No One Company ‘Driving’ Disney’s Digital Strategy, Iger Says

"There isn’t one company, Apple or any other company for that matter, that’s driving” Disney’s digital media strategy, Disney CEO Robert Iger said in a Tuesday earnings call. “It’s important” for Disney “to be out in front and to be experimental” when making its content available via new platforms “because we haven’t discovered yet the silver bullet or the business model that’s going to prevail,” he said. “It probably will be many.”

Disney is considering various issues before deciding where to distribute its content. “We want to be in a good place on a good platform, where there is good navigation and decent access to revenue, and our brand and our products are in effect showcased well and it’s reliable for the consumer,” Iger said. Disney also wants “to be in places that we believe have growth potential so that the underlying technology or the underlying capital behind the effort is such that the platform’s going to be around for a long time,” he said.

Piracy is another key issue. “There’s no question that being available, well priced, well timed to the market is one of the best ways to combat piracy, and we have got to continue to be mindful of that, because the absence of being available in a world where there’s great technology and great content can be very dangerous,” Iger said. “It’s also important for us to be relevant,” and “when you're on these new platforms you just appear to be more relevant to the consumer,” he said. Disney will provide more details on its digital strategy at an investor conference Feb. 17 in Anaheim, Calif., Iger said.

The company was “very pleased with how we've started off the new fiscal year,” Iger said as Disney reported that revenue for Q1 ended Jan. 1 grew 10 percent to $10.7 billion from the year-ago period. Profit soared 54 percent to $1.3 billion.

Movie studio revenue, including theatrical and home video, was about flat at $1.9 billion. But operating income in that division jumped 54 percent to $375 million, “driven by reduced home entertainment distribution and marketing costs,” said Chief Financial Officer Jay Rasulo. “Increased home video units were driven by” strong demand for Toy Story 3 and its earlier release dates outside the U.S. compared to fiscal 2010’s release of Up on home video, he said. Iger declined to say how many copies of Toy Story 3 were sold, but said the title also boosted sales of the first two Toy Story movies. The Blu-ray release of Beauty and the Beast “was extremely well-received,” he said. Iger didn’t elaborate on its sales or Blu-ray results in general.

The home video marketplace industrywide “continues to soften,” Iger said. But Disney has “been relatively well-positioned because of the strength of the brand, the nature of the titles that we put out and … the fact that we tend to make movies that people want to own so their kids can watch them multiple times,” he said.

Revenue in Disney’s Interactive Media division grew 58 percent to $349 million. The growth in game sales and subscription revenue came because of strong demand for new games and higher pricing of “self-published console games” like the new Epic Mickey and Toy Story 3, Disney said in a 10-Q SEC filing. Those results were “offset by the consolidation of” Disney’s Playdom division, Rasulo said. The division’s operating loss widened to $13 million from $10 million in Q1 the prior year. Playdom results “were largely driven by purchase accounting, which will continue to impact results for the remainder of the year,” Rasulo said. Operating expense for the division included increases in product development expense of $24 million due to the acquisition of Playdom and costs of goods sold of $19 million, “driven by higher console games sales volumes,” the 10-Q said. An increase in selling, general, administrative and other costs, meanwhile, “was primarily due to higher sales and marketing costs driven by the release of Epic Mickey and the impact of acquisition accounting for Playdom,” the 10-Q said.

The Disney executives offered no new details in the earnings call about the 200 or so jobs that were cut at Disney Interactive after the end of Q1 (CED Jan 27 p9).