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Disney COO Tom Staggs Defends ESPN After Subscriber Drop, Touts New ‘Star Wars’ Parks

Disney Chief Operating Officer Tom Staggs reiterated the company’s belief in ESPN and the continued delivery of the sports network’s programming via traditional television bundles, rather than any near-term move to new digital platforms.

Staggs’s remarks came Thursday at the Bank of America/Merrill Lynch Media, Communications & Entertainment Conference in Beverly Hills. His speech comes a little more than a month after the company’s report of a modest decline in ESPN subscribers helped initiate a selloff of not only Disney, but many other stocks.

Answering a question at the conference, Staggs said he thought that sharp downturn in Disney stock, which dropped from more than $121 a share to $108 on the news, was overblown. “I think, yes, the market overreacted,” Staggs said. “We feel good about where we sit. ESPN continues to be one of the most important and valuable brands in programming.”

Disney’s No. 2 executive, who rose to that position seven months ago behind CEO Robert Iger, said he thought that ESPN’s trove of sports rights deals had been underestimated. Some of the arrangements stretch all the way to 2030. He cited tennis’s ongoing U.S. Open and the recent resumption of college football as two strong franchises for ESPN, on both old and new platforms. The audience for college football digitally, via Watch ESPN, was up 60% on opening weekend, he said by way of example.

Staggs said that the advance of viewing online led some analysts to believe that television’s decline was more rapid than it is. Ratings showed that most digital users continue to consume most of their sports content via traditional linear television. “People sometimes think of this as a zero-sum game, more than is appropriate,” Staggs said, adding later: “We continue to believe in the value and appeal of the mutli-channel bundle and that value and that appeal is going to continue for some time.”

The COO confirmed that Disney will begin construction of new “Star Wars”-themed “lands” at Disneyland and at its Orlando theme park, but said it is too soon to say when those attractions will be completed. Each will amount to the single biggest investment in the history of the company’s theme parks, he said. “That is how important ‘Star Wars’ is to us and that is also how big the opportunity is for us,” Staggs said.

Iger previously announced the “Star Wars” lands at the company’s mega-fan event, D23. Staggs reiterated that the “Star Wars” additions will be deeply immersive, with visitors able to “fly” the millennium falcon fighter and to eat and drink in a “cantina” like the one in the original films. Staggs quipped that he and Iger would like the parks to open “really, really soon,” but that those planning the complex expansions have cautioned they can’t be completed overnight.

The executive, who previously helmed Disney’s theme parks and served as the company’s CFO, said the Labor Day weekend rollout of new “Star Wars” toys hinted at how strong the upcoming “Episode VII” film and the future theme parks will be. In a series of “unboxing” events publicized via YouTube, Disney stretched the toy introductions over 18 hours. By the time stores opened to sell the new merchandise, there were 130,000 people lined up worldwide, Staggs said.

In yet another example of the company’s wall-to-wall exploitation of the “Star Wars” theme, it will add an “overlay” from the space odyssey’s upcoming episode on Space Mountain attractions already in its theme parks.

Staggs said he is not concerned that the recent economic slowdown in China will harm Disney’s new theme park in Shanghai, which is due to open in the spring of 2016. He said that the park is being built as a long-term bet on the popularity of Disney in Asia. Reactions to the unveiling of the park’s creative details were overwhelmingly positive, Staggs noted, adding that the market for the park is huge: 330 million people living within three hours of the Shanghai location have adequate income to attend.

While the giant park in China has been grabbing the lion’s share of attention, Staggs noted that other developments could also hold a big upside for the Mouse House. “The World of Avatar,” based on the animated film, is coming to Disney’s Animal Kingdom in Florida. Staggs said he believes it has the same potential for boosting attendance and visitor approval as the “Cars Land” addition at Anaheim’s California Adventure. That park saw attendance jump from about 6.3 million to 8.4 million after a billion-dollar upgrade that focused on “Cars.”

The conglomerate had announced in its last earnings call that it intended to buy back $6 billion to $8 billion of its stock during the current fiscal year. While shares of Disney and other entertainment stocks have dropped sharply in recent weeks, Staggs said the declines had been advantageous in the buy-back. Disney has already repurchased $5.6 billion worth of shares, he said.

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