Walt Disney aims to take a slice of the video streaming market with the launch of its very own service.
The entertainment company's shares dropped nearly four per cent in after-hours trading following the announcement.
Along with the strategic shift into streaming, Disney revealed net income attributable to the company fell to $2.37bn (£1.82bn), or $1.51 per share, from $2.6bn, or $1.59 per share, the previous year.
Revenue edged down slightly to $14.24bn from $14.28bn the previous year.
Shares in Disney fell 3.96 per cent to $102.74 while Netflix stock edged down 2.53 per cent to $173.85.
Disney's new streaming service will be based on the technology of video streaming company BAMTech, and Disney said it would pay $1.58bn to buy another 42 per cent stake in the firm.
Chief executive and chairman Bob Iger called the move an "entirely new growth strategy" for Disney. "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," he said.
Today we announced a strategic shift in the way we distribute our content.
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.