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Disney Investor Day: Tech, Franchises, and Growth

Cinderella's Castle
Flikr/cdharrison
Cinderella's Castle

Disney CEO Bob Iger and the leaders of all its divisions are taking the stage at an Investor Conference today in Anaheim California. Iger kicked off the day with the key themes that are dominating the day's presentations: the value of brands and franchises, embracing technology, and growing in the US and abroad.

Digital distribution is very much in the spotlight; today the company announced a new destination for Disney's digital content, called "Disney Studio All Access." This system, presumably a web application, will give consumers access to their Disney movie libraries through Disney.com and across multiple devices, including smartphones and tablets. The service will launch in the second half of the year.

"All Access" is a big deal for Disney's future and the whole digital entertainment landscape. RBC Capital Markets Analyst David Bank this shows that Disney's moving towards "direct control" of the customer, far more than any of its competitors. What does that mean? Disney can sell directly to consumers with its own one-on-one relationship, without needing to go through a third party retailer, which will get a cut. Disney will continue to distribute through Apple and Video-on-Demand. But with this new system aims to encourage people to buy digital copies of movies because they'll be able to access them everywhere, instead of renting movies which brings lower margins.

Disney is making another move to drive higher margin DVD sales rather than rentals. Disney has twice the market share of the DVD sell-through market as it does the rental market, and is working to protect its higher-margin sales. Bob Chapek explained the company's new deal with Netflix and Redbox — starting in late January Disney began offering DVDS to Netflix and Redbox the first day they go on sale for full price, $18. Then six weeks later the price will drop down to $10. In contrast, most other studios sell their DVDs to Netflix four weeks after they hit stores for as little as $6.

Redbox has said it's not changing its $1 a day price for DVDs, which means it'll just take a lower margin. And in the long run the higher wholesale prices are designed to improve Disney's bottom line by encouraging more purchases and fewer rentals.

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