Disney chief strategy officer Kevin Mayer (Code Media 2018)

Hi, I'm Kara Swisher, executive editor of Recode. Thanks for listening to Recode Replay. Here's an interview from the 2018 Code Media Conference. Some question about your title earlier. You've got multiple titles. Senior executive vice president and chief strategy officer, number 2 after Bob Iger.

Oh, that's not part of my title.

Yeah, I think so.

If you want to believe that, you know, no problem. I got a lot of questions about what Disney is doing.

I think a lot of people here are paying a lot of attention to you guys. One thing that's obvious of interest to a lot of us is your direct-to-consumer plans. You guys have been very loud about the fact that you're shifting the business in many ways.

Yeah.

To streaming stuff directly to consumers and getting them to pay for it. First product you're going to do in this vein is ESPN+ coming out next month.

Thereabouts. Early spring.

Early spring.

Yeah.

Q1. March.

Early spring.

We know what it's called. We know the pricing.

It's $5 a month, correct?

We kind of know what's in it. I think the way Bob describes it, Bob Iger describes it as thousands of hours of content, but it's not what's on ESPN.

It's not what's on the main channels. That's correct.

So can you explain the logic of selling something that's not on TV for a different price?

Well, these are what we're selling is a lot of thousands of events, you know, upwards of 10,000 actually events that you can't otherwise consume. If you're a television subscriber and a pay-TV subscriber and paying that big monthly bill, you still can't consume a lot of the product that we have or any of the product that we have on ESPN+. So we have non-Power 5 conference college football, basketball, lacrosse, every sport actually that non— in the smaller Division 1 conferences, which is You know, many, many millions of people have gone to these conferences. It's their alma mater and they're interested in watching their teams play and they have no way to do it today. So that's, I think, a very big value add for, for those consumers. We have the major tennis tournaments, the Opens other than the French Open. And so we'll have that content, which if you're a tennis fan is really great. 182 Major League Baseball games. So one game essentially every night of the baseball season. We have the MLS, all of the out-of-market games, all of them will be on this service. So if you're a soccer fan of U.S. soccer, you'll love that. We have just a very vast array of programming. Plus, we're going to put non-sports, non-live event programming on there. The 30 for 30s, right? That great documentary series. The entirety of that library will be on exclusively on this, on this service. You can't get that entire library anywhere else. So it's a lot of good stuff.

I pay for cable. I have Spectrum. So I've got ESPN, I've got ESPN Watch, which has all the linear ESPN plus a bunch of other stuff and a lot of on-demand stuff. Is this— are you trying to get another $5 out of me on top of that, or is this aimed at someone who's not paying for ESPN currently?

Well, for both. If you are a subscriber to pay-TV, we're launching a new app and this app is a reimagined ESPN app. It's going to be fundamentally the best app for sports fans ever created. It's going to have news highlights, scores and clips like we've always had at ESPN. But video will be front and center. That's free. You just have to download the app. free and you can get all that, all that content like you always have been able to. But we're going to prioritize video in this app and a much cleaner, more efficient video interface than we've had in the past. If you are a pay-TV subscriber, you just authenticate yourself and you get all the stuff that's on ESPN.

Like I can do today.

You can do today. Watch it in the same app.

Right.

And if you want these thousands of other events which might tickle your fancy, if you're a sports fan, you just want more and more stuff, more leagues, more games, more sporting events, you'll subscribe to it. Another, another $5. If you're a fan of one of the sports that isn't well covered elsewhere, you'll subscribe to it. If you're an alumni, if you went to a school which is not well covered, you might subscribe to it. So it's meant for people that aren't getting all they need out of the main.

Are you prevented contractually from moving any of the stuff that's on linear ESPN to ESPN Plus, or is it just a business decision? You could move it over, but you don't want to?

You know, we could move it over. There are some implications I won't get into here, but we could do it.

We should get into some of those.

