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Disney CEO: Don’t Discount ESPN’s Value

6/04/2012 12:01 AM Eastern

The Walt Disney Co. chairman and CEO Bob
Iger shot back at distributors that complain of rising programming
costs, telling an audience at an investment conference
last week that those gripes neglect to include the
value of the shows to their own content pipes.

“It’s an odd business that the very
distributors of this great product
complain about the cost of the product
and they do that more than [they
talk about] the value of the products
to their consumers,” Iger said at the
Sanford Bernstein Strategic Decisions
Conference in New York last Wednesday.
“Usually, if you’ve got a distributor
out there, they are extolling the
virtues of what they are distributing
or reselling to the customer, not complaining
about how much it costs to
buy it.”

Later during the Bernstein conference,
Charter Communications CEO
Tom Rutledge offered a distributor’s
point of view. One reason disputes between
programmers and cable distributors
get emotional, Rutledge said, is
because cable operators helped create
many of these channels.

Furthermore, license fees for networks
were created initially to help
those programmers develop better
programming to help differentiate cable from broadcast,
Rutledge said. That all changed when the government
mandated that the networks should be available to
all distributors.

“Things have reversed,” he said. “Pricing power is in the
hands of the programmers.”

Iger tried to draw distinctions between ESPN’s national
networks, which provide hundreds of hours of original
programming in addition to games, and the proliferation
of costly regional sports networks.

“ESPN gets tarred a bit with the same brush that the
RSNs get tarred with,” Iger said. “That’s
really unfair. Even though there are ardent
local sports-team fans — I’m one
of them — that are willing to pay substantially
for their favorite local team,
if you look at the cost of those channels
versus the ratings they deliver and
the amount of original programming
they deliver, it’s not even close to what
ESPN delivers.”

NO COMPARISON

Iger said that in some markets, ESPN
has four times the primetime ratings
of local RSNs and delivers hundreds of
more hours of live sports. “The value
is being delivered to the customer. We
hear that both from the cable distributors
and from advertisers.”

At the same time, Disney is sensitive
to distributors that struggle with rising
costs, the CEO said.

“We’re not trying to kill the golden
goose,” he said, and Disney is mindful
not to price itself out of the market
when it increases rates.

He also said Disney has been adding valuable products
for affiliates, including the authenticated online
service WatchESPN. Disney is launching a new app —
for the Disney Channel — next week on Comcast systems
that will allow the MSO’s authenticated subscribers to
watch Disney Channel programming on mobile devices.
Similar apps for ABC Family and other channels are expected
soon, he said.

Iger also had a few choice words for Dish Network, the
satellite-TV and equipment provider that’s drawn programmers’
ire with Auto Hop, an ad-skipping DVR.

DISH: ‘BITING THE HAND’

Although Disney has remained on the sidelines in recent
lawsuits concerning the product, Iger said, “I happen to
believe what they are doing is harmful both to our business
and to theirs. It feels like a bite the hand that feeds
you approach, in my opinion.”

“By attacking [the] revenue model, one has to question
in the end, what ultimately, if they’re successful, that does
to the ability to invest in that product?” Iger asked rhetorically.
“If that gets hindered or diminished in any way, what
does it do to them? They don’t seem to care about that.”

So far, Disney has stayed out of the lawsuits filed in federal
court in California by Fox, NBC and CBS against Dish.
Dish filed a pre-emptive suit in New York, claiming that
programmers, including Disney’s ABC network, are stifl
ing the Auto Hop’s growth. ABC has said in the past it is
monitoring the situation.

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