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Disney Will Be Aggressive With Direct-to-Consumer Products

With ESPN losing traditional pay-TV subscribers, the Walt Disney Co. said it plans to be aggressive launching digital direct-to-consumer services.

“We will be launching a direct-to-consumer sports service sometime in probably calendar 2017,” Disney CEO Bob Iger said on the company’s earnings call Tuesday.

That service will be powered by technology from BAMTech, the Major League Baseball spinoff in which Disney made a $1 billion investment last year.

“I was at BAMTech a couple of weeks ago and the quality of that technology has just blown us away and the potential that we believe that has for us is enormous,” Iger told the analysts on the call.

“We're very excited about what the potential of this is long term, both for the company and for third parties who can use the product because the technological side of it is so strong in ways that are value enhancing for them as well,” he said.

Disney is experimenting with making its content available on a direct-to-consumer basis in the U.K. with Disney Life. And to some degree, going direct-to-consumer risks disrupting the pay-TV ecosystem, which has been a cash cow for companies in the cable network business.

“We have to be careful because we have existing agreements and existing relationships and a lot of value still being reaped from the traditional distribution relationships. But I can tell you that it is our full intent to go out there aggressively with digital offerings direct to the consumer for ESPN and other Disney-branded properties,” Iger said.

“You have to be willing to either create or experience some disruption as we migrate from what has been a more traditionally distributed world to a more modern or more non-traditional distribution world,” he added. “And some of that we're going to end up doing to ourselves, meaning we understand that there is disruption, but we believe we have to be a disruptor too.”

Disney expects some of the subscriber losses it is seeing in the traditional pay-TV world to be offset by new virtual MVPDs. ESPN is on all of the key services already launched and has a deal to be on Hulu’s new live streaming service and another entity that Iger declined to identify but appears to be YouTube, according to a Wall Street Journal report.

“Clearly the deals that we have done with new platform owners, mostly over-the-top, have already yielded some nice gains from those services in subs, but they're not right now being counted fully by Nielsen,” he said.

“What's really important is the deals that we've negotiated for distribution, particularly for ESPN, are to be in all subs or all households launched,” Iger added. “And so these are light packages that offer us 100% penetration from those packages.”

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.