Disney isn’t ready to completely reinvent the way it gets its movies and TV shows in front of audiences or merchandise in the hands of consumers. But Walt Disney Co. chief Bob Iger has a few ideas in mind that could impact the company’s bottom line in the not-too-distant future.
“What’s next for Disney are much more direct-to-consumer product offerings,” said Iger during a discussion with Variety co-editor-in-chief Claudia Eller at the Dealmakers Breakfast on Wednesday. “The question is how fast we bring that product to market and challenge business models that are so valuable to us today.”
What Iger is considering are ways that Disney can more directly interact with its consumers.
He gave examples of how people who see Disney’s films are the customers of movie theaters, not Disney. “The theater owners own the customer, we don’t,” Iger said. Similarly, consumers who purchase Disney-branded merchandise do so at big-box retailers like Walmart and Target, not necessarily Disney stores. “They’re Walmart customers, not Disney customers,” Iger said.
But that’s not to say that Disney plans to get into the exhibition business to create a closer connection. “We’re not going to go into the business of building movie theaters,” Iger said.
But it already has launched Disney Movies Anywhere, an app through which it is selling and storing digital copies of Disney, Pixar and Marvel films. Apple’s iTunes, Google Play, and Walmart’s Vudu support the service.
At its theme parks, it’s launched My Magic Plus, a wristband-based system through which guests can store Fast Passes for attractions, and room keys when visiting Walt Disney World, but also save credit cards through which they can purchase food and merchandise.
The overall idea is to find ways to better understand who Disney’s customer is and customize experiences for them. That could include online retail destinations built around “Star Wars,” Marvel’s superheroes or Pixar’s properties that package publishing, TV shows and films and offers access to those for a fee.
As Disney focuses more attention on its brands, “There are opportunities where we can use these brands and the affinity customers have with them to sell directly to them,” Iger said. “Long term for our company, that’s what we’re concentrating on.”
Iger singled out ESPN given the popularity of the sports network and its audience’s loyalty to the brand.
“We could do that in a second,” Iger said, but “in doing so, do we want to disrupt in an extreme way the multichannel subscription model that’s delivered to us so much profitability to our company for so long? I don’t think we need to hasten that. By not doing it now, we don’t lose anything. We can always do it.”
During the Q&A, Iger provided further insight into the future of Disney’s various divisions, including its studio, TV networks and theme parks. Event, held inside the Palm restaurant, at its new location in Beverly Hills, presented by Bank of America and sponsored by Delta.
That included plans to add “Star Wars” attractions at its theme parks around the world, driven by what will appear in future films, the first of which is “Star Wars: The Force Awakens,” directed by J.J. Abrams.
On His Decision to Stay at Disney Through 2018:
In October, Iger extended his contract to remain chairman and CEO of the Walt Disney Co. through June 30, 2018. He will appoint a chief operating officer in 2015, with the individual most likely groomed to replace Iger when he does retire.
“It’s not the easiest thing in the world to walk away from,” said Iger of Disney.
He dismissed any notions of wanting to run for public office, a longtime rumor concerning Iger’s plans after Disney.
“I don’t think that would be fun,” Iger said. “I know it wouldn’t pay as well,” he joked.
While Iger’s successor has yet to be named, Iger acknowledged that he’s working closely with Disney’s board of directors on finding his replacement and planning a smooth transition for the next Disney chief.
“There’s a time for anyone to step off the stage,” Iger said. “I will have been CEO for 13 years. That’s enough.”
On Plans for New Acquisitions after Maker Studios, Lucasfilm, Marvel and Pixar
“I don’t rule out a possibility for another large acquisition,” Iger said, but noted that “there’s nothing imminent. We don’t have strong strategic holes or deficits. There’s no big need right now. We’re fortunate as a company that we have an unbelievably strong balance sheet. We have more than enough to do.”
Recent acquisitions like Maker Studios, Lucasfilm, Marvel and Pixar all fulfill a purpose at the company, Iger said. And when it comes to future deals, deals must flow through an “acquisition sieve” and provide the company with either new intellectual property that Disney can build brands around, or provide it with new forms of technology that Disney can use to distribute its content or entertain its fanbase.
The Impact Technology Has on Entertainment Conglomerates Today
“Disruption is happening,” Iger said. “There’s no question about it. We’re seeing it more on the TV side than anywhere else.”
That disruption is largely happening through technology, and the ability of consumers to access TV shows and movies on mobile platforms, smart TVs, videogame consoles and other devices, which is impacting longstanding business models and revenue streams.
“Just about anywhere you look, there’s something happening that is shaking the foundation of the business model that’s shaped the underpinning of these great businesses,” Iger said.
With that said, Iger is upbeat on the prospects of what new technologies provide companies like Disney.
“I like to look at this change as a glass half full, versus a glass half empty,” he said. “You have to have a degree of optimism. People don’t want to follow pessimists. I can’t ignore the changes going on. You have to admit the disruption taking place. Don’t be in denial about it. Don’t will it away. Embrace technology, not push it away or deny its existence. Embrace technology every step of the way, even in ways that disrupt our business.”
