Disney chairman and CEO Bob Iger said he’s “very enthusiastic” about Hulu‘s plans to launch a bundle of live TV networks in 2017 — in part because such online services give the Mouse House leverage in negotiations with traditional pay-TV distributors.
“We think new entrants in the marketplace is great, because it’s basically more mouths to feed (for our programming),” said Iger, speaking at the MoffettNathanson Media and Communications Summit in New York Wednesday.
Hulu’s over-the-top TV play “will keep legacy distributors more honest,” Iger said, not only in terms of what they pay Disney for carriage of ESPN, ABC and other nets but also with respect to cable and satellite ops making improvements to their user interfaces to stay competitive with the OTT crowd.
The new Hulu broadband-delivered TV service has a “tremendous” user interface, Iger said, noting that Disney execs have seen a first look because the conglom is a part owner (along with NBCUniversal and 21st Century Fox). “They’ve become a big buyer of our programs already,” and the virtual pay-TV service will extend that, he added.
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Asked about the prospects for ESPN, which has felt pressure from subscriber declines in recent quarters, Iger said, “We feel great about ESPN long-term, for a number of reasons… The combination of the ESPN brand, sports and live still makes that business very, very attractive to us.”
Still, Iger acknowledged that ESPN has been subject to “some disruptive trends in the marketplace.” He attributed the sports programmer’s sub losses to its absence on “skinny” bundles on new and traditional TV services, and said the company is getting “much more aggressive” in discussions with distributors about getting ESPN on the slimmer channel packages.
“In the United States today, you can’t launch a new multichannel bundle successfully without ESPN,” Iger asserted. He cited Sony’s PlayStation Vue, which launched nationwide with a “slim” bundle including ESPN in March. “We’ve been told… their sub numbers have gone up significantly” since adding ESPN, Iger said.
Meanwhile, Iger boasted about Disney’s movie biz. Since the Pixar acquisition the company has released 28 films with an average $780 million box office take, he said. That has given Disney’s studio arm a return on invested capital higher than anyone in Hollywood, he claimed: That return “would make the rest of the industry look silly… We’ve had fewer misses because we’ve had tremendous attention to detail in making these movies good.”
For its fiscal second quarter of 2016, Disney revenue and earnings came in below Wall Street expectations. While the Mouse House’s studio posted a 22% gain in revenue, the cable networks group revenue fell 2% to about $3.9 billion.
“We don’t stop, we don’t pause, it doesn’t cause us to do anything different,” Iger said Wednesday in discussing the company missing quarterly numbers. “If you’re running a company like this, you can’t possibly run it with a great focus on quarterly results,” he said, because “your long-term prospects are going to dim appreciably.”
At the MoffettNathanson conference, Iger spoke at length about the Shanghai Disney Resort, set to open June 16 after 17 years in the works.
“One of the critical elements was making it distinctly Chinese, making sure people visiting the park feel it’s theirs,” Iger said. For example, Shangai Disneyland has a “Mickey Avenue” rather than a “Main Street” as with every other park. In the future, Disney will focus on developing new attractions in Shanghai around franchises like Star Wars and Marvel.
At Disney’s U.S. theme parks, the company is building two “significant” Star Wars lands in California and Orlando, Fla., and has plans for a “really good Marvel presence” that Iger said has yet to be announced.
One question that didn’t come up during the MoffettNathanson session: Disney’s succession plans for Iger after COO Tom Staggs’ exit. Last week, Iger told analysts on Disney’s Q2 earnings call that he currently does not have “any plans” to extend his contract past 2018.
