WEBVTT - Disney CFO Hugh Johnston Talks Earnings

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<v Speaker 1>Early today, Caroline and I spoke to Disney CFO Hugh Johnston,

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<v Speaker 1>and we discussed all of those parts of the House

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<v Speaker 1>of Mouse.

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<v Speaker 2>Isn't this If you look at the major investments that

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<v Speaker 2>we've been making in the business over the last couple

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<v Speaker 2>of years, Number one is in the streaming business, and

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<v Speaker 2>number two obviously is in the experiences business, so parks

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<v Speaker 2>and cruises.

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<v Speaker 3>And the like.

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<v Speaker 2>And as you've seen in the number is through twenty

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<v Speaker 2>twenty four, you know, it really marked a pivot for

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<v Speaker 2>the Walt Disney Company.

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<v Speaker 3>The creativity is certainly very.

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<v Speaker 2>Much back back to back billion dollar movies and a

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<v Speaker 2>terrific slid for twenty five in addition to that fantastic

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<v Speaker 2>workout of the TV studios with sixty Emmys, and that

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<v Speaker 2>obviously feeds the flywheel of the Walt Disney Company, whether

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<v Speaker 2>it's streaming or whether it's experiences including parks, consumer products,

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<v Speaker 2>and of course the cruise ships. So given those investments

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<v Speaker 2>that we've been making, and given that we now have

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<v Speaker 2>good financial visibility into the returns on those investments, we

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<v Speaker 2>felt like it was important to inform investors not just

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<v Speaker 2>on how we were investing, but what they should expect

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<v Speaker 2>in terms of the returns on those and with that visibility,

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<v Speaker 2>we're confident that we can actually deliver.

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<v Speaker 3>Here across the media sector.

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<v Speaker 1>Your industry is getting better at being profitable in streaming,

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<v Speaker 1>so that's where I want to go. Is this something

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<v Speaker 1>that is kind of industry wide macro level factor is

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<v Speaker 1>supporting you, or is this something that you've done in

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<v Speaker 1>the last year specifically that's kind of cracked the formula

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<v Speaker 1>for streaming at Disney.

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<v Speaker 3>I think it's a combination of both.

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<v Speaker 2>Streaming is certainly very much scale business, so as everyone

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<v Speaker 2>gains more scale, obviously that helps the industry overall. For

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<v Speaker 2>us in particular, I think the combination of the terrific

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<v Speaker 2>ip that we're putting into the service, the product improvements

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<v Speaker 2>that we're making, and that we are intending to make

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<v Speaker 2>with the new leader that we have on product, Adam Smith,

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<v Speaker 2>who came over to us from YouTube, we see obviously

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<v Speaker 2>a terrific future in terms of where streaming is going.

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<v Speaker 3>You know, it's important to think.

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<v Speaker 2>About what do additional subscribers mean in terms of the

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<v Speaker 2>streaming business. In many ways, streaming has the characteristics of

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<v Speaker 2>a software business, where the incremental value of an additional

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<v Speaker 2>subscriber is very high because the incremental cost to that

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<v Speaker 2>incremental subscriber are very low. So we feel optimistic about

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<v Speaker 2>as the industry is coming together, we're going to continue

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<v Speaker 2>to both add subscribers and in addition to that, because of.

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<v Speaker 3>The value we're delivering with the great ip and the.

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<v Speaker 2>Great product that we're putting into this service, we'll be

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<v Speaker 2>able to take pricing as well. And that combined with

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<v Speaker 2>good cost management that we have in place in terms

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<v Speaker 2>of good disciplines on that business, we feel very optimistic

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<v Speaker 2>about where streaming is going for us.

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<v Speaker 4>You're also curving password sharing. How much of an impact

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<v Speaker 4>will that make?

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<v Speaker 3>You think it'll be a positive.

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<v Speaker 2>It'll be gradual over time and strengthen from quarter to quarter,

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<v Speaker 2>but we do think it'll be a positive impact on subscribers.

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<v Speaker 4>I'm interested in the film studio and what bonus you're

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<v Speaker 4>going to get from More or two, what bonus you're

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<v Speaker 4>going to be getting from Mafasa the Lion King. How

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<v Speaker 4>important has the investment been there?

