WHEN: Today, Thursday, November 8, 2018
WHERE: CNBC's "Closing Bell"
The following is the unofficial transcript of a FIRST ON CNBC interview with Disney CEO Bob Iger speaks with CNBC's Julia Boorstin today, Thursday, November 8th on CNBC's "Closing Bell" (M-F 3PM – 5PM.) The following is a link to video of the interview on CNBC.com: https://www.cnbc.com/video/2018/11/08/disney-ceo-comments-on-companys-performance.html.
All references must be sourced to CNBC.
JULIA BOORSTIN: Thanks so much. And Bob Iger thanks so much for joining us today, on this big earnings beat for you, both on the top and bottom line. Tell us what is driving this – this upside surprise for the company?
BOB IGER: Well, if you don't mind, before we get to earnings, it has been a very difficult day in our country and in particular in our backyard in Southern California where 12 innocent people lost their lives through a senseless act of gun violence, including a heroic member of law enforcement. And these were people that were neighbors and relatives and our hearts go out to all of those victims. It is a very – just a very very difficult morning here.
BOORSTIN: Certainly a tough time in Southern California with this shooting. Now, moving onto your – to your results, big upside surprises, especially at the studio. What was driving that growth?
IGER: Well the studio had another record year with just incredible success across the board. And obviously a great, very strong film slate. And so that really helped drive not only our earnings for the quarter but for the year. No studio has ever done as well as our studio did in fiscal 18.
BOORSTIN: And tell me about the media networks division, particularly strong growth in broadcasting, but what's going on at ESPN? What are you seeing in terms of cord cutting and subscriber losses, and also the ratings trends?
IGER: Well we are on a same war on the call just after this interview but ESPN had its best quarter in quite a while, in terms of sub losses. And what we're seeing there is continued erosion in terms of traditional subs but the growth in the digital MVPDs continued through, not only the year but the quarter. And so the sub losses were bated substantially.
BOORSTIN: So does that mean you see a quarter either next quarter or in the future when you'll actually start seeing the growth because of these digital MVPDs?
IGER: Well I – we are not going to speculate about the year ahead because it's just begun. So it is a just little early. But the signs -- the trends have been good for a while. And these were the best numbers we've seen in a long time.
BOORSTIN: And then in terms of the theme parks, it sounds like particular strength in the U.S., you've been making some really big investments both internationally and here at your U.S. Parks. Do you see those investments paying off? And what are you seeing in terms of consumer trends? Does the consumer seem confident that they're spending more?
IGER: Well I think the results at the parks and resorts are the result of a number of things. What we have managed to build over the years and the fact that we're leveraging the great IP at the company has certainly helped. We have incredible operational excellence at our parks, not just domestically but you know, across the world. And we've also implemented a bunch of new strategies when it comes to ticketing and pricing, one more recent in Florida, which didn't really have much of an effect this year because it just kicked in, but to make things simpler, to not only spend demand a bit and improve guest experience, make it easier as well to buy the tickets and also to increase yield. And on top of that we are seeing, particularly domestically, a very strong economy and that clearly has helped us.
BOORSTIN: And it seems like --- do you have any sense of how it is impacting consumers or their outlook in terms of bookings for the -- the calendar fourth quarter?
IGER: All signs look good right now, suggesting that our product is resonating, the people still want to our parks and the economy domestically is helping.
BOORSTIN: Great. Now, tell us a little bit about your digital strategy. We're about a year out from your launch of the disney direct to consumer app. What more can you tell us? Do you have name? Any more details?
IGER: We are announcing a name, probably in about 15 minutes.
BOORSTIN: Are you going to tell us?
IGER: No. I'm going to wait for the call. I want people to listen to our earnings call. You know, we announced a year ago that we were going to the direct to consumer business in a fairly big way not to take advantage of trends that we are seeing, but to start shifting our business to address a lot of disruption and transformation that we're seeing overall. And since that announcement, we acquired the majority stake in BAMtech, the technology platform necessary to launch these products. We launched ESPN plus which is doing extremely well, and achieved over a million paid subs fairly quickly and that growth is continued but we are not getting specific in terms of updating it. And then in the end of calendar 19, we'll launch a Disney direct service that will feature Disney Pixar, Marvel, Star Wars, and ultimately national geographic. And then of course through the acquisition of 21st Century Fox, we'll end up with a controlling stake in Hulu, or 60% of Hulu, and that will be a priority as well in terms of investment and growth in the -- basically direct to consumer digital media space.
BOORSTIN: And in terms of the Disney direct to consumer app, what is your plan in terms of acquiring or investing in more original content to make sure you have enough to launch with a year from now?
IGER: Well we're doing a few things. First of all we're weaning ourselves of third party licensing, which we've already started, so that the product appears on our service and not on third party services. We're investing substantially in original content, really against what will be all of those brands but we're making Star Wars series and Marvel series and certainly series and Pixar original movies as well. And then there will be thousands of hours of library products that will be television and movies. And then there will be a lot of programming that the core Disney fan we believe will really love. You know there are ardent fans all over the world and we have the opportunity to pull back the curtain a bit and show them things they've never seen before, including a great docuseries on Walt Disney Imagineering.
