Disney CEO Bob Iger, during the company’s earnings call yesterday, told analysts Disney had no immediate plans to take ESPN over the top, a la HBO or CBS, but instead inferred that option isn’t completely off the table.
Referencing Dish Network’s OTT offering, Sling TV, which carries ESPN and ESPN2, Iger said Sling TV is “designed to attract consumers or households that are either cord-nevers or cord-laters.”
“We believe that there is an attractiveness to, or a real justification for, trying to convince, particularly Millennials to sign up for some form of subscription TV when they might not have signed up for any,” Iger said. “There is definitely an opportunity not just for ESPN but for other Disney brands to ultimately put a product in the marketplace that reach consumers directly. We think we have that opportunity with a Disney-branded service; we may have an opportunity to bring out a Marvel-type product and possibly Star Wars.”
The lure, he said, are the estimated 12 million broadband only homes in the United States, “the subscriber we’re trying to reach,” Iger said.
Nevertheless, Disney is “mindful of the value of the expanded basic bundle to this company,” adding that there’s no “reason for us to attempt to take out some of this product, particularly ESPN,” over the top immediately.
But, Iger said, “If we see that market dynamics are changing in such a way that it’s better for us as a company to take the product out directly and to not only improve our margins by taking out the middle man but to create a closer relationship with the consumer that could be mined for revenue- generating purposes, then we’ll do that,” he continued. “But we think that if we were to do that now, it would be somewhat precipitous of us and there doesn’t seem to be any reason to be that way.”
Later, in an interview on CNBC, Iger said Disney’s dalliance with OTT via its Sling TV deal was necessary in light of recent industry developments.
“We believe that in a media environment that’s changing right before our eyes that some experimentation is necessary,” he told CNBC. “I don’t want to chalk it up just to an experiment, because we actually believe this is going to last, but we are going to take a careful approach and obviously not put in jeopardy the expanded basic bundle which is so valuable to the company and to the industry.”
It should. It’s a similar sentiment to one HBO CEO Richard Plepler expressed a year ago.
In January, Plepler pointed to the $4 billion worth of partnerships HBO has with pay-TV operators and said, “none of those partners are doing us a favor, they’re doing their own business a favor. If the model changes, and that makes sense down the road, we will have the ability to do what we need to do.”
“It’s about arithmetic. If the arithmetic changes and the arithmetic makes sense in a different way, we are not going to be caught without the ability to pivot,” Plepler said.
Ten months later, in October, the Time Warner property announced plans to go over the top with HBOGo in 2015.
Is it time to start the clock on ESPN and Disney? It’s already counting down.
Disney earnings by the numbers:
- Revenues were $13.3 billion, up 9% from $12.3 billion in the first quarter a year ago, and beating analyst expectations of $12.87 billion.
- Adjusted earnings per share were $1.27, up from $1.04 a year ago, again beating analyst expectations of $1.04.
- Cable operating income dropped 2%, due in large part to sports rights, primarily the new contract it signed with the NFL.