WEBVTT - Bloomberg Surveillance: Disney CFO Hugh Johnston

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<v Speaker 1>There's a lot to discuss with Hugh Johnston, the Disney

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<v Speaker 1>CFO who joined us now. Hugh, it's great to catch

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<v Speaker 1>up with you. We spoke for years in your years

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<v Speaker 1>of PEPSI fantastic to see you in a new c

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<v Speaker 1>Let's just get straight into these numbers if we can

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<v Speaker 1>cost cutting. Can you walk us through where that cost

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<v Speaker 1>cutting exercise is really buying?

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<v Speaker 2>Yeah, it actually is. In Good morning to you John

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<v Speaker 2>and to the team there. I'm very excited about that

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<v Speaker 2>the progress that we've made on cost cutting. To be honest,

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<v Speaker 2>when you do these programs, you're always looking for is

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<v Speaker 2>it actually flowing to the bottom line, And what we

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<v Speaker 2>communicated yesterday was five hundred million dollars of saves flowed

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<v Speaker 2>through to the bottom line, and you can see it

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<v Speaker 2>in the P and L in the form of margin

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<v Speaker 2>improvement to the tune of three hundred and fifty basis points.

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<v Speaker 2>That's a huge, huge margin jump and something that we've

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<v Speaker 2>got a lot of confidence in will continue because we're

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<v Speaker 2>really getting good traction and good momentum on managing our

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<v Speaker 2>costs more tightly while reinvesting back in the business to

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<v Speaker 2>drive the top line as well.

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<v Speaker 1>So here you've got a really strong story to tow

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<v Speaker 1>this morning the stock as well. I certainly don't want

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<v Speaker 1>this conversation to drown into a conversation about activists, but

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<v Speaker 1>I need to ask about now some paths. Have you

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<v Speaker 1>spoken to him personally at all since you took on

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<v Speaker 1>the new role.

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<v Speaker 2>Yeah, I spoke to him a couple of times, briefly,

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<v Speaker 2>not recently, And honestly, we're just at a very different

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<v Speaker 2>spot on this. We feel right now like we've got

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<v Speaker 2>terrific momentum. Bob and the team have spent the last

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<v Speaker 2>year both fixing the business and now pivoting to building

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<v Speaker 2>the business, and you can see it in the results,

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<v Speaker 2>and you can see it in our confidence as well.

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<v Speaker 2>The share of purchase that we've communicated, the earnings guidance

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<v Speaker 2>we've communicated, the increase in the dividend all suggests that

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<v Speaker 2>we have confidence that we're not only going to be

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<v Speaker 2>able to do this for the short term, but we're

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<v Speaker 2>going to be able to do it for multiple years.

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<v Speaker 2>So honestly, I don't think we need any incremental help.

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<v Speaker 2>I think we need to keep this management team focused

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<v Speaker 2>on doing the things it's doing so that we can

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<v Speaker 2>continue to deliver great results and make progress on the

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<v Speaker 2>big strategic issues that will help us emerge from the

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<v Speaker 2>disruption that's going on in media in a much much

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<v Speaker 2>stronger position than we were in before.

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<v Speaker 1>To some analysts, including our run in Bloomberg Intelligence, wondering

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<v Speaker 1>whether you've been too conservative on the outlook for streaming

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<v Speaker 1>to turn a profit by the fall, see what would

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<v Speaker 1>you say back to them this morning.

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<v Speaker 2>I'd say the guidances is to do Q four. If

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<v Speaker 2>we do better, we do better. But the guide is

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<v Speaker 2>Q four.

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<v Speaker 3>You can you give us a name and maybe a

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<v Speaker 3>price for this bundle of the sports bundle. Everyone's just

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<v Speaker 3>asking that forty dollars, fifty dollars, call it Spike.

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<v Speaker 2>Yeah. No, we haven't come up with a name for

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<v Speaker 2>it yet. You know, the focus when you do a

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<v Speaker 2>three way JV is on how do we make sure

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<v Speaker 2>that we get the operating principles right so that the

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<v Speaker 2>parties are aligned up front and they're aligned on going

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<v Speaker 2>and delivering a great product to consumers. And that's the

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<v Speaker 2>real focus here is how do we make it easier

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<v Speaker 2>and reduce friction for the sports fans. So we're going

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<v Speaker 2>to get to pricing shortly. We'll get to a name

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<v Speaker 2>at some point, I'm sure. But what's most important is

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<v Speaker 2>I think we're going to deliver a product that's going

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<v Speaker 2>to make your life a hole lot better if you're

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<v Speaker 2>a sports consumer. Hugh.

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<v Speaker 3>Do you think that ultimately the idea of a bundle

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<v Speaker 3>going back to the future and getting people with reduced

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<v Speaker 3>friction to find their sports team and find the game

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<v Speaker 3>that they want to watch is going to take eyeballs

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<v Speaker 3>away from some of the other providers, the cable networks

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<v Speaker 3>that have traditionally had these contracts. You're going to be

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<v Speaker 3>directly on some of these sports rights.

