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Jennifer Dauble



Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Disney President & CEO Bob Iger today, Wednesday, February 10th. Excerpts of the interview will run throughout CNBC's Business Day programming.

All references must be sourced to CNBC.


JULIA BOORSTIN: Mister Iger, thank you so much for joining us after your earnings call. So, the big question, is what drove your earnings upside this quarter?

BOB IGER: Well, we have strengthened our media networks. Both on the advertising front, and on the subscriber front or subscription revenue front. And we had-- better-than-expected attendance at our parks. And then, there are a lot of ins and outs comparisons to last year that were more apples to oranges, but in general, we consider that given the environment to be a good solid quarter for the company.

JULIA BOORSTIN: So, what continues to drag on results, looking across the various businesses?

BOB IGER: Well, you have to start with parks and resorts, where we're getting volume in terms of attendance. We’re quite pleased with but we’re discounting to do that. And we're continuing to do that in the quarter that we're in-- because clearly the economy, from a number of different perspectives is having an impact-- on how much people travel. And what they spend, when they spend. That would be the primary factor. There's still some softness in the advertising marketplace. But advertising is only about 20 percent of our revenue. And while we’re experiencing some strength now -- in general the marketplace is not as strong as it was before the economy crashed in the latter part of 2008.

JULIA BOORSTIN: So, what is your outlook on the economy?

BOB IGER: I'm not an economist but-- we believe that the advertising market is strengthening. We're seeing-- direct evidence of that now. And we believe that while visibility isn't great, it probably-- will continue to strengthen somewhat as the year progresses. But we're not making predictions at all about travel and tourism. We know we have great product in the marketplace. But we're still discounting to get the volume that we’d like in that business. So no predictions. We're mostly focused on making great product, and—continuing to pursue the strategies that we've been pursuing for the last number of years.

JULIA BOORSTIN: Your earnings indicate some strengthening of the advertising market. Do you expect advertising to return to its prior levels, and over what kind of time frame?

BOB IGER: Eventually, we hope that advertising returns to prior levels. But no predictions in terms of timeframe, either on the national or the local level.

JULIA BOORSTIN: And what kind of trends are you seeing in advertising right now?

BOB IGER: Scatter pricing at the ABC Television Network-- currently is running just about 30 percent above the upfront, and there’s some decent spending from certain sectors. Notably, the telcos and technology. On the local level, it's also up. Just about double digits from a year ago. ESPN also up nicely-- from a year ago. But again, no predictions in terms of-- long-term advertising prospects.

JULIA BOORSTIN: Now, based on the parks and consumer products, do you see the consumer coming back in a real way?

BOB IGER: No, not yet. Not yet. There's still a lot going on in the marketplace that-- suggests that-- the consumer's being impacted by a challenging economy. Clearly jobs is still an issue. Job security an issue, consumer confidence basically has reflected that. Housing prices have not bounced back of a significant level or significant rate. And so-- we're-- we're still dealing with, and we'll continue to deal with probably throughout the year a consumer that is buying hard. Meaning shopping for real bargains, and also buying late, waiting for discounts.

JULIA BOORSTIN: You mentioned jobs. Small and big businesses say nonstop on CNBC that we won’t see a full recovery until jobs recover. Do you anticipate a jobs recovery?

BOB IGER: Well, I-- I agree that I think jobs is a very, very significant, very significant contributor to a softness of the economy. And certainly, a contributor in a major way to consumer confidence. Obviously, when you don't have a job, your confidence is low, and when you're worried about keeping your job, it's also quite low. We're not economists. So, predicting what's going to happen in that marketplace is not something that we feel comfortable doing. But it's definitely a factor.

JULIA BOORSTIN: Now, your movie studio. You entirely overhauled your movie studio over the past several months. When will we see the impact of some of these changes?

BOB IGER: Well, you're starting to see some of the impact already, in that some of the restructuring was aimed at changing how we market, and how we distribute our product, both on the theatrical side and on the home video side. From a creative perspective, that takes some time, although the new group is in place. That is leading the creative-- direction of the studio, it's already having an impact, even on the films that they inherited, because they largely were not completed. So, you'll see some results in the slate that we feel really good about that's coming up, but-- you won't see the full result until the theatrical slate rolls out in 2011, 2012.

