Walt Disney Co. President Bob Iger spoke at the Goldman Sachs Communacopia Conference today.
Iger started by addressing the many emerging markets for
Disney. “We see a great increase in media consumption on a global basis,” he
said, pointing out the obvious positive effect this would have on the
entertainment giant. “We believe the internet has become a viable entertainment
medium,” he continued, reiterating the company’s technology focus.
Iger then spoke of the recent shakeups at Disney and of how
proud he was of the cultural changes at the company. “It is a culture that has
adapted to change” he said, praising the company for opening their arms to adjustment.
“Culture change can… create a lot of value,” Iger stressed.
He reiterated the advantages of synergy for the Walt Disney
Company. A “Disney-branded video game, for instance, can ultimately create a
lot of value for many businesses,” he explained. He went on to list examples of
the various markets that are woven together by the Disney brand (theme parks,
films, etc).
When asked if there was an opportunity to leverage the
Disney Channel globally, Iger pointed out the 27 Disney Channels worldwide that
reach 130 markets, and the Disney Channel’s use of American programming as well
as local programming. Specifically, Iger spoke of the purchase of Hungama (an
Indian children’s channel), and that the combination of Hungama, the Disney
Channel, and a third Disney-created channel are number one in the kids’
television market in India. Furthermore, on the global front, Iger mentioned
Russia as a potential Disney Channel market.
International business is expected to continue to grow faster
than domestic businesses. Disney recently released “Secret of the Magic Gourd,”
the first Disney movie made in China for the Chinese market. This, plus India
and Russia, were offered up as examples by Iger of Disney pursuing a larger
presence in international markets.
Moving on to revenue discussion, Iger explained that 23% of
total revenue is advertisement-based; however, ESPN revenue is dominated by
subscription fees.
According to Iger, international travelers to domestic theme
parks are still below 2001 percentages. However, total 2008 bookings are above
the 2007 pace. “People have not stopped or slowed down when it comes to taking
family vacations,” he explained.
Concerning the recent stock buybacks at Disney, Iger
reconfirmed that Disney “will continue to buy our stock back as long as it’s a
good value.” Disney has bought back over $13 billion of stock since fiscal ‘06.
Iger considered the stock buybacks to be a good way to return capital to
investors.
Disney is currently without a COO (Iger’s position before
the departure of Eisner). Iger did not see the need for a COO with such a strong
senior management team. His policy was simple: “if it ain’t broke…”
Next came a discussion of HD-DVD vs. Blu-ray. “We see Blu-ray
as the far more attractive format and the only true next generation format,”
Iger confidently affirmed. He then cited its capacity and processing power as
examples of its superiority. According to Iger, Blu-ray is outselling HD-DVD
almost 2 to 1. The “industry should be behind Blu-ray,” he passionately proclaimed.
“I think it’s a foregone conclusion as to which format wins.”
As a side note, Iger mentioned that he had an iPhone with
Disney animated shorts from the ‘30s and ‘40s on it for his children to watch.
Concerning theme parks, Iger confirmed that the “parks are
in great shape” and that Disney will continue to invest in capital, not just in
maintenance. “Everything we have done with Pixar in the parks has worked extremely
well,” he asserted. He also confirmed a new attraction for Disney’s California
Adventure: “We are going to build a Carsland at California Adventure. Which will
be a real anchor for that park in the near future.”
Concerning theme park attendance, Iger suggested that “it is
possible that we will end up with record attendance at our domestic parks.”
Iger then shifted to discussing ESPN, and specifically, ESPN’s
online success. He introduced a new ESPN product: a widget center so ESPN widgets
can be used on any device (mobile phone, computers, etc). Monday Night Football
on ESPN has been a success in that profits have improved since Monday Night Football
had lost money for many years on ABC.
Iger once again reiterated Disney’s focus on more Disney-branded
films than non-Disney, as well as an overall decrease in the number of films
released per year. He cited two major reasons for this. One was that less films
allowed for stronger marketing. Second, fewer films allows more concentration
on quality.
Finally, concerning the Pixar acquisition, Iger confirmed
that “the number one success would be the strengthening… of our creative
management.” John Lasseter and Ed Catmull were specifically credited. According
to Iger, Cars is number one film ever made by Disney in terms of film
merchandise sales. Looking towards future Pixar releases, he said that Wall-e
and Toy Story 3 are “headed in the right direction.” More importantly, however,
with the acquisition of Pixar “the tension that existed in our relationship [is]
out of the equation.”
The full presentation is available here.