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Iger: Netflix Deal Focuses on Disney Movies, Not TV Shows

5 Feb, 2013 By: Erik Gruenwedel

Walt Disney Co.’s recent landmark subscription video-on-demand license deal with Netflix will focus on Disney movies, while maintaining streaming access to Disney Channel programming to authenticated third-party cable, satellite and telecommunication operators, CEO Bob Iger said.

Netflix begins streaming Disney movies, including Touchstone, Marvel, Pixar and Lucasfilm releases, in 2016. Starz Entertainment currently distributes Disney movies in the pay-TV window.

Speaking Feb. 5 in a fiscal call to discuss Disney’s first-quarter (ended Dec. 29) results, Iger said a lot of thought and consideration went into the Netflix agreement, including the belief it would not dissuade consumers from subscribing to multichannel distributors.

“We thought long and hard about it, talked about it at length, and believed in the end that this is a movie play, and there are limitations in terms of when the movies are available and how many there are,” Iger said.

The CEO said management felt Netflix (or SVOD) to be a different distribution opportunity to the popular Disney Channel, on which Disney will continue offering repurposed programming on demand to authenticated multichannel subscribers.

“[Netflix] stepped up and paid the right price, which was also extremely important,” Iger said. “We were impressed with the platform and user interface. We thought from an environment perspective, it was the perfect place for our product to be distributed.”

Separately, Iger confirmed Disney would release additional standalone "Star Wars"-themed movies outside of the upcoming trio of saga films, including Star Wars: Episode 7 in 2015, directed by J.J. Abrams.

The CEO said Lawrence Kasdan (The Bill Chill) is writing the script for one of the films and Simon Kinberg is working on the other. Both projects are considered in the planning stages.

“Those [creative entities] are becoming more real,” Iger said, adding that Kasdan and Kinberg are also consultants on Episode 7. “When we did the analysis on [the] Lucasfilm [acquisition], we did not place [monetary] value on [these additional movies].”

Meanwhile, Walt Disney Studios reported operating income of $234 million, which was down 43% from $413 million during the previous-year period. The studio, which includes Walt Disney Studios Home Entertainment, said revenue declined 5% to more than $1.5 billion from $1.6 billion last year.

Notable factors for the decline were decreases in home entertainment and theatrical revenue, partially offset by an increase in television and subscription video-on-demand distribution, including Netflix.

Indeed, the operating income increase was primarily due to SVOD license sales of library titles in the current quarter and higher international sales driven by the timing of title availabilities.

The drop in home entertainment revenue was largely due to lower Blu-ray Disc sales of the Cinderella: Diamond Edition release, compared with The Lion King: Diamond Edition release on Blu-ray in the prior-year quarter. Additionally, the prior-year quarter included Cars 2, which had lower production cost amortization given the strength of its merchandise licensing revenue, compared with Brave in the current quarter.

The decline in theatrical revenue was driven by marketing and distribution costs for Oscar-nominated Lincoln and Monsters, Inc. 3D in the current (second) quarter, the continuing strong performance in the prior year of The Lion King 3D, which was released in Q4 2011, and one additional new Disney theatrical title in wide release in the current quarter.

Disney titles in wide release in the current quarter are Wreck-It Ralph and Frankenweenie, compared with The Muppets, which was released last year.

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