Investors' biggest question about the future of Walt Disney Co. continues to be whether and how it will turn around its struggling television business.
Chief Executive Robert Iger's answer, new streaming services aimed directly at consumers, will likely be a primary focus of the company's earnings report Thursday.
His decision to launch an entertainment-streaming service in 2019 will mark a revolution in the way the media company makes and spends money and in its relationship with consumers. Instead of licensing all the content it produces to other distributors, be they movie theaters, cable systems or online hubs like Netflix Inc., Disney will start selling the content it produces directly to consumers, with no intermediaries.
The move is necessary, insiders say, because Disney's TV business has turned from growth engine to albatross, in part because of the rise of streaming giants such as Netflix and Amazon.com Inc.
Profit in Disney's television unit, its largest, is down 11% so far this year. Television generated $6.1 billion of profit in the first nine months of Disney's fiscal year, 48% of the company's total. In 2014, it was 56%. In 2012, it was 66%.
“The fact that the TV ecosystem is facing challenges has made us shift our focus pretty dramatically,” said Kevin Mayer, Disney's chief strategy officer. “We see these streaming efforts as a way to capture new revenues and profits.”
Despite Disney's impressive growth in film, theme parks and consumer products, the company's stock has fallen 17% in the past two years, largely over anxiety about the future of television.
Mr. Iger laid out plans for the streaming service in August to try to allay Wall Street's concerns. But his announcement raised new worries about whether the company can execute effectively. Shares of Disney have fallen 8% since then.
To power its streaming ambitions, Disney bought majority control of the technology company BamTech for $2.58 billion.
$6.1B Disney's profit from TV in first nine months of the fiscal year
Disney is also preparing to launch an online ESPN offering next year that will stream over 10,000 sporting events, including early matches in Grand Slam tennis tournaments and professional baseball, hockey and soccer games.
Because those aren't shown on TV, however, the service is expected to be complementary to cable subscriptions. The entertainment offering, however, could prove an attractive alternative for families that don't want to pay big cable bills.
The centerpiece will be all of the movies Disney's studio produces, including sequels to “Star Wars” and “Toy Story,” which will be available six to nine months after they make their debuts in theaters. “It's a content investment that ultimately we believe will provide more revenue for the company than it did in the previous model,” Mr. Mayer said.
Currently, Disney sells so called pay-TV rights for its movies to Netflix for more than $300 million a year, according to people with knowledge of the arrangement.
Including planned original movies and TV series, Disney will invest $1.8 billion on its streaming service between 2019 and 2021, research firm Moffett Nathans on estimated. That is on top of what Disney paid for BamTech.
Disney has yet to set a price for its service and is considering whether to give cable subscribers a discount, said people with knowledge of the matter.