Walt Disney Co. chairman and CEO squashed any speculation that the entertainment powerhouse would run roughshod over its partners in Hulu once it gains control of the online video pioneer next year, telling analysts that the Mouse House will make any decisions with “an eye toward being fiscally responsible to the other shareholders.”
Disney will control 60% of Hulu once it closes its purchase of certain Fox assets by the end of the first half next year, but it will still have partners in Comcast-NBCUniversal (with 30%) and AT&T (with 10%). While speculation has been that Disney will try to buy the others out -- although some analysts hope Comcast will hold on to its stake just to tweak Disney’s nose -- Iger said the plan is to pump Hulu up with as much original programming as possible.
Iger said the intention is to increase investment in Hulu, particularly on the programming side.
“We aim to use the television production capabilities of the combined company to fuel Hulu with a lot more original programming,” Iger said on a conference call with analysts to discuss fiscal fourth quarter results.
Iger added that will also include ad-supported programming on the service. He noted that Hulu subscribers are generally 20 years younger than traditional network viewers, which he said is underappreciated but should be incredibly attractive to advertisers. He also added that with its high-quality content, there is an opportunity to increase pricing at some point.
Hulu will stick to general entertainment programming, Iger said, leaving more family oriented fare to its other direct-to-consumer offering, Disney +, which is expected to launch later in 2019. Iger gave some more details on the service besides its official name -- some analysts had taken to calling it Disneyflix, in deference to Netflix, the SVOD service many believe it is emulating -- adding that the service will be loaded with content from Disney, Pixar, National Geographic and the Marvel and Star Wars universes.
Disney reported one of its strongest quarters ever -- revenue was up 12%, operating income grew 17%, spurred mainly by huge gains in its Studio Entertainment division -- where revenue rose 50% and operating income nearly tripled. At its Media Networks, which includes cable and broadcasting networks, revenue increased 9% and operating income rose 4%. Broadcasting drove most of those gains with 21% revenue growth and a 6% hike in operating income. At the cable networks, revenue rose 5% and operating income declined 6%.
While Disney has focused intently on its direct-to-consumer offerings, Iger stressed that it is not abandoning its more traditional lines of distribution. But it also sees the handwriting on the wall.
Iger said Disney wont "de-prioritize" or "sacrifice" traditional distributors, but added, "We’re also realists. We see what’s going on in the marketplace. We see the growth of new platforms and program consumption versus channels consumption.”
Iger said it's too early to tell when that shift will happen, adding that if the company sees opportunities to move programming to DTC, it will do that.
“We can’t right now estimate in any way if that will happen,” Iger said.
