Disney FY 3Q17 Earnings Call Notes

Bob Iger

The future is direct relationship between content creators and consumers

” It’s been clear to us for a while with the future of this industry will be forged by direct relationships between content creators and consumers. Given our incomparable collection of strong brands that are recognized and respected the world over, no one is better positioned to lead the industry into this dynamic new era, and we’re accelerating our strategy to be at the forefront of this transformation.”

Ending distribution agreement with Netflix

“With this strategic shift, we’ll end our distribution agreement with Netflix for subscription streaming of new releases beginning with the 2019 calendar-year theatrical slate. These announcements marked the beginning of what will be an entirely new growth strategy for the company, one that takes advantage of the opportunities the changing media and technology industries provide us to leverage the strength of our great brands.”

If we wanted to take ESPN direct we could

“I’m not going to comment specifically about the agreements. There are elements to the agreement that – well, first of all, if we wanted to take ESPN direct, we could. There are elements to the distribution agreements that we have that would cause us to if we were to bring the service direct to the consumer or create some – I’ll call them sub-optimal circumstances for us. I’m not going to get into detail about that. If we were to create a direct-to-consumer app that had the linear services, just as Netflix is distributed by multichannel servers out there or product out there, we would give our distributors an opportunity to distribute our app and other third parties as well.”

Creating content exclusively for the service

“But we’ve already begun the development process at the Disney Channel and at the Studio to create original TV series and original movies for this service. So if the Studio makes, let’s call it, roughly 10 films a year or distributes 10 films a year – that includes Marvel and Pixar and Star Wars and Disney-branded and Disney Animation. We’ve commissioned them to make, to produce more films with the incremental films being produced very, very specifically and very exclusively for this service. So this will represent a larger investment in Disney-branded intellectual property, both TV and movies.”

This gives us optionality

“I think there are forces, whether they’re technological in nature or sociological or economic in nature, out there that are changing the way media is consumed in general, and I don’t think this is either going to hasten them or exacerbate things in any way. What it does do, though, is a couple of things. First of all, it gives us the ability to leverage the strength of our brands, which a lot of our peers and competitors do not have. Secondly, it gives us what we’d call optionality. It’s a word I’ve not used very much in my life, but it gives us the flexibility, really, to move our product to the consumer in many new ways, ways that we’ve not been able to do before, because of just how strong this platform is that we bought control of.”