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<v Speaker 2>Well, I think it's quite important and in many ways

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<v Speaker 2>to talk about that, we ought to dial back a

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<v Speaker 2>little bit to where we were.

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<v Speaker 3>A few years ago.

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<v Speaker 2>You know, as we launch streaming, and it's important to

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<v Speaker 2>remember we've only been in the streaming business five years.

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<v Speaker 2>This is a relatively nascent business for us in many ways.

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<v Speaker 2>Even though it's going to be quite profitable for us,

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<v Speaker 2>or is quite profitable now, it'll be more profitable in

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<v Speaker 2>the future. But as we think about where we were

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<v Speaker 2>a few years ago, we were very much focused on

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<v Speaker 2>creating a lot of quantity in order to fill the

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<v Speaker 2>service with content, and as is often the case, when

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<v Speaker 2>you push hard on quantity, sometimes quality isn't quite up

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<v Speaker 2>to where you would like it to be. When Bob

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<v Speaker 2>Biger came back a couple of years ago, he talked

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<v Speaker 2>about restoring creativity to the center of the company and

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<v Speaker 2>reducing quantity and focusing on raising the bar on quality.

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<v Speaker 3>Now we've been talking about that.

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<v Speaker 2>For really a year year and a half, but you

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<v Speaker 2>saw the impact of that. I think very much in

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<v Speaker 2>twenty four with Inside Out two and Deadpool and Wolverine

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<v Speaker 2>back to back billion dollar.

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<v Speaker 3>Movies is it's never been done before.

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<v Speaker 2>And then on the TV side with Avid Elementary and

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<v Speaker 2>The Bear and of course Showgun, we had sixty Emmys.

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<v Speaker 2>So I think that focus on quality is not something

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<v Speaker 2>that's kind of a one time random thing, but in

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<v Speaker 2>fact is a sustaining impact on the company. So as

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<v Speaker 2>we think forward to the slate in twenty twenty five,

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<v Speaker 2>whether it's Muwana Iu or Mufasa the Lion King, or

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<v Speaker 2>Lilo and Stitch or Avatar or Captain America, we're very

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<v Speaker 2>optimistic that those movies are going to be big, big

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<v Speaker 2>hits as well.

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<v Speaker 3>We couldn't be more excited about them.

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<v Speaker 1>So you've talked about the linear TV or live TV

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<v Speaker 1>business almost.

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<v Speaker 3>Like a hedge.

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<v Speaker 1>I know you want to keep that audience. It's important

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<v Speaker 1>to you, particularly the older demographic. But like many sports

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<v Speaker 1>fans interested in the D two C launch on ESPN,

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<v Speaker 1>how you think that that will kind of change your

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<v Speaker 1>audience and customers' attitudes in how they pay for sports

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<v Speaker 1>by sports.

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<v Speaker 2>Well, the important thing I think about the ESPN Flagship

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<v Speaker 2>launch Flagship is the project name that we use on that.

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<v Speaker 2>The thing to think about it is it's not just

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<v Speaker 2>another distribution channel, So it's not basically taking ESPN Alon

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<v Speaker 2>as it exists and just putting it into streaming. It

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<v Speaker 2>will have all of that content, to be clear, but

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<v Speaker 2>in addition to that, it's really going to be a

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<v Speaker 2>true digital experience in so many ways, so the ability

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<v Speaker 2>to do e commerce, the ability to track fantasy, the

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<v Speaker 2>ability to shape some of the ESPN broadcast products to

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<v Speaker 2>your liking, the ability to do online vetting as a

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<v Speaker 2>part of the product. It's a much more interactive, much

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<v Speaker 2>more digital product, and that's where I think the big

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<v Speaker 2>reshaping will come from. Consumers will choose what they want

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<v Speaker 2>to go through traditional cable networks or whether they want

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<v Speaker 2>to go through the newer digital networks, and that's something

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<v Speaker 2>that we're there for everyone everywhere. That's really the goal

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<v Speaker 2>of ESPN is we want to be where the sports

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<v Speaker 2>fan wants to be, but we do intend to bring

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<v Speaker 2>a lot of value in that product, and I think

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<v Speaker 2>sports fans will come to it relatively quickly.

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<v Speaker 4>Disney CFO Hugh Johnston that