Speaker 1: All right, let's find out what's been going on at
Speaker 1: Disney as it came out with sales and profit that
Speaker 1: was below Wall Street expectations, joining us to look at
Speaker 1: all this is gua Tech and Media as a Bloomberg
Speaker 1: intelligence guita looking at what's happened in Disney. I mean
Speaker 1: it's quite something. You add twelve million subscribers, which is
Speaker 1: a big, big beat on the consensus, and he's still
Speaker 1: coming below estimates. What happened here? Yeah, and that's it's
Speaker 1: a really good, good question. I mean, um, what happened
Speaker 1: was they came in light on profits, and they came
Speaker 1: in light on profits both on the streaming side and
Speaker 1: the streaming of course there are absolutely no profits, which
Speaker 1: meant there were more losses than expected. So so far
Speaker 1: we have seen four billion dollars in fiscal two losses.
Speaker 1: And then on the theme park side as well, and
Speaker 1: this was a little bit of a surprise. I think
Speaker 1: to most investors. They came in about twenty short of
Speaker 1: consensus in terms of you know, park profits. So I
Speaker 1: think those two were like the big headline numbers that
Speaker 1: is kind of causing this weakness and after hours normally
Speaker 1: when we think about costs in streaming, we would be
Speaker 1: thinking about access of content, but that's not a problem
Speaker 1: for Disney has loads of content. So it's kind of
Speaker 1: curious what is the where is the cost structure that's
Speaker 1: so high when it isn't the content, so it is
Speaker 1: the content too. They are spending uh really, they're they're
Speaker 1: spending tons and tons of money for producing some of
Speaker 1: these really big shows on the Disney Plus platform. Yes,
Speaker 1: they have access to i P, but remember creating even
Speaker 1: like one season of The Mandalorian or some of these
Speaker 1: Marvel series, it costs of about twenty five million per episode.
Speaker 1: So we're looking at, you know, ten billion dollars in
Speaker 1: content costs for fiscal two. That's probably going to go
Speaker 1: up the next year. So they are spending a lot
Speaker 1: on content. But where they're really looking to get more
Speaker 1: efficiencies going forward is really in the marketing spend. So
Speaker 1: with you know, with them launching in so many different markets,
Speaker 1: they obviously had to undertake very intensive marketing efforts, but
Speaker 1: obviously all of that is going to come down pretty
Speaker 1: pretty nicely going forward. So that's interesting because it means
Speaker 1: that they need new content, not just the other content,
Speaker 1: but are they also producing some content that is only
Speaker 1: for the streaming, it's not for the theatrical and therefore,
Speaker 1: you know, you really have to up the spending. Oh. Absolutely,
Speaker 1: there is a lot of content that's exclusively for streaming.
Speaker 1: Whether it's all of these Marvel TV shows, whether it's
Speaker 1: you know the Mandalorian which is a Star Wars show, Um,
Speaker 1: we had and or we have you know, she Hug,
Speaker 1: all of these are created exclusively for the Disney Plus platform.
Speaker 1: Um and so yes, they do have you know, just
Speaker 1: that component. But of course, as you mentioned, they also
Speaker 1: have you know, content that they are creating for a
Speaker 1: theatrical worldwide theatrical releases, which then also again flows back
Speaker 1: into the Disney Plus platform after about two months or so. Um,
Speaker 1: you know at the box office. Well, tell me sounds
Speaker 1: what happens that you know, we've got just on the
Speaker 1: sports side of things that you know, we've got major headwinds. Indeed,
Speaker 1: with all these different rights that they have to screen
Speaker 1: sport in different jurisdictions. Uh, these cost a lot of
Speaker 1: money and a lot of these are coming up for renew. Yeah,
Speaker 1: that is a big, big, you know, pain point, not
Speaker 1: just for Disney. I think it's it's for all of
Speaker 1: you know, the media landscapes. So for Disney, Disney they
Speaker 1: are the biggest sports rights holder right now. They pay
Speaker 1: about nine billion dollars every year and that's really because
Speaker 1: of ESPN and all of the marquee rights that ESPN holes. Um. Yes,
Speaker 1: there is huge cost inflation. On average. We've seen at
Speaker 1: least about you know, fifties sixty cost inflation every time
Speaker 1: these rights come up for renewal. So that is something
Speaker 1: that that Disney is definitely looking at down the road.
Speaker 1: But what they have shown us so far is that,
Speaker 1: you know, they are willing to exercise a lot of
Speaker 1: discipline and forego rights if it doesn't make financial sense
Speaker 1: to them. So they did that recently in India with
Speaker 1: the I p L cricket streaming rights. Um that was
Speaker 1: really a huge magnet for them in terms of subscriptions,
Speaker 1: but it was very, very expensive, and so they decided
Speaker 1: to let that go, and they said they're going to
Speaker 1: do the same thing for new sports rights that kind
Speaker 1: of come up. They're going to be very financially disciplined
Speaker 1: as they take a look into those You mentioned the
Speaker 1: parks were disappointing. Was a lot of that tied to
Speaker 1: China because of lockdowns or whether it was it also
Speaker 1: disappointing in North America. No, it was definitely some of
Speaker 1: it was international. And with China, what they did mention
Speaker 1: was that they have very very actually they have absolutely
Speaker 1: no visibility into when Shanghai is going to be able
Speaker 1: to reopen. So that is definitely going to take a
Speaker 1: toll in terms of pranctability. But you know what was
Speaker 1: disconcerting was that we saw some pretty weak results from
Speaker 1: the US, you know, the domestic parks as well. Of course,
Speaker 1: some of that was tied to Hurricane Ian, which affected
Speaker 1: their Florida park. It resulted in about sixty five million
Speaker 1: dollars of operating income impact. But they also talked about
Speaker 1: higher costs and so one has to wonder about inflationary
Speaker 1: pressures in their cost pace. Um, you know, they talked
Speaker 1: about costs of new attractions. So all of that kind
Speaker 1: of really took or or you know, exerted pressure on
Speaker 1: on the bottom line for for the market segment. Excellent stuff, Guita,
Speaker 1: thanks very much. We know that Disney is off the
Speaker 1: worst levels and after hours of stock traded down about
Speaker 1: almost eight percent, now down about six six point one percent.
Speaker 1: Gita wrong and often is. Tech and media analysts at
Speaker 1: Bloomberg Intelligence