This is the right place for it. It's mostly a business decision that we are You know, I think we're well served by the pay-TV ecosystem. We still— I think it serves consumers well. I think many tens of millions of consumers feel well served by that ecosystem. We're well served by it. So we think we want to prioritize that, but also offer consumers an opportunity to buy more and set ourselves up for a future where we may very well pivot and go over the top.

That's sort of one of the suggestions. If you eventually do go over the top, this would be the thing.

This would be the precursor to that and it would set the table for it. give us the capabilities, we can test ourselves out and be ready.

So you have 2 big DTC things coming. I said that out loud. It's a weird thing. It's a weird acronym. The ESPN one seems to be a smaller step, right? You're selling an ancillary thing that augments an existing product and you're not disrupting the core relationship you have with your cable distributors and all those long-term programming fees. And then the Disney-branded thing, which is coming out late 2019, seems like a bigger deal. You're pulling stuff off the existing distribution.

We are channels. We are, we are pulling stuff off. We will— just to be clear, though, for the pay-TV system, we're not pulling current Disney Channel product off of that to put on the app. So that won't be a part. You'll still have to be a pay-TV subscriber to get the current season of Disney Channel programming. But I think everyone has heard probably by now that we're pulling our pay-one movies off of Netflix where they are now, and we're going to dedicate those exclusively in the US to this app. We're pulling all of, all of our library as it becomes available, as encumbered in many different windows. But as that cleans itself up, we're going to pull all that, all the library movies, all the past Disney Channel series, all the past seasons of those will be on the app. And we're making a lot of original content for it that we're pretty excited about.

So there— and again, Bob has said we're going to, we're going to give— we may even be giving up some revenue that we could potentially get through traditional distribution or selling to Netflix by moving into this app. We may take a short-term hit. We think longer term, this is the way to go. The sequencing of doing the ESPN app, which is a much smaller step, and the Disney app, which is a much bigger thing. What's the logic in that, in doing that order?

Well, we have the tech, we have the technology, technological capability now with BAMTECH. You could launch Disney tomorrow. We could launch Disney tomorrow, but we would not have the pay-one movies. And we think that the pay-one movies is a very important component of consumer value. We'd rather launch hot and with all of the content that we, you know, that are put our best foot forward. We don't have the pay-on movies and we don't have the original content made yet. We're in the midst of making a lot of original content. So we want to go out when we have a good array, which we think creates a fair, you know, better value for consumers. That end of 2019, those pay movies start to become available, and that's when we're going to launch.

What was the thing internally within Disney where you guys said, oh, now let's do it? Because obviously you've been thinking about this for years and everyone is sort of thinking about when do we break from traditional distribution and do something new? What was the turning point for you guys?

We have been thinking about it for a pretty long time and we are focused on the consumer. I think most, most companies are. We certainly are. And when we saw a consumer need that we felt being unmet, we felt that was a good moment for us to make a growth move. We also needed some incremental growth. We thought the pay-TV system, which had been serving to provide us with a lot of growth, has been slowing down. Obviously, those two combined, you know, a note that we could serve consumers better by making great product packaged in a mobile-first, modern way with the Disney branding elements surrounding all of our product. We thought that would be a really great consumer proposition. And the timing seemed to be fortuitous. We were able to get a great streaming platform in place. And there's always a time for everything, that everything comes together. This is the time that—

but that's, that's a really hard thing to get right. And lots of industries get it wrong where they want to protect the existing revenue stream. They They can see what's coming. They know there's a middle period where things will be rocky, and they don't usually want to make the leap, and they time it wrong. Music, we've seen that. Lots of public— lots of industries, we've seen that. You guys are, I think, going out further than some of your peers. Was it the slowdown in— I mean, what was— what was the one sort of alarm that said, oh, we should jump?

