NEW YORK—Speaking at the Morgan Stanley Technology, Media and Telecom Conference, Disney CEO Bob Iger noted that media companies are in a “tricky” place these days, with their traditional pay TV and linear TV businesses collapsing and their new streaming businesses still too nascent to make up for lost revenue and push them into profits.
“There are six or seven basically well funded, aggressive streaming businesses out there, all seeking the same subscribers in many cases competing for the same content,” Iger said in a transcript of an interview at the Morgan Stanley conference produced by Seeking Alpha. “Not everybody's going to win.”
“So what we're doing right now is we own two-thirds of Hulu, and we have an agreement with Comcast that may result in us owning 100%, is that we're really studying the business very, very carefully, all those competitive dynamics with an understanding that we have a good platform in Hulu,” he continued. “We have very strong original programming, actually highly awarded original programming, some delivered by FX, which is a great not only producer but brand. And we also have a good library. So it's a solid platform, and it's also a very attractive platform for advertisers. It's already proven to be valuable for them, and advertising has proven to be valuable for us.”
“But the environment is very, very tricky right now,” he admitted. “And before we make any big decisions about our level of investment, our commitment to that business, we want to understand where it could go. The whole streaming business other than Netflix, which is relatively mature, it's a nascent business for most of us. And we're also at an interesting point in the world from a media perspective where a lot of people are still getting linear programming or consuming media on traditional platforms.”
“And while I think I've said publicly that the future of linear I don't believe is very bright and eventually, I think everything will migrate to streaming, we're not quite there yet,” Iger said. “And so, you have erosion of a traditional platform and its economics and some growth in the new platform but not the kind of compelling growth that we’ll all need to be profitable. And I think it's just a tricky period of time.”
While Iger declined to say whether Disney would sell its stake to Comcast or buy out Comcast’s minority stake for full control this year, the Disney CEO stressed that “I’m generally bullish on streaming as a great consumer proposition, as a really robust platform to deliver high quality content under easily used circumstances. And I am extremely bullish on some of our streaming prospects, notably Disney+, which grew to just such an -- at such a meteoric rate.”
In terms of the challenges streamers face in reducing profits and producing profits, Iger noted that price hikes, reducing the cost of production and advertising would play a role.
“I think, in our zeal to grow global subs, I think we were off in terms of that pricing strategy,” he said. “And we're now starting to learn more about it, and to adjust accordingly. And when you think about streaming in general, it's a consumer delight in the sense that we used to talk often when it came to linear programming about à la carte, it’s the ultimate à la carte proposition for the consumer. And while I'm pro consumer, generally, I think we have to take a look at how easy it is for the consumer to not just sign on, but sign on sometimes under promotional circumstances where it's not only less expensive, in some cases, it's free, and the signing you get for three months, you get one month free, watch all you want in a month, so sign off that and go to another one that's doing the same thing. So, I think we have a lot of rationalization to do from a pricing perspective. But, that's one path to profitability, another is we do have to grow subs. A third is basically coming to grips with rising costs of production, and also figuring out just how much volume we need for that platform.”
“The other thing I didn't mention in terms of path to profitability is advertising, which is also still very new on that platform,” Iger added later. “And when you think about a relatively reduced ad load, the purity of those brands and the specificity of that audience and an audience is not only very engaged, but loyal, it's an advertiser's delight. And that's very new for us.”