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<v Speaker 2>Well, I think it's going to be targeted more at

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<v Speaker 2>people who either were never in the cable bundle or

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<v Speaker 2>people who had already departed from the cable bundle, you know,

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<v Speaker 2>at the margins. Might there be a little bit of shifting, Yeah,

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<v Speaker 2>there could be, But to tell you the truth, I

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<v Speaker 2>don't think sports is going to be the reason that

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<v Speaker 2>someone makes that shift all by itself. I think there

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<v Speaker 2>are a lot of factors that weigh into that. From

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<v Speaker 2>our perspective, we're focused on meeting the fan wherever they

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<v Speaker 2>choose to be. I don't think we're motivating the fan

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<v Speaker 2>to move. But if the fan does move. We want

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<v Speaker 2>to be there because we want ESPN to be everywhere.

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<v Speaker 1>He We're super interested in how you're going to bid

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<v Speaker 1>for those sporting rights. Do you think you might bid

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<v Speaker 1>for them as joint venture? How's this going to work

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<v Speaker 1>in a months and years to come.

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<v Speaker 2>No, quite the opposite. We all will be bidding independently.

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<v Speaker 2>And that's something that we're quite firm on is that

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<v Speaker 2>is not the purpose of the venture. The purpose of

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<v Speaker 2>the venture is purely distribution. It's not about procurement of content.

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<v Speaker 2>So we'll continue to compete with each other for sports

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<v Speaker 2>rights just as we always have. It'll actually, I think,

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<v Speaker 2>be a great benefit to the league because it's no

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<v Speaker 2>different in terms of the way we bid for sports rights.

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<v Speaker 2>But that reduced friction benefits all of the leagues as well.

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<v Speaker 2>So I think the leagues will actually be pretty optimistic about.

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<v Speaker 1>There was some reporting yesterday that suggested the leagues weren't

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<v Speaker 1>aware of this joint venture. Q. Have you've spoken to them?

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<v Speaker 2>I have not personally, but we certainly have as the

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<v Speaker 2>Walt Disney Company. Candidly, when you're putting together a three

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<v Speaker 2>way GV and a three way GV in the media, business.

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<v Speaker 2>Trying to keep it private until you get the deal

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<v Speaker 2>done is challenging enough to involve more parties, frankly, just

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<v Speaker 2>would have created I think too much risk. So we

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<v Speaker 2>certainly let them know the moment that we announce it. Here.

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<v Speaker 3>We have lots more questions about the sports and the streaming,

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<v Speaker 3>and hopefully we can ask you about them. But I

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<v Speaker 3>do want to shift gears just a bit to Shanghai's utopia.

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<v Speaker 3>The idea that the Chinese offerings of Disney did pretty

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<v Speaker 3>well actually worstallwarts, which was surprising because we've heard a

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<v Speaker 3>lot of a different tone from other US companies. How

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<v Speaker 3>much are you seeing Disney welcomed in China despite some

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<v Speaker 3>of the rhetoric that we've heard out of the Chinese

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<v Speaker 3>Communist Party.

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<v Speaker 2>Yeah, we're very much welcomed. You know, Disney is just

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<v Speaker 2>sort of a beloved brand. It's part of the reason

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<v Speaker 2>that I came here, is it truly is an iconic,

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<v Speaker 2>beloved brand, not just in the United States, but really

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<v Speaker 2>almost everywhere in the world. So the Chinese consumer is

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<v Speaker 2>very much responding to what's a fabulous park experience, which,

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<v Speaker 2>by the way, has been true in the rest of

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<v Speaker 2>our international parks as well, every one of our international

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<v Speaker 2>parks made money in the quarter, and they're all doing

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<v Speaker 2>extremely well. International parks revenue grow thirty five percent. So

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<v Speaker 2>I'm very, very optimistic about all the parks outside I views,

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<v Speaker 2>including the park in China.

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<v Speaker 1>We thought people loved McDonald's and Starbucks as well. But

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<v Speaker 1>there's been boycotts in certain places against America Inc. And

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<v Speaker 1>you think of the Walt Disney company, I think as

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<v Speaker 1>the company behind America Inc. All around the world. To you,

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<v Speaker 1>how have you avoided that as a company.

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<v Speaker 2>It's a great question, and in all candor, I'm so

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<v Speaker 2>new here, I'm not sure I can give you a

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<v Speaker 2>great reason in that regard, other than the fact that

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<v Speaker 2>as a company, what we're really focused on is just

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<v Speaker 2>bringing joy to families, right, We're about bringing smile to

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<v Speaker 2>people's faces, or about families coming together. And given that's

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<v Speaker 2>who we are, I think maybe we tend to be

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<v Speaker 2>a little bit more immune to that than most here.

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<v Speaker 1>It sounds like you've been there years based on that response,

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<v Speaker 1>Hugh Johnson, it's good to hear from you, sir. Thank

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<v Speaker 1>you very much for being with us. We look forward

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<v Speaker 1>to catching up with you in the quarters and the years.

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<v Speaker 1>To come. Hugh Johnson there the Disney CFO