JULIA BOORSTIN: Now, Disney is cutting the window for Alice, and its distribution of Alice in Wonderland in the U.K. What is your strategy in tightening that window?

BOB IGER: Well, regarding Alice-- Alice is a film that's coming out on March 5th. And-- if-- if we waited the typical amount-- for releasing a home video in the marketplace, that would put the home video in the middle of the summer, which is not the right time to be selling home videos. If we waited until after the summer, then the film would be not as new, not as fresh-- as it would if it came out earlier.

So, what we've proposed is a shortening of the window for Alice, because if we can put the video roughly 13 weeks after the movie is released versus what would be more of a traditional 17 week, that gives the ability to put the video out before the doldrums of the summer, and to put it out when the movie is still very fresh in consumers' mind. We think that's not only a good thing-- for the company, and for the filmmakers, but it's a good thing for the business, because it is in the best interest of the exhibitors that the movie industry stay healthy. And them agreeing to that window is a step in the direction of enabling us to make sure that this film is healthier than it would be if we waited.

The problem with waiting these days is that you're dealing with a much more competitive marketplace than ever before. There are more choices than before. You're dealing with an economy, as we just discussed, that's relatively soft. And you're dealing with-- I believe, greater-- amounts of piracy, which is—and can be a real threat.

The sooner we put a product into the marketplace-- the less vulnerable we are to piracy. So, we think this is the right thing to do for this film, and what we're asking those we are in discussion with is for them to be patient with us. And we're telling them that we're not doing a one-size-fits-all approach to movies. Each movie is different. Some will be in a window that's similar to this, and some will be in a much more traditional window.

JULIA BOORSTIN: But this is-- the start of potentially a new strategy?

BOB IGER: Well, there's a yes and now to that. The strategy is to make sure that the business is healthy as possible. We're dealing with conditions that have changed. Whether it's on the piracy front, or on the competitive front, or on the economic front. And so, the only reason the strategy really has changed is to contend with conditions-- that a dynamic marketplace is providing us. That's it. It's not about-- revolutionizing the business. It's about making sure that the business of movies is healthy. We know for instance that the investment in 3D is one step in the direction of making it healthier, and it's been a great partnership with-- the theatrical exhibitors around the world in that all regard. And all we're really saying is let's work together to make sure that the industry-- that motion picture making and distribution remains healthy.

JULIA BOORSTIN: Now, Disney is reportedly in selling Miramax for something like $600 million or $700 million. Are you interested in selling Miramax, and why?

BOB IGER: Well, our primary interest is in deriving value from all of our assets. We have essentially stopped fueling new development at Miramax. And spending on new motion pictures. We'll spend to finish those we’ve committed to and we’ll release those that have been made in a manner that’s appropriate to each film. At the same time, we're exploring our options, and really focusing more at the studio on a strategy that has us releasing Disney, Disney Pixar-- and Marvel movies primarily.

JULIA BOORSTIN: Speaking of Marvel, the Marvel acquisition was just completed. When will we see its impact on the studio, and then will we start seeing those characters in the parks?

BOB IGER: Well, all divisions of the company are working well with-- the divisions of Marvel to explore the opportunities-- that we saw when we decided to acquire Marvel. Whether it's on the Disney Stores front, and in retail, or studio side, television side, where we're starting discussions about developing television series. It will take some time to see a specific result, although it's quite possible that we'll get a TV series on one of our channels by the end of the year.

On the studio front, we're involved with the Marvel Studio in terms of the production of films, and those films are-- distributed for the time being by-- third parties. Paramount for instance. And so, we won't be involved that much in that regard. But there's definitely collaborations going on, and I would say that-- we're even more excited today than we were the day that we announced the deal. Part of that comes from-- having the opportunity to engage with Marvel, and looking for other possibilities. And also discovering the strength of the people at Marvel which is considerable.

JULIA BOORSTIN: Now, over at the media networks NewsCorp negotiated retransmission fees for Fox channels. Tell me-- how you're interested in handling the negotiation fees for ABC.

