WEBVTT - Disney CFO Hugh Johnston Talks Rising Shares, Earnings

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>So to the earnings and focus on Disney. The company's

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<v Speaker 2>first quarter earnings topping estimates, fueled by success in its

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<v Speaker 2>movie studios and streaming business. The stock is positive and

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<v Speaker 2>joining us Now's the Disney CFO Hugh Johnston. Welcome back

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<v Speaker 2>to the program sir. We'll talk about how solid these

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<v Speaker 2>numbers aren't just the moment. There's one headline the least

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<v Speaker 2>from me. We're talking about a little bit earlier this morning.

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<v Speaker 2>We'd love an explanation from you on it. Just seeing

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<v Speaker 2>a second quarter modest decline in Disney Plus subscribers quarter

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<v Speaker 2>on quarter, could you explain that we tested the limit

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<v Speaker 2>of price tolerance and consumers. What's going on there?

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<v Speaker 1>Good morning, Jonathan, No, I don't think so at all. Actually,

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<v Speaker 1>that's really sort of more seasonal decline than anything else.

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<v Speaker 1>A year over year will will certainly be up, so

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<v Speaker 1>certainly not concerned from that perspective. More broadly, the streaming

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<v Speaker 1>business is doing extremely well. This is a business were

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<v Speaker 1>we invested pretty heavily in a couple of years ago,

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<v Speaker 1>and what you're seeing now is the benefit of those investments.

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<v Speaker 1>Our expectation is will continue to grow subs, will improve margins.

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<v Speaker 1>We should make more than a billion dollars in that

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<v Speaker 1>business this year, and next year we're looking at double

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<v Speaker 1>digit margins in that business. So certainly a ton of

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<v Speaker 1>positive momentum. Now you get into the question of why.

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<v Speaker 1>A lot of it is the great content that's coming

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<v Speaker 1>from the studio side of the house, both on the

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<v Speaker 1>TV and the.

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<v Speaker 3>Movie side of our entertainment business.

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<v Speaker 1>We Wanta to Inside Out to Deadpool, all terrific hits,

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<v Speaker 1>and on the TV side, the combination of Abbot, Elementary,

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<v Speaker 1>Showgun and high potential causing viewership to grow. We're seeing

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<v Speaker 1>higher engagement, We're seeing churn ultimately coming down over the

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<v Speaker 1>course of this year.

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<v Speaker 3>So we feel like.

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<v Speaker 1>The streaming business is going to be one of the

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<v Speaker 1>big drivers for our company going forward.

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<v Speaker 2>Here, you know how much I love Showgun and least

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<v Speaker 2>so I can say love Momana two as well. So

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<v Speaker 2>the content SLEN is looking pretty good so far. I

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<v Speaker 2>did want to talk about the cost issue though, and

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<v Speaker 2>clearly not an issue from you, so I appreciate the explanation.

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<v Speaker 2>Conversation we've had over the last few days or so

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<v Speaker 2>is if we get tariffs, can companies pass on the costs.

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<v Speaker 2>I'd like to know from your perspective and for the company,

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<v Speaker 2>the additional tarists that have gone onto China, how that

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<v Speaker 2>could impact your business. How are you thinking about things?

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<v Speaker 1>Yeah, right now, based on what's been proposed, And obviously

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<v Speaker 1>this is a rapidly evolving environment, so we're going to

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<v Speaker 1>react as we learn things.

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<v Speaker 3>The impact would be im material to us.

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<v Speaker 1>So from that perspective, really, the Walt Disney Company will

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<v Speaker 1>be fine based on what's on the table right now.

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<v Speaker 4>At the same time, there's a question about the American

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<v Speaker 4>brand at a time when they're increasing tensions between the

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<v Speaker 4>US and China, the US and Europe. Given the fact

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<v Speaker 4>that the experiences side of your business has been such

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<v Speaker 4>a driver of growth for you, are you concerned Have

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<v Speaker 4>you seen any pullback in attendance in some of the

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<v Speaker 4>areas like Shanghai, like France, like Paris? They could potentially

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<v Speaker 4>have some feelings around the negotiations.

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<v Speaker 1>Now, broadly speaking, the international parks business did very well.

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<v Speaker 1>Profitability was up twenty eight percent for the quarter. Attendance

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<v Speaker 1>broadly speaking was up, So from that perspective, we certainly

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<v Speaker 1>feel good. Disneyland Paris actually had a terrific quarter, so

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<v Speaker 1>freely positive in that regard. Candidly, in many ways, what

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<v Speaker 1>the Walt Disney Company represents is an opportunity to.

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<v Speaker 3>Get away from all of the things that are happening.

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<v Speaker 1>In the world right Our job is to basically bring

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<v Speaker 1>families joy, bring them together, give them smiles. So I

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<v Speaker 1>think in many ways we're not a part of that

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<v Speaker 1>conversation at the.

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<v Speaker 4>Same time, and it's sort of pulling together the idea

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<v Speaker 4>of experiences and the smiles and the streaming business, the

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<v Speaker 4>idea that how much are people willing to pay for this?

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<v Speaker 4>John was alluding to that with terifs, but just more broadly,

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<v Speaker 4>how much are you seeing consumers push back against some

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<v Speaker 4>of the price increases, whether it's at the parks or

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<v Speaker 4>whether it's at the streaming services, just simply because of

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<v Speaker 4>how much prices of our already gone up.

