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Disney Rides Technology to New Business Models

7 Feb, 2006 By: Holly J. Wagner

Walt Disney Co. CEO Bob Iger is excited about high-definition DVD, but he's still hedging with other platforms and sounded off aggressively — if nonspecifically — on the company's first-quarter 2006 financial call about exploring new platforms and windows.

“I'm actually bullish on next-generation DVD,” Iger said. “I realize it's going to go through a challenge period because of competing formats and the fact that we have to penetrate the market with new players and new software, new movies [but] I think it's something that is going to ignite the marketplace.”

Iger would not be specific, but again said he's open to tinkering with windows to get the most out of the market. While the theatrical window creates value for the rest of a property's life, other windows may have to change to accommodate consumers.

“It comes down to one very obvious thing. I hate to sound clich?, but we are watching consumer behavior change right before our eyes, and technology is causing that. And yet a lot of these businesses are very wedded to these business models and practices and habits and relationships,” he said. “It behooves the whole industry to really look at what consumers are doing and how they are changing and not let these other models get in the way of it.”

“I actually believe that you are going to see a fair amount of change windowing of product, whether it's movies or television product; iTunes is one example of that,” he said. “Where it's going to come, when it's going to come, I am not exactly sure, but I believe there is an inevitability to it.”

Iger put investors on notice that Disney will take risks to strengthen its content holdings and expand the way it delivers that content.

“We are managing our businesses for the long term, not quarter by quarter. This means our decision-making in some instances may challenge well-established business models or practices in the near term, so that benefits can be captured in the long run,” he said. “The iPod deal announced during the quarter is a clear example of our vision for the digital future.”

Consumers have downloaded 2.5 million units of Disney long-form content from iTunes, Iger said.

“What we are learning from the iPod experience is that people will pay for the convenience of either getting what they missed before, or for mobility,” he said. He extolled the potential for handheld device growth and said, “You should look for us to be active in this area.”

CFO Thomas Staggs predicted that home video sales will be flat again this year, a projection that no doubt will factor into future decisions. Iger remains open to making unconventional moves to respond to the market.

“We continue to carefully monitor and analyze consumer behavior and new technology developments to assess how best to evolve our businesses, either by adapting current business models or creating entirely new ones,” he said. “Although it is difficult to predict what models will prevail in a digital world, as a company we won't let traditional practices get in the way of best serving the interests and demands of our consumers. We are committed to innovation and experimentation as it relates to new media development.”

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