Disney CEO Bob Iger lays out details on company's Netflix competitor

we are joined by a bob iger of course chairman and CEO of Disney after really a very important day for the company an investor day long and coming much-awaited and you didn't disappoint I will tell you at least from my perspective in terms of inundating us with content and then giving a lot of the specifics the investment community has been clamoring for but let me just start with the big picture if I can Bob which is you clearly are pointing in a different direction for this company in terms of the way it goes about distributing the amazing content that you create here at Disney why is that something that you feel is necessary to do and necessary to do in such a significant way as you detail today well I think you have to look at not only the way the world is going but we had to assess what the biggest opportunity was for the company to grow over the long term and clearly consumers are enjoying a kind of a different form of entertainment in the home one that is over-the-top and not necessarily connected to a traditional satellite or or cable distributor a distribution model one that has a significant amount of choice one that enables the consumer to customize or to have personalized experiences one that can be watched seamlessly on multiple devices and so it was clear that given the company's ability to create content that people love why not give people content that they love but on platforms that they've becoming that are becoming more and more interesting to them more more compelling to them now you set out some relatively ambitious goals in terms of subscriber projections between 60 and 90 million on the disney plus service by fiscal year 2024 or the end of growth that and as well Hulu which you control 60% of I think forty to sixty million subs in the same time period some people look at Netflix and say 150 million subs around the world and they still lose two to three billion dollars a year how is Disney going to be able to make money and more money than otherwise would have by licensing so much of that content in this new world if Netflix is still losing so much with such a large subscriber base well as we demonstrated at the beginning of this press and we have a almost a hundred years of creating great content that the world loves under Disney and then Marvel and Pixar and of course Star Wars with an aiding National Geographic to it and I think when you start with a a brand base that is that strong then your you have an advantage basically in the marketplace because of the you know the love that people have for that brand and the desire to be entertained by spend money on those brands we've seen that in multiple ways as a company I grant you that you know in this new world while we're still really learning more and more about monetization you know we enter this business I think with real strength in terms of the brand affinity that our products have and I think that gives us not only the ability to reach more people but it gives us the ability to do so in more economically viable ways yeah I'm curious about that economically viable meaning what you're pricing the services $6.99 that is below certainly what Netflix is that in a number of the other competitors out there what about it makes it economically viable at those subscriber projectiles when you do say you're going to be profitable by fiscal year yeah I don't think interestingly enough we're pricing this to be accessible to the millions and millions and not hundreds of millions of Disney fans and Marvel fans and fix our fans and Star Wars fans that are out there and I think that's what yeah that's where you have to start the base the the sheer number of people worldwide that know our brands that interact with our brands on a daily basis that spend money on our brands is huge and no other company has that so well I think Netflix has done a good job of creating brand value and name value and única product that I think is is considered of great value to a lot of people they're still building their brand in many respects whereas in our case we start with a customer relationship that in many respects as visceral as I mentioned you know I I was taken to see Cinderella by my my grandparents when I was I think four years old and I watched that movie with my grandchildren it's five generations of Uyghurs that watch that there's a connection that my family has to these stories and to these brands and so if I see the opportunity to buy Disney Plus and I can watch it on all these devices and I can download the movies and I'm gonna watch original product but I'm also going to watch things from the library that's something I know that I'm going to want um nobody disputes the power of the brand I think it's apparent to everybody and the evergreen nature of it you just mentioned in terms of spanning generations but there are those who say you know what you have a great model now even with the bundle starting to lose certainly lose carriage nonetheless the license fees that you're going to forego as a result of now putting so much for your own content on the platform are significant some say as much as two and a half billion in incremental profits in nineteen perhaps as much as five billion a year by the early 2020s that you're foregoing in license fees why is that the is it the better way to go I think there are platform economics that that Trump license fees to third parties we can start with the affinity that people have to the brand they want to be connected to it but obviously the ability to have a direct relationship with the consumer gives us I think an opportunity to in having that relationship with them to monetize much more effectively knowing your consumer gives you the ability to as a for instance give them a more compelling experience and have a connection now and also was think as obvious is if you look at the Disney consumer they're going to movies in movie theaters they're renting or downloading movies in their home they're buying consumer products they're visiting our parks they're sailing on our cruise ships and I could go on and on and and interestingly enough now that's true with Marvel and Pixar and and Star Wars across multiple businesses if suddenly your customer relationship is much tighter if you're if the proximity between you and a customer is better then you're gonna serve them a lot better across your platforms and you'll monetize you know that that called broadened deepened relationship but it fuller is in the third you know if you look at this company over the years where we've been distributing