1 00:00:02,440 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:06,960 --> 00:00:09,800 Speaker 2: We'll begin with our top story, Disney reporting fiscal second 3 00:00:09,880 --> 00:00:13,200 Speaker 2: quarter profit that beat estimates thanks to sharply narrower losses 4 00:00:13,360 --> 00:00:16,680 Speaker 2: in its streaming TV business and higher ticket prices at 5 00:00:16,720 --> 00:00:18,640 Speaker 2: theme parks. And please to say that joining us now 6 00:00:18,680 --> 00:00:21,759 Speaker 2: for more is the Disney CFO Hugh Johnston here wonder 7 00:00:21,760 --> 00:00:23,640 Speaker 2: for to catch up with you once again, sir, I 8 00:00:23,640 --> 00:00:25,919 Speaker 2: want to begin if we may talking about the theme 9 00:00:25,920 --> 00:00:28,760 Speaker 2: park business and the consumer price tolerance that you see. 10 00:00:28,800 --> 00:00:31,200 Speaker 2: Do you still have that pricing power at a time 11 00:00:31,240 --> 00:00:33,880 Speaker 2: where many companies are reporting that yes there is upper 12 00:00:33,920 --> 00:00:37,519 Speaker 2: rent stability, but maybe some low rent fragility around the consumer. 13 00:00:38,200 --> 00:00:40,560 Speaker 3: Yeah, good morning, great to be with you all. Yeah, 14 00:00:40,800 --> 00:00:43,040 Speaker 3: I actually believe we do. If we sort of zoom 15 00:00:43,040 --> 00:00:44,960 Speaker 3: out a little bit. The quarter was really a strong 16 00:00:45,000 --> 00:00:47,720 Speaker 3: one for us, seventeen percent of I growth, thirty percent 17 00:00:47,760 --> 00:00:48,680 Speaker 3: EPs growth. 18 00:00:49,000 --> 00:00:51,080 Speaker 4: That's what led us to raise guidance. 19 00:00:50,720 --> 00:00:53,319 Speaker 3: To twenty five percent EPs growth for the full year, 20 00:00:53,320 --> 00:00:54,760 Speaker 3: which is obviously quite strong. 21 00:00:55,720 --> 00:00:57,200 Speaker 4: Two big stories I think here. 22 00:00:57,280 --> 00:01:01,480 Speaker 3: Number one, you were just talking about experiences business was 23 00:01:01,680 --> 00:01:04,880 Speaker 3: up ten percent on a revenue basis, twelve percent on 24 00:01:04,920 --> 00:01:08,200 Speaker 3: an AI basis, and the parks business was actually up 25 00:01:08,240 --> 00:01:10,440 Speaker 3: thirteen percent on OI. 26 00:01:10,160 --> 00:01:12,000 Speaker 4: So we do feel good about that. 27 00:01:12,560 --> 00:01:15,160 Speaker 3: Obviously, I watch other stocks report and have seen that 28 00:01:15,319 --> 00:01:18,399 Speaker 3: the value consumer is really struggling a bit and making 29 00:01:18,520 --> 00:01:21,520 Speaker 3: choices right now, we're not really seeing as much of 30 00:01:21,560 --> 00:01:21,880 Speaker 3: that in. 31 00:01:22,240 --> 00:01:24,160 Speaker 4: Our portfolio of products. 32 00:01:24,720 --> 00:01:27,600 Speaker 3: The other positive for us is obviously the streaming service. 33 00:01:28,480 --> 00:01:31,280 Speaker 3: Last year, we lost about six hundred million dollars. This 34 00:01:31,400 --> 00:01:33,959 Speaker 3: year we're about break even and we saw twelve percent 35 00:01:34,000 --> 00:01:37,080 Speaker 3: revenue growth, So we're encouraged by the progress we've made 36 00:01:37,080 --> 00:01:39,720 Speaker 3: in that business in a relatively short period of time. 37 00:01:40,000 --> 00:01:41,959 Speaker 1: Hugh, you said that you're not seeing that kind of 38 00:01:41,959 --> 00:01:45,000 Speaker 1: price sensitivity. How much could you increase prices in from here? 39 00:01:45,360 --> 00:01:46,279 Speaker 4: It's a great question. 40 00:01:46,400 --> 00:01:50,000 Speaker 3: We took prices up a little bit in the beginning 41 00:01:50,000 --> 00:01:53,200 Speaker 3: of this year and didn't really see much of an impact. 