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Iger: DVD Resilient in Changing Times

3 Dec, 2007 By: Erik Gruenwedel

Bob Iger

Until the link between the Internet and television becomes more reality than hype, packaged media will continue to reign, despite challenges from streaming and electronic sellthrough, said Disney's chief executive.

As the keynote speaker last week at the Sanford Bernstein & Co. media conference in New York, Bob Iger said it was too early to determine whether electronic sellthrough and streaming of movies on the Web were shifting consumers away from DVD.

“Our instinct is that these people [streaming] would not have bought the DVD,” Iger said. “The computer is a great way to watch a movie, but at some point bringing the computer and Internet to the TV set is very important to grow that business. When that happens, consumption [of movies digitally] will grow.”

Iger said with the advent of movie downloads, storage will become an issue for average users to the point that many will find themselves having to erase something for which they paid.

“That's an odd situation for the consumer,” he said. “If you bought the DVD, you wouldn't want to throw it out.”

Iger said retail prices for movie downloads remain margin neutral, which he said meant Disney makes as much profit when it sells Ratatouille on iTunes as it does on DVD.

The executive defended charging less for new releases electronically than in packaged form. He said consumers will pay for quality and convenience online but they won't pay more than traditional retail. “What we are selling through electronic sellthrough is vastly different [in terms of usage] than the physical product, so charging less is the right thing to do,” Iger said.

“Those who want to charge the same online as the physical product are making a mistake and will not help grow the market.”

Iger said television programming on the Internet represents a different opportunity and challenge than movies. The CEO said television viewing on the Internet continues to evolve strongly. He said ABC.com has streamed more than 200 million episodes since launching less than two years ago.

“That doesn't mean 200 million people watched entire TV shows,” Iger said. “But they started watching and that's significant. You are providing people with the opportunity to own more skews than they would have previously [with DVD].”

He said third-party data suggested online viewers constitute a more-engaged audience compared to network TV viewers.

“Their commitment to watching more [content] increases,” he said.

Separately, Iger said the ongoing writers strike underscores coming to terms with changing distribution models and production costs not aligned with traditional encumbrances.

He said the studios haven't determined the economic model for electronic sellthrough and streaming. He said the studios are trying to create content for differing media formats at substantially altered costs.

“We are competing for people's time and money with entities that didn't exist five, 10 years ago,” Iger said. “That changes how we make these programs and how we pay for them. We have to be careful about that.”

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