WEBVTT - Geetha Ranganathan on Disney Earnings (Audio)

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<v Speaker 1>Okay, Well, joining us now is that Gita Ranganatha Bloomberg

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<v Speaker 1>Intelligence techn Media and is having a look at disney earnings,

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<v Speaker 1>which came out essentially beat. We do have them topping

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<v Speaker 1>those profit views, but it's also raising the price of

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<v Speaker 1>its flagship Disney Plus streaming service. It's ad free version anyway,

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<v Speaker 1>by thirty eight percent, all designed to generate more revenue.

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<v Speaker 1>What did you make of the overall picture that Disney

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<v Speaker 1>actually drew? So the overall picture, in my view, Rashad

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<v Speaker 1>was very very strong. So you know, we saw them

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<v Speaker 1>come ahead of their streaming subscriber guidance or we were

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<v Speaker 1>expecting about ten million subscribe new subscribers. They delivered about

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<v Speaker 1>fourteen point four million. They confirmed that they're seeing an

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<v Speaker 1>acceleration in that course of course subscription product through fiscal

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<v Speaker 1>fourth quarter. So expect all their new content launches as

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<v Speaker 1>well as their new market launches to kind of bear

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<v Speaker 1>fruit as they finish out this fiscal year in September.

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<v Speaker 1>And then what you know, the question that the market

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<v Speaker 1>has really been asking, which is do these streaming services

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<v Speaker 1>have pricing power? And you know, Disney seems to think

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<v Speaker 1>it does. There obviously, as you just pointed out, they're

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<v Speaker 1>raising their prices, but they're also kind of cushioning that

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<v Speaker 1>blow a little bit because they're offering on December eight,

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<v Speaker 1>they're going to debut an add supported service at the

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<v Speaker 1>same time, which basically means that anybody who wants to maybe, um,

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<v Speaker 1>you know, cut back on their expenses has that option. Uh,

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<v Speaker 1>And so they're going to try and control chun in

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<v Speaker 1>that way. So it's a it's a statement of confidence. Um,

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<v Speaker 1>they're adding subscribers and they're raising prices, and and the

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<v Speaker 1>market has picked up on this. It was already up

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<v Speaker 1>four percent in the regular session and as Doug mentioned,

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<v Speaker 1>gaining six point eight percent in in after hours, and

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<v Speaker 1>in fact of late it has outperformed peers and it's

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<v Speaker 1>also outperformed the SMP. That's all well and good, but

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<v Speaker 1>the stock was down pretty hard earlier. And one question remains,

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<v Speaker 1>you know, partial looking good and all that, but does

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<v Speaker 1>that continue if you go to recession? Probably not. Yeah,

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<v Speaker 1>that that's a very very important question. Brian and I

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<v Speaker 1>think they were asked this question repeatedly on the call

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<v Speaker 1>about any signs of softening that they're seeing with consumer spending,

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<v Speaker 1>and their resounding answer and they kept repeating this was

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<v Speaker 1>was no um and that even if there was a

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<v Speaker 1>slight softening, which I think is inevitable, they have multiple

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<v Speaker 1>levers to keep that profit machine running. So what they've

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<v Speaker 1>done is they have instituted, they've they've kind of taken

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<v Speaker 1>their or they've used the pandemic very They've used that

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<v Speaker 1>time really wisely to kind of implement all of these

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<v Speaker 1>operational efficiencies. They have this new reservation system, they have

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<v Speaker 1>this new virtual assistant called Genie Plus, which basically reduces uh,

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<v Speaker 1>you know, waiting times in lines. So they have all

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<v Speaker 1>these things which kind of improve their real management kind

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<v Speaker 1>of um, you know, spread out attendance, smoothing out any

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<v Speaker 1>peaks and valleys. And what that has done is that

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<v Speaker 1>has really kind of boosted profits immensely. And so we're

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<v Speaker 1>seeing operating margins that are way higher than you know,

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<v Speaker 1>pre pandemic levels. And now what they're saying is that

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<v Speaker 1>they're also seeing the benefit of international visitation kind of

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<v Speaker 1>kicking in at the domestic parks and that should keep

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<v Speaker 1>those margins at an elevated level. So is there a

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<v Speaker 1>possibility that we see a slowdown? Yes, how bad is

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<v Speaker 1>it going to be? Maybe not too bad, because I

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<v Speaker 1>think they have multiple levels that they can kind of

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<v Speaker 1>pull well into. T thing is gither they have this

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<v Speaker 1>amazing target for subscriber growth then they I think they

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<v Speaker 1>said this a couple of years ago, and they're looking

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<v Speaker 1>at what two sixty million of them by the fiscal

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<v Speaker 1>two thousand and twenty four. Yes, they actually did walk

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<v Speaker 1>that back a little bit. Um So one of the

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<v Speaker 1>main growth drivers for subscribers to the Disney Plus service

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<v Speaker 1>has that been their Indian streaming platform, which is called

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<v Speaker 1>hot Star. And the main reason why hot Star has

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<v Speaker 1>been such a runaway success has been because of the

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<v Speaker 1>cricket streaming rights that it that it boasts of, so

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<v Speaker 1>it's called the Indian Premier League the I p L Cricket. Now,

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<v Speaker 1>what Disney did is they made a very conscious decision

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<v Speaker 1>to walk away from the streaming rights for you know,

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<v Speaker 1>that that property because it was way too costly and

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<v Speaker 1>it was going to kind of mess up their profitability goals.

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<v Speaker 1>So with that in mind, they actually did walk back

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<v Speaker 1>guidance slightly. Uh So, now instead of two hundred instead

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<v Speaker 1>of an upper range of about two hundred and sixty million,

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<v Speaker 1>they're guiding to about two d thirty million, But I

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<v Speaker 1>don't think the market is going to punish them for

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<v Speaker 1>this only because this is mainly due to the fact

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<v Speaker 1>that you know that the so so Hot Star subscriber essentially, yes,

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<v Speaker 1>there's a lot of volume on that platform, but but

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<v Speaker 1>the but the subscriber quality itself is pretty low because

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<v Speaker 1>they basically bring in about just one dollar per month

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<v Speaker 1>versus about seven dollars for you know, a non Hot

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<v Speaker 1>Star subscriber. So you know, profitability again is well intact,

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<v Speaker 1>just a quick question. You know, we've had a lot

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<v Speaker 1>of trouble in China with the lockdowns. How is China

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<v Speaker 1>looking at the moment with the park there? Yeah, they

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<v Speaker 1>actually just just reopened the park in in Shanghai. They

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<v Speaker 1>said it's you know, so far momentum has been good,

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<v Speaker 1>but I think it's going to take a while for

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<v Speaker 1>it to kind of really get back to full capacity.

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<v Speaker 1>But so far it says it's pretty much in line

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<v Speaker 1>with expectations. It could be good down the road, I suppose,

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<v Speaker 1>and also ESPN where it used to be one of

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<v Speaker 1>the reasons you sold Disney now looking a lot better

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<v Speaker 1>anyway out of time geta but always a pleasure love

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<v Speaker 1>having you on the show geta Ranganathan Bloomberg Intelligence tech

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<v Speaker 1>and media analyst. Boy, they've got some good people there.

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<v Speaker 1>This is Bloomberg