movies through movie theaters and the movie theater is the relationship with a customer even though it's our product that is touching the hearts and and and and and bait and basically becoming part of the deep and and happy memory the cable channels or the satellites the channels are distributed through satellite providers and cable providers the customer relationship is theirs the consumer products are usually sold by big-box retailers the customer is there's like or by Amazon I could go on and on we have a customer relationship with all these folks through third parties any other than our theme parks where we were direct relationship we don't know who these customers are and in knowing who they are I think we have an opportunity that is extraordinary from a from a father but many billions in costs that you're going to see between now and 2020 for yes and also look I think you have to consider that a lot of the product that's on that service is being made for another platform and being monetized for that platform so you look at all the movies put aside the library but you look at the sake Captain Marvel which is the first movie that will be available right first original movie that'll be available that will have over a billion dollars in global box office probably well over by the time it becomes available so the cost of that product has already basically been borne by its initial basically foray into the marketplace now I realize that we could license it to third parties and make money on it but it's much more efficient to us for us to do it this way and have it be part of a service that's also creating new content which by the way the content that we're creating that's original for this also will create longer-term value right but in a sense it does fully commit you in terms of what you're producing to the service I mean Rowi it that's where you are so to work in other words in five years you find yourself not getting the projections that perhaps you had the models not going to necessarily be in the right place well I am uh you know I'm an optimist I'm a realist but I'm an optimist and I've been at the company for forty five years I've been president or CEO since 2000 and I have a you know a a a strong understanding of or a deep understanding and appreciation of Disney and its brand its relationship to consumers and so I'm pretty optimistic about the ability for this thing to particularly when we make it accessible because the content we're putting on because of the user interface and because of the price so I believe this is going to be successful if in five years time it proves you know I proved to be wrong or we proved to be wrong we're still making great content that's going to be in great demand globally and you can shift in a moment and license those pretty quickly if you needed to not that you're necessarily going to because of course you expect it to be successful I do I don't want to dwell on that for that reason but I don't think that's really an issue look if you're building up library value regardless right right you know you mentioned of course the at Ricola display there's been some questions about windowing whether or not the service over time is going to start to see some of your original content when it comes to even the big movies sooner than it otherwise would is that a possibility this is really not about windowing to us because frankly those other windows are really working for us it was mentioned earlier that our studios had two years where they've had over seven billion dollars in global box office by the way that's only on about what ten movies a year so that's really working for us and if it's not broken we don't want to try to fix it I don't really think for us there would be any more money in it if we were to put those movie on this on the service a little earlier don't forget in that window after it's available in four its theatrical run it's this these moves will be available for a form of rental or or or download or purchase the physical copies are still being we're asked towards the end of the presentation today you know you're gonna have three services in the marketplace obviously Disney Plus which we've been talking about here Hulu and ESP n plus majority is in the market now do you run the risk particularly when it comes to Hulu and Disney Plus both operating its scale of confusion amongst the consumer or with the different interfaces I just wonder whether there's a way to sort of consolidate that offering that perhaps is more efficient for you I think there'll be a way to consolidate the creation meaning the the technology and the code both the user interface customer relationship management data storage all those things across those businesses but we still have a minority shareholders Hulu and so until you know we work our way through that relationship I think you can basically figure that who's going to be run pretty much as it's been run on the ESPN front the back office in the back of house so to speak is the same but the user interface is different you're talking about two very different products also like I study the marketplace very carefully and we both know that if you're in the same business in many ways you know we're on we're being distributed to the home on platforms that were created many many years ago that served us well on the consumer extremely well over now of decades but I think in today's world I don't think the consumer really wants to buy 150 200 channels of programming for a fairly significant price when they're not interested in many of those channels in some cases they can't even find them and I think what we're starting to see in terms of that platform is not necessarily the popularity of these channels in decreasing its I think consumers are starting to say wait a minute the price to value relationship even though I'm getting a lot of content and a lot of quality isn't really there because I don't need all of them you know a lot of this started and I'm you and I have had this discussion and in fact some of your peers if you want to call them that in the business look at you and say that started because the ESPN because of how much you're charging for it because you paid all that money for all those rights a long time ago I think we were a convenient scapegoat in that regard I think all of the channels look I know that ESPN charged more per subscriber than a lot of the other channels but I think you have to look at the value that was created there both to the consumer and to the distributor and advertising rates on live sports the distributor the cable come in the satellite