Speaker 1: We welcome Bloomberg Tech co hosts Ed Ludlow and Caroline Hyde,
Speaker 1: and they are joined by Disney c FO Hugh Johnston.
Speaker 2: Take it away, Thank you very much. Indeed, it's wonderful
Speaker 2: to be joined by you, Hugh, with Ed and I
Speaker 2: across various parts of America. You just first start with
Speaker 2: us for a moment. Will you rating Disney's overall fourth
Speaker 2: quarter performance? You were strong in parks, Look, you were
Speaker 2: strong in streaming, but there was some weakness in films
Speaker 2: and TV. Talk us through how you rate yourself?
Speaker 1: Yeah, actually I thought it was a good quarter overall,
Speaker 1: and frankly versus Wall Street, we beat expectations by six cents. So,
Speaker 1: as you noted, the experiences business did very very well,
Speaker 1: six percent revenue growth, thirteen percent of why growth was terrific.
Speaker 1: Sports did very strongly while we were launching the new
Speaker 1: DTC product, which is off to a great start. And
Speaker 1: then in terms of experience the entertainment business, it was
Speaker 1: largely just the overlap of the film slate that drove
Speaker 1: the numbers. I know the linear business looked a little
Speaker 1: bit soft, but that's primarily due to the fact that
Speaker 1: we had India in the numbers last year where we
Speaker 1: made eighty four million bucks and wasn't in the numbers
Speaker 1: this year. Take that out Apple Staples basis. Overall, I
Speaker 1: thought the quarter was good and it actually allows us
Speaker 1: to end the year with a lot of momentum as
Speaker 1: we think about where we are right now. We grew
Speaker 1: EPs nineteen percent for the year and nineteen percent Keeger
Speaker 1: for the last three years, and that's why we both
Speaker 1: guided to double digit EPs growth in twenty six and
Speaker 1: on top of that, doubled the share of purchase and
Speaker 1: increased the dividend by fifty percent. Hugh, good morning.
Speaker 3: On that momentum, the focus for a lot is streaming,
Speaker 3: right and you have the confidence to say streaming is
Speaker 3: going to continue to be profitable through twenty twenty six.
Speaker 3: What are the factors behind that? What allows you to
Speaker 3: have the confidence to have such visibility into how that
Speaker 3: streaming business is going well?
Speaker 1: Of course, streaming always begins with the quality of the
Speaker 1: kind that we have and the quality of the slate
Speaker 1: that we have going forward. So if you think about
Speaker 1: the film slate we have right now, number one, we
Speaker 1: obviously have Zotopia two, followed by Avatar, follow a Brad
Speaker 1: the Double Wars Product two, followed by Toy Story five, Mowana,
Speaker 1: and then we've got an Avengers movie as well. So
Speaker 1: if I look at all of that playing its way
Speaker 1: into the streaming service, certainly feel good about those ten
Speaker 1: pole events. In addition to that, our TV side continues
Speaker 1: to perform very strongly. The ratings are great, the number
Speaker 1: of hit shows are great. And then on top of that,
Speaker 1: we're investing in the product in a significant way, creating
Speaker 1: a unified app, and in addition to that, improving our
Speaker 1: recommendation engines and improving the navigation withinside within the DTC app.
Speaker 1: Put all of that together and what we really see
Speaker 1: is just a huge opportunity for growth. We aspire to
Speaker 1: grow that business double digits along with the double digit
Speaker 1: margins we expect to achieve this coming year. And as
Speaker 1: a result, I think we're going to continue to see
Speaker 1: that business do really well and be a real growth
Speaker 1: driver for Disney.
Speaker 2: The profitability streaming operating inn come for the first quarter
Speaker 2: of twenty twenty six you got to be three hundred
Speaker 2: and seventy five million dollars. That's a lot less than
Speaker 2: the street was anticipating.
Speaker 1: Why is that? I think it's primarily due to the
Speaker 1: fact that we're investing in product in the business and
Speaker 1: we're investing in bundling. So we all know that bundling
Speaker 1: ultimately is a very profitable thing to invest in. It
Speaker 1: increases retention, reduces churn, increases engagement, and that's not a theory.
Speaker 1: We have proof on that. But initially, when you do bundling,
Speaker 1: you're making an investment on top of that. The things
Speaker 1: I was talking about related to recommendation engines and the like,
Speaker 1: all of that requires some investment in the early part
Speaker 1: of the year, but the paybacks on that are going
Speaker 1: to be tremendous. So we certainly feel great about it.
Speaker 1: And for the full year, the double digit margin we
Speaker 1: got to do is very much in line with what
Speaker 1: we had indicated a year ago.
Speaker 3: How close a Disney and YouTube TV to a resolution
Speaker 3: and what do you plan to do? That kind of
Speaker 3: gives our audience right now a sense of what your
Speaker 3: strategy for distribution is on how you resolve that.
Speaker 1: Well, in terms of where we are right now, it's
Speaker 1: an active negotiation, so that's obviously going to be driven
Speaker 1: by both sides. We don't control that. What I can
Speaker 1: tell you is We've put very much a very attractive
Speaker 1: deal on the table, very much in line with and
Speaker 1: in a few areas, perhaps better what we're doing with others,
Speaker 1: and we feel like we're making the right proposal to
Speaker 1: value the content that we create and to give consumers
Speaker 1: access to this great content on YouTube. That said, if
Speaker 1: YouTube chooses not to engage with us on that front,
Speaker 1: obviously that content is available elsewhere. Our expectation is that
Speaker 1: at some point consumers will shift to other opportunities.
Speaker 2: Well, consumers want ESPN and consumers could get ESPN the
Speaker 2: streaming app performing At the moment, how do you measure
Speaker 2: you own success there?
Speaker 1: Yeah, it's early days. Obviously, the product has only been
Speaker 1: in the market as of the end of the quarter
Speaker 1: about five weeks so far off to a great start.
Speaker 1: And we think about it from two perspectives. Number one,
Speaker 1: the perspective of are we getting engagement, And the answer
Speaker 1: is yes. People love the Sports Center for You capability,
Speaker 1: They love the Discover sports capability that we have. In
Speaker 1: addition to that, in terms of the subscriptions that we're getting,
Speaker 1: eighty percent of those are bundled subscriptions, So it's not
Speaker 1: just benefiting ESPN, it's benefiting the entirety of the Disney
Speaker 1: Plus ecosystem. So we feel great about it from both perspectives.
Speaker 1: It's off to a great start and what we've seen
Speaker 1: as engagement goes up when people do subscribe to the service.
Speaker 3: Hugh, is this the last earnings report and quarter before
Speaker 3: Disney's board names a successor to Bob Iger's CEO.
Speaker 1: That's a great question. So what the board has previously indicated,
Speaker 1: and I will say the board has been about as
Speaker 1: transparent as any CEO succession I have ever seen in
Speaker 1: my long career. What the board is indicated is that
Speaker 1: will take place sometime during the first calendar quarter of
Speaker 1: twenty six. We report in next February. Whether that'll be
Speaker 1: before or after, I'll be up to the board, but
Speaker 1: we should have it done by the end of March.
Speaker 3: Disney CFO, Hugh Johnson, great talk again, Thank you very much,