BOORSTIN: And as you get closer to the launch of this product, do you cleaner, clearer, a better sense of how many people are the target audience? Like how big this addressable market is?
IGER: Well the good news for us is, first of all there's a huge family audience to target. And that's with the Disney service will be -- and I almost gave the name away -- and then – I've been using the name awhile – and then we also know that we have core fans that are Disney fans and then there are marvel fans and Pixar fans and of course star wars fans and when the acquisition is complete there are people who love national geographic. So this will be very brand centric, and that's a good thing, not just in terms of obviously attracting subs because of the importance of those brands and the interest people have in them but it will also be a navigational tool so we look to build what I'll call a really really elegant experience for people. You'll have enough volume to obviously support price and to attract customers but it will also be a lot of quality, and quality under those brand umbrellas, and simplified navigation because of those brands.
BOORSTIN: You mentioned Hulu, of which you'll own 60%. Are you going to pursue acquiring the 30% of Hulu that Comcast owns or the 10% that Time -- Warner Media owns?
IGER: Well, it is premature really except to say that if Comcast is interested in divesting, or if Time Warner or AT&T Time Warner is interested in divesting, we certainly would be interested in buying their stake. But with 60%, which is what we will own, we'll have enough control to manage Hulu in a way that is consistent with -- the strategy of the company is deploying.
BOORSTIN: But would the ability to acquire more of it change how much you invested in it, in terms of content?
IGER: No, not necessarily. Our plan is to invest in all three services: the ESPN service, the Disney service, and the Hulu service, so that we achieve our goals in terms of not just going in to the direct consumer space but transforming the company by being in that space. That will require investment, and those investments will be made across those three brands. We started with ESPN and Disney. Hulu obviously has been investing in content. It is increasing that is being made and to use production entities of what will be the new company, particularly on the television side thanks to the fox assets and the talent that we are bringing in to help fuel Hulu's growth as well.
BOORSTIN: You're nearing final approvals for your Fox acquisition. What can you tell us about the state of the integration and where things stand now?
IGER: Well obviously, there is just so much we can do until we get final approval. We are very happy that we achieved that in the EU just this week and there are just a few markets left to go. And we are optimistic that we will get regulatory approval in those markets. At a time that's probably meaningfully ahead of what we anticipated back in June, we said it could take as much as 12 months. So we feel good about that. While we are waiting, there is a lot of planning that is done. We are able to create basically the outline of an organization and we announced that for both television and for the studio. But we can't run the business as one. And we can't really influence how the business is being run in the interim. So, it's kind of a waiting period right now. But during that period we can identify not only the opportunities but a lot of things we are planning to implement as soon as the deal is approved.
BOORSTIN: One of the markets that has not yet been approved, the deal is china. Are you at all concerned that China could block the deal as part of retaliation over trade issues?
IGER: No. We don't see any signs of that. We're optimistic about gaining approval in China. We hope it doesn't take too long. But no – we don't think politics is going to enter into this.
BOORSTIN: You don't – and if you don't think politics is going to enter into that approval, we're just a couple days after the midterms, do you think that outcome of that election is going to impact your company at all?
IGER: No. Not that I – no. Not that i'm aware. No.
BOORSTIN: Not that you're aware. No. Another question about fox is you're now getting to spend more time with these assets, you've getting closer to this approval. And you are paying significantly more than you had originally agreed to pay, thanks to Comcast coming in as a rival bid there --
IGER: Are you thanking to that? Or am I supposed to thank it?
BOORSTIN: -- I should say a result of Comcast coming in as a rival bid, they are paying about 19 billion more. Do you a sense that you might have overpaid or do you feel – how do you feel about those assets?
IGER: When we made the second deal that we made, which was in June, we said at the time that we felt very good about the price that we were paying. There were changes that occurred between the time that we made the deal in December and the time that we made the deal later in 2018. For instance tax legislation in the United States, as a for instance. And so we feel very good about the deal we made and we are looking forward to getting the approvals so we can operate as one company.
BOORSTIN: And as part of that, there's a lot of changes to your studio. Tell us what to expect in terms of the studio going forward, you're going have a big chunk of the box office market share here in the U.S. How are you going to approach this to make sure that you're able to grow the studio without over saturating the market?
IGER: Well, first of all we have both been in the market. And so I don't think we're – we're not looking to make more movies as a combined entity. We're thrilled at the assets and the people that we're bringing on the studio side – under Fox, and Fox 2000, and Fox Searchlight. Some of those movies are perfectly complimentary to the films that we make. They have been in the family business a bit but typically they are not. It is more adult oriented. Obviously searchlight makes a different kind of movie than the movies Disney is making. So we think that the films that those studios will make, have made and will make, are complimentary to the films that that we've made as a studio. So we think it fits in perfectly in that regard, in that there isn't that much overlap. The great thing too is with this comes not only talent but some incredible properties, starting with Avatar. And Jim Cameron's busy making not one but a few Avatar films that will be part of a Disney slate. And that's extremely exciting to us.
BOORSTIN: Great. Well, we look forward to following the completion of the fox deal and also we will be tuning into your earnings call where you announce the name of the new Disney streaming service. That was a good tease there.
IGER: Yeah, you almost caught me too.
BOORSTIN: Thank you much for joining us. We'll let you get off to your call. Back over to you.
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