Disney Chair & CEO Bob Iger yesterday said the company, despite recent stock downgrades from analysts, "will continue to derive growth from ESPN," but it will "just not be at the rate we have seen before.” Iger appeared on Bloomberg TV and said of ESPN's long-term rights fees, "We haven’t second-guessed that at all. Our cable fees are going up per subscriber, but as I’ve said, ... we have lost some subscribers." Iger: "We made a decision to license ... the NFL and Major League Baseball, the NBA, and the College Football Championships to name a few, for one main reason. That is to serve the ESPN fan well and really to essentially perpetuate a competitive advantage that ESPN has and to continue to support the strength of its brand and the consumer proposition that it makes." Iger said of the current TV model, "It is a business that is relatively mature, the multichannel television business, so you’re not going to see growth in households that’s anything close to what the business experience over the last decade or two decades. There’s some pricing leverage, there’s still some price increases that can and will be taken, certainly by the best channels in my opinion. By the way, we believe we will continue to see some growth in that business, but it won’t grow at the rate that we saw in the past." Iger: "If you’re in a market that is being disrupted, you obviously want the best products that are out there in a disrupted market, and we believe we have that at the company, including obviously ESPN. If you’re in a market that is changing, you’d rather have a very strong hand, so I’ve said what’s better than ESPN in that regard?"
OVER THE TOP: Bloomberg TV’s David Westin asked, "How important is direct-to-consumer for ESPN’s future?” Iger said, “We believe in the multichannel model, and we believe that it’s not only not going away, but the predictions about its demise were, we think, overstated. That said, we talked about growth being limited in many respects, or more limited than before. We think at some point, if that business model were to fall apart, there are opportunities to go direct-to-consumer.” Iger: "Long-term, ESPN will be just fine, but we refuse to have our head in the sand or be Pollyannaish about what we’re seeing in the marketplace and others may be seeing things differently. We believe there’s disruption going on and there’s more disruption ahead and we’re spending a fair amount of time making sure we’re well positioned in that market. Obviously ESPN is we believe something of great value even in this disrupted world.”
SHOTS FIRED? Iger said of BTIG analyst Rich Greenfield, who yesterday questioned Iger's claim that an ESPN OTT net could launch immediately if the company wanted, "The analyst that came out with that report has been wrong about us on a number of occasions, and so one would have to question, if he’s been wrong so often before how valid were his comments this time around? He’s entitled to his opinions and the other thing I would say, I don’t know where the accountability is. When he’s wrong, I don’t know who he’s accountable for" ("Bloomberg West," Bloomberg TV, 12/21).
CRYSTAL BALLERS: In N.Y., Andrew Ross Sorkin notes Greenfield on Friday "became the only analyst to have a 'sell' rating" on Disney. Most analysts "wave off concerns about ESPN, arguing that this won’t be a problem for some time and that live sports will remain the most desirable programming for viewers who still want a bundle of channels." Rosenblatt Securities Senior Research Analyst Martin Pyykkonen said, "The turmoil and disruption will most be felt by the distributors and some of the weaker programming content companies. For Disney, we think it’s a reasonable bet that they will be a necessary part of almost any skinnier programming package going forward." Sorkin notes it is also possible that shifts in TV-viewing habits will "change more slowly than some of the most dire predictions." Disney "may have seen all of this coming," as it has "spent the past decade diversifying its business by adding big franchises like Star Wars, Marvel and Pixar while expanding its theme park business." So while the entire TV industry "may be challenged, perhaps Disney will be able to weather the storm better than many others" (N.Y. TIMES, 12/22). The WALL STREET JOURNAL's Ben Fritz writes despite a record-breaking opening for "Star Wars: The Force Awakens," some Wall Street analysts "remain concerned about cord-cutting pressures" on ESPN and are "taking the current hoopla as an opportunity to sell." Jefferies analyst John Janedis yesterday said that the success of the film "doesn’t change his core thesis that slowing media-industry growth and rising sports-rights costs at ESPN will limit further upward earnings revisions." ESPN is Disney’s "biggest single business and Wall Street has been sensitive to any signs that its growth rate is slowing as fewer customers pay for cable-television bundles" (WALL STREET JOURNAL, 12/22).
