Disney CEO: 'Netflix More Friend Than Foe'4 Aug, 2015 By: Erik Gruenwedel
Bob Iger says existing theatrical window important to Disney movies
In a home entertainment world going digital and on demand, Walt Disney CEO Bob Iger straddles the fence between the status quo and evolution.
Speaking Aug. 4 on the Disney fiscal call, Igor reiterated his belief that the bundled channel pay-TV ecosystem represents the best consumer value, including access to ESPN. Despite citing data that claimed 83% of pay-TV households watch ESPN, the No. 1 sports network has increasingly come under scrutiny as it downsizes on-air talent and streamlines costs in the face of pay-TV subscriber cutbacks.
In addition, Iger said projections suggest the 5½ hours a day people spend watching TV will increase to six hours due to OTT video. At the same time, he refused to concede that taking ESPN direct to the consumer via OTT and disrupting existing pay-TV agreements was a good idea.
ESPN in February for the first time became a quasi standalone service when it joined Dish Network’s broadband-only Sling TV.
“The multichannel universe … is still the dominant form of television viewing. It is clearly the dominate form for sports viewing as well,” Iger said. “When we look at that [MVPD] universe, we don’t really see dramatic declines over the next five years. We just don’t think it’s necessary [rolling out ESPN separately].”
At the same time, Iger said OTT video (i.e. Netflix) provides Disney with a lucrative distribution channel for off-network and original programming and movies.
“We look at Netflix as more friend than foe because they have become an aggressive customer of ours,” he said. “Products like Netflix are pretty attractive because they offer up user-friendly, efficient and often times much less expensive way to watch television.”
When asked if Disney has agreements in place protecting against subscriber losses due to cord-cutting and OTT video, Iger, without elaborating, said such safeguards do exist.
The CEO said that as Disney enters into new retransmission agreements, it will “take an even longer view” on digital distribution as either a threat or opportunity in the marketplace.
With Netflix launching theatrical releases day-and-date with streaming, Iger reiterated support for the existing theatrical window as it relates to Disney’s tentpole titles — despite a relatively flat domestic box office.
“At the moment, we don’t see any need to aggressively compress it,” he said. Iger said most Disney home video releases are timed to coincide with consumer product launches.
“For us, we don’t see taking steps to decrease the theatrical window because frankly it’s working for us,” he said. “It’s just hard to say when something either feels too disruptive, too fast or not. But when we see it we’ll tell you about it.”
Finally, with the theatrical launch of Star Wars: The Force Awakens in December, and the opening of Shanghai Disney next year marking seminal events for the media giant, Iger cautioned analysts not to overextend estimating what the $5.5 billion amusement park and "Star Wars" movie will achieve financially.
“We know we have probably the most valuable film franchise that ever existed [in 'Star Wars']. [And] we fully expect the success of this film will reverberate throughout the company not only in 2016, but in the years beyond,” Iger said. “So we just want to be careful here that the market doesn’t get too far ahead of us or itself.”
COO Tom Staggs said Shanghai Disney would not be profitable in 2016, but that “quite attractive’ fiscal returns would follow in subsequent years.
With a pending outsized presence in China, Iger envisions Disney movies expanding beyond theatrical and into the country’s nonexistent home entertainment market.
Iger admitted China’s historically “challenged” DVD market due pirated discs undermined development of a legitimate home video universe. The Motion Picture Association of America has long labeled China as a perennial hub of packaged-media piracy — despite government efforts to clamp down on the black market.
With the evolution of a middle class and digital distribution, Iger contends China can now make a formidable home entertainment market.
“We’re in a number of conversations … about output deals for our films,” he said. “We feel good about digital delivery of these films into a window that is likely to be lucrative for us over a long period of time.”