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Disney Downplays a la Carte Plans as ESPN Preps OTT Services

Walt Disney Co. chief Bob Iger likes experimenting with digital platforms, yet while ESPN — one of Disney’s biggest moneymakers — is getting ready to launch over-the-top services to stream more sports programming, don’t expect the move to lead to Disney backing a la carte options for its cable channels anytime soon.

“We’re well-positioned to go direct to the consumer if the marketplace demands it, but we don’t feel a need to do that now,” Iger said during a call with Wall Street analysts to discuss Disney’s strong fourth quarter and fiscal year results on Thursday.

In fact, Iger has no interest in breaking up the bundles of channels it currently offers through cable and satellite services.

Despite Disney being “very well positioned” to take advantage of the a la carte universe, “we don’t feel a compelling need to take a product to market right now that is a challenge to (its current) multi-channel bundle. There’s no need to do it now that precipitates the downfall of that bundle.”

ESPN currently generates over $8 billion in carriage fees for its channels each year, and receives over $6 a month from pay-TV operators for nearly every cable subscriber. Another 74 cents per subscriber comes from ESPN 2.

This fiscal year, Disney generated $15.1 billion from its cable holdings alone, a gain of 5% over last year, increasing profits by 7% to $6.5 billion.

Instead, Iger said that Disney is focused on launching over-the-top services like one around its NBA games, that serve as an add-on to make subscribing to ESPN more attractive, and give the network a way to further exploit its rights for major sports broadcasts across digital devices.

“The package of NBA games that will be on ESPN will be stronger than anything we would ever offer on over-the-top,” Iger said. “It may enhance the enjoyment of the sport but not replace it.”

The goal is to be “present on new platforms in a robust way” and “get closer to the consumer,” Iger said. “No traditional media company has done a better job at going digital than ESPN,” citing growth in advertising revenue and the channel’s traffic numbers.

That’s largely because live sports still command considerable coin from advertisers. ESPN also has been aggressive in locking down rights to more games, recently securing NBA games through the 2024-25 basketball season, which it will share with Time Warner, and Major League Soccer matches. It scored this summer with the World Cup.

But Iger sees an opportunity for Disney’s other properties, including ABC, Marvel and Lucasfilm, to further exploit apps as a way to provide more value to viewers.

Iger noted that Disney’s critics may call the company’s approach conservative, “but we call it a smart approach.”

Disney’s chief has long proclaimed his support of digital platforms. “We’ve established we’re pro-technology,” he said. “But if you do it to a point where you’re endangering your own business model, which is already facing a fair amount of challenges, it doesn’t seem to make sense.”

A la carte would also cause more harm to networks than benefits, Iger said.

“If the bundle would break up, the ones that would suffer are the less popular channels,” he said. “In an a la carte world, they would simply disappear.”

He added that a la carte options would create even more fragmentation, and eliminate networks that don’t have the strong branding that an ESPN or Disney Channel does — an A+E, for example, a network that Disney also owns, and Vice, in which it recently acquired a stake.

“Diversity and variety would go away, it’s that simple,” Iger said.

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