CNBC Exclusive: CNBC Transcript: Disney Chairman and CEO Bob Iger Speaks with CNBC’s Julia Boorstin on “Closing Bell” Today
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Disney Chairman and CEO Bob IGer and CNBC's Julia Boorstin on "Closing Bell" (M-F, 3PM-5PM ET) today, Tuesday, May 9th. Following are links to the video on CNBC.com: http://video.cnbc.com/gallery/?video=3000617115 and http://video.cnbc.com/gallery/?video=3000617114.
All references must be sourced to CNBC.
KELLY EVANS: NOW STRAIGHT OUT TO JULIA WHO IS SITTING DOWN WITH DISNEY'S CEO, BOB IGER, ON A FIRST ON CNBC INTERVIEW. JULIA?
JULIA BOORSTIN: THANKS, KELLY. BOB, THANK YOU FOR JOINING US AHEAD OF YOUR EARNINGS CALL. APPRECIATE IT. SO IT SEEMS LIKE THE BIGGEST UPSIDE SURPRISE IN TERMS OF DRIVING THAT EARNINGS WAS THE PARKS AND RESORT DIVISION. WHAT HAPPENED THERE THAT LED TO THE HIGHER THAN EXPECTED EARNINGS?
BOB IGER: PARKS AND RESORTS UP 20% FROM A YEAR AGO. WE HAD RECORD NUMBERS IN OUR DOMESTIC PARKS, BUT WE DID WELL IN ALL INTERNATIONAL PARKS, AND WE HAD A QUARTERLY PROFITABILITY IN SHANGHAI WITH GREAT ATTENDANCE. JUST A TREMENDOUS PERFORMANCE, AND, OF COURSE, THE STUDIO UP 21%, AND THEIR SUCCESS STORY CONTINUES S AS WELL, AND IT WAS A GREAT DRIVER OF THE QUARTER.
BOORSTIN: NOW, OF COURSE, INVESTORS, ANALYSTS CONTINUE TO BE FOCUSED ON YOUR MEDIA NETWORKS AND YOUR ESPN DIVISION IN PARTICULAR. NOW MEDIA NETWORKS THE REVENUE AND OPERATING INCOME IN THE QUARTER WAS BOTH A LITTLE LESS THAN ANALYSTS EXPECTED. WHAT'S GOING ON WITH THAT DIVISION?
IGER: WELL, REMEMBER, WE SAID THIS YEAR, SPECIFICALLY ABOUT ESPN, THAT BECAUSE OF SOME NEW LIVE SPORTS LICENSE AGREEMENTS, NOTABLY WITH THE NBA, THERE WOULD BE A SIGNIFICANT INCREASE IN OUR PROGRAM COST. A LOT COMES IN THE QUARTER WE'RE CURRENTLY IN, BUT IT'S AFFECTING THE YEAR, AND SO MEDIA NETWORKS ENED UP WAS NOT A SURPRISE TO US. WHAT'S GOING ON WITH ESPN, SEE, IF YOU'D LIKE ME TO ADDRESS IT RIGHT AWAY, IS THAT, AS YOU KNOW, WE WERE ONE OF THE FIRST TO CITE TRENDS THAT WE WERE SEEING IN THE MARKETPLACE THAT SAW A REDUCTION IN THE NUMBER OF EXPANDED BASIC SUBS IN THE UNITED STATES. WE WERE CANDID ABOUT IT. CANDID ABOUT IT IN AN INTERVIEW WITH CNBC IN THE SUMMER OF 2015. WHEN WE SAW THAT TREND BEGINNING, WE TOOK IMMEDIATE STEPS TO START CONTENDING WITH IT OR DEALING WITH IT, INCLUDING NEGOTIATING DEALS WITH ALL THE NEW PLATFORM PROVIDERS, THE OVER OVER-THE-TOP PROVIDERS, TO INCLUDE ESPN, IN EVERY ONE OF THEIR SUBS, IT INCLUDED THE INVESTMENT IN BAMTECH BE IN THE DIRECT TO CONSUMER BUSINESS IT INCLUDED A LOT OF WORK DONE TO IMPROVE OUR OWN APPS, AND TO INCREASE ENGAGEMENT WITH ESPN USERS ON DIGITAL PLATFORMS, WHICH WE'VE DONE AND DONE DRAMATICALLY WELL AND IT ALSO INLUDED MORE ATTENTION TO RUNNING THE BUSINESS EFFICIENTLY. WE BELIEVE WE'RE WELL-POSITIONED TO CONTEND WITH WHAT WE THINK IS CONTINUED DISRUPTION IN THE BUSINESS, BUT HARDENED BY THE LAUNCHES OF HULU, YOUTUBE, AND PREVIOUS LAUNCHES OF AT&T DIRECT, AND SONY VIEW AND OTHERS BECAUSE WE BELIEVE THESE NEW LIGHT PACKAGES THAT INCLUDE ESPN AND OVER THE TOUCH TOP PLATFORMS ARE THE FUTURE AND WILL BE OF GREAT HELP TO US AS WE CONTINUE TO MANAGE THIS GREAT BUSINESS.
