WEBVTT - Deep Dive: Disney Earnings 0:00:02.520 --> 0:00:07.400 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.560 --> 0:00:12.480 The Stock Movers Report, your roundup of companies making moves 0:00:12.480 --> 0:00:15.880 in the stock market, harnessing the power of Bloomberg Data. 0:00:16.680 --> 0:00:18.079 Let's take a look at some of the stocks on 0:00:18.120 --> 0:00:21.000 the move. I'm Paul swinging alongside Isabelle Lee. One of 0:00:21.040 --> 0:00:23.240 my companies I used to cover, the Walt Disney Company, 0:00:23.239 --> 0:00:26.200 making Mouse. That reported some numbers, better than expected numbers, 0:00:26.320 --> 0:00:28.319 so of course stocks them. So. The Walt Disney Company 0:00:28.400 --> 0:00:31.880 reported better than expected third quarter earnings, with continued growth 0:00:31.880 --> 0:00:35.519 at its parks and streaming business overshadowing a tough climate 0:00:35.520 --> 0:00:37.479 for movies and traditional TV. Let's break it down with 0:00:37.520 --> 0:00:40.120 Keitha Rung andough that she covers all the media stuff 0:00:40.159 --> 0:00:43.960 for Bloomberg Intelligence. Githa's it seemed to me like, on 0:00:44.000 --> 0:00:47.159 the surface, a pretty good quarter for Disney. What's the 0:00:47.159 --> 0:00:48.320 street a little concerned about? 0:00:48.520 --> 0:00:52.760 Yeah, really good quarter for Disney. Paul, the beaten raise 0:00:52.840 --> 0:00:55.360 for sure, you know, expectations might have been, you know, 0:00:55.440 --> 0:00:58.320 slightly high, and the fact that they didn't necessarily give 0:00:58.400 --> 0:01:02.240 us any specific guide for fiscal twenty twenty six. They 0:01:02.320 --> 0:01:06.160 did point to a raised guidance for EPs growth for 0:01:06.640 --> 0:01:09.639 fiscal twenty twenty five eighteen percent now instead of sixteen percent. 0:01:10.200 --> 0:01:12.479 But they didn't necessarily give us anything specific for fiscal 0:01:12.480 --> 0:01:15.959 twenty twenty six. That could be a slight source of disappointment. 0:01:16.520 --> 0:01:18.600 Other than that, the only other thing that I think 0:01:18.880 --> 0:01:21.479 might be causing this reaction is that they did say 0:01:21.480 --> 0:01:25.280 that they will stop disclosing Disney Plus subscriber numbers. But again, 0:01:25.400 --> 0:01:28.000 this is not something totally unexpected. I mean, Netflix has 0:01:28.000 --> 0:01:30.840 stopped doing this. We're seeing this kind of move away 0:01:30.840 --> 0:01:33.960 from just subscriber numbers to a greater focus and profitability. 0:01:34.080 --> 0:01:36.119 I want to zero in on parks because I'm still 0:01:36.120 --> 0:01:38.319 scarred by how expensive it was when I visited a 0:01:38.319 --> 0:01:41.760 couple of years ago as an adult. But how sustainable 0:01:41.840 --> 0:01:44.800 is there strong parks performance given the divergent domestic and 0:01:44.840 --> 0:01:46.600 international performance. 0:01:46.880 --> 0:01:50.520 Very sustainable, Isabell. So you know, we saw domestic parks, 0:01:50.560 --> 0:01:52.880 and I say that because you know, domestic parks actually 0:01:52.880 --> 0:01:55.480 coming into this year, coming into this quarter, there were 0:01:55.480 --> 0:01:57.480 a lot of worries, one of course, about the general 0:01:57.480 --> 0:02:00.240 macroeconomic environment, but the bigger source of worry was really 0:02:00.280 --> 0:02:04.280 the opening of Epic Universe, which is, you know, Universal's 0:02:04.320 --> 0:02:07.520 big Florida Theme parket traction. But the fact that it 0:02:07.600 --> 0:02:12.320 had absolutely no impact at all, or very very modest impact, 0:02:12.320 --> 0:02:15.480 if at all, is really amazing, and it just kind 0:02:15.480 --> 0:02:18.560 of speaks to the resilience in Disney's business model. They 0:02:18.600 --> 0:02:22.640 reported again, very very strong per capita growth, you know, 0:02:22.680 --> 0:02:25.160 in terms of food and beverages, in terms of concessions, 0:02:25.280 --> 0:02:27.160 so all of that doing really well. And the reason 0:02:27.200 --> 0:02:29.880 I'm so positive about this business going forward. First of all, 0:02:30.120 --> 0:02:32.720 it contributes about fifty five to sixty percent of Disney's profits, 0:02:32.720 --> 0:02:34.720 are really really important to their top line, to their 0:02:34.720 --> 0:02:38.280 bottom line. Definitely, they have a lot of upcoming capacity, 0:02:38.400 --> 0:02:40.799 So the biggest source of expansion over the next few 0:02:40.800 --> 0:02:43.119 months is really going to be their cruise ships. They're 0:02:43.160 --> 0:02:47.520 launching two new cruise ships, their biggest ever actually, which 0:02:47.560 --> 0:02:50.400 is going to come on board in November and December. 