Disney shuns long-term digital content

Summary Disney isn't into long-term digital content deals. Chalk it up to the lessons learned from Netflix's 2008 deal with Starz.

(Do you believe in magic? image by Erin MC Hammer, CC BY 2.0)

Disney CEO Bob Iger said that any digital distribution deals it cuts for its content will be short term, because the market is evolving too quickly.

Iger, speaking on Disney's third-quarter earnings conference call, was asked about cutting deals with sites like Hulu and efforts like TV Everywhere, which links a cable subscription to any screen access. The upshot from Iger was that Disney isn't going to enter multi-year content deals.

"I don't think we will make long-term deals for the content, because I think the world is changing too much," said Iger.

Disney's approach to content deals reflects the lessons from the Netflix-Starz deal. In 2008, Netflix cut a deal with Starz to distribute video for roughly US$30 million a year. Netflix and Starz are currently negotiating a new deal that will feature a price tag anywhere from US$200 million to US$350 million, say analysts. That Starz deal was the linchpin of Netflix's streaming movie service. Netflix became a major player, but in 2008 it looked like a bit player. The lesson: don't cut three-year deals, because today's start-up might kick your tail a few years later.

When it comes to TV Everywhere, Disney said that the authentication process needs to improve. Given Disney's relationship with cable companies — and the revenue stream that those players provide — Iger said that the entertainment giant will play with release windows as needed. Overall, it sounded like TV Everywhere would get priority over internet distribution deals. Iger said:

We will basically push the window back, or make access to the programming more difficult or later, except if a customer is authenticated as a subscriber, and I think you will see, over the next few years, a lot of deals done that enable this. We now have to hope that not only is the technology improved that enables authentication, but that the whole user experience gets better.

Just as a for instance, there have been over 2.5 million downloads of the Watch ESPN App. A lot of people downloaded it, but they were subscribers to services that hadn't cut authentication deals with us yet, but even where there were subscribers to services that had cut authentication deals, the user experience still could be better; it needs to improve.

So I think this is kind of a developing situation. I think it's very exciting, because of what it provides us, what it provides the distributor and what it provides the consumer, but you're still at the beginning of the beginning on this.

Disney reported third-quarter earnings of US$1.47 billion, or 77 US cents per share, on revenue of US$10.67 billion. Wall Street was expecting earnings of 73 US cents per share. The quarter was carried by television and theme park sales.

Via ZDNet US