Disney Wants a Piece of Retrans and a Fee-based TV Everywhere Model

Disney CEO Bob Iger outlines views on the company's fourth quarter earnings call Nov. 12

By Claire Atkinson -- Broadcasting & Cable, 11/12/2009 5:56:41 PM

Disney CEO Bob Iger outlined his views on retransmission fees and his disagreements with TV Everywhere as it is taking hold. Speaking on the company’s fourth quarter earnings call Nov. 12, Iger said: “We’re intent on getting paid fair market prices or fair market value. We have a good relationship with multi channel providers who’ve paid us well and we’ve been increasing value for them by investing in programming and brands; ESPN, Disney and ABC Family.” He continued, “We’re watching carefully the dynamic about retransmission and fully expect to participate in the trend however it goes.” Disney Co. owns ten stations. Iger’s response to an analyst’s question relates to a recent push by both Fox and CBS to get a piece of their non-owned station group’s retransmission dollars which are paid by pay-TV providers.

The Disney CEO also elaborated on the company’s position on the TV Everywhere initiative that involves cable providers and channels offering top tier TV shows online for free, if consumers provide their subscription details. “What we’ve heard suggests that interest in charging the consumer for greater access isn’t a priority and we think it should be,” he added that, “If we go to a world of authentication we shouldn’t be precluded from offering our products directly to consumers,” who aren’t pay-TV subscribers. Ten percent of the country watches TV without a cable or satellite connection.

Disney reported its fiscal fourth quarter, another tough time for its broadcasting unit and as expected, a better time for cable. Operating income in broadcasting was $2 million in the quarter to October 3, 2009 versus a loss of $71 million in the prior year, thanks to higher domestic and international sales of shows such as Grey’s Anatomy. For the year, the company said operating income at broadcasting was down by $337 million to $505 million because of lower advertising sales at the network and the stations, because of lower ratings.

Cable’s operating income was $1.483 billion, a 19% improvement on the prior quarterly period. Cable networks' full year operating income was $4.3 billion. ESPN did better on higher affiliate revenue which was partially offset by lower ad revenue since the service sold fewer units. Advertising revenue was higher at ABC Family which sold more units at higher rates.

Speaking on the call, Iger said ESPN was seeing a stronger ad market with the stronger categories including: autos, men’s grooming and insurance. “We’re seeing good business from movies and retail is strong,” he said, adding that the sports media company had not often had to compete beyond the traditional sports ad category. He cautioned however not to take the current positive quarter as a read on the coming year. “Don’t take that to the bank for full year,” he said.

Iger and Tom Staggs, Disney's CFO, gave some growth statistics for ESPN’s digital businesses. The unit’s ESPN 360 product has seen subscription numbers double. “We’re seeing encouraging signs in terms of digital ad revenue,” said Iger. ESPN’s ScoreCenter iPhone application, which is ad supported, now has four million subscribers, with two million using it regularly.

Separately, Disney Co. said today it would swap two top management executives, moving Staggs into a new role as chairman of its theme parks unit. Disney meanwhile named James Rasulo, who currently heads theme parks to Staggs’ post, to the position of running the conglom’s numbers. The two switch roles at the end of the year.

Overall net income for the quarter was up 18% to $895 million, revenue was up 4% for the quarter to $9.9 billion.  For the full year, net income fell 25% to $3.3 billion while revenue was down 4% to $36.1 billion. The company’s fiscal full year included an additional week of revenue versus 2008.