Disney’s big opportunity: the cord-cutters, cord-nevers, and cord-laters

Key Speakers At The 2014 Milken Conference
Robert "Bob" Iger, chairman and chief executive officer of The Walt Disney Co., speaks at the annual Milken Institute Global Conference in Beverly Hills, California, U.S., on Monday, April 28, 2014. The conference brings together hundreds of chief executive officers, senior government officials and leading figures in the global capital markets for discussions on social, political and economic challenges. Photographer: Patrick T. Fallon/Bloomberg via Getty Images
Photograph by Patrick T. Fallon — Bloomberg via Getty Images

There’s no question that the hit movie Frozen is one of the biggest successes in Walt Disney history. As CEO Bob Iger said on the company’s earnings call Tuesday, “a full year after its release we’re seeing the true impact of Frozen across our entire company.”

But Iger also spent a lot of time answering questions on a much more uncertain topic: What to do about all those Millennials who aren’t watching “traditional” TV? You’ve heard of cord-cutters? Well, how about cord-nevers and their distant (and possibly mythical) cousins, the cord-laters?

Allow me to explain: We all know that an increasing number of people are watching shows outside of traditional cable TV bundles, whether it’s on YouTube (GOOG) or Netflix (NFLZ) or Amazon (AMZN) or Hulu. That’s especially true when it comes to younger viewers. Nearly a quarter of 18- to 34-year-olds say they don’t subscribe to pay TV, according to recent data from comScore (SCOR). Out of this group, more than half of them have cut the cord—cancelled their cable TV subscriptions—while the rest never had a cord to begin with. These are the aforementioned cord-nevers. As for the cord-laters, these are young people who don’t currently pay for cable TV but who might do so in the future—you know, when they get married, have kids, and settle down.

Iger called out all three of these sub-categories on his call with investors. And he made sure to, yet again, carefully say that while he is interested in providing programming directly to these anti-corders (yes, I’m making up another term), the traditional bundle remains incredibly valuable to Disney and its various brands, especially ESPN. At the same time, Iger seemed more open about experimenting outside of the bundle with various Disney properties. He also talked at length about the opportunity Disney has to monetize a relationship with no middleman.

Here is one of the most interesting tidbits out of the earnings call, straight from Iger’s mouth: “There is definitely an opportunity, not just for ESPN, but for other Disney brands, to ultimately put product in the marketplace that reaches consumers directly.”

What he’s talking about is someday creating a Disney-branded video streaming service. Or channels that would stream Marvel comic shows or Star Wars. He drew the line at – at least for now – removing ESPN from Disney’s bundle of cable channels and making it exclusively online. If in the future it makes more financial sense, then he’ll consider it.

“But we think if we were to do that now it would be somewhat precipitous of us,” Iger said.

Iger has a history of making bold bets on new technologies and new ways of reaching consumers. But Disney hasn’t been the fastest mover when it comes to sidestepping the cable bundle. Why? Its biggest moneymaker is the unit that runs ESPN, which relies on the traditional cable bundle model, so it makes sense that Iger is treading lightly. At the same time, he clearly sees the opportunity for Disney to reach those cord cutters, nevers, and laters in a more direct way. Given the company’s reach—from Frozen to live sports—there’s little doubt that opportunity could be massive.

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