There wasn't— there really was not an alarm that said, oh yeah, it's time to do it because of competitive pressures or business pressures. There was a confluence of opportunity. We did note that we thought consumers could really— would enjoy our product. We felt that we had the technical capability to finally deliver it in a quality— and as quality of a way that we feel we needed to, to serve our consumers. We wouldn't go out with a product that wasn't excellent. And now we have the capability to do it. And, you know, we have the vision to do it now. So I don't think it was any particular event that precipitated us, you know, making this move. It was a confluence of just realizations that we could serve consumer better. We could actually vertically integrate into, you know, move into the value chain, into distribution in a high-quality way without owning a lot of infrastructure now, which you can now do. And so the confluence of those 2 events or those 2 opportunities in our minds made it the right time to jump. We're going sooner than most. We think we have the brands to do that. You have to earn your way to be— have a direct-to-consumer relationship. Consumers have to want to find you. They have to love your brand. It has to be, you know, emotionally resonant with them enough so that they'll pay you money to access your content. And you got to have the goods. You got to have high-quality content, enough of it that consumers want to pay for it. We have all that.

Last year when you guys announced the Disney service, it was unclear initially what was going to be in it. And then you sort of iterated over time, said, oh, we're going to add this studio and this studio. And now it's pretty much everything, right?

Yeah.

Why not just say that at the get-go? Was there an actual change in thinking?

It wasn't— we evolved our thinking. We weren't— when we first announced— when we first indicated that we were going to do this, we weren't sure what we were going to do with the Marvel and Star Wars product.

Right.

We thought about it. And we think— we thought that it— you know, one question we had in our mind is, does it make sense to have a Disney branded service and have Marvel and Star Wars in it? That was one thing that we just wondered, was that the right thing to do? We realized we have Marvel and Star Wars in our theme parks and in our Disney stores and people on our Disney channels. And so I don't think there's any brand dissonance there between those brands. So we overcame that objection.

But you had to think that through.

We thought it through. And then we also realized that, you know, if we're going to do this, let's put our best foot forward, put all the product, all the firepower we can. and just go big. And that's what we decided to do.

Like most of the big media companies, you guys have been traditionally wholesalers, right? You don't have a relationship with the consumer. That's why we're talking about direct-to-consumer. What are the things you're learning and figuring out about how that process works?

Well, we are learning that, you know, it is nice to have a direct-to-consumer connection because you can learn more about them. If you're just— if you're intermediated by a third party and you're a wholesaler to that retailer, And the retailer earns and is in a position to get all the consumer data. And we feel that we can actually serve our consumers much, much better if we understand their affinities, understand their viewing habits, how they— when and how they want to interact with our product. And therefore, we can personalize our product to consumers in a way that we could never otherwise do. And we think that serving consumers better in that fashion is really important.

Is there some sort of organizational change you need to do to get your head around that, though? Because, you know, people have been doing this for a while. People have been selling direct to consumer. Netflix, most obviously, has been doing it for several years. Lots of other folks are, but the big TV and movie studios have not been.

There are organizational capabilities that we have to bring on board, and we did that. We invested over 2 tranches, $2.6 billion in BAMTECH. They know how to do this. They've done it a lot. So we are— we're happy to be there. We have a 30% stake in Hulu. You know, I've been on the board of Hulu for many years. We've learned from that experience. It's It's an augmentation versus a change. And who knows, with, you know, with an upcoming acquisition, if that closes, that would be, you know, cause for some further change, probably.

Let me ask you about that Fox deal. Then I want to go back to Hulu. One of the big narratives the last couple of years is the problems that ESPN— problems ESPN has and some of the problems that that has caused for Disney. And there's a lot of discussion about spending all this money on sports rights while viewership and subscriptions are declining. You guys are making a really big bet in part on regional sports networks, buying lots, basically taking on many more expensive sports rights.

We are.

Explain the logic there.

Yeah, we think that sports is a great business. Yes, there are some elements you pointed out. You have fixed sports rights against variable revenue, but rates are, rates are pretty solid and increasing. We think that, you know, there are, there have been a slow decline in subscribers that's mitigated a little bit of late. I don't want to take too much good news from that, but it has seem to mitigate the loss of subscribers. And there's no stronger emotional bond in sports between a local audience and its local sports teams. And I think that survives. And if we do make this broader transition to a direct-to-consumer model, that is a fantastic local way into consumers' houses and into a relationship with consumers through their local team.

