Disney is outsourcing a big piece of its home entertainment division to Sony Pictures Entertainment, which will manufacture, distribute and market the Mouse House’s DVDs and Blu-ray discs and other physical media.

As part of the deal, Sony will market, sell and distribute all Disney’s new releases and catalog titles on physical media to consumers through retailers and distributors in the U.S. and Canada. Disney will continue to manage its own digital media, like premium video-on-demand.

It’s unclear if this will result in layoffs at Disney. However, the studio is expected to conduct an internal assessment across all business functions that support physical entertainment amid the transition to Sony, according to sources familiar with the agreement.

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According to Disney, the licensing model allows the studio to continue to offer films and TV shows through physical retailers and to respond to consumer demand more efficiently. The company said the shift is consistent with strategies it’s implemented companywide, as well as transitions in other markets.

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Whatever the reasoning, physical disc sales have long been in decline — and they show no signs of rebounding amid the industry’s streaming boom. Revenue for physical media in the U.S. dropped 28%, to $754 million, in the first half of 2023, compared with $1.05 billion in the prior year, according to data from trade association DEG: The Digital Entertainment Group. It’s projected that 2024 will be the first year revenue drops below one billion dollars.

As a result, Best Buy discontinued sales of DVDs and Blu-ray discs in the store and online in early 2024. The move followed Netflix’s decision last September to shutter its DVD-by-mail service. Walmart, Amazon and Redbox are among the select major retailers to sell copies of “Avatar: The Way of Water,” “Avengers” or other Disney blockbusters.

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