Disney CFO Talks 'Star Wars,' ESPN Competition, Deal Outlook

 

NEW YORK – The Walt Disney Co.'s acquisition plans and the outlook of its ESPN and studio businesses were in focus here on Tuesday as CFO Jay Rasulo spoke at a big annual investor conference.

Appearing at the 41st Annual UBS Global Media and Communications Conference, he was asked about his appetite for acquisitions, saying: "We don't have anything on the scale of Marvel or Lucasfilm right now." He added: "I don't feel there is anything we need," but "you will continue to see us do acquisitions in the future."

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When asked about potential divestitures, he said: "We look at the portfolio at all times" and are currently "happy" with all the assets.

Asked about the potential launch of an online pay TV provider, Rasulo echoed Viacom CEO Philippe Dauman's Monday prediction that it would happen sooner or later, but didn't name the likely company to launch first. He also said "we would certainly be happy to license our content" to such digital pay TV providers, but emphasized they would have to buy the whole bundle of Disney channels that traditional pay TV firms pay for. The current pay TV system is "still the most valuable system" of distributing TV content from a consumer's standpoint, he said, suggesting that a la carte offers wouldn't be consumer-friendly.

Questioned how quickly C7 ratings could become the standard in TV upfront advertising negotiations, he said it won't be this coming year yet.

Asked about Disney's decision to offer Disney Channel TV content via free-to-air networks in such countries as Germany and Russia, Rasulo said it allows the conglomerate "to distribute more strongly something that is quite important to us."

Discussing key growth drivers for Disney, he said he expected growth contributions from all units in the coming years. After the recent box office successes of Marvel, Lucasfilm's Star Wars VII, set for a 2015 release, will be a key driver of Disney's studio performance, Rasulo said. He also said there will be much more in terms of Star Wars consumer products on offer around that release. Overall, he said investors should expect Lucasfilm to follow the successful Marvel path now that it is part of Disney as the company would look to push its content across various Disney and other platforms just like in the case of the Marvel acquisition.

Asked about the recent decision to create four Marvel series for Netflix rather than a traditional TV network, Rasulo said the firm did content for Disney XD to keep things close to home before launching Marvel's Agents of SHIELD on ABC. The Netflix deal came when the company was ready to look outside for distribution, he added. "It's a little bit like the Avengers strategy" with four superhero creation stories that should eventually lead the heroes together, he explained about the blueprint for the Netflix series.

"I'm not sure I would call [Netflix] our go-to SVOD partner," Rasulo emphasized on Tuesday when asked if it was the main go-to-place for the company nowadays, highlighting that the firm has also done deals with Hulu and other digital distributors. And he said the Marvel show deal was also pitched to others. "We try to be even-handed and, of course, advantageous to Disney," he said about Disney's approach to deciding where to take content. "We are out there playing the field."

Asked about Disney's position in sports amid the recent launch of Fox Sports 1, Rasulo said ESPN has always seen competition, and new competition hasn't hurt advertising demand at the sports giant and he continues to feel good about ESPN. "The ratings haven't changed a lot," he said, touting ESPN's bigger audience. But he emphasized that "we are not going to cede our position" or become complacent. 

He predicted that Disney would end up getting NBA rights again, which ESPN and ABC currently share, but signaled he was expecting a lot of competition for them. He said they are the last remaining piece of the sports puzzle for Disney after other big league deals that it has already sealed.

Rasulo also said on Tuesday that the firm's upcoming Shanghai Disneyland theme park could become the company's second-largest behind Disneyworld. And he signaled that after its planned 2015 launch, the firm could invest in it further. The park is within three hours of 300 million-plus people.

More Star Wars rides are likely to come to the firm's parks over time, he added, as part of a broader theme parks discussion.

Asked about the latest feedback for the MyMagic+ digital wristbands at Disney's Disney World theme park in Florida, Rasulo said it encourages users to plan their visits more. "When people plan at home, they tend to plan for a lot more time," he said, explaining that the main benefit for Disney is the expanded time people spend at the parks. He said it was still in the "early days" to assess the financial impact, but said the company is planning to roll the service out across the operation.

Discussing the importance of mobile devices, Rasulo said "it provides a huge opportunity to get our content out to consumers" previously not reached, particularly in international markets. He said content companies, for example, can't wait for India to launch its 4G mobile network.

"Investors should not expect a departure" from the successful strategy at Disney, Rasulo also told investors when asked about possible changes. Summarizing the three key pillars of the strategy are a focus on creative excellence, a conviction that technology must be embraced to increase content and a focus on international growth opportunities.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai

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