You're not worried about the overhang of these expensive sports rights while people who no longer— you know, if I don't want to watch the Minnesota Wild at some point, I'm not going to have to pay to watch that if I'm in Minnesota?

We think there's— the fandom there is pretty rabid in terms of local teams and local sports, not necessarily Minnesota, but I'm sure in Minnesota too. And we think that where there's rabid fandom and where there's a high affinity, there's money to be made. And we think fundamentally that there will continue to be very good business.

If this deal goes through, you're going to have control of Hulu, the two-thirds stake. How does Hulu fit into the future that you're laying out here? It is a direct-to-consumer service. It's different than the Disney service, different than the ESPN service.

We have— I think we would deconstruct our strategy into 3, 3 components. Our direct-to-consumer strategy. We have a family-friendly service, which is our Disney service, and it has Disney, Pixar, Marvel, Star Wars original content. It'll be for families. That'll be the sweet spot. It'll, of course, extend well beyond families. But the sweet spot for that service would be a family audience. You have a sports audience through ESPN and the RSNs, hopefully when those get added in. And then we have a general entertainment service through Hulu, and that will be— that will be the home of our general entertainment programming once it's off its first run. So ABC, Freeform, those general entertainment brands that we have will find its way onto Hulu. And we think once the Fox acquisition is completed, that we will continue that practice as Fox already does with Hulu as well with their brands.

Hulu is losing a lot of money and its losses are increasing. You can see in your filings and Fox. It's not the worst thing for you guys and Fox and NBC because they're spending that money paying you for the rights to the stuff they're putting up there. Does that logic still work if you're the two-thirds owner?

Well, yeah, because we'll be— we'll be taking— we'll be stepping into the shoes of Fox, which already— which gets paid for its content.

Right.

So, yes, the answer would be no. We consolidated, which we don't consolidate now. So, you know, but the underlying cash flow picture of that doesn't really change for us. So it's an accounting issue. It makes perfect sense. We're going to— we're very much in support of growing Hulu. It takes an investment for sure. And we're happy to— happy to undertake that investment for the— for the outcome, which we know is going to happen. It's going to be a big profitable service.

You've— you do M&A. I always say this. You guys did 3 of the best deals ever, right? You got Marvel, Lucasfilm, Pixar, $15 billion all in, give or take.

Yeah, give or take. Yeah.

Yeah. It seems like if I were you guys, I'd say, well, we're done because we did the 3 best deals of all time. We should stop gambling. We should walk away from the table. I'd love to get some insight into sort of how you guys think through acquisitions. I know you're looking at stuff all the time. How do you figure out this is worth thinking about, this is worth kicking a tire, this is worth about— this is worth spinning up a whole team to actually look at it? Ultimately, you're going to pull the trigger, but how do you sort of walk through that process?

Well, it's a pretty collaborative process. It's led by, in our case, strategy. We have— we do a lot of thinking around our company about strategic initiatives and the strategic future of the company. You know, Bob is focused on this quite a bit. Bob Iger, our CEO, he thinks about the future a lot. And the first 3, you know, Pixar was the first thing that Bob did when he took over as CEO, is he noted that we— our animation capabilities were pretty broken at Disney. and that Pixar was doing really, really well. And he took the bold move to suggest that maybe that was something we should look at acquiring. That was definitely his idea.

Yeah.

He came up with that. And, you know, he turned to me to help value the company and understand, you know, how it would fit in our ecosystem, how we might extract value from it, what's a fair price to pay for it, how it might enhance our brands and everything. That was his idea. And in various incarnations, you know, Marvel and Star Wars, Went down the same path. And Bob and I collaborate really closely on that stuff. And we have a good idea of what we're after. We were after IP for those years.

So those, those 3 deals were IP, right? You're not buying a lot of overhead. You're buying the rights to existing stuff and the rights to make new stuff.

And plug it into our existing business system, right? Takes advantage of successful IP more than anyone else's. We are in a unique configuration that way.

