WEBVTT - Bloomberg's Ranganathan on Disney's EPS, BAMtech Stake (Audio)

0:00:02.040 --> 0:00:05.439
<v Speaker 1>Global business news twenty four hours a day at Bloomberg

0:00:05.480 --> 0:00:08.559
<v Speaker 1>dot com, the radio, plus mobile lap and on your radio.

0:00:08.800 --> 0:00:13.080
<v Speaker 1>This is a Bloomberg Business flag from Bloomberg World Headquarters.

0:00:13.160 --> 0:00:16.000
<v Speaker 1>I'm Charlie Pellett. Just getting the latest quarterly numbers out

0:00:16.000 --> 0:00:19.360
<v Speaker 1>of the Walt Disney Company. Third quarter adjustin EPs of

0:00:19.400 --> 0:00:21.920
<v Speaker 1>a dollar sixty two estimates There were for a dollar

0:00:22.000 --> 0:00:25.280
<v Speaker 1>sixty one third quarter revenue of beat as well, fourteen

0:00:25.360 --> 0:00:28.680
<v Speaker 1>point three billion estimates there for fourteen point two billion.

0:00:29.080 --> 0:00:32.199
<v Speaker 1>Digging a little deeper into the third quarter report, media

0:00:32.240 --> 0:00:35.840
<v Speaker 1>networks revenue five point nine one billion estimates, there were

0:00:35.880 --> 0:00:39.920
<v Speaker 1>four six billion. Parks and resorts revenue there four point

0:00:39.960 --> 0:00:43.800
<v Speaker 1>three eight billion estimates four point four two billions. Stay

0:00:43.840 --> 0:00:46.320
<v Speaker 1>with Bloomberg. We've got more on the Disney story coming

0:00:46.360 --> 0:00:49.639
<v Speaker 1>up right here on Bloomberg Radio. Also just one additional

0:00:49.640 --> 0:00:51.920
<v Speaker 1>headline to pass along to you. It is buying a

0:00:52.040 --> 0:00:57.520
<v Speaker 1>minority stake in BAM Tech SMP up a point today one,

0:00:57.520 --> 0:00:59.800
<v Speaker 1>a gain there of less than point one percent. Down

0:00:59.800 --> 0:01:02.639
<v Speaker 1>in US Reels up three, little change there and has

0:01:02.680 --> 0:01:05.160
<v Speaker 1>Stack Advancing twelve a gain of two tenths of one

0:01:05.200 --> 0:01:09.960
<v Speaker 1>percent to fifty five Gold up four or fifty out,

0:01:10.319 --> 0:01:13.679
<v Speaker 1>a gain of three tenths of one percent. I'm Charlie Pellet.

0:01:13.680 --> 0:01:19.200
<v Speaker 1>That's of Bloomberg Business Flash. This is taking stock with

0:01:19.360 --> 0:01:24.280
<v Speaker 1>pin Box and Kathleen Hayes on Bloomberg Radio. Disney, the

0:01:24.319 --> 0:01:29.280
<v Speaker 1>Walt Disney Company, reporting quarterly results that exceeded analysts estimates

0:01:29.560 --> 0:01:32.480
<v Speaker 1>by a penny. Right now, taking a look at the

0:01:32.520 --> 0:01:35.560
<v Speaker 1>shares in the after hours trade, they are higher by

0:01:35.600 --> 0:01:40.080
<v Speaker 1>about one percent. Here to tell us more about Disney

0:01:40.200 --> 0:01:46.080
<v Speaker 1>and all things media, is Geita Raganathan, technology and media

0:01:46.120 --> 0:01:50.960
<v Speaker 1>analyst for Bloomberg Intelligence, joining us from our office in Princeton,

0:01:51.120 --> 0:01:57.360
<v Speaker 1>New Jersey, and you can follow geta at n gone one. Alright,

0:01:57.440 --> 0:01:59.720
<v Speaker 1>Keith tell us about Disney. I was looking at the

0:02:00.000 --> 0:02:02.480
<v Speaker 1>else today and I think the most interesting thing, at

0:02:02.520 --> 0:02:05.320
<v Speaker 1>least for those that don't know about bam Tech, is

0:02:05.360 --> 0:02:09.680
<v Speaker 1>that bam Tech, which Disney announced they're taking a third

0:02:10.160 --> 0:02:14.920
<v Speaker 1>thirte pent steak Um was previously formed by Major League

0:02:14.960 --> 0:02:18.920
<v Speaker 1>Baseball was part of the digital rights business of Major

0:02:19.000 --> 0:02:23.079
<v Speaker 1>League Baseball. Correct, yes, exactly exactly. I think the most

0:02:23.240 --> 0:02:27.239
<v Speaker 1>interesting part of this steake by Disney kind of really

0:02:27.320 --> 0:02:32.640
<v Speaker 1>shows their commitment now towards the whole digital consumption of media,

0:02:32.680 --> 0:02:35.960
<v Speaker 1>and I think it demonstrates UM that they are willing

0:02:36.040 --> 0:02:38.560
<v Speaker 1>to take some form of ESPN or at least some

0:02:38.760 --> 0:02:42.240
<v Speaker 1>content from ESPN and kind of go direct to consumer

0:02:42.440 --> 0:02:47.040
<v Speaker 1>or kind of have some UM digital offering with that content. UM.