42 00:01:53,360 --> 00:01:56,560 Speaker 3: So as to what the future brings, we're obviously very 43 00:01:56,640 --> 00:01:58,720 Speaker 3: judicious with the way that we price. We want to 44 00:01:58,720 --> 00:02:02,680 Speaker 3: provide access to as many guests as we possibly can, 45 00:02:03,120 --> 00:02:06,320 Speaker 3: but we do believe that the great experiences we provide 46 00:02:06,920 --> 00:02:08,080 Speaker 3: people are willing to pay for. 47 00:02:08,360 --> 00:02:10,639 Speaker 2: Here, let's talk about the streaming business just a little 48 00:02:10,680 --> 00:02:13,200 Speaker 2: bit more and more specifically, if we can Hulu. I 49 00:02:13,200 --> 00:02:15,960 Speaker 2: want to get into Hulu and the future of that business. 50 00:02:15,960 --> 00:02:18,560 Speaker 2: Can we just start with something like the likes of 51 00:02:18,600 --> 00:02:23,720 Speaker 2: Taranaka and Showgun on Hulu. How impressive that content actually was. 52 00:02:23,800 --> 00:02:26,360 Speaker 2: When you have something like that a big hit, how 53 00:02:26,400 --> 00:02:29,200 Speaker 2: does it translate in some gains for the company. How 54 00:02:29,240 --> 00:02:30,960 Speaker 2: does it fall to the bottom line? 55 00:02:31,320 --> 00:02:34,040 Speaker 4: Yeah, it really does create two things. 56 00:02:34,120 --> 00:02:37,520 Speaker 3: Number One, it brings new subscribers in right, we call 57 00:02:37,560 --> 00:02:41,200 Speaker 3: them for subscribers. Those types of jows do pull people 58 00:02:41,880 --> 00:02:44,920 Speaker 3: into the service, and then once they're into the service, 59 00:02:44,960 --> 00:02:48,280 Speaker 3: they realize just the great amount of content that's out there, 60 00:02:48,320 --> 00:02:51,880 Speaker 3: so that those shows also tend to increase stickiness over time. 61 00:02:52,000 --> 00:02:56,240 Speaker 3: So from both perspectives, they're truly additive. And the other 62 00:02:56,280 --> 00:02:59,560 Speaker 3: piece of it that's terrific I think is it really 63 00:02:59,560 --> 00:03:02,160 Speaker 3: does a great well with the linear business as well. 64 00:03:02,280 --> 00:03:04,720 Speaker 3: So you know, we use these different windows to choose 65 00:03:04,720 --> 00:03:07,640 Speaker 3: when to show things, whether it's on FX or whether 66 00:03:07,680 --> 00:03:10,160 Speaker 3: it's on ABC, and then into the streaming service, so 67 00:03:10,560 --> 00:03:13,519 Speaker 3: we were actually getting quite good at reaching different audiences, 68 00:03:13,880 --> 00:03:16,880 Speaker 3: streaming being a bit of a younger audience, the linear 69 00:03:16,919 --> 00:03:20,280 Speaker 3: business being a bit of a more mature audience. It 70 00:03:20,320 --> 00:03:22,320 Speaker 3: gives us the ability to reach the most people, which 71 00:03:22,360 --> 00:03:25,600 Speaker 3: is obviously terrific from an advertising and a subscriber process. 72 00:03:25,639 --> 00:03:29,240 Speaker 2: That sets up brilliant the conversation about the future of Hulu, Hugh, 73 00:03:29,320 --> 00:03:32,079 Speaker 2: So let's talk about it. A report yesterday from Reuter's 74 00:03:32,080 --> 00:03:34,800 Speaker 2: that JP Morgan has valued the company for you close 75 00:03:34,800 --> 00:03:37,680 Speaker 2: to twenty seven point five billion Morgan Stanley value when 76 00:03:37,760 --> 00:03:40,720 Speaker 2: HULI for Comcast at more than forty billion? Is that 77 00:03:40,760 --> 00:03:43,480 Speaker 2: an accurate assessment of where things are? They also reported 78 00:03:43,480 --> 00:03:46,280 Speaker 2: that we're looking for an independent valuation now to try 79 00:03:46,280 --> 00:03:48,040 Speaker 2: and close the gap. Could you just update us and 80 00:03:48,080 --> 00:03:50,600 Speaker 2: tell us if that's an accurate representation of the current 81 00:03:50,600 --> 00:03:51,480 Speaker 2: state of affairs. 