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Iger: Netflix Deal is a “Movie Play”

Disney Chief Says Output Agreement Won’t Affect Linear Channels 2/05/2013 1:48 PM Eastern

Walt Disney Co. chairman and CEO Bob Iger said the media giant’s recent output deal with Netflix won’t cut into viewership at its kids’ networks and other channels, on a conference call with analysts late Tuesday.

In December Disney signed a long-term licensing deal with Netflix beginning in 2016 for an estimated $350 million per year.  The agreement replaces an earlier deal the studio had with cable premium channel Starz.

On a conference call to discuss its fiscal first-quarter results, Iger said he has no qualms that the Netflix deal will steer viewers away from its other networks, especially its kids’ channels.

Online’s ability to affect ratings at linear networks was most evident last year in a report by Sanford Bernstein media analyst Todd Juenger, who showed how Viacom’s deal with Netflix for its cable content helped draw viewers away from its Nickelodeon kids’ network.

On the conference call, Iger said he was impressed with Netflix’s platform and user interface, and without revealing details said the online giant “stepped up and paid the right price.”

He added that he was confident the strength of its networks like the Disney Channel networks was sufficient to withstand any added pressure from Netflix.

“This is not a step in the direction of encouraging people to not subscribe to multichannel services,” Iger said on the call. “This is a movie play… Given the popularity of shows that we have, the demand to see those shows relatively quickly remains pretty high and we believe we will be able to sustain that.”

Disney also seemed to ease analysts’ fears that its recent flurry of carriage deals could affect affiliate fee growth, especially at its ESPN channels. Chief financial officer Jay Rasulo said that the company is beginning to see the effect of some of those new deals already one month into the fiscal second quarter.

“We are beginning to recognize in the second fiscal quarter the new rates associated with the new deals we negotiated at ESPN,” Rasulo said. “The rates are differential across all the ESPN channels. Yes, I think we can expect to see an increase. I don’t want to talk about how much.”

Rasulo said that Disney was “exploring” an exit from its ESPN UK network, which has been in limbo since the channel lost the bidding for British Premier League Soccer rights last year. He declined further comment.

 

September