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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 2: That Disney story again stocks up nine percent, although it

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Speaker 2: is down nine percent for the year, so they got

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Speaker 2: some work to do there. We go to the analytical

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Speaker 2: side of this story, Githa Ranganath, and she is the

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Speaker 2: media analyst for Bloomberg Intelligence based on in Princeton. Etha,

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Speaker 2: you follow this company for many years. Have they finally

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Speaker 2: finally turned the corner and they can become a stock

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Speaker 2: that most people need to own? I think so, Paul.

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Speaker 3: I think you know, this turnaround story has now been

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Speaker 3: in the works ever since Bob Eiger came back more

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Speaker 3: than two years ago, and it looks like, you know,

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Speaker 3: everything that he's kind of put in place along with

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Speaker 3: the CFO Hugh Johnston, is really working. So they did

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Speaker 3: raise a guidance, you know, for the full year. But

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Speaker 3: it's not just that, it's just the conviction in the

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Speaker 3: outlook as you kind of look out and build out

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Speaker 3: the earnings model for the next few years. I mean,

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Speaker 3: we are basically looking at them doubling their EPs from

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Speaker 3: close to almost six dollars this year to well over

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Speaker 3: ten eleven dollars in the next four to five years.

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Speaker 3: So just a lot of conviction I think now in

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Speaker 3: their long term growth trajectory, with those new parks, with

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Speaker 3: the added capacity, with the sixty billion dollar investment, with

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Speaker 3: you know, the Abu Dhabi Park, new cruise ships, everything

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Speaker 3: seems to be finally kind of coming together.

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Speaker 4: Last quarter, though, the question was about their theme parks

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Speaker 4: prices are too high. The consumers pinched there was a

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Speaker 4: competitor opening up a park in Florida and everyone was

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Speaker 4: kind of worried. What changed in three months.

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Speaker 3: Yeah, so they did say at that point that, you know,

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Speaker 3: summer bookings were strong. Of course, nobody really believed them.

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Speaker 3: But you know, when they kind of reported the numbers

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Speaker 3: today and you saw that thirteen percent increase in operating

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Speaker 3: income in the domestic parks, domestic parks are really the

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Speaker 3: bread and butter of you know, the Disney tein park

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Speaker 3: business makes up seventy percent of revenue. You know, then

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Speaker 3: that has really managed to I think a lay fears

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Speaker 3: and they you know, it's not just what they reported, Alex,

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Speaker 3: it's what they said for the remainder of the year.

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Speaker 3: So they said bookings are up this quarter four percent.

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Speaker 3: They said bookings advanced bookings are up for the fiscal

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Speaker 3: fourth quarter seven percent, and that is with that new

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Speaker 3: Epic Universe coming on board. So still demand seems to

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Speaker 3: be really resilient. It seems to be strong, even though

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Speaker 3: there's a little bit of softness internationally. Domestically, they seem

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Speaker 3: to be in very good shape.

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Speaker 2: So Getha talk to us about the profitability of their

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Speaker 2: streaming businesses writ large here. How profitable are they? Do

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Speaker 2: you think they can approach the profitability of say Netflix, I.

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Speaker 3: Think they can over time, They definitely can. So this year, Paul,

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Speaker 3: we're looking at just over a billion dollars in operating

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Speaker 3: income on a twenty five billion in revenue. That's about

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Speaker 3: four five percent margins. But really what we're you know,

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Speaker 3: looking to the north star here is definitely Netflix. As

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Speaker 3: you just pointed out, Netflix should get to thirty percent

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Speaker 3: operating margins this year. So that's really what what Disney

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Speaker 3: is working towards. So even as we kind of build out,

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Speaker 3: you know, or we look at the earnings trajectory for

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Speaker 3: that streaming unit over the next couple of years. I mean,

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Speaker 3: we look at them getting to you know, fifteen sixteen

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Speaker 3: percent margins over the next two to three years, and

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Speaker 3: then of course a lot more upside with you know,

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Speaker 3: the pricing power, with subscription growth, with password sharing, with

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Speaker 3: you know, their advertising buildouts, so they have a lot

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Speaker 3: of different levers that they can pull as well.

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Speaker 4: Is the goal to catch up with Netflix in terms

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Speaker 4: of streamer subscribers? Is it about profitability?

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Speaker 2: Like?

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Speaker 4: What's the goal there? Because Netflix is so far ahead

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Speaker 4: just in basic numbers.

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Speaker 3: Netflix is absolutely far ahead, and there's no doubt about that,

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Speaker 3: Alex they have well over three hundred million subscribers just

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Speaker 3: in terms of scale, Disney has about one hundred and

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Speaker 3: twenty five. So there's one hundred and twenty five million.

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Speaker 3: So there's a lot of cashing up to do. But

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Speaker 3: there is one area where Disney is far ahead of Netflix,

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Speaker 3: and that's advertising. They have a very very good advertising

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Speaker 3: infrastructure and this is an area that Netflix is kind

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Speaker 3: of really struggling with. And then remember Disney has a

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Speaker 3: big weapon that they can use with that ESPN. It's

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Speaker 3: not going to be called flagship I know. But with

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Speaker 3: that ESPN streaming launch coming a little bit later this year,

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Speaker 3: they have you know, they're spending something like eleven to

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Speaker 3: twelve billion dollars in sports rights that they are going

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Speaker 3: to monetize from a streaming perspective. So that is where

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Speaker 3: you know, they're going to have an unrivaled streaming product

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Speaker 3: even when you compare it to Netflix, because they're going

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Speaker 3: to offer you entertainment, they're going to offer you sports.

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Speaker 3: You know, there's going to be something for everybody. So

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Speaker 3: it's going to be you know, I think they can

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Speaker 3: you know, I'm not sure if they're going to completely

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Speaker 3: be able to match Netflix in terms of subscriptions, but

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Speaker 3: they're going to be able to get to that profit number,

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Speaker 3: I think pretty quickly.

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Speaker 1: Keith.

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Speaker 2: If I'm an investor in Disney, I just kind of

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Speaker 2: write off what used to be the core business, which

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Speaker 2: is the cable network business, and to say it's in

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Speaker 2: secular decline. I'm focusing more on the growing streaming business.

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Speaker 2: Is that kind of the.

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Speaker 3: Play that is the playball across and that's across majority

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Speaker 3: of the space, So you know, yes, it's just kind

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Speaker 3: of you know, coming along if you will. Advertising is

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Speaker 3: a big concern their affiliate fees again as in secular decline.

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Speaker 3: We know other companies are actually trying to separate out

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Speaker 3: their cable networks business just because it's been struggling and

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Speaker 3: the outlook doesn't look good. Comcast actually is, you know,

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Speaker 3: separating out its cable networks a little bit later this year.

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Speaker 3: They even have a new name for that new business.

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Speaker 3: And you know, we kind of expect WBD, Warner Brothers,

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Speaker 3: Discovery will do something similar, but yeah, I think it's

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Speaker 3: pretty much at this point, it's pretty much written off, Paul.

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Speaker 3: The linear networks business is dying, all right.

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Speaker 4: Getha, thanks a lot, Really appreciate you either running out

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Speaker 4: on Boomerg and talent is analysts on US Media on

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Speaker 4: Disney Earning.

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