have traditionally been better for instance and and those channels are in demand and look it's a it's a it's an open marketplace and the more in demand you have the more pricing leverage you have I don't think that ESPN should be blamed for what we're seeing today I think you just have just different you have a different consumer today and the more choice that has entered the market your grandkids or kids or my kids they're not going to subscribe to this bundle that's okay happening but I think you believe that don't you I believe that they will continue to watch a linear television I think live sports and certainly news and maybe financial news by the way we always hope continue to to have value and people will be interested in it but I think long-term I think you have to consider that linear television is going to be less popular than just television than programs and you know we're in the short you know in the short term we still are very supportive of the channels that that we own and that we're distributing we're going to continue to put put resources behind them to create great programming I think long term you have to you have to put the consumer first so if going all the way back to how this started if we put Hulu and ESPN and Disney Plus into one product the only way you can get these things is one that's doing exactly what the consumer today doesn't want now if there are consumers that want it that way we'll give it to them that way and hopefully ultimately and all three one user name one password make it really easy for them to do it in a discount discount yes but we still have ownership issues as it relates to Hulu to accomplish that Bob when you think about the evolution of this business and when you get to a more mature phase in this new undertaking that you discuss today will it have the same margin characteristics or profitability of the good old fashioned business of having your networks carried on a cable system that was so profitable for so many years well we're not projecting what margins will be but again I think that there's huge system economics and owning a platform and and attracting customers directly over time and giving us the ability to attract customers of fix our Marvel Disney Star Wars and and National Geographic in other words in the past if you went out of with channels Marvel didn't have a channel Marvel might have Marvel though might have a channel and Disney would have a channel and that Geo has a channel and you know there's I think a lot of waste there so if you really look at margins this is one platform for all of them so and and again a direct relationship with a customer we have the ability to basically interact with not just in this business but across the board to think about ultimately the relationship you have of them like going to our movies and go into our parks and so I think that long-term the value of creation for this is better for us based on the investment making than what we're currently doing did you do I mean again that direct a consumer relationship you've mentioned a number of times so you can mark it to people I would assume we walk into the into a theme park do you give them a free trial or something like that no but I think you know you know one of the things we will do is that we will immediately begin marketing to people who go to our theme parks and people who are members of d23 which is essentially a club of great Disney fans or people who have Disney branded Co branded credit cards so I think that there's there's already a you know a pretty significant group of people that have expressed themselves as Disney fans by the way so there's efficiency and marketing right there we have a relationship with them so I think that there'll be a lot of that here meaning using the platform to connect ourselves to the customer more intimately and to interact with them or transact with them more frequently but I don't think about movie downloads and right you know that which right now almost all of them are done through third parties there's no reason why that can't be done through this meaning for purchase in that window down the road just as for instance or possibly selling tickets to movies and packages to theme parks I think there's a lot that can be done because you've got fanbase that is so interested in interacting with the brand in multiple ways but I wondered just in the larger sweep of sort of history in terms of business there are many companies that did not do what they should have which has changed their model and they didn't leave their old business and they suffered dramatically you are doing what many believe you have to do in order to change the trajectory of the business but just because you go from one house that's getting that's a really nice house but now it's getting flooded all the time and move to another house doesn't necessarily mean that houses any better than the one you're leaving it could be worse but it's not getting flooded all the time okay I gotta try to follow that I mean I guess I'm just wondering it was the business that you're going towards going to look like the business you are moving away from no but the world isn't going to look that way either I don't think if you measure it against the present the present doesn't stay the present for very long in fact in today's world that's changing so much the marketplace has never been this dynamic meaning speed of change is much faster and that's technology that's consumer behavior driven by technology it's it's it's economics it's how things are marketed anywhere you look so you can't measure it against what it is today you have to measure against what you believe it's going to be tomorrow and I think one of the reasons why companies fail to innovate is they continue to measure it against today so if you're in the business of selling film physical film you want to keep selling as much of that film as you possibly can and you're not really thinking and and you believe you may hit a speed bump here and there whether it's the economy or new competitor enters the marketplace but you're not really thinking it's going away so you need to understand what your business is which is not about film it's about capturing about taking pictures exactly let's let people take pictures no matter how they want to take them and and look it's a lot of pressure to not do that in a way because you're getting measured by quarterly earnings and an annual earnings and how much you grew you know next year in many cases compensation is tied to near term versus long term so it becomes very very difficult to innovate again because you just