Disney, however, finds itself in an enviable position, given that “when you make great content, you tend to be in demand by consumers and distribution platforms all over the world,” Iger said. “If a new distribution platform emerges, the first call they make is to Disney.”
On the Increase in Entertainment Options on New Digital Platforms
“Distribution isn’t a differentiator (anymore),” Iger said. “Distribution is a commodity,” which has forced streaming services and other online platforms to get into the original content game. “Content is still king,” Iger said. “There’s just more of it.”
And that doesn’t surprise Iger. “There are many more ways you can get content distributed than ever before. That’s a good thing.”
The bad side is that “there’s more content, but not more fantastic content. The quality hasn’t expanded as much as the content has expanded. There are things to be said for things that are great.”
On the Studio’s Decision to Make Fewer Movies
Under the reign of Rich Ross, Disney’s film studio produced fewer movies, reducing the slate to around 13 a year over the last three years. That figure will increase to 21 over the next three.
“It’s not about how much you make, it’s about how good the quality is,” Iger said. “You’ll be better off as a company making fewer things and concentrating on those and how you bring those to market … in a very less cluttered way, even though the marketplace is more cluttered.”
Why the Studio Makes Movies Like “Million Dollar Arm”
“Million Dollar Arm” may have generated praise from critics, but the $25 million film, starring Jon Hamm as a baseball scout who recruits new players in India, earned just $38 million earlier this year. That film will be followed by another feel-good sports film in “McFarland, USA,” with Kevin Costner, in February.
“You can quickly lose $10 million on a $40 million movie these days,” Iger said. “We need to be even more careful about them today than a couple years ago.”
But the point of making those non-tentpoles at the studio is to produce what it calls “brand deposits.”
“We like making these kinds of movies,” Iger said. “When people think of Disney they think of a collection of experiences. We want them to have positive thoughts about (the brand),” and profitability isn’t always necessarily the end goal.
On Whether TV Is a Good Business
Television is “not a high margin business as some of our other businesses are,” Iger said. “It’s a perfectly fine business to be in,” especially if a company can create the shows and own the network they are on. “It helps a lot.”
Overall, cable is experiencing slower growth, as new platforms compete for consumers’ time, but Iger still called it a good buy.
When it comes to branding, ABC Family is said to be rethinking its image, now that many of its series appeal to teen and tween girls, rather than the entire family.
“Over time, the programming mandate was one that was aimed at young female adults,” Iger said, with shows like “Pretty Little Liars.”
Iger said he would support any suggestion of a new way to brand the cable channel, should the right strategy be developed.
How ESPN Will Compete with New Players like Fox Sports
“Fox Sports and the other challengers right now are all competing to be a distant No. 2 because of the rights ESPN has managed to buy over the years,” Iger said, noting that ESPN has spent considerable coin to lock down broadcast rights to NFL, NCAA, MLB and NBA games. “We made a very conscious decision to do that for competitive reasons. We will buy the cream of the crop even if it costs a lot of money.”
Iger said ESPN needed to in order to continue to grow the venerable sports brand. But while it’s spent heavily on rights deals, those pacts also include the necessary digital rights to enable ESPN to go directly to its audience and make the viewing experience more flexible and compelling to consumers, Iger said.
Iger did note that the cost for sports rights is increasing due to increased competition. But “there’s a misconception that rising costs are eating into ESPN’s profits,” Iger said. “It’s not growing at the rate it used to grow, but it’s continuing to grow and will continue to grow its profitability in the next five to ten years.”
On the Move of Marketing Dollars to Digital Platforms
Iger showed some annoyance in the current state of advertising and how it’s impacting TV buy rates.
Marketers are increasingly shifting their budgets to digital platforms, considering that’s where more viewers are accessing entertainment.
“There are people in denial about this,” Iger said, and called it “ridiculous.” “Of course there’s money that’s moved over. We’ve moved it.”
The issue that needs to be solved is how to track which ads are viewed and on what digital platforms.
“There’s a strong sense (that online) is where the consumers are,” Iger said, but a solution to measure that audience needs to be more robust, he said. “There’s a lot of money being invested in solving this.”
Did Disney Kill the Merger of Hasbro and DreamWorks Animation?
Iger adamantly denied reports that Disney forced Hasbro to back away from a merger with DreamWorks Animation, given that the toymaker has licenses to produce playthings based on “Star Wars,” Marvel’s superheroes, and now “Frozen” and its popular Disney princess line, too, which previously was handled by rival Mattel.
“It’s absolutely not true,” said Iger, who also stressed that Disney is not looking to buy a toy company. “We got way too much credit.”
However, Iger simply presented Disney’s position on working with partners.
“You can be a good partner or you can be a bad partner,” Iger said, cautioning that “we fully expect that given the size of our business at Hasbro that they will behave as the licensee they were when we decided to do the deal and give more business to them.”
It was a very diplomatic way of saying a merger with DreamWorks Animation would have created a different kind of Hasbro that may not have sat well with Disney.
“If you choose to be a bad partner, there can potentially be ramifications,” Iger said. “There’s a difference in saying if you do that deal, you’re dead. We didn’t have to. Other people did it.”