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Iger: Distributors Should Accept Lower Video Margins

Disney Chief Says MSOs, Telcos Have Other Products to Take Up Slack 9/24/2013 1:32 PM Eastern

Cable operators and telcos who have enjoyed high-growth in their broadband and telephony operations, may have to accept dwindling video margins in the future, Walt Disney Co. chairman and CEO Bob Iger told an industry audience Tuesday.

Iger, speaking at the Goldman Sachs Communacopia conference in New York, said that broadband apps like Watch ESPN and other content have helped drive growth at high-margin business like broadband and telephony for distributors, and in order to continue reaping those rewards, they will have to weather lighter margins on the traditional video side.

 “You can’t look at the MVPD of today and only focus on their  video business. You have to look at the collection,” Iger said. “While the cost of programming has increased and perhaps that has resulted in some lower margins for the distributor, the fact is they have put themselves in these other businesses that have inspired great growth over the years. They may have to accept lower margins on their video business because they are in a business that goes well beyond that.”

Iger added that apps like Watch ESPN have helped programmers receive additional revenue from distributors because they also increase the value of the overall voice, video and data bundle.

Iger said he considered the emergence of mobile video as the most dramatic change he has seen in his 40 years in the media business, adding that it is essential for both programmers and distributors to ensure that more content is available on more devices.

That also means more money for programmers – he said Disney gets paid “incrementally” for making its content available on mobile devices, adding that it adds value to both the content owner and the distributor because it allows them to sell their customers seething they have never had before.

“We have got to as an industry, I believe, basically  grow or enable all of this to happen,” Iger said of greater availability of mobile content. “Because I think not only does it create relevance to the multichannel package, it enables the consumer to do something that is far greater than what they’ve been able to do before, and it keeps the multichannel platform healthier and basically more competitive to all the other entrants in the marketplace.”

September