Disney’s Iger Coy About Linear TV Future Plans

On Wednesday, Wall Street analysts tried to get Walt Disney Co. CEO Bob Iger to tip his hand on future plans for ABC, ESPN and the company’s other cable networks, but without much success.

“Clearly if we are to do anything significant in what I’ll call strategic direction with the linear nets, we have to keep in mind the need for content ultimately to fuel our D2C businesses, notably, as you mentioned, Hulu,” Iger said in response to a question from J.P. Morgan’s Phil Cusick.

“So, anything that is to be done would be done with an eye toward maintaining a rich flow of content to fuel our growth business — and that would be streaming,” Iger said. He had earlier noted that linear TV is still profitable, although Disney is considering options.

“There’s obviously complexity as it relates to decoupling the linear nets from ESPN, but nothing that we feel we can’t contend with if we were to ultimately create a strategic realignment,” he added.

Disney has been publicly seeking a strategic partner for ESPN, with Iger repeating that the path forward for ESPN is in the direct-to-consumer business. He emphasized in response to an analyst’s question that he is not seeking a financial investor for ESPN, but rather a partner who brings content or distribution assets to the table.

For its fiscal third quarter (ended July 1) Disney reported Linear Networks revenues down 7% to $6.7 billion and operating income down 23% to $1.9 billion. Revenues for the domestic channels fell 4% to $5.5 billion, with operating income down 14% to $1.8 billion.

“The decrease at domestic channels was driven by lower advertising and affiliate revenue, and by higher programming and production costs, driven by the NBA and the new Formula 1 agreement,” said Kevin Lansberry, Disney interim CFO.

“While domestic linear advertising revenue declined year-over-year, ESPN ad revenue increased by 4%, demonstrating the relative strength of sports,” he said.

“Quarter-to-date, ESPN domestic linear cash ad sales are pacing down, reflecting in part the absence of the Big Ten this year. It’s worth noting, however, that the absence of the Big Ten is expected to drive overall operating income favorability in [fiscal] Q4 versus the prior year. The fourth quarter will also hold an additional Monday Night Football game versus the prior year,” Lansberry said.

“Linear advertising continues to see impacts from market softness. While sports is healthy, entertainment continues to face headwinds,” he said of the current quarter.

As the writers strike crossed the 100-day mark, with an actors strike as well now, Iger had these comments on the labor disputes: “Nothing is more important to this company than its relationships with the creative community, and that includes actors, writers, animators, directors, producers. I have deep respect and appreciation for all those who are vital to the extraordinary creative engine that drives this company and our industry. And it is my fervent hope that we quickly find a solution to the issues that have kept us apart these past few months—and I am personally committed to working to achieve this result.”