Disney CEO Bob Iger had to know that he’d face the ESPN question this morning at the Sanford C. Bernstein Strategic Decisions Conference. The Wall Street firm has led the pack in warning that sports programming contributes to rising pay TV prices — and that could become a big turn-off for consumers in a stagnant economy. ESPN is seen as a culprit because the network and its offshoot channels account for more than 26% of pay TV programming fees, but just 5% of the ratings. But Iger stood firm, taking a page from Franklin Roosevelt by saying in effect that the industry has little to fear but fear itself. Pay TV subscribers “generally are pleased with the variety of programming that they get.” He attributed the growing complaints about sports costs to the fact that “it has been a rough economy over the last few years.” He adds that ESPN has been careful about its price increases to compensate for its aggressive investments in programming including rights for major sports matches. “We’re not trying to kill the golden goose.” Indeed, the pay TV providers who criticize ESPN may be doing more to upset the status quo when they complain about costs instead of “selling the value to the consumers.” If they want to complain about sports costs, they should train their fire on regional sports networks. “If you look at the cost of those channels vs the ratings they deliver, it’s not even close ” to ESPN, he says. But at the end of the day he isn’t concerned that ESPN — Disney’s cash cow — will be whacked as pay TV providers begin to offer low priced services without sports. In a few cases where it’s been tried (for example, Time Warner Cable offers a $40 a month package without sports) “adoption is not particularly high.”
Iger continued to voice no-worries on other TV matters. He doesn’t fear that the shows he licenses to streaming services such as Netflix cannibalize conventional viewing. Many investors believe that ratings at Viacom’s Nickelodeon have plummeted in part because kids watch the network’s shows on Netflix. “We can have our cake an eat it too,” Iger says. Still, his policy for distributing shows to the Web “has morphed a bit from super aggressive to slightly less aggressive than we were.” He’s upbeat about a TV Everywhere application for the Disney Channel that will be available next week to Comcast customers who want to watch shows on mobile devices. Another one will be out soon for ABC Family. “We got paid by Comcast for what we called TV Plus capability.”
The Disney chief also took a measured swipe at Dish Network’s Hopper DVR which now can automatically skip past ads in recorded broadcast network shows. CBS, Fox, and NBC have sued Dish claiming the ad zapper violates their copyrights and programming agreements. Iger says Dish’s initiative is “harmful, both to our business and to theirs….But they don’t seem to care about that.” Dish filed its own complaint against the networks, including ABC, in an effort to establish that the Hopper is OK — just an automated version of what DVR users already do. “I’m confident in our position legally,” Iger says.
He declined to forecast the television upfront ad sales market. Although sales in the scatter market have been “pretty good” for ESPN and ABC, “it’s too early to tell” about the upfronts.
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