M+E Daily

Disney remains “bullish” about the growing number of over-the-top (OTT) TV services, including the new virtual multichannel video programming distributor (MVPD) services launched by Hulu and YouTube in recent weeks, according to Disney CFO Christine McCarthy. “We are encouraged by what we see in the adoption” of those new platforms, she told the MoffettNathanson Media & Communications Summit in New York City May 17.

ESPN wasn’t included in some of the early “skinny” OTT packages, but the network is included in Sling TV, Sony’s PlayStation Vue, DirecTV Now, YouTube TV and Hulu’s new service, she noted. It’s still “early days” for these “nascent offerings” that have only been around for a year or less in most cases, she pointed out. But Disney is “very bullish” about these services on a long-term basis, and “you do have to have some time to allow for consumer adoption,” she said.

On a per-subscriber basis, being on these platforms is “as good” for Disney in terms of profitability as being on traditional pay TV services, she went on to say.

Features of the OTT services that Disney likes include their user-friendly designs and the fact that their interfaces “keep getting better and better” and they’re “mobile-friendly,” she said. Those features, combined with their “lower price point” in comparison to traditional pay TV services, make them a “very attractive alternative for consumers,” she added.

“Time will tell,” however, if the OTT services are “compelling enough” for consumers who sign up for them to continue being subscribers, keeping the churn rate down, she said. “We certainly hope” that the adoption of digital MVPDs will be enough to offset losses in cable TV services, she said, noting that the features and pricing of OTT services will likely appeal to many young consumers, including those who never subscribed to cable TV services.

She compared adoption of new digital TV services to the arrival of ATM machines in the banking industry, noting that “people were kind of afraid” to use them at first, but just about everybody uses them now. She predicted that OTT “adoption will occur” and it will happen quickly because “people are a lot more tech-savvy” now than they used to be and “they know how to download things,” she said, adding: “They’re going to sample. A lot of millennials love to sample things.”

Although Disney executives are “optimistic” about the OTT services, “we’re also realists,” so they know it’s too soon to know for certain how the new services will fare on a long-term basis. She also conceded “something else may come” along that’s more significant, but “I don’t know what that’ll be” yet.

Of Disney’s movie business, she said the company’s studio has “been on a great run for the last three years – both creatively and financially” due to “great” intellectual property and its “sound strategy.” But she said “no studio is immune to a miss.”