Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So to the earnings and focus on Disney. The company's
Speaker 2: first quarter earnings topping estimates, fueled by success in its
Speaker 2: movie studios and streaming business. The stock is positive and
Speaker 2: joining us Now's the Disney CFO Hugh Johnston. Welcome back
Speaker 2: to the program sir. We'll talk about how solid these
Speaker 2: numbers aren't just the moment. There's one headline the least
Speaker 2: from me. We're talking about a little bit earlier this morning.
Speaker 2: We'd love an explanation from you on it. Just seeing
Speaker 2: a second quarter modest decline in Disney Plus subscribers quarter
Speaker 2: on quarter, could you explain that we tested the limit
Speaker 2: of price tolerance and consumers. What's going on there?
Speaker 1: Good morning, Jonathan, No, I don't think so at all. Actually,
Speaker 1: that's really sort of more seasonal decline than anything else.
Speaker 1: A year over year will will certainly be up, so
Speaker 1: certainly not concerned from that perspective. More broadly, the streaming
Speaker 1: business is doing extremely well. This is a business were
Speaker 1: we invested pretty heavily in a couple of years ago,
Speaker 1: and what you're seeing now is the benefit of those investments.
Speaker 1: Our expectation is will continue to grow subs, will improve margins.
Speaker 1: We should make more than a billion dollars in that
Speaker 1: business this year, and next year we're looking at double
Speaker 1: digit margins in that business. So certainly a ton of
Speaker 1: positive momentum. Now you get into the question of why.
Speaker 1: A lot of it is the great content that's coming
Speaker 1: from the studio side of the house, both on the
Speaker 1: TV and the.
Speaker 3: Movie side of our entertainment business.
Speaker 1: We Wanta to Inside Out to Deadpool, all terrific hits,
Speaker 1: and on the TV side, the combination of Abbot, Elementary,
Speaker 1: Showgun and high potential causing viewership to grow. We're seeing
Speaker 1: higher engagement, We're seeing churn ultimately coming down over the
Speaker 1: course of this year.
Speaker 3: So we feel like.
Speaker 1: The streaming business is going to be one of the
Speaker 1: big drivers for our company going forward.
Speaker 2: Here, you know how much I love Showgun and least
Speaker 2: so I can say love Momana two as well. So
Speaker 2: the content SLEN is looking pretty good so far. I
Speaker 2: did want to talk about the cost issue though, and
Speaker 2: clearly not an issue from you, so I appreciate the explanation.
Speaker 2: Conversation we've had over the last few days or so
Speaker 2: is if we get tariffs, can companies pass on the costs.
Speaker 2: I'd like to know from your perspective and for the company,
Speaker 2: the additional tarists that have gone onto China, how that
Speaker 2: could impact your business. How are you thinking about things?
Speaker 1: Yeah, right now, based on what's been proposed, And obviously
Speaker 1: this is a rapidly evolving environment, so we're going to
Speaker 1: react as we learn things.
Speaker 3: The impact would be im material to us.
Speaker 1: So from that perspective, really, the Walt Disney Company will
Speaker 1: be fine based on what's on the table right now.
Speaker 4: At the same time, there's a question about the American
Speaker 4: brand at a time when they're increasing tensions between the
Speaker 4: US and China, the US and Europe. Given the fact
Speaker 4: that the experiences side of your business has been such
Speaker 4: a driver of growth for you, are you concerned Have
Speaker 4: you seen any pullback in attendance in some of the
Speaker 4: areas like Shanghai, like France, like Paris? They could potentially
Speaker 4: have some feelings around the negotiations.
Speaker 1: Now, broadly speaking, the international parks business did very well.
Speaker 1: Profitability was up twenty eight percent for the quarter. Attendance
Speaker 1: broadly speaking was up, So from that perspective, we certainly
Speaker 1: feel good. Disneyland Paris actually had a terrific quarter, so
Speaker 1: freely positive in that regard. Candidly, in many ways, what
Speaker 1: the Walt Disney Company represents is an opportunity to.
Speaker 3: Get away from all of the things that are happening.
Speaker 1: In the world right Our job is to basically bring
Speaker 1: families joy, bring them together, give them smiles. So I
Speaker 1: think in many ways we're not a part of that
Speaker 1: conversation at the.
Speaker 4: Same time, and it's sort of pulling together the idea
Speaker 4: of experiences and the smiles and the streaming business, the
Speaker 4: idea that how much are people willing to pay for this?
Speaker 4: John was alluding to that with terifs, but just more broadly,
Speaker 4: how much are you seeing consumers push back against some
Speaker 4: of the price increases, whether it's at the parks or
Speaker 4: whether it's at the streaming services, just simply because of
Speaker 4: how much prices of our already gone up.