0:02:47.120 --> 0:02:49.400
<v Speaker 1>So I think that definitely is going to be reassuring

0:02:49.440 --> 0:02:52.320
<v Speaker 1>to investors. Well, under the terms of the transaction, Disney

0:02:52.360 --> 0:02:55.679
<v Speaker 1>says is going to pay a billion dollars in two installments,

0:02:55.800 --> 0:03:00.480
<v Speaker 1>one now and one in January twenty seventeen, and also

0:03:00.560 --> 0:03:05.160
<v Speaker 1>has the option to acquire majority ownership in the coming years.

0:03:05.680 --> 0:03:09.920
<v Speaker 1>Does Disney need this, this kind of network, this major

0:03:10.000 --> 0:03:13.000
<v Speaker 1>league baseball, this band tech that was separated from the

0:03:13.240 --> 0:03:16.000
<v Speaker 1>broader digital business. Yeah, I think it is going to

0:03:16.080 --> 0:03:19.239
<v Speaker 1>be instrumental for Disney and kind of launching UM and

0:03:19.400 --> 0:03:22.120
<v Speaker 1>over the top service, if you will. Disney has kind

0:03:22.160 --> 0:03:25.200
<v Speaker 1>of really taken a very cautious approach because they get

0:03:25.720 --> 0:03:29.200
<v Speaker 1>a lot of revenue from their traditional pay TV operators

0:03:29.280 --> 0:03:33.840
<v Speaker 1>almost nine billion dollars in affiliate fees for ESPN and

0:03:33.919 --> 0:03:36.440
<v Speaker 1>its sister networks from the traditional operators, so they have

0:03:36.520 --> 0:03:39.840
<v Speaker 1>to be really careful when they go all out with

0:03:39.920 --> 0:03:42.680
<v Speaker 1>a digital product. And I think this investment so they've

0:03:42.680 --> 0:03:45.640
<v Speaker 1>been so they've never really made an announcement to launch

0:03:45.720 --> 0:03:49.520
<v Speaker 1>and direct consumer product, at least for ESPN content. But

0:03:49.640 --> 0:03:51.800
<v Speaker 1>this investment kind of shows they're willing to take at

0:03:51.880 --> 0:03:54.800
<v Speaker 1>least a small step in that direction. And so we'll

0:03:54.800 --> 0:03:57.120
<v Speaker 1>see how it plays out. And obviously the option for

0:03:57.200 --> 0:04:00.680
<v Speaker 1>them to go out and acquire the entire unit suggests

0:04:00.680 --> 0:04:03.840
<v Speaker 1>that they're they're willing to make a bigger commitment. All right,

0:04:03.920 --> 0:04:06.440
<v Speaker 1>let's go through some of the other areas. For example,

0:04:06.560 --> 0:04:11.280
<v Speaker 1>the Media networks posting income operating income of two point

0:04:11.320 --> 0:04:15.920
<v Speaker 1>three seven billion. The estate was for two point four billion, right,

0:04:16.040 --> 0:04:18.360
<v Speaker 1>and so I'm just digging through the numbers here, and

0:04:18.480 --> 0:04:21.280
<v Speaker 1>it looks like UM as expected. You know, the ad

0:04:21.440 --> 0:04:25.640
<v Speaker 1>revenues were fine, but then the decline and subscribers kind

0:04:25.680 --> 0:04:27.480
<v Speaker 1>of is tending to weigh. And this has been a

0:04:27.640 --> 0:04:31.719
<v Speaker 1>drag on the media networks business ever since Disney spoke

0:04:31.760 --> 0:04:35.880
<v Speaker 1>about subscriber losses last summer UM and it continues to

0:04:35.960 --> 0:04:38.880
<v Speaker 1>be an overhang. But I think the bigger, the bigger

0:04:38.960 --> 0:04:42.279
<v Speaker 1>concern now is going to be the increase in programming

0:04:42.360 --> 0:04:45.440
<v Speaker 1>costs UM. I mean, Disney has something like about fifty

0:04:45.520 --> 0:04:50.279
<v Speaker 1>three billion dollars in just sports commitments alone. The big

0:04:50.360 --> 0:04:53.960
<v Speaker 1>worry for investors really is, you know what happens when

0:04:54.000 --> 0:04:57.599
<v Speaker 1>affiliate phase kind of level off, but sports costs continue

0:04:57.680 --> 0:05:00.840
<v Speaker 1>to rise, and that's exactly what we are seeing both

0:05:01.000 --> 0:05:05.240
<v Speaker 1>in this quarter as well as going into fiscal twenties seventeen,

0:05:05.279 --> 0:05:07.000
<v Speaker 1>when we're going to see a huge step up in

0:05:07.240 --> 0:05:10.359
<v Speaker 1>NBA fees. Um. You know, that's almost gonna be at

0:05:11.160 --> 0:05:13.920
<v Speaker 1>increase in sports rights with the twenty four billion dollar

0:05:14.040 --> 0:05:17.800
<v Speaker 1>deal that innbated with ESPN and Turner, So I think

0:05:17.880 --> 0:05:21.440
<v Speaker 1>that is definitely going to be a big source of concern.