82 00:03:51,840 --> 00:03:52,120 Speaker 4: Yeah. 83 00:03:52,160 --> 00:03:55,520 Speaker 3: So we have a well defined process in terms of 84 00:03:55,520 --> 00:03:59,040 Speaker 3: how this is going to play its way out. Beyond that, 85 00:03:59,120 --> 00:04:02,360 Speaker 3: I'm not going to comment on that right now. One 86 00:04:02,400 --> 00:04:04,400 Speaker 3: of the disciplines I have is I talk about M 87 00:04:04,400 --> 00:04:06,120 Speaker 3: and A when it's done, not before it's done. 88 00:04:06,240 --> 00:04:08,200 Speaker 2: Too early to talk about a timeline here a little 89 00:04:08,200 --> 00:04:08,800 Speaker 2: bit too early. 90 00:04:08,880 --> 00:04:09,720 Speaker 4: So here, let's talk. 91 00:04:09,560 --> 00:04:11,880 Speaker 2: About going forward from here where the big opportunities are 92 00:04:12,000 --> 00:04:13,000 Speaker 2: for the stream and business. 93 00:04:13,480 --> 00:04:13,640 Speaker 4: OK. 94 00:04:14,000 --> 00:04:17,080 Speaker 3: I think there are a multitude of opportunities. Number One 95 00:04:17,760 --> 00:04:20,680 Speaker 3: great programming, and that's an advantage that we have in 96 00:04:20,720 --> 00:04:23,160 Speaker 3: our Disney portfolio because we create so much of our 97 00:04:23,200 --> 00:04:27,040 Speaker 3: own IP. Number two is driving engagement, and bundling clearly 98 00:04:27,080 --> 00:04:30,080 Speaker 3: does that. Whether it's with sports, whether it's down in 99 00:04:30,120 --> 00:04:33,320 Speaker 3: Latin America, we're actually putting sports, General Entertainment and Disney 100 00:04:33,400 --> 00:04:37,200 Speaker 3: Plus together, and or the tile that we added, the 101 00:04:37,240 --> 00:04:40,240 Speaker 3: Hulu tile on Disney Plus, so that bundling is clearly 102 00:04:40,279 --> 00:04:45,000 Speaker 3: an opportunity. Third is password sharing. That's an opportunity for us. 103 00:04:45,000 --> 00:04:47,320 Speaker 3: We think it's pretty substantial and it's going to drive growth. 104 00:04:48,120 --> 00:04:51,240 Speaker 3: Fourth is distribution cost. We do think by going direct 105 00:04:51,279 --> 00:04:55,600 Speaker 3: to consumer we can actually both build a stronger relationship 106 00:04:55,600 --> 00:04:58,720 Speaker 3: with the consumer and also reduce our costs. And then 107 00:04:58,760 --> 00:05:03,040 Speaker 3: fifth is technology. Clearly an opportunity in terms of recommendation engines. 108 00:05:03,480 --> 00:05:06,400 Speaker 3: As we put all of that together, we're pretty well 109 00:05:06,440 --> 00:05:08,159 Speaker 3: convinced that this is going to be a great growth 110 00:05:08,200 --> 00:05:10,839 Speaker 3: business for the Disney Company for a long long time. 111 00:05:11,000 --> 00:05:13,920 Speaker 5: Hugh, you mentioned a number of things there, including password sharing. 112 00:05:14,000 --> 00:05:16,120 Speaker 5: How much do you expect all of those initiatives you 113 00:05:16,240 --> 00:05:19,359 Speaker 5: just mentioned to save money? What's the cost benefit of 114 00:05:19,400 --> 00:05:19,800 Speaker 5: all of that? 115 00:05:20,400 --> 00:05:24,360 Speaker 3: Yeah, I mean things like password sharing obviously drive additional 116 00:05:24,400 --> 00:05:28,600 Speaker 3: revenue growth. Things like distribution costs do save money for you. 117 00:05:28,880 --> 00:05:32,040 Speaker 3: In addition to that, things like recommendation engines and direct 118 00:05:32,040 --> 00:05:34,880 Speaker 3: to consumer marketing tends to reduce churn, which allows you 119 00:05:34,920 --> 00:05:38,040 Speaker 3: to reduce marketing costs. So there really is some synergy 120 00:05:38,120 --> 00:05:41,360 Speaker 3: between the revenue benefits and the cost benefits. But overall, 121 00:05:41,800 --> 00:05:44,320 Speaker 3: we're looking to make this into a great business, not 122 00:05:44,360 --> 00:05:46,560 Speaker 3: just a growth business, but a great margin business for 123 00:05:46,640 --> 00:05:47,800 Speaker 3: the company as well, Hugh. 124 00:05:47,839 --> 00:05:49,920 Speaker 1: Over the past six months we've been talking about the 125 00:05:49,960 --> 00:05:53,640 Speaker 1: cost cutting operations in Disney. Have we finished some of 126 00:05:53,680 --> 00:05:56,240 Speaker 1: the shrinking, have we finished the pairing back, and are 127 00:05:56,279 --> 00:05:58,320 Speaker 1: you back on some sort of growth trajectory. 