@ Media Summit: Disney's Iger Finds Value In A Bigger Google

This story was written by David Kaplan.
Bob Iger, Disney's president and CEO, has a Facebook page, but he only has two friends. He tells John Byrne, executive editor, BusinessWeek, in a Q&A at the opening of McGraw-Hill Media Summit, that it's important for executives to experience the same things their audiences do. He began by touching on the purchase of Pixar and working with Steve Jobs, who was chairman and CEO of the digital animator and now a board member, and of the impact of social media on the entertainment industry and the new media/old media divide.

-- Social nets: "I realize [the term social networking] is sort of a cliche these days. We invested in Club Penguin, which is really a gaming world. I've got some pretty cool stuff in my igloo: wide screen TV, basketball hoop. It's enabling us to build other social net franchises for other Disney unit. You'll soon be able to go to Radiator Springs, which is a virtual world aligned with the Pixar movie Cars. It's about embracing the consumer, which means using technology."

-- Not an experiment: The digital buiness is not viewed as laboratory, but as a revenue-generator, although it's still in the nascent stages relative to other parts of Disney (NYSE: DIS). As he has said before, Disney's digital revenues are slated to grow from $750 million to $1 billion this year. "In terms of total revenue, you could say that number is still pretty low, given this is a $35 billion company." How big a part of the company's revenues will digital become? Iger refused to quantify: "Much bigger. We can't predict where technology will take us. Some of that will be cannibalistic of other business, but overall, it will lead to growth. The revenue from online business will come from a number of ways. Micropayments will be a part of it. Advertising, of course. ESPN has done a great job with online advertising. Social media is not just about 20 year-olds. Younger kids are using broadband. The broadband-enabled computer will be become a major vehicle for entertainment for us." Lots more in extended entry

-- No direct threat: With Google (NSDQ: GOOG) and DoubleClick's $3.1 merger cleared this week - along with other M&A activity in the digital advertising space - is Iger concerned about how these combinations would affect Disney's business. "Google, Microsoft (NSDQ: MSFT), Yahoo (NSDQ: YHOO) - they all need our stuff, they want an association with companies like Disney. If you ask Google, Disney is a very popular search term. When they provide a consumer with a great search - and it lets them find Ratatouille or our travel services, that's good for us. They create value for us and we look at making that process better, whether giving them access to video or other features within."

-- He's no Steve Ballmer : Asked if he were Microsoft CEO Steve Ballmer, would he buy Yahoo? "I'm not Steve Ballmer. He can probably afford to buy Yahoo himself. We watch that stuff from a afar. We're not affected."

-- Blu-Ray is exciting: We still have a ways to go on the marketing. People don't understand that a Blu-ray player will still play you're old DVDs. We'd like you to replace your video library, but you don't have to. Although Disney has done quite well, the overall DVD market has started to flatten out. Blu-ray will reverse that and create some growth. But I can't say how much.

-- Old media: TV is still a very powerful medium. We denigrate it by calling it old. When you watch a DVD on a flat screen TV, that's a new experience. My five-year-old son doesn't look at it as old or new - it's just media. You introduce something on something we'll call a mature platform, but you extend it through new media.

-- Disneyland in China: The mayor of Shanghai sys Disneyland is coming to his city. "I don't want to call the mayor a liar. We've been looking at China and we're talking with the government. I'm not prepared to say whether or when, however."

-- Branded content sales: Doing good: Iger was a little more specific when it came to how the company's movie and TV download deal with Apple's (NSDQ: AAPL) iTunes is doing. After saying business is "good," Iger said that in the past year-and-a-half, over 4 million movies have been sold, though that pales beside its DVD sales numbers. On the TV side, "about 40 or 50 million episodes" have been bought on iTunes. "It's all incremental to us. People aren't watching episodes on their iPods instead of watching it them on TV. Our experience tells us that [download views] are in addition to TV. Engagement is at a higher level, because the shows are more accessible." So there's no cannibalization? "We're not seeing that, and that goes for movies as well. The people who buy the downloads are not necessarily people who would buy it on DVD. Over the long run, there will be a shift, but hard good will not go away completely. But electronic delivery will grow as the technology and the screen gets better."

-- Video games: Self-publishing is the way to go. In terms of acquisitions, though, Disney has concentrated on buying developers not publishers, because it wanted to have tighter control of its productions, since most would be aligned with its movies and other entertainment products. "We've kicked the tires on a few acquisitions. We don't feel the need to buy a publisher to be successful. Violence associated with video games will not restrict Disney's ability to grow the business, since younger children are becoming more of a focus of video games. We don't have to be edgy, we have to just be good."

-- Not buying AOL: In case anyone was wondering, Disney is not going to buy AOL (NYSE: TWX). Byrne asks why, just for the hell of it, but again, Iger just smiles and says he won't go there. "We don't want to comment on specific acquisitions, even though I just did. We have a very strong balance sheet, cash flow is strong and we will buy something if we feel it will add value. We have the wherewithal to do that, but it's not a necessity."

-- Not Iger's Disney: Byrne: Will Steve Jobs take over Disney? Iger's response: "I haven't asked him. There will be great CEO's here in the future. It's not Iger's Disney.


By David Kaplan
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