There aren't that many of those deals available, obviously, right? You do more of those. Fox is different. There's overhead, there's going to be overlap. I'm just wondering how you think that through. And then when you do things like kick a tire on Twitter, which is a whole radically different kind of business, how do you think through something like that where it's not— you don't have a machine to plug a Twitter into?

It's a fundamentally different type of acquisition. Yeah, there for the first 3 IP acquisitions, although I would say Pixar was IP plus capability, they had a really fantastic technological capability and creative capability to make new IP.

Yeah.

I mean, for sure, that was not just an IP purchase, that was a capability purchase. But we, you know, with Twitter, we were thinking about something different. We were saying we have IP now. And you're correct, there wasn't a whole lot of great branded IP to buy. We didn't know we could buy Fox then. And so we would have looked at it then had we known that. But we thought, okay, we have IP, we're exploiting it pretty damn well and pretty fully. How can we expand the business platforms upon which we can exploit our intellectual property? And we were also thinking then about going direct to consumer and how can we— what is the right infrastructure to own to go over the top most efficiently? And Twitter was a really good idea. I thought we looked at it pretty hard. I think we've been public about that. We decided ultimately not to, not to pull the trigger for various reasons. But, you know, that is a different type of thing. It's taking your existing IP and exploiting it in a different way.

Are there other internet properties like that that that are— where you could imagine that working for you?

We've looked at— when we think about direct-to-consumer, we thought about taking our own brands and putting them direct-to-consumer, which we're doing. We thought about aggregation. You know, Twitter is one example of that. There are other aggregators. We thought about being a platform at some point where people bring their own content and you just exploit it by providing a technical platform by which it can disseminate to the world. Neither of those ended up being places where we made our bets. And instead, we decided to stick close to the knitting and buy BAMTECH and take our own products, our own brands, directly to consumer rather than aggregating third-party content. I think that's the right choice for us. It's what we do best. So we know best. And it's— I say, I think the closer to the core you stay, the more probability of success you have, frankly.

But I assume you guys have probably looked at some other sort of things that are, that are not in that wheelhouse of IP and thought we could really make a bold move and step out. It's kind of what you do, right? We think your job is to think through that stuff.

We think, we think boldly. Yeah, I think the 3, the 3 IP acquisitions we did were pretty bold. At the time, people thought we were making mistakes, you might recall, and I think we proved them wrong.

Yeah. And you got some grief over BAMTECH. People think you're overpaying for the capabilities of going direct to consumer. You could build this quickly yourself.

Whenever you do a deal, there's naysayers and there's positive and there's negative voices and positive voices. I haven't heard a cacophony of negativity on that at all.

Quiet. And in this room, other places, people say, you know, actually, if you look at some of your digital deals, those have not been great. Playdom ended up being a write-down. Maker didn't work out the way people wanted it. Is there some thread there with digital where it's been more difficult for you to assess that stuff?

I think technical— or technology undergoes rapid change, and it is hard to understand exactly what the course of monetization they're going to take. I mean, with Playdom, you know, Facebook, that was a social games company, and Facebook dramatically changed its algorithm because of the spammy nature of these games. And that, that hurt the entire industry. We learned a lot from that. You don't want to be dependent on someone else's algorithm. I think that was a big learning that we had there. It's obvious in hindsight. Maker was a big play on YouTube. We weren't that— we didn't have a huge presence on YouTube until then.

Right.

And YouTube is a fundamentally different type of social network than the consumer-to-consumer social networks. As you know, artist-to-consumer, it's a different— it's a different type of thing. And we learned a lot there. We still— we still have a lot of the Maker assets that are part of our interactive division. And we learned a lot about native advertising and how to launch content on YouTube to get the best reach. We learned a lot from that, too.

So, I mean, Wall Street doesn't punish you for this, right? They just sort of blink and move on. But having stumbled with that stuff, does that make you more wary of doing something else that's on a platform that you're maybe not familiar with?

