With ESPN continuing to weigh on Disney's results, CEO Bob Iger said in an exclusive CNBC interview that concerns about the network's subscriber losses are overblown. While ESPN has seen some erosion from consumers switching to skinnier cable bundles, he says Disney's strategy of including ESPN and Disney's other cable networks on all the digital TV bundles in the works will be a game changer.
"I think there's way too much pessimism about ESPN because ESPN is still in demand from three constituents you want to be in demand the most from," said Iger. "One – distributors. Two, consumers and three, advertisers. And the reason it's in demand is the brand is still strong, the product is still good and we've invested nicely to keep that product as high quality as possible."
Iger outlined the strategies Disney is taking to adapt to the new marketplace: keeping ESPN's programming strong, and making sure it's launching on every new digital service.
"We believe that (digital TV services) is going to occupy a good part of the future. It's less expensive, easier to use, more mobile friendly." said Iger. Disney's already signed deals to include ESPN and other channels in Hulu's upcoming launch, as well as other unnamed services. (Google hasn't announced anything yet but is widely expected to launch a live TV bundle attached to YouTube.)
Iger also says at some point this year those digital subscribers will be fully measured and will have some impact on Disney's bottom line. Iger wouldn't disclose how many traditional subscribers have been lost or how many are expected, but said that Disney earns roughly the same from new digital services as it does from traditional bundles.
"The other thing that's important is when all these new channels launch we're in all of their homes," Iger added. "The notion of a skinny bundle that excluded ESPN is not the case in the new world order."
When it comes to the future of TV, it sounds as if Iger is re-evaluating everything, even his approach to ABC and ESPN's sizable ad business. "I think in today's world we have to be mindful of the number of commercial interruptions," Iger said.
Iger says ESPN may never break out as a stand-alone service, separate from digital and traditional TV bundles. Disney does intend to launch a multisports service direct to the consumer on the BAMTech platform, in which Disney has an ownership stake, some time in 2017. "That will include a number of ESPN products in it. And then we'll see where that takes us."