Iger to Programmers: Keep D.C. In Mind

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As its ESPN network carriage
deal with Time Warner Cable comes
closer to its August expiration, The Walt
Disney Co. CEO Robert Iger last week said
programmers walk a fine line between
obtaining value for their content and attracting
the ire of regulators.

Speaking at the Sanford Bernstein Strategic
Decisions conference in New York
last Wednesday, Iger said that programmers,
Disney included, are focused on obtaining
carriage fees from distributors that
reflect the value of their content. But he
added that they are also aware that excessive
increases may attract unwanted scrutiny
from Washington.

“You have to be mindful of the potential
backlash on both the regulatory front and
consumer front,” Iger said. “You can’t price
completely ignorant of either of those entities.”

Iger said the ideal is to strike a balance,
and the more value a programmer
provides, the more pricing power
that programmer has.

“You can’t get too cavalier about it,” Iger
added. “Just because you have leverage,
you can’t just put any number on it. You
have to balance the short-term desire to
increase revenue with the long-term prospect
of potential fallout if you do it too fast,
too high.”

Still, Iger said that
he does not foresee
federal regulators
getting involved in
the process.

“I don’t think we
are facing imminent
danger from a la
carte, nor do I believe
that the government
is going to step in and really regulate pricing,”
Iger said. “There’s just too much danger
in that. That said, you’ll hear, certainly,
from this administration, a
pro-consumer approach
taken in general. And if a
company such as ours or
others walks over whatever
that invisible line is, then
you will probably see some
criticism of it, but not necessarily
regulation.”

Disney had been involved
in a high-profile
retransmission consent
dispute with Cablevision
Systems in March regarding
its WABC-TV in New
York. While that dispute
was resolved — only after
the channel went dark for
about eight hours on March
7 — Iger said that the lesson
to be learned from that dispute
is that distributors will
pay for value.

“The conclusion that
everyone should reach
[from that dispute] is that
there is value being provided
by these big TV stations
particularly in big
markets, value that cable
entities are ultimately willing to pay,”
Iger said.

Another potential carriage battle is on
the horizon: Disney’s ESPN carriage deal
with Time Warner Cable expires at the end
of August. Iger did not
comment specifically
on the Time Warner Cable
agreement, but said
that in general Disney
is looking to increase its
fees for ESPN.

Iger added that he
sees no major competitive
threat to ESPN from
the pending Comcast-NBC Universal joint
venture. There had been speculation that
Comcast could offload some NBC’s sports
content onto its Versus sports network to
create a rival to ESPN. Iger said he does not
see that happening. But he added that the
combination could change the way sports
rights are negotiated.

What will be most interesting to
see is whether Comcast takes
a different approach to buying
sports for the networks,” Iger said. “NBC
and GE have said that the sports packages
on NBC have lost considerable money in
the recent past. Whether Comcast will
take an approach that enables those loses
to be sustained or does something different
— you could actually conclude that it
would be better in a way, but that is pure
speculation.”

NBC said in April that it lost about $223
million on the 2010 Winter Olympics in
Vancouver. Iger said no matter how it
shakes out, there will be plenty of sporting
events for ESPN to bid on. He added that
the network will continue to take a disciplined
approach, using the recently negotiated
deal for the NCAA Men’s Basketball
Tournament — won by CBS and Turner
Sports — as an example.

Turner and CBS were the winning bidders
for the tournament with a 14-year deal
valued at $10.8 billion. Iger said ESPN was
in the bidding, but dropped out when it felt
the price was too high.

“That’s a good example of something we
went after quite aggressively and we just
got to a point where we felt we had gone as
high as we wanted to go and we were outbid,”
Iger said. “We just felt that the likely
returns for us to go any higher would not
have been in keeping with the long-term
interests of ESPN and the shareholders of
the company.

“We know we can’t buy everything. …
There are going to be times when we step
up and there are going to be times when
we walk away.”

At Time Warner Inc.’s Investor Day
on May 27, Turner Broadcasting
System chairman and CEO Phil
Kent said the NCAA deal would lead to
higher carriage fees for its networks,
echoing Iger’s comments that quality
programming begets higher fees.

“I think we will look back on this as one
of the smartest deals this company has
ever made,” Kent said.

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