BOB IGER: Well, retransmission fees are associated with-- what we provide on a local basis-- through our own television stations. And we own ten, and many of them are market leaders and have been for years. They provide those communities with great programming. Both the local programming, news, and syndicated programming-- that they air as well as their national program or the ABC Network that they air. And we believe that the value that we have created-- also-- extends to the distributors who distribute our signals to-- multichannel subscribers.

This clearly is a trend in the directions of stations getting paid cash for retransmission consent. We feel given the fact that we create value and we have market-leading stations-- we should participate in that trend, and we have every intention of doing so.

JULIA BOORSTIN: And so, would you be willing to threaten pulling your product from say, a Time Warner Cable the way that-- that NewsCorp did?

BOB IGER: We're resolute in our desire to get retransmission consent fees. We're engaged in discussions-- right now-- with certain operators. And it is our full intention to get paid for them. It would be our hope that we not face the need or the-- the imminent threat of having a signal taken off the air, but we're also engaged-- in negotiations. And as I said, we're-- we're resolute in our desire to get paid an appropriate amount of money-- for the stations that we provide to these multichannel operators.

JULIA BOORSTIN: Looking at your cable networks, can you can continue to grow subscription fees the way that you’ve been growing them?

BOB IGER: Our goal with our cable networks is to continue to grow the quality of our programming, and our brand. To continue to provide core value to the distributors, which we're doing. ESPN and the Disney Channel are great-- examples of that. ABC Family. Another one, where you have increased-- investment in programming, and program quality. The production values, and that's reflected in increased ratings. We see that at the Disney Channel, at ESPN, and ABC Family. And so, with that dynamic in mind, we believe we should be able to derive more revenue from subscriptions.

JULIA BOORSTIN: Is ABC interested in bidding for the next Olympics, the 2014 and 2016 Olympics?

BOB IGER: Well, if we were to bid, it would be ESPN that would-- do the bidding. They'd be the primary-- television network or networks up for those Olympics. But we usually don't comment on-- on acquisitions from a program perspective (UNINTEL).

JULIA BOORSTIN: NBC is on track to lose money with this year's Olympics. Since you're broadcasting the Oscars coming up, do you think these big television events are worth it?

BOB IGER: Well, it depends on how much you pay for them. We've had a long association with the Academy Awards, and-- the Academy Awards on ABC have been nicely profitable over that period of time. We’re dealing with an economy that’s a little bit more challenging today, but you're stealing with not only a great high-quality event, but one that consistently gets among the highest ratings of all television programming. I think the Super Bowl is a great example of a big event that I think delivered real value to the network that covered it. Record ratings and a fantastic game. So, I-- yeah, I think it's largely the function of what you pay for them. But we love being in the business of big events-- provided that they can create value for us. I think it’s safe to assume that there are big events that continue to do that.

JULIA BOORSTIN: cNow, over in your theme parks division, you've been investing a lot of growth. You're expanding in Hong Kong, you have a new cruise ship coming online. That is a lot of inventory. Do you think the demand is going to be there?

BOB IGER: Well, we do. The-- the cruise ship-- well, we're actually building two. But the next one that we launch—or the first one that we launch will be in-- January of 2011. And we believe that while we're not great predictors of the economy that we'll probably be looking at an economy that's a little bit stronger than the one that we have today.

California Adventure build out while-- starts to roll out this summer. Doesn’t roll out in total until 2012. Hong Kong and-- Florida-- also in-- a few years. So, we feel-- good about the timing to market of all this new product. You start with the idea creating great product, and the notion that we're in this for the long run. It's not about delivering results in one quarter or even in one year, it’s over time. And they’re all designed to create long-term value. Interestingly enough, we're already booking our new cruise ship, and so far, so good. The bookings have been-- quite strong, and-- and we feel good about that.

JULIA BOORSTIN: And you mentioned the attendance in the U.S. parks is up over this past quarter, but it is pretty much flat looking globally.

BOB IGER: Yeah, you're dealing with challenges from an economy perspective in different markets. So, Europe would obviously be a good example in terms of what's going on in the European marketplace, and Japan as well. It's a difficult global economy. It's not just an economy that is facing difficulties domestically.