BOORSTIN: BUT THERE ARE A NUMBER OF FACTORS HERE OVER THE PAST COUPLE WEEKS, WE SAW A RANGE OF MEDIA STOCKS WENT DOWN ON CONCERNS ABOUT DECLINING ADVERTISING, BUT ABOUT CORD CUTTING. EVEN IF YOU ACCOUNT FOR THE NEW SKINNY BUNDLES, OVER THE TOP PACKAGES, THERE'S STILL TALK ABOUT HALF A MILLION PAID SUBSCRIBERS IN THE FIRST QUARTER. HOW DO YOU ADDRESS THAT?
IGER: WELL, I JUST TALKED ABOUT HOW WE'RE ADDRESSING IT. WE ARE SEEING SOMEWHAT OF A SHARE SHIFT BEGINNING FROM WHAT I CALL TRADITIONAL EXPANDED BASIC PLATFORM PROVIDERS TO A LOT OF NEW OVER THE TOP PROVIDER PROVIDERS. WE LIKE THE OVER THE TOP BUSINESS IN SOME OF THESE NEW PLATFORMS BECAUSE THEY ARE USER FRIENDLY, MOBILE FIRST, ENGAGEMENT WITH THE USERS, WE THINK, IS QUITE GOOD. WE ARE JUST SEEING THE BEGINNINGS OF IT. THEY'RE NASCENT BUT WE LIKE THE TRENDS WE'RE SEEING. HULU JUST LAUNCHED, YOUTUBE LAUNCHED A MONTH AGO, FOR INSTANCE. WHAT WE'RE SEEING IS SOME SIGNIFICANT GROWTH OF ESPN, SUBS, AND OTHER DISNEY CHANNEL SUBS, DISNEY OWN CHANNEL, AND ON THOSE PLATFORM, BUT SO FAR, IT'S NOT ENOUGH TO MAKE UP FOR SOME OF THE LOSSES IN THE TRADITIONAL ONES, WHICH, ULTIMATELY, WE WILL SEE THAT, BUT THE PLATFORMS ARE BRAND NEW.
BOORSTIN: SO YOU THINK ULTIMATELY, THE RISE OF DIGITAL WILL COMPENSATE FOR THE DECLINE IN TRADITIONAL?
IGER: WE THINK WHAT WE'RE GOING TO SEE FOR OUR BUSINESS SPECIFICALLY, ESPN, WE'RE GOING TO HAVE A RISE IN OVER THE TOP, LIGHTER PACKAGES, INCLUDING ESPN, THAT WILL COMPENSATE FOR SOME OF IT. WE WILL EVENTUALLY BE IN A DIRECT TO CONSUMER BUSINESS FOR ESPN PRODUCTS, HOPE TO LAUNCH ONE ON OUR BAM TECH PLATFORM BEFORE THE END OF THE YEAR. WE ARE INCREASING ENGAUGEMENT WITH APPS SIGNIFICANTLY. WITH THAT, COMINGS NOT ONLY BRAND AFFINITY BUT ADVERTISING, AND RUNNING THE BUSINESS MORE EFFICIENTLY. WE ARE ACTUALLY CONFIDENT IN ESPN'S FUTURE. WE GOT A TREMENDOUS LINEUP OF PROGRAMS AND PRODUCT, OF LIVE SPORTS. LIVE SPORTS IS STILL A HUGE DRIVER OF CONSUMPTION, AND IT'S JUST, BY THE WAY, AS A FOR INSTANCE, THESE NEW PLATFORMS KNOW THEY CAN'T LAUNCH WITHOUT ESPN BECAUSE OF THE POPULARITY OF LIVE SPORTS.