0:02:51.000 --> 0:02:53.720 One of them sets sail from Asia, and that basically 0:02:53.760 --> 0:02:56.359 takes the number of cruise ships to eight cruise ships, 0:02:56.520 --> 0:02:59.720 effectively kind of doubling their capacity in a span of 0:02:59.800 --> 0:03:02.320 just two to three years. So that is going to 0:03:02.400 --> 0:03:05.919 really buoy you know, both top line and bottom line 0:03:06.080 --> 0:03:08.680 going into twenty twenty six. And then beyond that, you 0:03:08.760 --> 0:03:12.840 really have this huge sixty billion capital expansion plan that 0:03:12.919 --> 0:03:14.799 is really going to play out over the next five 0:03:14.840 --> 0:03:16.240 to ten years. So we're going to see a lot 0:03:16.280 --> 0:03:18.799 more attractions all over the world. We're going to see 0:03:18.800 --> 0:03:21.520 that new Abu Dhabi park come out. So there is 0:03:21.639 --> 0:03:24.760 really a lot of you know, a sustained momentum that 0:03:24.800 --> 0:03:26.520 we can expect at the park's going forward. 0:03:26.919 --> 0:03:28.919 Eitha talk to us about that deal they just made 0:03:28.960 --> 0:03:32.200 with the NFL. It seems like a really positive development 0:03:32.240 --> 0:03:32.760 for the company. 0:03:32.960 --> 0:03:36.160 Yeah, it's really good. I think from a Disney from 0:03:36.160 --> 0:03:39.240 an ESPN standpoint that they're so closely aligned now with 0:03:39.400 --> 0:03:43.160 the NFL. I mean, the NFL is absolutely the premium property, 0:03:43.160 --> 0:03:45.080 the gold standard, Paul. You know this well when it 0:03:45.080 --> 0:03:47.440 comes to you know, sports properties in the in the US. 0:03:47.480 --> 0:03:49.120 And the fact now that they're going to be able 0:03:49.160 --> 0:03:52.760 to use all of this content for their upcoming ESPN 0:03:52.880 --> 0:03:56.040 streaming launch, I mean that itself just kind of give 0:03:56.400 --> 0:03:59.520 gives it a tremendous boost, I think even before you 0:03:59.600 --> 0:04:03.400 know it come on board. So it's great for the product. 0:04:03.560 --> 0:04:06.600 It's also great from a strategic standpoint because the NFL 0:04:06.640 --> 0:04:09.600 is obviously one of the most important sports properties, and 0:04:09.640 --> 0:04:12.400 this really gives them access or it at least definitely 0:04:12.480 --> 0:04:15.120 gives them a little bit of an advantageous position compared 0:04:15.120 --> 0:04:17.080 to let's say, an Amazon or a Netflix or an 0:04:17.080 --> 0:04:19.520 Apple if they want to ever outbid you know, the 0:04:19.560 --> 0:04:23.800 current media partners. So definitely, I think a strategically, very 0:04:23.839 --> 0:04:25.640 very sound move on the part of Disney. 0:04:25.880 --> 0:04:27.799 So it seems like we had a good quarter. Runway 0:04:27.800 --> 0:04:30.800 for growth is really just long and wide. What downside 0:04:30.839 --> 0:04:34.640 risks remain then, especially around the macro uncertainty and tiriff exposure. 0:04:34.800 --> 0:04:37.919 Do you see, Yeah, maybe a little bit of execution risks. 0:04:37.920 --> 0:04:39.919 So we still really don't know how this whole. I mean, 0:04:40.120 --> 0:04:43.599 obviously everybody is very excited for the ESPN product launch, 0:04:44.080 --> 0:04:45.960 but we still don't know how exactly that's going to 0:04:46.000 --> 0:04:48.320 play out. Again, a huge source of upside is going 0:04:48.320 --> 0:04:51.640 to be the streaming business. Everybody's expecting huge cost savings 0:04:51.680 --> 0:04:54.160 when it comes to the integration of Hulu and Disney Plus. 0:04:54.400 --> 0:04:56.320 But again, execution is a little bit of a risk. 0:04:56.360 --> 0:04:59.640 And then you pointed out you know macro factors. Remember, 0:04:59.680 --> 0:05:02.880 Disney still obviously has huge exposure because of its parks 0:05:02.920 --> 0:05:05.360 business and anytime we see kind of a slowdown in 0:05:05.400 --> 0:05:07.839 the economy. We do feel that in the parks as well. 0:05:08.279 --> 0:05:11.360 And of course advertising also, so you know, they do 0:05:11.440 --> 0:05:14.120 have a substantial exposure to advertising because of their TV 0:05:14.200 --> 0:05:16.760 network's business. So there again we can see a little 0:05:16.760 --> 0:05:19.720 bit of an impact. But overall, as it stands right now, 0:05:19.720 --> 0:05:21.480 the business seems to be in really good shape all 0:05:21.560 --> 0:05:22.159 right here. 0:05:22.000 --> 0:05:24.800 The problem childs though, are the broadcast networks and the 0:05:24.839 --> 0:05:27.640 cable networks. What you know, just because of cord cutting, 0:05:27.680 --> 0:05:30.720 that they're just declining businesses. What's the company saying that, 0:05:30.839 --> 0:05:32.359 what we're going to do with those businesses. 