Bob Iger Says Disney Unlikely to Follow Comcast and Warner Bros. Discovery In Exiting the TV Channel Business
Will Disney follow Warner Bros. Discovery and Comcast in splitting off most of its TV assets from its streaming business? Don't bet on it.
CEO Bob Iger appeared on CNBC Tuesday morning, where he was interviewed by David Faber about his company's acquisition of Comcast's share in Hulu, which was finalized Monday.
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But Faber also used the opportunity to ask whether Iger, who effectively kickstarted the idea of splitting linear TV from streaming in a CNBC interview two years ago, whether Disney is reevaluating its decision to keep its company together.
Warner Bros. Discovery said Monday that it would split itself in two: One company with the studios and HBO Max streaming business, and another with its global TV networks. That move followed a similar decision from Comcast, which is spinning out most of its cable channels into Versant later this year, but keeping NBC, Bravo, Peacock and theme parks for itself.
'Soon after I returned to Disney, I put everything on the table and asked the team to evaluate whether we should buy Hulu or whether we should sell Hulu, whether we should sell our linear television networks or whether we should hold on to them, and after a pretty lengthy process internally, and really taking a long look at what these properties could mean to us, long term, we decided that the best course for us to take was to not only buy [Hulu] in its entirety, but also to hold on to the linear television networks and to integrate them seamlessly with our streaming business,' Iger said. 'What that has enabled us to do is aggregate revenue, both on the sub fee side and on the advertising side. There is still enough linear television subscribers to generate a significant amount of revenue in advertising and in subscription fees. We program them seamlessly, we manage them in one organization. And so there's been great economies of scale in doing that.'
'It's one of the things that's enabled us to turn the streaming business around from a huge loss to profitability, and over the next several years, it will enable us to grow margins significantly on the streaming side, because of the ability to amortize program costs and the ability to essentially aggregate audiences in revenue,' he added. 'It's also interesting to us that as many others exit that business, I think it gives us a stronger hand to stay in that business. We're very focused. We will have, interestingly enough, a linear television business that's paired with a streaming business. So when you think about it, these spin off companies won't have the assets from a streaming perspective that we will have.'
And having a broadcast network like ABC is a big part of that.
'I think there's a lot more value in a broadcast network, again, if it's paired very, very seamlessly with a streaming business,' Iger said. 'I mean, you think about our core networks, obviously, ESPN is a big one. That will be connected, obviously, fully with ESPN's digital offering. Disney Channel is connected seamlessly with Disney Plus. FX and ABC have fed Hulu programming very effectively. And now when you think about all four, and we also have Nat Geo, which does the same with Disney Plus, when you think about those five networks and how they're programmed across linear and streaming, you've got a business that actually provides us an opportunity to not only grow, but to grow margins in the process as well. So, again, we like the direction we're going. We like the fact that we're one of the few that is doing this, because I think it sets us up to be even more competitive in a marketplace that's becoming even more fragmented.'
Iger also said that Disney+ will most likely follow the path laid by Netflix, which stopped reporting its subscriber numbers on a quarterly basis.
'Probably,' Iger said, when asked by Faber if the company will pursue that strategy. 'We're focused on EBITDA and cash flow and growing margins, and that's, in fact, what we're doing. I think at some point, what we're mostly going to disclose is the bottom line.'
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