Business

It’s still early days for over-the-top (OTT) streaming TV services, but they’re well-positioned to take advantage of the increased shift to TV viewing on mobile devices, according to Disney CEO Robert Iger.

“It seems like we’re on the cusp of some significant growth for new entrants in the multichannel marketplace,” he said Feb. 7 in an earnings call for Disney’s first quarter (ended Dec. 31). “What we like about them is they are mobile-friendly or mobile-first, their user interfaces tend to be very strong, and their pricing is priced substantially lower than the expanded basic bundle that most” of the multichannel video programming distributors (MVPDs) are offering, he said.

Iger noted that gives Disney “a chance to both attract consumers that may not sign up for multichannel service or hold consumers into multichannel subscriptions.”

Like 21st Century Fox CEO James Murdoch a day earlier, Iger expressed confidence in the coming Hulu OTT live streaming TV service that Fox and Disney will be providing their channels for. Disney and Fox each own about a 30% stake in Hulu.

“So far, in terms of what we’ve seen of the product, we’re encouraged by it in terms of its user interface and actually have a lot of faith in it from a technological perspective as well,” Iger told analysts.

Iger also expressed confidence in ESPN and ABC, as well as Disney’s film division, despite the fact that revenue in Media Networks fell 2% in the quarter from a year earlier, to $6.2 billion, while film studio revenue dropped 7%, to $2.5 billion.

“My confidence in ESPN is due to a number of things, but clearly the deals that we have done with new platform owners, mostly over-the-top, have already yielded some nice gains from those services” in terms of subscriptions – despite the fact that “they’re not right now being counted fully” by Nielsen viewership data, he said.

In addition to the Hulu OTT deal, Disney has also “done a deal with another entity that has not been announced, and we’re in discussions with others” for Disney networks to be included in new OTT platforms, he said.

Iger went on to say that “what’s really important” about the new OTT deals that Disney has negotiated for distribution, especially for ESPN, is that its networks will be included in all households that those new services launch in. He added: “We think that this wave that we’re seeing is really a signal of what is to come and what the future will be.”

Another “really good” aspect of the new “skinny” TV bundles is that “if we end up with a world where the $40 to $50 a month package becomes more and more popular, that means that some consumers may obviously take the savings that they may have from that and spend it on” video services that Disney offers direct to consumers or via Netflix or other services that Disney content is offered on, he said.

Iger also expressed enthusiasm for the technology of video streaming company BAMTech, which Disney recently paid $1 billion for a 33% stake in.

Iger recently saw a demonstration by BAMTech and “the quality of that technology has just blown us away and the potential that we believe that has for us is enormous,” he said, once again noting that Disney plans to launch a direct-to-consumer sports service using BAMTech’s technology. That will happen “sometime in probably calendar 2017,” he said, declining to provide pricing or be more specific on the launch timing.

Iger added that “one of the things that impressed” him was that BAMTech can use data to increase or generate revenue from advertising – “something that we don’t have today in part because a lot of our distribution comes through third parties, so we don’t get access to that information.”

Disney, at this time, doesn’t “need to make any acquisitions to accomplish what we need to do on the digital side” of its business, he also said.

Iger pointed to another Disney digital initiative – this one the DisneyLife online movie and TV streaming service in the U.K. “We’re still in, what I’ll call, an experimental stage because we’ve been learning more and more about [the] technology platform, churn rates, pricing — those sorts of things,” he said.

Disney’s film business struggled in the first quarter despite the success of the “Star Wars” prequel “Rogue One” because it couldn’t match the performance of the same quarter last year, when it released “Star Wars: The Force Awakens.” But the company is confident in several coming movie releases, including the live-action “Beauty and the Beast” that’s coming in March, Marvel’s “Guardians of the Galaxy Vol. 2” in May, Pixar’s “Cars 3” this summer and “Coco” in November, and Marvel’s “Thor: Ragnarok” (also November), according to Iger.

The first trailer for “Beauty and the Beast” attracted more than 127 million online views in the first 24 hours, breaking a record held by “The Force Awakens,” and the trailer Disney released more recently also generated more than 100 million views, he said, adding that first week ticket pre-sales for next month’s release “has also been very strong — reminiscent of pre-sales for some of our biggest Marvel movies.”

Iger also expressed confidence that his successor will be “chosen on a timely basis and chosen well.” But he told analysts: “If it’s in the best interest of the company for me to extend my term, I’m open to that.” As of now, Iger is scheduled to step down as CEO in 2018.

Disney’s total first-quarter revenue fell 3% from a year ago, to $14.8 billion. Profit fell 14% to $2.5 billion. Earnings per share decreased 10% to $1.55 from $1.73, “driven by” a 13-cent-per share gain in the prior year related to its investment in A&E Television Networks, Disney said in a news release. Excluding that gain and certain other items, earnings per share for the quarter decreased 5% to $1.55 from $1.63, it said.

Disney’s results were “slightly light on revenue but better on profit vs. expectations,” Pivotal Research Group analyst Brian Wieser said in a research note. He added: “Our overall view on the stock and the company is relatively unchanged.” Disney shares were up 0.67% at $109.73 Feb. 8 in afternoon trading.