BOORSTIN: BUT A COUPLE WEEKS AGO, YOU DID MAJOR LAYOFFS AT ESPN. ARE YOU DONE? MORE TO COME? WHAT'S THAT SAY ABOUT THE STATE OF THE RESTRUCTURING?
IGER: I DON'T TAKE ANY LAYOFFS LIGHTLY. TO SAY THEY ARE MAJOR LAYOFFS, YOU ARE TALKING ABOUT 100 PEOPLE OUT OF A FEW THOUSAND PEOPLE, SO I DON'T THINK I WOULD CALL THAT MAJOR. AS I SAID, WE'RE BEGINNING TO CONTINUE TO MANAGE THE BUSINESS EFFICIENTLY. I DON'T THINK I NEED TO COMMENT SPECIFICALLY ABOUT THOSE OTHER THAN TO SAY THAT DURING, FIRST OF ALL, IT'S A CHARACTER TRAIT OF THE WALT DISNEY COMPANY TO MANAGE ITS BUSINESSES EFFICIENTLY. ANY TIME YOU ARE IN A BUSINESS THAT'S DYNAMIC WITH A CHANGING MARKET PLACE, YOU HAVE TO, ONE, MAKE SURE THAT YOUR PRODUCT IS OF THE HIGHEST QUALITY, WHICH ESPN IS DOING, YOU'VE GOT TO, I THINK, BE ON THE FOREFRONT OF THE CHANGES OCCURRING, WHICH I TALKED BOWE, AND YOU GOT TO BE PAYING ATTENTION TO COSTS. THAT'S WHAT WE ARE DOING.
BOORSTIN: BUT JUST IN THE LAST QUARTER, AMAZON BOUGHT THE RIGHTS TO NFL GAMES, AND MARK ZUCKERBURG SAID THAT FACEBOOK WILL LIKELY BE, EVENTUALLY, INTERESTED IN SPORTS RIGHTS, ARE THOSE NEW DIGITAL PLATFORMS POSING A THREAT TO ESPN.
IGER: AMAZON BOUGHT RIGHTS TO GAMES THAT TWITTER OWNED LAST YEAR. NOTHING NECESSARILY NEW ABOUT THAT. WE DON'T TAKE COMPETITION LIGHTLY, BUT ESPN ALWAYS FACED A LOT OF COMPETITION, WHETHER IT'S FROM THE TRADITIONAL TELEVISION NETWORKS, WHETHER IT'S FROM CABLE NETWORKS, OF WHICH THERE ARE MANY IN THE SPORTS BUSINESS, AND NOW THE EMERGENCE OF SOME OF THE COMPANIES THAT ARE IN THE DIGITAL SPACE THAT ARE INTERESTED IN SPORTS. THE MESSAGE THAT IT IS SENDING IS LIVE SPORTS ARE OF GREAT INTEREST TO CONSUMERS AND TO ADVERTISERS. NO ENTITY IN SPORTS TODAY HAS THE ARRAY OF LIVE SPORTS, THE QUALITY AND VOLUME THAT ESPN HAS. AND THOSE DEALS THAT ESPN HAS ARE LONG TERM DEALS. WE'RE GOING TO CONTINUE TO ENGAGE WITH THOSE SELLERS OF THOSE RIGHTS BECAUSE IT'S CRITICAL, AND SO NO ONE'S BETTER POSITIONED THAN ESPN.
