Disney's Iger Not Looking for Web Partner

Wants to Keep Ad and Consumer Control In-House

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NEW YORK (AdAge.com) -- Walt Disney Co. President-CEO Bob Iger ruled out a major partnership with an internet portal today during a third-quarter-results call with analysts, but did reveal financial details of the company's own internet ventures, including its Apple iTunes partnership.
President-CEO Robert Iger said Disney's internet revenue is expected to reach $1.2 billion this year.
President-CEO Robert Iger said Disney's internet revenue is expected to reach $1.2 billion this year. Credit: AP

Responding to a question about a possible partnership with Yahoo or Google, Mr. Iger responded: "We have a number of initiatives with both. We have discussed kind of broad, sweeping partnerships with one of the big broad aggregators or portals, but for the most part, those discussions have resulted in conclusion on both parts that it doesn't necessarily make sense."

Mr. Iger explained that talks generally break down over who controls the advertising and access to the consumer, and Disney felt it could better capitalize on both those fronts by going it alone.

Internet revenue
Disney's internet revenue is expected to reach $1.2 billion this year, Mr. Iger said. Nearly half of that will come from the theme parks' web operations. Internet revenue from iTunes, the TV and movie websites of ABC and ESPN, and Disney.com were north of $500 million. Of that, one-third came from advertising, while the rest was split between paid content and commerce. The company is projecting internet revenue of around $1 billion in the next five years from "syndication businesses," or second-run video content.

Among new web initiatives, ABC sales is adding more internet-savvy sales executives, while Disney.com will conduct an extensive relaunch to accommodate video, community elements and commerce. ESPN is also expanding its community experience around specific sports teams, geographic regions and fantasy games. Advertisers are committing big budgets to the cross-platform opportunities surrounding NFL's "Monday Night Football," now broadcast by cable sports net ESPN from corporate sibling ABC. Non-TV sales were up 50%, according to the company.

Cable networks
Cable networks, which include the Disney Channel and ESPN, saw a 12% boost in revenue for the quarter to $2.16 billion and a 15% boost in operating income to $969 million, largely due to growth at ESPN. The segment was hurt, however, by Disney's problematic ESPN-branded mobile venture, which cost the company $150 million in 2006. Mr. Iger said problems have been addressed by changes in marketing, a reduction in price and a change of the handset. Mr. Iger admitted that results from the cellphone venture had been "disappointing" and the venture would be monitored closely.

Programming costs associated with the six new dramas on ABC's schedule this coming TV season and increased creative investment in online hit broadcasting operating profit for the quarter. Broadcasting revenue rose 8% for the quarter to $1.576 billion while operating income was down 28% to $183 million. Operating profit was not broken out for the division.

Scatter market
Disney Chief Financial Officer Tom Staggs said third-quarter scatter market (the three months to July 1) ran at higher levels than the upfront, and fourth-quarter scatter prices are in the high single digits. The scatter market comprises the ad spots that are sold in each quarter, rather than those bought ahead in the upfront market, when marketers reserve ad time before the start of the fall season. Discussing ABC's upfront performance, Mr. Iger said ABC had brought in roughly the same amount of money but had used less inventory, allowing the network to capitalize on scatter. ABC booked $2.3 billion in advance commitments during the upfront.

Disney's net income for the quarter was $1.1 billion vs. $811 million in the third quarter last year. While total revenue was $8.6 billion vs. $7.7 billion in the same period a year ago, the increase was attributed to DVD sales of the movie "Chronicles of Narnia" and a strong performance from ESPN.
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