0:05:22.320 --> 0:05:24.320
<v Speaker 1>Do you believe that this is one of the reasons

0:05:24.640 --> 0:05:28.440
<v Speaker 1>why the stock is down eight percent year to date

0:05:28.560 --> 0:05:32.360
<v Speaker 1>is people are concerned about this spending. Yes, absolutely, I

0:05:32.400 --> 0:05:35.520
<v Speaker 1>think it's It's been one of the biggest, um biggest,

0:05:35.600 --> 0:05:39.040
<v Speaker 1>biggest causes for for worry. Um. You know, the sports

0:05:39.160 --> 0:05:42.400
<v Speaker 1>rights um have been very, very expensive, and Disney has

0:05:42.440 --> 0:05:44.760
<v Speaker 1>continued to go out and acquire the best of the

0:05:44.880 --> 0:05:48.479
<v Speaker 1>best content, but then as you know, affiliate fee pressure

0:05:48.640 --> 0:05:51.640
<v Speaker 1>has been increasing. I mean, investors are really worrying about

0:05:51.680 --> 0:05:54.920
<v Speaker 1>how they're going to defray those expenses. Well, just to

0:05:55.200 --> 0:05:59.440
<v Speaker 1>give you more detail on that, bam Tech minority acquisition

0:06:00.080 --> 0:06:05.040
<v Speaker 1>band Techs roster of sports includes the National Hockey League

0:06:05.120 --> 0:06:07.640
<v Speaker 1>of obviously Major League Baseball, the p g A Tour,

0:06:08.640 --> 0:06:12.600
<v Speaker 1>as well as Ice Network, the leading digital platform for

0:06:13.200 --> 0:06:15.560
<v Speaker 1>professional figure skating. So they're gonna have a lot of

0:06:15.839 --> 0:06:19.919
<v Speaker 1>sports that they can use over there many different media properties.

0:06:20.279 --> 0:06:25.120
<v Speaker 1>Well that in any way affect the park and resort business.

0:06:26.240 --> 0:06:28.520
<v Speaker 1>I don't think so. I think their park and resort

0:06:28.560 --> 0:06:32.039
<v Speaker 1>business has been, um, you know, a very very steady performer.

0:06:32.120 --> 0:06:38.360
<v Speaker 1>It contributes about of overall company income. Now, domestic attendance

0:06:38.440 --> 0:06:42.080
<v Speaker 1>has been slightly weak. Um, it's it's been weakening a

0:06:42.160 --> 0:06:44.039
<v Speaker 1>little bit. And then there have been you know, there's

0:06:44.080 --> 0:06:47.360
<v Speaker 1>been some concern who's given all the incidents in in

0:06:47.720 --> 0:06:50.960
<v Speaker 1>Orlando and and probably you know, weakening trends and attendance

0:06:51.440 --> 0:06:55.960
<v Speaker 1>international also especially with the events and in Paris and Brussels. Um,

0:06:56.160 --> 0:06:58.360
<v Speaker 1>you know, euro Disney has kind of taken a hit

0:06:58.440 --> 0:07:01.040
<v Speaker 1>there a little bit. But in the big cat list

0:07:01.160 --> 0:07:03.120
<v Speaker 1>and I think we'll get more color on this during

0:07:03.160 --> 0:07:06.240
<v Speaker 1>the call. Has been the launch of Shanghai Disney and

0:07:06.400 --> 0:07:09.880
<v Speaker 1>that should be a big driver for that segment um

0:07:10.200 --> 0:07:12.560
<v Speaker 1>going forward. It leads into the next three to five years.

0:07:13.000 --> 0:07:15.440
<v Speaker 1>Thank you very much for spending time with us on

0:07:15.600 --> 0:07:17.840
<v Speaker 1>a day that I know you're looking to get on

0:07:17.920 --> 0:07:22.480
<v Speaker 1>that conference call. Geta Ranana Thumb. She is the technology

0:07:22.560 --> 0:07:26.560
<v Speaker 1>and Media analyst for Bloomberg Intelligence. Shares of the Walt

0:07:26.600 --> 0:07:29.120
<v Speaker 1>Disney Company right down, right now are down about a

0:07:29.200 --> 0:07:33.320
<v Speaker 1>quarter of a percent in after hours trading. Thank you

0:07:33.400 --> 0:07:36.400
<v Speaker 1>for listening to taking stock. I'm pim Fox and this

0:07:36.920 --> 0:07:48.360
<v Speaker 1>is Bloomberg. Yeah. Coming up, Bloomberg Law will be talking

0:07:48.400 --> 0:07:51.680
<v Speaker 1>about Chevron's victory in a long running court battle over

0:07:51.920 --> 0:07:56.840
<v Speaker 1>toxic waste in Ecuador. We've got the details, but June

0:07:56.880 --> 0:07:57.240
<v Speaker 1>Grasso