BOORSTIN: MOVING ON TO COUPLE MORE TOPICS BECAUSE YOU HAVE TO GO TO THE EARNINGS CALL, YOU EXTENDED YOUR CONTRACT TO JULY 2019 , BUT THERE'S STILL NO SIGNS OF A CLO, EVEN EVENTUAL REPLACEMENT FOR YOU. DO YOU HAVE A DEEP ENOUGH BENCH OF TALENT HERE TO EVENTUALLY REPLACE YOU?
IGER: I EXTENDED MY CONTRACT BECAUSE IT GIVES THE BOARD, ANOTHER YEAR TO PURSUE SUCCESSION, AND TO GIVE THEM AN OPPORTUNITY TO CONTINUE TO ASSESS TALENT FROM THE INSIDE AND POSSIBLY FROM THE OUTSIDE AS WELL. I AM COMPLETELY CONFIDENT THAT OUR BOARD WILL IDENTIFY THE RIGHT PERSON TO SUCCEED ME AT THE RIGHT TIME, AND I THINK THAT THEN IT'S OUT THERE ABOUT THIS, WHILE IT'S OBVIOUSLY IMPORTANT BECAUSE AND JUSTIFIED BECAUSE THE NATURE OF OUR COMPANY IS JUST MAYBE JUST A LITTLE BIT GREATER THAN THE IT NEEDS TO BE. I'M LEAVING IN NOW 2019, AMPLE TIME FOR THE BOARD TO DO WHAT IT NEEDS TO DO HERE.
BOORSTIN: DO YOU WANT TO RUN FOR PRESIDENT?
IGER: I'VE HAD ONE OF THE GREATEST JOBS IN THE WORLD, I BELIEVE, FOR 12 YEARS. I HAVE A FEW YEARS LEFT AS WE JUST TALKED ABOUT THAT. I GOT A LOT TO DO HERE STILL, AND I WANT TO MAKE SURE THE COMPANY IS SET UP FOR THE FUTURE, AND I'M NOT SPENDING MUCH TIME THINKING ABOUT WHAT'S NEXT.
BOORSTIN: THERE HAVE BEEN REPORTS THAT KATZENBERG AND OTHERS ARE PRESSURING YOU TO RUN. ARE YOU ENTERTAINING THE IDEA?
IGER: I SAID WHAT I'M GOING TO SAY ABOUT THAT.
BOORSTIN: SO YOU SERVE ON THE PRESIDENT'S ECONOMIC ADVISORY COUNSEL, BUT YOU HAVE NOT BEEN TO ANY OF THE MEETINGS YET. WE HAVE NOT SEEN YOU AT ANY OF THE MEETINGS. HAVE YOU BEEN IN TOUCH WITH THE PRESIDENT ABOUT SOME ISSUES YOU'RE INTERESTED IN
IGER: I HAVE. THERE'S BEEN TWO MEETINGS, BOTH CONFLICTED WITH ONE, A VACATION I TOOK, AND ANOTHER DISNEY BOARD MEETING. I HOPE TO ATTEND THE NEXT MEETING, LOOKING FORWARD TO HAVING A VOICE IN THE ROOM WITH OTHER CEOs, MANY OF WHOM I RESPECT A LOT, AND I'M NOT IN TOUCH WITH THE PRESIDENT FOR QUITE A WHILE, BUT BEEN IN TOUCH WITH OTHERS IN THE ADMINISTRATION, AND THERE ARE CERTAINLY ISSUES THAT HIS ADMINISTRATION'S DEALING WITH THAT ARE IMPORTANT TO THE WALT DISNEY COMPANY.
BOORSTIN: WHAT ISSUES ARE MOST IMPORTANT TO YOU. HEALTH CARE REFORM? TAX REFORM.
