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Disney’s Iger Views iTunes Arrangement as ‘Incremental Consumption’

Nov 17, 2005  •  Post A Comment

Walt Disney Co. CEO Robert Iger said Thursday he doesn’t expect the media company’s recent decision to offer episodes of “Desperate Housewives” and “Lost” on Apple Computer online store iTunes to cannibalize the company’s bread-and-butter broadcasting business. Instead, he said, he views the offering as an opportunity to generate incremental revenue.

“While the iPod is offering a wonderful experience, and the quality is sensational, people would not opt to watch a program on an iPod and not on a large screen,” Mr. Iger said during the company’s fiscal full-year earnings call. “We actually believe this is incremental consumption.”

Meanwhile, Mr. Iger appeared to signal that Disney would be interested in offering alternative forms of distribution of its content for the large screen, but that the price points would be higher for content broadcast on television than the $1.99 per download currently being charged for “Lost” episodes on the iTunes service.

“We have to consider the impact on large-screen platforms,” Mr. Iger said. “We should charge more for the large-screen experience than the [small-screen experience].”

Also Thursday, Disney reported an 8 percent increase in fiscal 2005 profit to $2.5 billion, while revenue for the 12 months ended Oct. 1 advanced 4 percent to $31.9 billion. For the fiscal fourth quarter, profit sank by 27 percent to $379 million, while revenue rose 3 percent to $7.7 billion.

The company said its fiscal fourth quarter was hampered by a $313 million loss at the studio unit, which was hurt by weak box-office performance in general and a number of film flops, including “The Brothers Grimm” and “Dark Water.” Disney had previously estimated its studio would lose between $250 million and $300 million in the fiscal fourth quarter.

The bright spot at Disney continued to be the company’s media networks division, which includes both cable and broadcast assets. The division reported a 23 percent increase in operating income to $2.7 billion for the fiscal year, while revenue of $13.2 billion represented a 12 percent increase over last year. The company attributed the results largely to the strength of ESPN, which reported advertising and affiliate-fee revenue gains.