Jay Rasulo isn’t as sure as Viacom CEO Philipe Dauman is that we’ll see an online pay TV service in 2014. But one “is coming” he said today at the UBS Global Media and Communications Conference — and Disney would be “happy to license our content.” Here’s the catch though: It would have to license content from others, too, and “look like existing [cable and satellite] offers” that require viewers to pay for channels they don’t watch. “We believe that the [pay TV] system is still the most valuable way the product can be offered to the consumer,” Rasulo says. The system also works well for Disney. The growth of pay TV retransmission consent payments ”have been a huge boon” to the industry, They also have added about $500M to Disney’s revenues over the last few years and “have mostly fallen to the bottom line.” On another broadcast matter, Rasulo is less certain than CBS chief Les Moonves is that the industry will sell most ads next year on the basis of viewing over seven days as opposed to the current three. “The hesitation has to do more with the advertiser side than the content producer side.” Like other execs, though, Rasulo is excited about opportunities to offer TV content on smartphones and tablets. He calls mobile “the single largest” technology opportunity.
Disney shares just shot up close to 3% after CFO Jay Rasulo announced the plan at the Bank of America Merrill Lynch Media, Communications and Entertainment Conference. “We intend to significantly increase our buyback next year probably in the $6B-to-$8B range,” he says. The company can do that without jeopardizing its single A bond rating, Rasulo adds, although it might have to borrow some cash toward the end of its share repurchase. The company can spend because, following big investments in its theme parks and programming, “we’ll see an increase in cash flow.” The announcement follows a four-month period when Disney shares have been in a holding pattern. The price hit an all-time high of $67.89 in mid-May, and have slipped nearly 6% since then. ”Investors have been concerned about ESPN’s weak ratings (down 32% in Q2) in light of a period of stasis in both affiliate fees and sports rights,” Macquarie analyst Tim Nollen noted in a report yesterday. Rasulo says that ESPN and other properties are still strong, and can grow. Following the announced plan to write down as much as $190M for The Lone Ranger, Disney has “learned that there needs to be a cap on tent pole, non-franchise (spending) that doesn’t quite put as much as risk,” he says. The studio has “found our stride in a slate that looks like two Marvel films a year, Star Wars, one Disney animation, one or two …
On the sidelines of the Allen & Co. conference in Sun Valley last week, Walt Disney Company CFO Jay Rasulo said executive car allowances are going the way of the Edsel. “We’re phasing them out,” Rasulo told Bloomberg. The move is part of a larger attempt to curtail some perks at the Mouse. Rasulo wouldn’t be led on specifics, but told Bloomberg he was seeking to modernize operations. “We looked at the way technology is changing our businesses. We’re removing vestigial parts.” A mid-level Disney exec told the news agency that in recent years their monthly car allowance was $900. Some company units have also done away with the half-day Friday policy during the summer. Disney CEO Bob Iger and Rasulo last year ordered an internal review to pinpoint superfluous positions and increase efficiency. In one result, about 150 staffers were laid off at the film studio April.
Most execs like to raise expectations when they address investors. But Disney CFO Jay Rasulo did just the opposite when he opened his appearance today at the Nomura U.S. Media & Telecom Summit. After seeing some analysts’ rosy forecasts for the current quarter, he says that “maybe I wasn’t clear” in earlier presentations about the challenges the entertainment giant faces in the quarter that ends in June. Although the company is “thrilled with the outcome” of Iron Man 3, which could end up with $1.3B in worldwide box office sales, last year it had The Avengers, which generated $1.5B. In addition it will have a lot of marketing expenses for The Lone Ranger, “a film we’re very excited about.” But since the film will be released July 3, the revenues won’t be booked until the fiscal Q4. All told, the studio’s operating income could be down $150M vs last year. In addition, ESPN will defer some revenues. And Disney’s theme parks could be down $65M with one fewer Easter holiday week falling in fiscal Q3. Disney shares, which had been up in early trading today, are now down about 1%.
Those hoping that Disney‘s Jay Rasulo would provide more detail today about the surprising movie licensing deal with Netflix that was announced yesterday will be disappointed. He told the UBS Global Media and Communications Conference that he would only talk about it in general terms. “This was the best and highest-value creator for the company and we’re thrilled to have done it,” he says. Disney wasn’t concerned about the state of the economy or the business cycle. The bigger consideration was that Netflix would be a good platform for Disney, which focuses on “franchise films with enduring value.” He notes that Pixar, Disney animation, Marvel live action, Star Wars and Disney live action might each produce one or two films a year. What’s more, “we really look at getting returns on the films” — which means finding multiple places including merchandising and theme parks where the films can generate revenue. “If it does not have life somewhere else, you’ll have a hard time.” With films such as Cars and Toy Story, “you can take these franchises to other places in our ecosystem.”