you're so tied to the business model that got you where you are which could be great but it often causes companies to not think about what is that business model going to look like tomorrow and again we're in a bit we're in a world that is everything about our world is being disrupted how we communicate how we transfer transportation how we buy things may I can go on it you know I don't have to tell you I can go on and on and you look across industries the automobile industry and the electric car Tesla comes along and now you know we'll see how they do long-term but you could maybe argue that that's something that the major automotive company should have been doing a while ago or a soft drink companies not going into the healthy drink business and mainframe companies not going into business and you're not what you you are obviously not wedded to the distribution or what you've been following for you and the monetization model what we're wedded to is we're wedded to creating great content that is branded that has served us extremely well what we also believe is no matter how much them the business sorry the marketplace changes no matter how much technology changes how people are told stories or get their stories we're still going to be relevant but only if we enable ourselves to be distributed and purchased by the consumer in more modern ways if we stick to the old that to me is a recipe for ultimate distinction extinction I'm sorry distinction would be to going the other way yes extinction um how much of Netflix's current value do you think has been derived as a result of things that were produced by Disney I have no idea we've had a good partnership with Netflix we were the first to license movies to them there was a big discussion about that way back something I mean it has to I think created as a result of your content definitely they derive value for they stood up and paid a significant amount of money for it in time because they realized its value and then after that they licensed television shows and after that they licensed original television shows the Marvel shows and I think that that clearly what we license to them was important to them from a value creation perspective and I don't begrudge them having done that or us I don't nor do I second-guess the fact that we did it we don't or that you did it as long as you did it no no I'll tell you why first of all we did extremely well licensing our content to Netflix we're launching this product because we are ready to launch it we wouldn't have been ready to launch it two three years ago we wouldn't have even been ready to talk about it it takes technology it takes content it takes the talent to make the content it takes a marketplace you could argue that what Netflix has done has actually been good for us because they've seeded the marketplace to robust over-the-top content distribution and presentation and so I like launching when we are launching and believe that it's a great time for us and the Fox SEC was acquisition and a lot to do with it something interesting David then I've observed and I don't think I've said it publicly but we announced that we were doing this in 2017 right so just summer of less than two years ago it was actually June of 17 that we decided to do it and that led to the purchase of Amtech and then the opportunity to buy Fox first came up later that year in fact just a few months after the board approved us buying the majority share of BAM tech which was done for one reason to go into the director consumer business Rupert and I sat down and talked about the transaction we would not have done that transaction had we not decided to go in this direction because if we hadn't we would have been looking at that business and through a traditional lens oh we're buying TV channels were buying more movie making capability etc and so on but by the time the acquisition opportunity came up and we knew we were going in this space we evaluated what we were buying through this new lens of what could National Geographic mean to us what could be what could mean to us being in the direct consumer space in India what could it mean having access to their library not to monetize it through to dish traditional means but to do it through this damn I mean the light bulb went off 30 years of The Simpsons well ok that's ok but that's a that's a perfect example of what I'm talking about an example it just maybe proves the point again we which maybe speaks to why people don't acquire companies too because you try to measure what you're acquiring in a traditional sense our decision to buy Pixar Marvel and Lucasfilm was made because we believed that great storytelling would stand the test of time and no matter how much the marketplace was disrupted whether it was cable and satellite movie theaters traditional television you name it a great story well told really story well told was going to succeed meaning as a an investment or as a financial proposition or no matter what yeah you mentioned the Fox deal of course something I followed closely by traditional measures particularly given the fact that you had to increase your bid to compete against Comcast and then well we don't know where the rsn sale ends up the multiple seems fairly high for that business do you feel by the traditional measurements though that it's going to have been a deal well worth having done well look we're very early into this process and I've never second-guessed decisions that we've made and I've certainly not going to second-guess this one not at this point anyway so I'm confident sitting in the audience today and and watching what we were presenting and seeing National Geographic be part of in the Simpsons be part of it and some of the films from the Fox library and knowing there was a team in place in that room that has done a phenomenal job of creating scripted television over the years made me feel great about that acquisition yeah now there's two billion dollars or so in synergies that a lot of analysts have certainly pointed at I think there was already been well we an out we talked about that number yeah are there more to come I mean I know there's been job losses associated with as there would be when you're putting these two together is there more to come there are you largely through the job cuts no no we're we're we're just beginning a consolidation process across the world and we've been we've been candid about that with with people in the organization there's there's work to do to get to the synergies that we talked about which were cost synergies we have we have consolidation ahead of us so there's