. Given that Disney dropped a cool 10 figures on a portion of the MLB’s video-technology venture, BAM Tech, just last year, the news doesn’t come out of nowhere. It does, however, represent a blow to Netflix’s reserves, albeit one Netflix clearly anticipated, and the arrival of yet another option in the ever-proliferating alternatives to a traditional cable package.

There’s a fair amount of ambiguity surrounding the details of both ventures. On the ESPN side, it’s unclear exactly which sporting events will be available to stream or at which price point, with Recode’s Peter Kafka reporting that “This won’t be the direct-to-consumer version of the ‘real’ ESPN channel that people have been speculating about for years. Instead it’s going to have lots of ... other stuff that doesn’t run on ESPN.” It also ought to be noted that while fellow tech giants like Amazon and Facebook have thrown their hats into the sports-streaming ring, Netflix has never shown much interest in doing the same — it’s the Disney content that directly impacts them. On the Disney side, the announcement focuses on feature films, particularly yet-to-be-released ones like Frozen 2 that can proceed directly to the cloud after their theatrical window, but leaves out the fate of the TV shows it owns and distributes through ABC, most of which have taken up digital residence on Hulu. Given that ABC — along with Fox, NBC, and Time Warner — has a stake in the Netflix competitor, where you can currently find the latest episodes of Scandal and Once Upon a Time, that’s not a trivial detail. Besides, feature licensing isn’t the only arrangement Disney has with Netflix, which also airs a flotilla of Marvel TV series.

There’s obviously a lot to iron out between now and when either of these products launch. For the moment, however, there’s the obvious fact that the streaming landscape is only getting more crowded, and that the balance will only continue to shift from content in need of a platform to platforms in increasingly desperate need of content. When it arrives, Disney’s service will join á la carte options like CBS All Access (CBS being the only member of the Big Four broadcast networks that opted out of Hulu), niche products like Shudder and Filmstruck (which trimmed Hulu’s library just as Disney is trimming Netflix’s by snatching away the Criterion Collection), and doubtless more sites that will spring up in the interim. No wonder Disney has also said it will be making a “significant investment” in shows and films of its own for the service-to-be that will sit alongside its robust back catalog. As Netflix has already seen, that’s what a streaming service has to do to convince the public it’s still worth spending money on.