Iger: Programmers Walk Fine Line on Fee Increases

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Walt Disney Co. CEO Robert Iger told an audience at an industry conference Wednesday that programmers have to 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, 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 fall out if you do it too fast too high."
Still, he 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 recent high-profile retransmission consent dispute with Cablevision Systems in March regarding its local ABC television station. While that dispute was resolved - only after the channel went dark for about 8 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 - its 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 an ESPN rival. 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 NCCAA 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."

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