128 00:05:58,760 --> 00:06:02,479 Speaker 3: We are definitely back a growth trajectory. That said, we're 129 00:06:02,520 --> 00:06:05,000 Speaker 3: always going to be looking hard at our cost structure, 130 00:06:05,160 --> 00:06:08,640 Speaker 3: in particular looking to reduce costs where perhaps they add 131 00:06:08,680 --> 00:06:11,240 Speaker 3: less value than they used to, and redeploy some of 132 00:06:11,279 --> 00:06:13,600 Speaker 3: that money back into the business so that we can 133 00:06:13,640 --> 00:06:16,200 Speaker 3: actually grow the balance of the business. So I think 134 00:06:16,200 --> 00:06:18,960 Speaker 3: that's a never ending exercise of looking for ways to 135 00:06:19,000 --> 00:06:21,040 Speaker 3: be more efficient as a company so that you can 136 00:06:21,040 --> 00:06:22,080 Speaker 3: invest in your future. 137 00:06:22,160 --> 00:06:24,720 Speaker 1: When you talk about growing, where is that growth focused 138 00:06:24,760 --> 00:06:27,040 Speaker 1: on geographically. We know that in the US you've got 139 00:06:27,040 --> 00:06:30,520 Speaker 1: a very strong parks business. In Europe there also is 140 00:06:30,640 --> 00:06:33,920 Speaker 1: a parks presence. But in Asia, in particular in China, 141 00:06:34,040 --> 00:06:36,680 Speaker 1: that has been a growth area. Is it still How 142 00:06:36,720 --> 00:06:38,479 Speaker 1: much can that be a bright spot at a time 143 00:06:38,480 --> 00:06:40,160 Speaker 1: of increasing geopolitical tensions? 144 00:06:40,600 --> 00:06:40,880 Speaker 4: Yeah? 145 00:06:41,240 --> 00:06:43,480 Speaker 3: I do think not just China, but all of Asia 146 00:06:43,520 --> 00:06:47,159 Speaker 3: represent growth opportunities for US, both in terms of the 147 00:06:47,200 --> 00:06:50,320 Speaker 3: streaming service and select markets as well as in terms 148 00:06:50,320 --> 00:06:53,200 Speaker 3: of the parks and cruises business. So we do see 149 00:06:53,480 --> 00:06:56,800 Speaker 3: good growth opportunities there. Europe and Latin America continue to 150 00:06:56,800 --> 00:06:59,800 Speaker 3: be good growth opportunities, and make no mistake, North America 151 00:07:00,160 --> 00:07:02,320 Speaker 3: not done growing yet. We still think there are terrific 152 00:07:02,320 --> 00:07:03,960 Speaker 3: opportunities here for us right at home. 153 00:07:04,040 --> 00:07:06,720 Speaker 5: When it comes to Asia Pacific, is it domestic demand 154 00:07:06,720 --> 00:07:10,120 Speaker 5: within those countries, specifically China, or is it tourists in 155 00:07:10,160 --> 00:07:10,640 Speaker 5: the region. 156 00:07:11,240 --> 00:07:14,120 Speaker 3: Combination of both. I wouldn't tie it to one or 157 00:07:14,120 --> 00:07:15,640 Speaker 3: the other. I think it's a combination of both. 158 00:07:16,120 --> 00:07:18,560 Speaker 5: And when you look at China, to Lisa's point, you 159 00:07:18,600 --> 00:07:24,000 Speaker 5: know we're going into a very heated political election coming 160 00:07:24,040 --> 00:07:27,720 Speaker 5: up in November, very hot rhetoric regarding China. Is it 161 00:07:27,920 --> 00:07:32,560 Speaker 5: becoming more challenging to deal with authorities in Beijing and 162 00:07:32,720 --> 00:07:36,640 Speaker 5: business on the ground given the increased geopolitical tensions. 