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Iger on SVOD: 'It's an Exciting Time' to Own Content

8 Nov, 2012 By: Erik Gruenwedel

Walt Disney CEO Bob Iger Nov. 8 said the media giant “feels very good” about licensing opportunities in the burgeoning subscription video-on-demand market and related digital platforms.

Speaking to investors during a fiscal call, Iger said the opportunities to monetize content are compelling and growing due to evolving technology. He expects output deals to services such as Netflix to grow significantly in the near future.

“It’s an exciting time for intellectual property owners,” Iger said. “We’re in business with Netflix and we’re in business with others and new entrants in the marketplace. We are engaged in discussions in a number of directions about that.”

Separately, the CEO said Disney has no plans to buy out existing distribution deals held by 20th Century Fox regarding output deals with Lucasfilm on past Star Wars titles. Disney recently announced it is acquiring George Lucas’ company for $4 billion.

“In valuing Lucasfilm going forward, we did not factor in any need on our part whatsoever to acquire any rights back from News Corp.,” Iger said. “We may choose, after closing [the deal] to explore that. But all the value we’re looking at is going-forward value associated with all the rights we’ve bought from Lucas. Any new IP that is created is not encumbered by any of the deals Fox had.”

Meanwhile, improved home entertainment unit pricing worldwide coupled with video sales of Marvel’s The Avengers helped Walt Disney Studios absorb a 32% decline in fourth-quarter (ended Sept. 29) operating income to $80 million from the previous-year period. Revenue declined 4% to $1.4 billion.

Studio revenue, which includes Walt Disney Studios Home Entertainment, for the fiscal 2012 year decreased 8% to $5.8 billion, while operating income increased 17% to $722 million.

Domestic theatrical operating income growth reflected the strong performance of The Avengers, partially offset by marketing costs for Frankenweenie, which was released theatrically after the fiscal year-end.

CFO Jay Rasulo warned that home entertainment operating income in the current first quarter (ending Dec. 31) is projected to fall more than $150 million due to the fact that Cars 2 and The Lion King 3D last year had already been accounted for regarding amortization costs. 

Amortization is an expense listed on the income statement use to quantify the reduction of the value of an asset by prorating its cost over a period of years.

“Consumer product sales are part of the ultimate package a film is amortized against,” Rasulo said. “So a lot of that was bled off in prior periods, which made [Cars 2] a particularly profitable title [at retail].”

He added that the strong retail performance of The Lion King was volume driven, as it had not been available on home video since January 2005.

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