VIDEOINK: Disney Sees OTT Five Years Out as a Viable Competitor

The rumors that ESPN’s days as heavyweight champion are over are vastly overstated. Or so says Robert A. Iger, chairman and CEO of The Walt Disney Company. During the company’s Q3 2015 earnings call. Before diving into specific financial results, Iger addressed what he called the buzz surrounding ESPN’s faltering numbers driven by cord cutters and what he called “potential trends among young audiences younger audiences who consume TV in different ways.”

Iger said that Disney is currently placing its bets on MVPDs rather than OTT services, and “we look at the television business and look at it as a consumer offering.” He added, “We don’t see dramatic declines (in multi-channel services) in the next five years or so, we’re not taking radical steps away from that business.”

However, Iger did point out that every new digital service has approached Disney for access to its programming. He refused to go into detail about Disney’s work with Verizon for its proposed new OTT service, Go90.

Operating income at the company’s cable networks ncreased 7% to $2.1 billion for the quarterm due to growth at the domestic Disney Channels, ABC Family and ESPN. ESPN, however, was met with lower advertising revenues, which came from lower ad rates based on lower ratings.

Iger said that changes in multiplatform viewing will benefit ESPN in the future, as it remains a MVPD must-have, viewed in more than 80% of multi-channel homes. He added that because 96% of all sports in watched live, “we have enormous confidence in ESPN’s future no matter how technology disrupts the TV business.”

The future, Iger said, will be dominated by “skinny packages” that include expanded basic cable and new affordable services that offer value to the consumer.

Disney included its SVOD revenue as part of broadcast business, where operating income decreased 15% to $300 million for the quarter, driven by higher programming costs, lower advertising revenue and higher labor related costs. it was partially offset by growth in affiliate fees and higher program sales revenue from SVOD distribution.

Overall, Disney Company reported record quarterly earnings of $2.5 billion for its third fiscal quarter ended June 27, 2015, compared to $2.2 billion in the prior-year quarter. Diluted earnings per share (EPS) for the third quarter increased 13% to $1.45 from $1.28 in the prior-year quarter. EPS for the nine months ended June 27, 2015 increased 16% to $3.95 from $3.40 in the prior-year period.