Disney CEO Talks Netflix, Cord Cutting, ESPN's Outlook
Walt Disney chairman and CEO Robert Iger at an investor conference on Tuesday discussed the outlook for Netflix, the cord-cutting debate and the future of the entertainment conglomerate's sports content juggernaut, ESPN.
Appearing at the 22nd annual Goldman Sachs Communacopia Conference in New York, Iger was asked about cord cutting by pay TV users. "So far we don't see evidence of this occurring," he said. But he added Disney and others must ensure they are offering content that is as strong as seen in the past via the pay TV bundle. Netflix is a different offer given its focus on library content, he argued.
Iger called the current pay TV network bundle "a really good bargain" for consumers. "I think the consumer is getting a good deal" from a $75 per-month pay TV package as is the pay TV operator, which can sell customers broadband and other services. "The cost of programming has increased ... but they may have to accept lower margins in their video business," because they have added other profitable businesses, such as broadband.
"Netflix has a running start" in the online video market, Iger argued, highlighting that Disney helped the firm with content deals. "It would be appropriate to declare Netflix victorious in some form," he said, but "it will be really hard for them to corner or monopolize the marketplace." Netflix likely won't be the only game in town in terms of online video players, which also include Amazon.com, he argued.
Asked about Intel and Sony as possible new broadband video service providers, Iger said Disney is always willing to work with user-friendly platforms whether old or new -- as long as they accept content licensing terms in line with Disney's content deals with traditional pay TV firms.
He also once again touted increased mobile video consumption, saying Disney's apps have benefited consumers and pay TV operators, while also getting Disney paid more in programming deals. Making the pay TV bundle more easily accessible when and where consumers want increases value, Iger said.
He also said that TV Everywhere apps could be monetized via low subscription fees and advertising as long as viewing is measured properly via new measurement techniques.
Iger once again touted Disney's brands, such as Disney, ABC, Pixar, Marvel, Lucasfilm and ESPN, as "unparalleled" and "unrivaled," which is key in the digital age when there are new opportunities to reach more people. He also said that there are "significant opportunities" around the world for these brands.
Asked about potential sales or acquisitions of assets, Iger said Disney many years ago sold its newspaper assets and about five years ago its radio business. Overall, he said he was very happy with the overall Disney asset portfolio and reiterated that he didn't see any major purchases on the scale of Pixar, Marvel or Lucasfilm in the near-term. "We will always look opportunistically if there is opportunity to add to our portfolio," he said.
Iger also lauded Disney's acquisitions under his watch, touting a 167 percent company stock increase since 2005 that his moderator had mentioned.
New sports program deals start kicking in for ESPN in 2014, drawing a question about the network's margin outlook. Iger said ESPN will not rest on its laurels and sees opportunities of growth despite increased competition. He concluded that ESPN's "best times" are still ahead of it.
Discussing international opportunities, Iger said ESPN was "less likely to grow its brand outside of Latin America." The company recently withdrew from Europe in what Iger called a "near-exit." He explained that it was "really difficult" to grow ESPN internationally as many markets feature established pay TV platforms that acquire sports rights as a loss leader. In the U.K., the challenge also was that English Premiere League rights can only be acquired for three years at a time, making longer-term planning difficult, he said.
Iger said that online video game Disney Infinity so far has been a "successful launch from a sales perspective," but said the holiday season will show if the company can declare victory. Iger said the game's success would play a key role in Disney's search for long-lacking profits in the games business.
He also called the planned Shanghai Disneyland, which is set to open in late 2015, the part of Disney's business that he is most excited about right now, lauding a new high-speed train there as improving its outlook.
Discussing theme parks further, Iger said the company is currently at pre-recession margins and expects to rise beyond those with current initiatives. A planned Avatar Land at Disney’s Animal Kingdom park at Walt Disney World will also be one "substantial" driver of growth, he predicted. And he touted a theme parks digital wristband that has been a big investment and has "so much potential," as it offers faster access to rides, cash-less payments and more. The wristbands will start rolling out in Florida, but has potential to help Disney's global theme park business, Iger said.
The film business wasn't part of the discussion on Tuesday and didn't come up in the Q&A portion, either.