Speaker 1: Yeah, We're not to be perfectly candid, and I think
Speaker 1: it's always important to remember from a consumer perspective, prices
Speaker 1: what you pay, and value is what you get, and
Speaker 1: if you deliver sufficient value to the consumer, they are
Speaker 1: willing to pay the price. And I you see that
Speaker 1: going on broadly with companies these days. Companies that deliver
Speaker 1: a lot of value they're pricing is being accepted by consumers.
Speaker 1: And if you look at the value of a Disney vacation,
Speaker 1: if you look at the value of all the things
Speaker 1: that we're able to deliver on the streaming service, people
Speaker 1: are willing to pay to pay the price for that
Speaker 1: because frankly, they're getting a lot for it. So we
Speaker 1: haven't seen pushback really in a material way at all
Speaker 1: in that regard.
Speaker 2: You're speaking of the streaming business. Can we talk about
Speaker 2: Hulu just a little bit more. Where are we with
Speaker 2: the negotiations with Comcast and we make it any progress.
Speaker 1: We're still in the process and I probably won't kind
Speaker 1: of go any further than that. I'd expect we'll get
Speaker 1: some resolution.
Speaker 2: Sometimes we'll holding things up few What are the sticking points?
Speaker 1: Oh, it's I think just the usual people have different
Speaker 1: points of view on the value of the assets.
Speaker 3: So nothing more than that.
Speaker 4: There is a content question here, Hugh, about what the
Speaker 4: driver of growth is going to be from a streaming perspective,
Speaker 4: whether it's instrumental and getting involved in some of the
Speaker 4: sports world, or whether you can kind of lean into
Speaker 4: existing brands. How you do content creation at a time
Speaker 4: when there is a lot of question around what exactly
Speaker 4: sells other than the legacy brands.
Speaker 1: Yeah, I think when you look at the Walt Disney Company,
Speaker 1: in many ways, we're best positioned from the standpoint of
Speaker 1: streaming because we do generate so much of our own
Speaker 1: content relative to some of our competitors in many ways.
Speaker 1: To think about Disney Plus is it really can be
Speaker 1: the portal into all things Disney and something you might
Speaker 1: want to have on twenty four hours a day, seven
Speaker 1: days a week, because if you want news, you'll be
Speaker 1: able to find it through Disney Disney Plus, Hulu. If
Speaker 1: you want sports, the ESPN tile, just one on Disney Plus.
Speaker 1: If you want movie entertainment, TV entertainment. Obviously, with all
Speaker 1: of our studios, we generate a tremendous amount of entertainment
Speaker 1: from our own ip, so I think more than most
Speaker 1: we're actually very well positioned to ascertain what the right
Speaker 1: level of content is and to create that content for ourselves,
Speaker 1: which obviously gives us some inherent advantages.
Speaker 3: If we were.
Speaker 4: Talking six months ago, we might have started the conversation
Speaker 4: on artificial intelligence and how much you were using that
Speaker 4: in your content creation at a time where that's increasingly
Speaker 4: something that's being done. How much have you explored that
Speaker 4: to lower costs, expedite the process of time to get
Speaker 4: some of the movies and videos online.
Speaker 1: We've got a number of use cases really across the
Speaker 1: entire company, from the ability to create content, to the
Speaker 1: ability to manage the company more efficiently, to the ability
Speaker 1: to manage our guest experiences inside the parks.
Speaker 3: And cruise business. So we're in the.
Speaker 1: Early days of leveraging all that as our most companies,
Speaker 1: because we really are very much in the early days
Speaker 1: of artificial intelligence generally speaking, but we're experimenting a lot
Speaker 1: to try to understand where can actually best add value
Speaker 1: to the Walt Disney Company.
Speaker 2: You do you see a shift in vibes in this
Speaker 2: country where the kind of content that people want of
Speaker 2: view is changing.
Speaker 1: Not really, you know, it tends to be I think
Speaker 1: more more based on age demographics than anything else. But
Speaker 1: by and large, if you look at what we're able
Speaker 1: to deliver by virtue of the broad base of IP
Speaker 1: that we have, we have sort of the very traditional
Speaker 1: things from the original Walt Disney Company right through to
Speaker 1: things that come out of Marvel that come out of
Speaker 1: Pixar that are sort of very current and contemporary. So
Speaker 1: I don't see dramatic shifts going on by any stretch
Speaker 1: to the imagination, and I do see our assets actually
Speaker 1: appealing to a wide, wide array of consumers.
Speaker 2: Here and you've got to run. We appreciate your time,
Speaker 2: as always said, thank you. The Disney CFO, Hugh Johnston