Disney’s Licensing Experiment Could Reshape Streaming

If Disney is able to earn revenue from selling rights to its original content, other platforms are expected to follow, diluting their exclusive portfolios.

The logo of the Disney+ streaming service hangs above a Disney booth
Disney already licenses out some of its content. AFP via Getty Images

Disney’s possible plan to license rival media companies more of its original films and television could lead to a muddling of titles across all streaming platforms.

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The media giant is looking to earn additional revenue from its content library to curb losses from its streaming business, Bloomberg reported. During the three months ending Oct. 1, the company reported a $1.5 billion loss for its streaming services. Its stock is down 45 percent from its 2021 peak of $197 per share.

“Media companies will watch the Disney experiment and if it works—if they’re closing that financial gap sooner—it is likely other media companies follow Disney within 12 months,” said Laura Martin, a senior internet analyst at Needham & Company.

Disney has already sold rights to a slew of its titles, including Grey’s Anatomy, the Politician, New Girl and How to Get Away With Murder, all of which Netflix (NFLX) licenses. Other Disney content, including the Star Wars films, is available on cable through TNT and TBS, both owned by Warner Bros. Discovery (WBD).

Disney isn’t the only streaming service selling content rights to its rivals. HBO Max licenses content to Tubi and Roku. Comcast (CMCSA)’s Peacock and Lionsgate’s Starz began sharing films and television shows in 2020. Excluding Netflix, most streaming services aren’t profitable,  according to Bloomberg, so many are in a similar position to Disney and could use additional revenue streams. Other companies will be watching Disney’s results, and if it can make significant revenue gains, consumers will likely see an increase in platforms selling original content to their rivals, Martin said.

Content is worth more when it lives on multiple platforms, Martin said. Many of the streaming platforms backed by traditional media companies, including Peacock, Paramount+ and HBO Max, have been “frenemies for 50 years,” she said. They collaborate to create a more viable ecosystem, she said, so when Disney reaches out to the platforms to sell rights to its content, it is natural for them to make a similar offer. Disney didn’t immediately respond to a request for comment.

Is exclusive content still king?

U.S. households subscribe to an average of four streaming services according to Deloitte, but there are around 10 major services to choose from. Companies differentiate their services through exclusive shows and movies, and if platforms sell rights to their original titles, they might weaken their sales pitches to consumers. But they will likely be licensing out pApple (AAPL)-system, BlinkMacSystemFont, 'Segoe UI', Roboto, Oxygen-Sans, Ubuntu, Cantarell, 'Helvetica Neue', sans-serif">roductions that are more than 10 years old, rather than titles released in the last five years, Martin said. This creates revenue for the content that might not be watched on their own services. Streaming platforms will likely continue to use exclusive content as a primary selling point because they will still have exclusive, recently released shows and movies, she said. 

Sharing titles could also solve consumer frustrations over exclusivity, she said. If Disney distributes its content across other streaming platforms, consumers without a Disney+ subscription will be able to access its shows, which leads to a more positive perception of the brand. Disney will also likely negotiate data rights so it can see how each title performs on different platforms and charge more for the content that earns the highest ratings in the future, she said.

Some streaming platforms won’t play

While many streaming services already license out some of their original content, Amazon (AMZN) Prime Video and Apple TV+ don’t. That likely won’t change, Martin said. While studio-backed companies have been collaborating for decades, these platforms are relatively new to the game. Apple and Amazon have enough money from their main businesses that they don’t need to negotiate licensing to earn more revenue, which takes time and workers away from other projects, she said.

Disney isn’t expecting two of its streaming platforms, Disney+ or ESPN+, to turn a profit until at least next year, despite launching in 2019 and 2018, respectively. Disney’s third streaming service, Hulu, is profitable, but the company shares earnings with Comcast, which owns one-third of the platform.

Disney could benefit from additional revenue streams to offset its massive content budget. Though Disney doesn’t disclose what percent of its budget goes to streaming titles, it spent a total of $32 billion on content last year. Since 2019, the media giant has spent $110 billion on producing shows and movies for theatrical releases, broadcast and cable television and its streaming services.

Disney’s Licensing Experiment Could Reshape Streaming