IGER: THERE ARE MANY. TAX REFORM CERTAINLY IS A GOOD ONE. WE PAY A FEDERAL TAX RATE THAT IS ABOVE 30% AND PAY $3 BILLION IN FEDERAL TAXES THIS YEAR. THE U.S. IS NOT COMPETITIVE WITH THE REST OF THE WORLD. WE'RE THE HIGHEST IN THE WORLD. THAT'S ONE. I'D LIKE OUR COUNTRY TO BE FOCUSED ON EXPORTING BRAND USA TO THE REST OF THE WORLD, THE TOURISM BUSINESS IS IMPORTANT BEING A WELCOMING PLACE TO THE REST OF THE WORLD, AND ENCOURAGE PEOPLE TO VISIT HERE, VERY, VERY IMPORTANT. THAT'S, OF COURSE, A LOT OF BUSINESS, NOT JUST THE DISNEY THEME PARKS, BUT HOTELS AND RESTAURANTS AND TRANSPORTATION, AND SUPPORT A LOT OF JOBS IN THE UNITED STATES. THAT'S ANOTHER ISSUE. WE'RE INTERESTED IN VETERANS ISSUES, AND THERE ARE MANY OTHERS. OBVIOUSLY, COST OF HEALTH CARE SHOULD BE ON THE MINDS OF ANY COMPANY OPERATING IN THE UNITED STATES GONE UP SIGNIFICANTLY.
BOORSTIN: I KNOW WE'RE OUT OF TIME, QUICK QUESTION ON YOUR INSIGHT INTO CONSUMERS BASED ON THEME PARK BUSINESS. HOW IS THE U.S. ECONOMY LOOKING AND HOW IS THE CHINESE ECONOMY NOW THAT YOU ARE SEEING BOOKINGS IN SHANGHAI?
IGER: THE FACT THAT OUR DOMESTIC PARKS BUSINESS HAS RECORD NUMBERS THIS PAST QUARTER AND OVERALL BUSINESS WAS UP 20% QUARTER TO QUARTER SUGGESTS THAT THE U.S. CONSUMER CERTAINLY IS INTERESTED IN VACATIONING, AND INTERESTED IN VISITING DISNEY THEME PARKS. THAT'S TRUE IN JAPAN, TRUE IN FRANCE, AND IT'S TRUE IN HONG KONG, AND IT'S TRUE IN SHANGHAI. PLEASED TO SAY THAT WITHIN THE NEXT TWO DAYS, SHANGHAI SHOULD HIT 10 MILLION IN ATTENDANCE BEFORE ITS FIRST ANNIVERSARY. THAT AT ONE POINT WAS A STRETCH TARGET FOR US FOR THE FIRST YEAR, SO,OBVIOUSLY, WE'RE GOING TO EXCEED THAT. TWO-THIRDS OF THOSE ATTENDING COME FROM OUTSIDE THE SHANGHAI AREA. IT'S A NATIONAL TOURIST DESTINATION IN CHINA, BODING EXTREMELY WELL FOR THE BUSINESS, AND GIVES US THE OPPORTUNITY BECAUSE WE HAVE THE LAND TO THINK EXPANSION TO CONTINUE TO GROW THE BUSINESS, AND, OBVIOUSLY, IT'S A VERY, VERY IMPORTANT MARKET FOR US.
About CNBC:
With CNBC in the U.S., CNBC in Asia Pacific, CNBC in Europe, Middle East and Africa, and CNBC World, CNBC is the recognized world leader in business news and provides real-time financial market coverage and business information to more than 385 million homes worldwide, including more than 94 million households in the United States and Canada. CNBC also provides daily business updates to 400 million households across China. The network's 15 live hours a day of business programming in North America (weekdays from 4:00 a.m. - 7:00 p.m. ET) is produced at CNBC's global headquarters in Englewood Cliffs, N.J., and includes reports from CNBC News bureaus worldwide. CNBC at night features a mix of new reality programming, CNBC's highly successful series produced exclusively for CNBC and a number of distinctive in-house documentaries.
CNBC also has a vast portfolio of digital products which deliver real-time financial market news and information across a variety of platforms including: CNBC.com; CNBC PRO, the premium, integrated desktop/mobile service that provides live access to CNBC programming, exclusive video content and global market data and analysis; a suite of CNBC mobile products including the CNBC Apps for iOS, Android and Windows devices; and additional products such as the CNBC App for the Apple Watch and Apple TV.
Members of the media can receive more information about CNBC and its programming on the NBCUniversal Media Village Web site at http://www.nbcumv.com/programming/cnbc.
For more information about NBCUniversal, please visit http://www.NBCUniversal.com.