JULIA BOORSTIN: Well, in terms of technology, how is the iPad going to change Disney's business?

BOB IGER: Anytime a device-- creates a better consumer experience, it changes our business. It’s good for business. But it also gives us opportunities to create new product-- for devices like that. We not only like the quality of the screen, but we like how immersive consumer can be with product on that platform. And it gives us great ideas, and great enthusiasm for all of our brands, Marvel, ESPN, Disney, ABC. And we're working to develop product for the iPad because we believe that it'll - it’ll - provide consumers with really exciting experiences.

JULIA BOORSTIN: You've been-- pushing the adoption of Keychest technology to encourage consumers to spend money buying digital copies of content. What if that technology - Keychest - does not gain industry support.

BOB IGER: Well, we'll be disappointed if it doesn't. What we're trying to do is simply create a better consumer experience. When consumers buy a digital file-- one of the barriers to entry for the consumer is the unknown in terms of just how playable-- how usable that file will be on different devices, on different platforms. We call it interoperability. So, if you can provide a consumer with a digital file that-- that is playable on any platform, any device, then that provides the consumer with more value, which obviously is great from the selling proposition for us. So, Keychest is designed to do just that. Let's create a product that when we put it into the marketplace the consumer knows they are getting a lot of value for it.

And we would hope to get other companies, both on the tech side and on the content creation side interested in this. They certainly should be aligned - the goal is making a product more useful and more valuable to the consumer. Whether they believe in the technology or not, that's obviously up to them, but that's what we're trying to do.

JULIA BOORSTIN: How long before these digital technologies-- whether it's new content on the iPad or whether it's Keychest, how long before they have a real impact on your bottom line?

BOB IGER: Well, they're already having an impact on our bottom line. They remain in some cases, relatively small compared with other businesses, but they're definitely having an impact. ESPN for instance had just a huge quarter digitally from an advertising perspective as an-- as an example. In fact they had a record quarter-- in terms of their digital advertising.

The company is-- above $2 billion in terms of what it generates-- from our digital businesses. So it's definitely having an impact, but it's the beginning of the beginning. There will be many more products adopted and rolled out, not only in the United States but across the world, and-- it will change our businesses in dramatic ways over time, but I think it's already having a profound effect.

JULIA BOORSTIN: A quick question about some news you announced today. It is very rare to see a First Lady partner with a publicly traded company. Why is Disney working with Michelle Obama on her health initiative?

BOB IGER: Well, it goes both ways. Why is Michelle Obama working with Disney, too? Some years ago-- we felt that it was really important for us to-- essentially help parents-- provide their children with healthier diets. And we-- were very, very focused on a healthy foods initiative that was primarily designed to associate our characters with food and food choices for children that would be-- be healthier, instead of the opposite.

Clearly childhood obesity is-- an area or a subject matter, or cause that the First Lady is very interested in. By the way, we think it's a very real issue. And she has chosen to adopt that as one of her major causes. And she obviously took note of the great strides that we've made as a company over the last few years in that area, and our interest in-- our-- responsibility aligned very nicely with the First Lady's. Thus the announcement that was just made.

JULIA BOORSTIN: And just-- a quick, final question. The Oscars are coming up on ABC. What do you make of this deviling of the number of Best Picture numbers to ten? Is that good for Disney? Is that going to be good for ABC's ratings?

BOB IGER: Yeah, I think it-- I think it's good for the business. I think it's definitely good for ABC's ratings because you have ten nominees versus five, then more diversity in terms of pictures. Probably more people have seen the pictures that are nominated. I'm sure they have. And that can't be bad, from a ratings perspective.

It doesn't necessarily change-- change the outcome of the race, but I think it increases interest. I think it's also good for the business, too to have more pictures feel included. And that - to be nominated for an Academy Award, it's such a great honor. We're certainly thrilled that Up was nominated for both the Best Picture and-- and Best Animated Picture. We think it's a good thing all around.

JULIA BOORSTIN: Great. Well, Bob Iger, thank you so much for joining us.

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