Well, we did BAMTECH, and we put even more money into BAMTECH than we did those. So I say no. I think it's— you know, we have a pretty strong resolve. To be technologically forward-thinking and to be business model forward and to be consumer-focused. And if you're going to be consumer-focused, you need to have a technical capability. You just have to have it these days. It's not an option.

One more ESPN question. You guys, John Skipper left at the end of last year, surprised people. What's the timing on his replacement?

That's a question for Bob. I know he's working on it and I don't think it'll be too far in the future. Here we have George Bodenheimer, who was very nice to come back out of his retirement. Retirement for several months. So probably that timeframe.

Do you want that job?

Running ESPN is great, but, you know, I'm going to do what Bob asked me to do happily. And that's, that's the job I'll have.

When I ask about Netflix, a lot of the TTC stuff you're doing looks like it's through the, you know, it's spurred on by what's happening at Netflix. You're pulling stuff off of Netflix. You've seen their growth, right? They're 100 million subs. It seems like they're doing a really good job. Is there something you think they could do better, or they— or maybe they wish they could have done differently?

I mean, you should ask Netflix that, I suppose, if you want to know the real answer to that. We like Netflix. I personally like Netflix. I'm a big fan of Netflix. They have a great product. They've done exceedingly well in the marketplace, obviously. I mean, nothing but admiration for them. And what we're doing, I think it's important to understand, we're not trying to hurt or kill Netflix.

In fact, we're just trying to serve consumers as best we You're taking some of the best product they have because we think we can serve consumers better.

Yeah.

And then you'll compete with them.

So that's a threat. Well, I mean, our focus is a bit different. We are focused on the family market and their 4 quadrant. They are big 4 quadrant service and they're making investments in 80 series that are, you know, they're deep enough in every single quadrant to make to be almost a must-have service for everyone. We're not trying to do that. And we think we can— our, our success does not have to come and probably will not come at Netflix. Netflix's expense. I just don't believe that to be true. They're going to be successful and I think we'll be successful. And we're going to— there'll be many, many households who are Disney fans or have a family or just Marvel, Star Wars fans will have both.

They're at 100 million subs now. I don't know what they'll be by the time you guys launch your service. Is there— was there much debate internally about, look, I know that you want to get all the stuff lined up and go late 2019, but let's go now because Netflix isn't going to slow down in the meantime?

No, we really want to go when we have a a service we're proud of. And it would take that— it will take that long to put a product out there with enough original exclusive programming, including the pay-one movies, to make, you know, that we'd be proud to offer to consumers. So again, we're really not focused on what Netflix does in the future. They're not the reason we're doing this and not the yardstick by which we're going to measure our success. We are going to serve consumers and we're going to step forward in the value chain and we have a high-growth, highly profitable business for us regardless of what Netflix does.

They're at 100 million subs today. What do you guys think you are at a year out?

I mean, we're not going to make projections like that. I've got to ask. You got to ask.

Do you guys have questions for Kevin Mayer? Oh, Rich Bierfield has a question.

Kevin, thanks for coming. That was great.

Thanks.

Disney's, you know, I think you talked to Disney's got a great array of broadcast and cable networks. You've got ESPN+, Hulu, Disney direct-to-consumer. You've got movies that go to the movie theaters, you've got movies that go to home video. I guess the question is, is like, who's the referee or how do you balance what content goes where? I mean, I think Bob said that the next High School Musical is not going to go to the Disney Channel. It's going to go to Disney direct-to-consumer. I think the next Star Wars 9, which comes out in late '19, isn't going to premiere on only on exclusively on Disney direct-to-consumer. You're going to put it through movie theaters, DVD and then it's going to hit the Disney D2C, you know, 9 months later. I guess how do you— how do you win in streaming if you're not all in?