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<v Speaker 1>Yeah, We're not to be perfectly candid, and I think

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<v Speaker 1>it's always important to remember from a consumer perspective, prices

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<v Speaker 1>what you pay, and value is what you get, and

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<v Speaker 1>if you deliver sufficient value to the consumer, they are

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<v Speaker 1>willing to pay the price. And I you see that

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<v Speaker 1>going on broadly with companies these days. Companies that deliver

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<v Speaker 1>a lot of value they're pricing is being accepted by consumers.

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<v Speaker 1>And if you look at the value of a Disney vacation,

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<v Speaker 1>if you look at the value of all the things

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<v Speaker 1>that we're able to deliver on the streaming service, people

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<v Speaker 1>are willing to pay to pay the price for that

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<v Speaker 1>because frankly, they're getting a lot for it. So we

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<v Speaker 1>haven't seen pushback really in a material way at all

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<v Speaker 1>in that regard.

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<v Speaker 2>You're speaking of the streaming business. Can we talk about

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<v Speaker 2>Hulu just a little bit more. Where are we with

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<v Speaker 2>the negotiations with Comcast and we make it any progress.

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<v Speaker 1>We're still in the process and I probably won't kind

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<v Speaker 1>of go any further than that. I'd expect we'll get

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<v Speaker 1>some resolution.

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<v Speaker 2>Sometimes we'll holding things up few What are the sticking points?

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<v Speaker 1>Oh, it's I think just the usual people have different

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<v Speaker 1>points of view on the value of the assets.

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<v Speaker 3>So nothing more than that.

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<v Speaker 4>There is a content question here, Hugh, about what the

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<v Speaker 4>driver of growth is going to be from a streaming perspective,

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<v Speaker 4>whether it's instrumental and getting involved in some of the

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<v Speaker 4>sports world, or whether you can kind of lean into

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<v Speaker 4>existing brands. How you do content creation at a time

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<v Speaker 4>when there is a lot of question around what exactly

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<v Speaker 4>sells other than the legacy brands.

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<v Speaker 1>Yeah, I think when you look at the Walt Disney Company,

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<v Speaker 1>in many ways, we're best positioned from the standpoint of

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<v Speaker 1>streaming because we do generate so much of our own

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<v Speaker 1>content relative to some of our competitors in many ways.

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<v Speaker 1>To think about Disney Plus is it really can be

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<v Speaker 1>the portal into all things Disney and something you might

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<v Speaker 1>want to have on twenty four hours a day, seven

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<v Speaker 1>days a week, because if you want news, you'll be

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<v Speaker 1>able to find it through Disney Disney Plus, Hulu. If

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<v Speaker 1>you want sports, the ESPN tile, just one on Disney Plus.

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<v Speaker 1>If you want movie entertainment, TV entertainment. Obviously, with all

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<v Speaker 1>of our studios, we generate a tremendous amount of entertainment

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<v Speaker 1>from our own ip, so I think more than most

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<v Speaker 1>we're actually very well positioned to ascertain what the right

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<v Speaker 1>level of content is and to create that content for ourselves,

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<v Speaker 1>which obviously gives us some inherent advantages.

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<v Speaker 3>If we were.

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<v Speaker 4>Talking six months ago, we might have started the conversation

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<v Speaker 4>on artificial intelligence and how much you were using that

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<v Speaker 4>in your content creation at a time where that's increasingly

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<v Speaker 4>something that's being done. How much have you explored that

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<v Speaker 4>to lower costs, expedite the process of time to get

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<v Speaker 4>some of the movies and videos online.

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<v Speaker 1>We've got a number of use cases really across the

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<v Speaker 1>entire company, from the ability to create content, to the

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<v Speaker 1>ability to manage the company more efficiently, to the ability

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<v Speaker 1>to manage our guest experiences inside the parks.

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<v Speaker 3>And cruise business. So we're in the.

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<v Speaker 1>Early days of leveraging all that as our most companies,

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<v Speaker 1>because we really are very much in the early days

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<v Speaker 1>of artificial intelligence generally speaking, but we're experimenting a lot

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<v Speaker 1>to try to understand where can actually best add value

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<v Speaker 1>to the Walt Disney Company.

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<v Speaker 2>You do you see a shift in vibes in this

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<v Speaker 2>country where the kind of content that people want of

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<v Speaker 2>view is changing.

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<v Speaker 1>Not really, you know, it tends to be I think

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<v Speaker 1>more more based on age demographics than anything else. But

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<v Speaker 1>by and large, if you look at what we're able

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<v Speaker 1>to deliver by virtue of the broad base of IP

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<v Speaker 1>that we have, we have sort of the very traditional

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<v Speaker 1>things from the original Walt Disney Company right through to

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<v Speaker 1>things that come out of Marvel that come out of

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<v Speaker 1>Pixar that are sort of very current and contemporary. So

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<v Speaker 1>I don't see dramatic shifts going on by any stretch

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<v Speaker 1>to the imagination, and I do see our assets actually

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<v Speaker 1>appealing to a wide, wide array of consumers.

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<v Speaker 2>Here and you've got to run. We appreciate your time,

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<v Speaker 2>as always said, thank you. The Disney CFO, Hugh Johnston