0:05:32.760 --> 0:05:35.760 They haven't said anything explicitly, Paul. So a few years ago, 0:05:35.880 --> 0:05:38.200 you know, this idea was floated that maybe they kind 0:05:38.200 --> 0:05:41.280 of spin off ABC, their broadcast network, maybe they spin 0:05:41.320 --> 0:05:45.000 off their linear cable channels, all of that. You know, 0:05:45.400 --> 0:05:48.920 noise is kind of quietened down. You know. Barbiger basically said, no, no, no, 0:05:48.960 --> 0:05:51.280 we need these businesses. They're all kind of integral to 0:05:51.320 --> 0:05:54.800 the whole Disney story. So we haven't heard anything recently 0:05:55.400 --> 0:05:58.799 that being said. Just this whole deal with the NFL 0:05:59.040 --> 0:06:01.600 and the NFL kind of day an equity stake. It 0:06:01.640 --> 0:06:05.280 almost seems like they are prepping for ESPN to kind 0:06:05.320 --> 0:06:08.800 of ESPN and maybe ABC to kind of coast solo. Remember, 0:06:08.839 --> 0:06:11.960 Bob Eiger only has a few more months left, so 0:06:12.120 --> 0:06:16.480 the end of twenty twenty six he leaves Disney, or 0:06:16.520 --> 0:06:20.320 at least that's what he says. Yeah, we think, and 0:06:20.360 --> 0:06:23.360 I really think he kind of wants to get this 0:06:23.440 --> 0:06:26.240 deal done so to separate ESPN because it's not really 0:06:26.960 --> 0:06:30.080 core to the rest of the Disney properties. But again 0:06:30.120 --> 0:06:31.520 it's a little bit of a wait and watch, but 0:06:31.560 --> 0:06:34.800 nothing explicitly, you know, stated from Disney management about what 0:06:34.800 --> 0:06:36.800 they want to do with the linear piece of the business. 0:06:37.040 --> 0:06:39.360 So ESPN is getting a fresh spin with an August 0:06:39.400 --> 0:06:42.320 twenty one launch. It will be thirty dollars a month 0:06:42.400 --> 0:06:44.640 for the new streaming up. What do you make of 0:06:44.680 --> 0:06:46.800 that price you think people will pay up for it? 0:06:46.920 --> 0:06:47.680 Or is that steep? 0:06:48.000 --> 0:06:50.080 It's a high price point, There's no doubt about it. 0:06:50.120 --> 0:06:52.040 I think most people were kind of expecting somewhere in 0:06:52.080 --> 0:06:54.960 the twenty three to twenty five dollars range. That said, 0:06:55.000 --> 0:06:57.640 what you know, we just ran a survey actually at 0:06:57.640 --> 0:07:00.479 Bloomberg Intelligence, and what we found is that there's actually 0:07:00.560 --> 0:07:03.000 a lot of interest in this product, so we think 0:07:03.000 --> 0:07:05.119 that the update will be fairly strong, and the update 0:07:05.240 --> 0:07:07.520 not so much as a standalone product, but when you 0:07:07.600 --> 0:07:10.800 bundle it with Disney Plus and Hulu, so they are 0:07:10.920 --> 0:07:14.240 running a pretty attractive promotion. So for the first year, 0:07:14.280 --> 0:07:18.480 you can get Disney Plus, Hulu and ESPN at a 0:07:18.520 --> 0:07:20.840 thirty to thirty dollars price point, which which seems like 0:07:20.880 --> 0:07:22.640 really good value. So I think we're going to see 0:07:22.640 --> 0:07:25.760 a lot of people come in initially through the bundles 0:07:25.800 --> 0:07:26.240 at least. 0:07:26.280 --> 0:07:28.480 All right, great stuff as always, Keitha, thank you so 0:07:28.560 --> 0:07:31.840 much for chatting with Uskeitha Ranganath, and she's the media analyst. 0:07:31.960 --> 0:07:35.200 The media anamals the Bloomberg Intelligence covering all those fun 0:07:35.240 --> 0:07:38.119 companies in the media space. And Disney again, pretty good quarter, 0:07:38.160 --> 0:07:41.360 maybe not quite up to expectations at mickey Mouse. 0:07:42.720 --> 0:07:46.720 The Stock Movers Report from Bloomberg Radio. Check back with 0:07:46.800 --> 0:07:49.400 us throughout the day for the latest roundup of companies 0:07:49.440 --> 0:07:52.560 making news on Wall Street and for the latest market 0:07:52.600 --> 0:07:57.080 moving headlines. Listen to Bloomberg Radio Live, catch us on YouTube, 0:07:57.160 --> 0:08:00.640 Bloomberg dot com, and on Applecarplay, and write auto with 0:08:00.720 --> 0:08:06.920 the Bloomberg Business app. MM hmm.