Disney CEO Bob Iger said streaming is a business in which not everybody’s going to win.
Speaking at the Morgan Stanley media investment conference Thursday, Iger noted that other companies at the conference had all predicted that their streaming business would be highly profitable in a couple of years and that they will increase their sub counts by tens of millions.
“It can’t possibly happen,” Iger said. “There are six or seven well-funded, aggressive streaming businesses out there, all seeking the same subscribers, in many cases competing for the same content. Not everyone’s going to win.”
Iger wanted investors to know that they can count on Disney emerging as a winner.
“I am extremely bullish on some of our streaming prospects, notably Disney Plus, which grew at such a meteoric rate,” Iger said.
He said that in order to make the direct to business profitable Disney had to rationalize costs and attract more subscribers. “I think one of the key things that we have to figure out is a pricing strategy that makes sense,” he added. “In our zeal to grow global subs I think we were off in terms of that pricing strategy and we’re now starting to learn more about it and adjust accordingly.”
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Disney also controls Hulu and will have to make a decision by next year about whether or not to buy out Comcast’s 35% stake in the business for upwards of $9 billion.
“We’re really studying the business very, very carefully,” Iger said. “We have a good platform in Hulu. We have very strong original programming, highly awarded original programming, some delivered by FX, which is great.”
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Hulu is also very attractive to advertisers, he added.
Iger previously said that either buying Comcast’s stake or selling all of Hulu was on the table. Comcast president Michael Cavanagh similarly said he’d be happy selling Comcast stake to Disney under their existing agreement, but he’d be open to other arrangements.
“The environment is very, very tricky right now and before we make any big decisions about our level of investment, our commitment to that business, we want to know where it could go,” Iger said. “The whole streaming business, other than Netflix, which is relatively mature, is a nascent business for most of us.”
The maturing of the streaming business is coming at the same time as a lot of people are still consuming media on traditional platforms.
“I’ve said publicly that the future of linear, I don’t believe is very bright and eventually everything will migrate to streaming. We’re not quite there yet. And so you have an erosion of a traditional platform and its economics and some growth in the new platform but not the kind of compelling growth it will all need to be profitable. It’s just a tricky period of time,” he said.
Iger noted that it was possible that Hulu was a good fit with Disney’s other assets as it shifts its strategy from funneling all of its content to its streaming properties to a more balanced approach.
“It’s already clear to us that the exclusivity that we thought would be so valuable in growing subs, well, it wasn’t as valuable as we thought,” he said. Content can actually exist on on a traditional platform and the streaming platform quite well without doing damage to either one.”
He pointed out that the comedy Abbott Elementary has a very different audience when it airs on ABC compared to when it streams on Hulu.
“The media age on ABC is substantially higher than the median age of the Abbott Elementary viewer on Hulu by about 30 years,” he remarked.
He said having show like that on both platforms would help amortize the cost of content better and there would also be a positive marketing impact. The Fox animation shows including The Simpsons remain among the most popular shows streaming on Disney Plus, even though they’ve all been seen on the Fox network, he added.
Iger also talked up the future of ESPN. “One of the reasons we’re optimistic is we know theI power and popularity of live sports, not just to consumers but to advertisers,” he said.”ESPN’s ratings have actually held up nicely particularly when you consider the erosion of the platform that they’re on.”
ESPN Plus at this point is a flanker to the ESPN brand, but “down the road, at some point, I think it’s inevitable, because of what’s happening with the media world and technology, ESPN will become a direct-to-consumer business.
At a time when the business model for the regional sports networks appear to be crumbling, Iger was upbeat about ESPN.
“When you combine the strengths of live sports and the brand and the value of advertising, you can create a business tha’s not subscriber dependent but dependent on advertising and subscriber revenue. I think there’s reason to be bullish.
One of Iger’s most important job returning to Disney for a second terms as CEO is to take another shot at picking a successor.
“I’m confident that we’ll identify the right successor at the right time,” he said. ■