more to come there yeah do you think the two billion dollar number is we're not updating we're not updating the number specific to the process itself a couple of things as well to get to mean the sale of the RS ends these regional sports networks continues I've been following that somewhat closely as well doesn't seem as though it's been going particularly well am I going to be surprised I mean what direction in the upside because I mean Major League Baseball maybe they're not perhaps there's a couple I you know it's hard I mean it's we spread today I know we don't get a chance to sit down with one you spent the day presenting Disney Plus and our other directed consumer services we have an earnings call in a couple of weeks we probably will know a lot more than anyway so I mean we're kind of getting fairly close to when you would want to have that deal kind of nearer Duncan for complete our our commitment to the Justice Department the US government was 90 days after closing the Apple board it's another thing I just was curious about can you stay on that board well obviously when you sit on the board of a publicly traded company you have to be very mindful of your responsibilities fiscal responsibilities to the shareholders of that company and I have been when the business of director consumer or television or movies has discussed on the album board i recused myself from those discussions there aren't many of them there's still very small business to Apple and I'm not at the point where I you know I believe it's problematic but it's something that I have to continue to monitor and finally you know ESPN we haven't talked as much by DSP n Plus which has been in the marketplace 2 million subs you talked about today in roughly 10 months but how should we view ESPN the network itself that is still carried on what 80 something million subs or something along those lines NES pn+ I know that programming is different to a certain extent are you expecting ESPN subs to continue to decline in the traditional model in the bundle and does ESPN Plus pick that up along the way or are they two different sort of models well I think right now ESPN Plus and probably for the foreseeable future meaning near-term is an extra service meaning it's not designed to replace the traditional business model so if it's an add-on yeah it's a place you can go to get more and engage more order you get different you know if you want to watch an Ivy League football game it's gonna be difficult to find that on ESPN but they have the rights on ESPN Plus and so on in fact a lot of what we've licensed for ESPN we can't put on because there's just so many hours in the day and so this is great in that regard and I think that will continue for a while we believe that there are sports fans out there that want that do want more ESPN and wanted in this fashion which basically means easily watched across devices over-the-top not connected not have to have a cable subscription service if they want to watch some sports or gain access to some so I we're not making any predictions about the health of the bundle or how many subscribers did you know the businesses seemed so going to I mean my god we started this conversation in 2011 one of our few interviews back in August of that year is when it sort of started to at least reverberate in the marketplace I mean you know the sub numbers are going to continue to decline at ESPN well I think the sub numbers for the expanded basic model will continue to decline we'll see what happens with ESPN we're you know we don't have anything to say about it in between earnings calls we typically comment about sub figures during earnings calls and they're already breaking down the set today yes these has been beneficial to a certain extent but that seems to be slowing as well well again I'm not gonna update numbers on that but I think what this does frankly is it gives us the ability to have a platform and a relationship with a consumer that should the traditional model start failing us which it's not yet there's there's been you know when it is I'm sure yes I'm sure I'm sure I'm sure we will but I don't see that not I don't see it happening in during my tenure here not that it by the way I'm pushing off the problem to somebody else I just don't think it's a problem we're going to have but if it there's a time when the channel the linear channel is no longer viable then we've got the ability to flip a switch and go in this direction when you talk about your tenure of course and I hope we do interviews for many years to come but 2021 is is it it's well two and a half years away all right yeah you seem to indicate in the meeting you're gonna stick to it this time yes sorry that your time is but you're gonna be right in the middle this of this enormous transformation of the company of this transition that we've talked about is that going to be frustrating to you know it won't be frustrating to me at all the most important thing is that the company get through the transition seamlessly I believe that two and a half years from now or roughly two years after we've launched this massive initiative the company will be will it will be well on its way and the company will be well on its way in terms of success here and it would be that will be the right time for a transition at the CEO level the Fox acquisition will have been assimilated will be often running on the director consumer space now would have been and the reason that I stayed now would have been tough primarily because of the Fox acquisition but as I said earlier that was somewhat tied to what we were planning to do direct to consumer so the timing was not right for for the shareholders of the company I actually would have been fine you know setting all this aside and going off and we know he's running for office at least you were thinking about it that's old news but not current news now it isn't well we've got you for another couple of years and I would appreciate your taking time today thank you pleasure all right you you

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Keywords: Squawk on the Street, CNBC, business news, finance stock, stock market, news channel, news station, breaking news, us news, world news, cable, cable news, finance news, money, money tips, financial news, stock market news, stocks, disney fox deal, bob iger, iger disney, ceo of disney, bob iger net worth, disney ceo, walt disney, disney streaming service, disney stock price, walt disney stock, disney stock today, disney earnings, mass media company

Id: mclKkHD1Vf4

Length: 32min 25sec (1945 seconds)

Published: Fri Apr 12 2019