Good question. We think we are all in. You're right. Some of our bigger movies will definitely— all of our bigger movies, I think, will ultimately go through a somewhat traditional path until they hit the pay window. And by the way, the home video window will be at our discretion. That may or may not be the same window in the future as it is today. I wouldn't be surprised if there were some changes there. But which product goes where? It's an excellent question, actually. And I think that, you know, the final decision will be made by Bob. I think it'll be obvious for many products. You know, the traditional ABC product will go on ABC first. The traditional Disney Channel product will probably go there. A Disney original movie like High School Musical, we may very well target for first initial deployment on the service. So it's a question that will probably go up to Bob. We're just starting that process now. It's something that we've actually been thinking about quite a bit. So it's interesting that you found that to be a good— you know, as a question. We are— it's going to be a process that we're going to have to work through.

And do you think distributors care about what content goes onto Disney Channel versus onto Disney DTC?

You know, I'd imagine they have— they're paying for product and they expect it to be the product that they paid for. And we are obviously going to fully adhere to all the commitments we've made to distributors. We would never think about breaching that covenant we have with them, and we're going to treat them the same way we always have, and we're going to make more content to go into Disney D2C. But the ultimate second window deployment is— of our Disney content will be our D2C service.

For years there's been this ongoing discussion about the theatrical window and should it get shorter, and, and why can't we— why can't we just watch movies day of like Netflix just did with Cloverfield? It seems like since you guys are going to buy Fox and Fox was kind of interested in shortening that window, that it's actually going to delay that process because you guys like putting Star Wars in the theaters. You, you're happy with that system?

We are happy with that system. It served us well and I think it served consumers well. We make big movies. The movies that we theatrically release, by and large, with small exceptions, are very big movies that really are best served to audiences in movie theaters. Audiences don't have to go to a movie theater to watch our movie. They can wait and watch it when it comes comes out on home video or ultimately in our DTC service. Clearly, they can do that. But we think our movies are big enough. They're event movies. They're big franchise films that are, you know, well served by being in movie theaters.

And you'd rather keep that system than letting me pay $50 to watch the new Star Wars day of at home?

The future, I don't know for sure.

But you like the model?

The model there serves us well. I'm not sure there's any urgent reason to disrupt it unless there was a— unless consumers were really better served by that.

Hi, Kevin.

A different kind of question. I'm curious about your organization. Where I'm from in Silicon Valley, you have these giant companies and they're decades and decades old and they become sclerotic and they degrade and there's almost nothing the top management team can do to reverse that process. You think of Sun Microsystems. Do you and Bob and the top management team talk about that?

How do you think about it? Because it seems like a vibrant company and it shouldn't be.

It shouldn't be. Well, thank you for that. I guess it's a compliment and we'll take the compliment. We do think about that a lot. Bob is always focused on balancing heritage and innovation. It's something he thinks about a lot. We have— we try to reward innovation. We reward risk-taking. We don't penalize people for trying and failing. And it's a— it's a big focus for Bob, actually. He's very focused on that. I think he struck the right balance.

And it's—

I think that's one of the tone at the top type of cultural attributes that he's setting very well. The first things he did when he came in was break the mold. He put our ABC shows on iTunes. He bought Pixar. He did, you know, did things that were clear indications of his willingness and, in fact, eagerness to embrace new business models, new technologies. And once you make a few big moves like that, it percolates down into the organization. They understand that that's our strategy.

Why hasn't that organization created a natural successor for him? He keeps announcing he's going to leave and then he stays on. And then you guys have—

We want him as long as he's away. As long as he's willing to stay, we'd love to have him.

Would you feel more comfortable? He said, this is, this is the person who's going to take my job in 2 years.

You know, he has 3 and a half years now to go and he will, he will find a great person to take his job at the right time. You keep saying that, but I keep trying to find— of course, I mean, that'd be great, but I have no reason to believe that.

Evan Mayer wants Bob Iger's job. Kevin, thank you very much for your time.

Appreciate it.

Thanks for listening to this episode of Recode Replay. If you liked it, then make sure to check out our other podcasts, Recode Decode, Recode Media, and Too Embarrassed to Ask. Thanks to our editor, Joel Robby, and our producer, Eric Johnson. For full coverage of the Code media conference, visit re:Code.net.