Bob Iger says Disney did the deal with Netflix because it "paid the right price"
Disney Chief Executive Officer Bob Iger reassured analysts Tuesday that the media giant didn't inspire cable subscribers to reach for the scissors and hack away the cord when his company signed a groundbreaking deal with Netflix last year.
Under the pact, the subscription service gets the right to stream new films from Pixar and Marvel, as well as those much-buzzed about "Stars Wars" sequels. It also gets access to a catalog of Disney family titles.
Also read: Disney Planning 'Star Wars' Spin-Off Films
But Iger said Disney felt that by limiting its offerings to movies, it would not empower Netflix at the expense of cable operators. In particular, the Disney chief said that he believed that his own company was not threatening the long-term health of the Disney channel by making its backlog of animated hits like "Cinderella" and "Bambi" available to Netflix subscribers with a click of the cursor.
Iger said that the deal is "…not a step in the direction of encouraging people to not subscribe to multi-channel services."
"This is a movie play…we felt it's a completely different product than the Disney Channel product," he added.
Cable operators have long worried that the more exclusive programming that Netflix acquires, the more it will be able to convince users to ditch pricey cable plans in favor lower-cost monthly memberships to streaming services.
Cable bills cost an average of $86 a month, according to market research firm NPD Group, but could hit $200 a month by 2020. In contrast, Netflix's least expensive subscription plan costs roughly $8 a month.
Disney has a vested interest in making sure people don't ditch cable for Netflix. The company makes a windfall from the Disney Channel, ABC Family and ESPN, in addition to other television properties. On the cable front, earns both advertising revenue and retransmission agreements, the massive fees cable operators pay to broadcast their suite of channels.
During Disney's most recent quarter, Disney's operating income for its media networks group, which includes ABC network and its cable holdings, jumped 2 percent to $1.2 billion. Revenue topped out at $5.1 billion, a 7 percent increase from the same period last year.
It turns out money was a major factor in motivating the pact with Netflix, as well.
"They stepped up and paid the right price," Iger said.
Disney has been mum about what that price is, but according to the Los Angeles Times, Netflix may have to shell out $300 million annually to the studio in licensing fees. That's a lot of reward to go along with any risk.