163 00:07:37,280 --> 00:07:38,640 Speaker 4: It has not been for us. 164 00:07:38,680 --> 00:07:41,160 Speaker 3: You know, one of the benefits of what we do 165 00:07:41,240 --> 00:07:43,880 Speaker 3: for a living is, you know, we make people smile. 166 00:07:43,920 --> 00:07:46,480 Speaker 3: We bring them happiness. Right, we bring them the most 167 00:07:46,480 --> 00:07:50,480 Speaker 3: magical place on earth. Candidly, the government's investing in infrastructure 168 00:07:50,520 --> 00:07:52,400 Speaker 3: to make it easier for guests to get to and 169 00:07:52,440 --> 00:07:55,800 Speaker 3: from the park. We're continuing to invest in that park 170 00:07:55,840 --> 00:07:57,280 Speaker 3: in order to drive growth. 171 00:07:57,520 --> 00:07:59,120 Speaker 4: It's doing better now than it ever has. 172 00:07:59,200 --> 00:08:03,480 Speaker 3: So we're the fortunate beneficiaries of bringing people joy in 173 00:08:03,480 --> 00:08:04,320 Speaker 3: a world that needs it. 174 00:08:04,440 --> 00:08:06,520 Speaker 2: Here, we've got to talk about the NBA deal as well. 175 00:08:06,720 --> 00:08:08,600 Speaker 2: Can you talk to us about that? And it is 176 00:08:08,640 --> 00:08:10,520 Speaker 2: going to be much higher. How do you make money 177 00:08:10,560 --> 00:08:12,800 Speaker 2: from something like that? I just want to understand the 178 00:08:12,880 --> 00:08:14,120 Speaker 2: numbers business of all of this. 179 00:08:14,840 --> 00:08:17,760 Speaker 3: Yeah, So the NBA, we're in the middle of discussions 180 00:08:17,840 --> 00:08:20,760 Speaker 3: right now. So again I don't comment on specific deals 181 00:08:20,840 --> 00:08:23,800 Speaker 3: until they're done. What I would tell you is two things. 182 00:08:23,880 --> 00:08:27,080 Speaker 3: Number One, we've had a long, long, productive relationship with 183 00:08:27,160 --> 00:08:30,239 Speaker 3: the NBA. We've benefitted from it, and clear the NBA 184 00:08:30,320 --> 00:08:31,520 Speaker 3: has benefited as well. 185 00:08:32,000 --> 00:08:34,000 Speaker 4: I expect that that'll continue. 186 00:08:34,520 --> 00:08:36,800 Speaker 3: Number Two, We'll always continue to look at the balance 187 00:08:36,840 --> 00:08:40,120 Speaker 3: of our rights portfolio, and as things come up, we'll 188 00:08:40,160 --> 00:08:42,440 Speaker 3: decide whether we want to continue with them in the 189 00:08:42,480 --> 00:08:46,319 Speaker 3: current form, reduce them, or even in some cases, perhaps 190 00:08:46,360 --> 00:08:49,440 Speaker 3: not continue to carry them anymore. So I think we'll 191 00:08:49,480 --> 00:08:52,199 Speaker 3: balance the portfolio rights and we'll get the things that 192 00:08:52,240 --> 00:08:55,320 Speaker 3: we need as the thirty five percent market shareholder in 193 00:08:55,360 --> 00:08:58,720 Speaker 3: the sports business to continue to make ESPN the true 194 00:08:58,800 --> 00:08:59,600 Speaker 3: leader in sports. 195 00:09:00,000 --> 00:09:01,920 Speaker 2: You said you won't comment on deals until they're done, 196 00:09:01,920 --> 00:09:04,040 Speaker 2: but maybe you'll comment on other people's deals. Can we 197 00:09:04,080 --> 00:09:07,640 Speaker 2: do that, Sony Paramount? How would that impact Hollywood? Is 198 00:09:07,679 --> 00:09:08,600 Speaker 2: that something you'd oppose? 199 00:09:09,800 --> 00:09:11,840 Speaker 4: You know, It's funny. I don't have a real comment 200 00:09:11,960 --> 00:09:12,520 Speaker 4: on that one. 201 00:09:13,520 --> 00:09:15,920 Speaker 2: I didn't expect you to, but we have to ask you. 202 00:09:15,920 --> 00:09:17,480 Speaker 2: You've got to leave it there. It's going to catch up. 203 00:09:17,520 --> 00:09:20,440 Speaker 2: Sir Hugh Johnson. There the Disney CFO on the latest earnings.