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Iger Exhorts Studios to Re-examine Business Models

26 Oct, 2009 By: Erik Gruenwedel

Bob Iger

The Walt Disney Co. chairman and CEO Bob Iger is calling on studios to think outside the box regarding current business models predicated on packaged media to bolster the bottom line.

In an interview with The Financial Times, Iger said the movie business continues to change “right before our eyes,” and not enough has been done to drive alternative distribution channels to replace revenue lost from slumping DVD sales.

“The business model that underpins the movie business is changing,” Iger said. “If we don’t adapt to the change, there won’t be a business — that’s my exhortation to my team.”

Disney’s filmed-entertainment division posted an operating loss in the most recent quarter — the first since 2005.

The studio next month plans to unveil Keychest, an ambitious distribution channel that would allow consumers to watch movies digitally stored on third-party servers and accessed via multiple platforms, including mobile phones, PCs, set-top boxes and Internet-connected Blu-ray Disc players and high-definition televisions.

The concept rivals a multiplatform distribution channel dubbed “TV Everywhere” from Time Warner and Comcast. Iger has questioned how “consumer friendly” the platform will be — alluding to the fact users must verify subscription status in order to access content on a separate device.

Iger created a stir earlier this year when he insisted that the average U.S. home had become saturated with DVDs.

“People are not looking to build [DVD] libraries as much as they once did,” Iger said.

Scottsdale, Ariz.-based research firm In-Stat, in a report, said Disney’s proactive approach to provide diversified access underscored the studio’s depth of content, including Marvel Entertainment, Club Penguin, Pixar, “High School Musical” and ESPN.

As more devices are capable of connecting to the Internet, either on a wire, or with a wireless device, the importance of content portability and content permanence will encourage development of cloud-based initiatives, according to In-Stat.

The report said that a large percentage of Disney consumers would appreciate having mobile access to digital content, which in turn would drive Disney’s incremental revenues.

“The idea of a secure digital storage locker up ‘in the cloud’ will eventually make a lot of sense, and will also help interested consumers gain easy and portable access to a lot of their content,” said principal analyst Gerry Kaufhold. “And the big upside is that when your local drive crashes, your content will still be safe.”

Kaufhold said Keychest would take time to establish a foothold among consumers.

“Some … will continue to buy packaged media,” he said.

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