Speaker 1: Let's turn to the earnings. Disney delivering better than expected earnings,
Speaker 1: the company streaming business posting a first ever profit, alongside
Speaker 1: a sluggish performance from its theme parks. The sock is
Speaker 1: down by about a third of one percent. So weigh
Speaker 1: in on all of this, and please to say that
Speaker 1: we can catch up with the Disney CFO Hugh Johnston.
Speaker 1: She is wonderful to catch up with you, sir. As always,
Speaker 1: we've got to start with the price increases. First of all.
Speaker 1: It's on the minds of a lot of people I
Speaker 1: can tell you around this table as well to you,
Speaker 1: So let's get into it. We've heard from a lot
Speaker 1: of companies that have talked about a lot of pricing
Speaker 1: power and sliding sales. What have you seen in the
Speaker 1: streaming business that gives you confidence you can hike prices
Speaker 1: without that delivering increased churn?
Speaker 2: Great? Well, good morning, Great to be with you all.
Speaker 3: Obviously, terrific quarter for us, and you all have mentioned
Speaker 3: the numbers a few times. The entertainment business is doing
Speaker 3: exceptionally well right now. We had the top movie in May,
Speaker 3: June and July, and the form of Planet of the
Speaker 3: Apes inside out too, and then now Deadpool.
Speaker 2: That's real value to the consumer.
Speaker 3: And as we think forward to what's going to be
Speaker 3: appearing on the streaming service, those three great motion pictures,
Speaker 3: the ip that we've produced ourselves are going to be
Speaker 3: on the streaming service, as well as an enormous number
Speaker 3: of Emmy nominated TV shows including Avid, Elementary and The Bear,
Speaker 3: Only Murders in the Building, and of course Showgun the
Speaker 3: huge hit. And when you deliver that much value to consumers,
Speaker 3: consumers are willing to pay a little bit more because, frankly,
Speaker 3: they're getting so much back in terms of entertainment.
Speaker 1: You've got to say, I'm with your Showgun was awesome.
Speaker 1: I said that last time just to endorse it once again,
Speaker 1: one of my favorites of the last twelve months. Clearly,
Speaker 1: the streaming business is doing well, which opens the door
Speaker 1: to high prices. You can't say the same thing about
Speaker 1: the theme park business. Just what is going on there?
Speaker 3: You Yeah, So one of the things to keep in
Speaker 3: mind is the theme parks business.
Speaker 2: We have actually grew in the quarter.
Speaker 3: Revenue is up two percent, so we're not talking about
Speaker 3: a business that's going negative in terms of growth. Earnings
Speaker 3: were down a little bit because we had inflation, and
Speaker 3: we're making some vestments back in the business. What we
Speaker 3: see happening more than anything is the lower income consumers
Speaker 3: are a little bit stressed and shaving a little bit
Speaker 3: off of their time at the park, and then higher
Speaker 3: income consumers are tending to travel overseas a little bit
Speaker 3: more right now. But given the strength of the ip
Speaker 3: that we have in the park, given the quality of
Speaker 3: the experience, when the consumer is soft, it tends to
Speaker 3: hit us late, It hits us a little bit less,
Speaker 3: and we tend to recover. Really, so we really just
Speaker 3: see this as a few quarters of slight perturbation in
Speaker 3: the numbers. Frankly, I think we're going to be right
Speaker 3: back as we get into the middle of next year.
Speaker 4: One of the other complaints commonly hear with the consumer
Speaker 4: is about bundles, not that they're not good, but that
Speaker 4: there's just too many of them and it's given people fatigue.
Speaker 4: Do you think there needs to be some consolidation. Do
Speaker 4: you agree that there's just too many options right now?
Speaker 3: Well, consumers do seem to appreciate having a limited number
Speaker 3: of bundles. Now, what we've tried to do with our
Speaker 3: own offering is offer the individual pieces or if people
Speaker 3: want to go at a discount by bundling, we're happy
Speaker 3: to do that.
Speaker 2: So that said, I think you do see.
Speaker 3: A trend where there's probably going to be a few
Speaker 3: big competitors in the marketplace and streaming as we see
Speaker 3: right now between Netflix, Amazon and ourselves, and then there'll
Speaker 3: be some smaller competitors out there and they'll have to
Speaker 3: decide how they're going to how they're going to run
Speaker 3: their businesses.
Speaker 4: Well, another huge draw of some of these sports rights,
Speaker 4: and on this view, the NBA has had this very
Speaker 4: odd bidding war where you've come out on skathe but
Speaker 4: Warner Broods loses out. You have Amazon dot Com a
Speaker 4: new entrance in there. You have all these streamers coming
Speaker 4: in trying to get their hands on live sports events.
Speaker 4: Do you think this is a healthy or unhealthy development
Speaker 4: for the industry?
Speaker 3: You know, generally speaking, what you see is sort of
Speaker 3: the leagues are choosing to go with with the big
Speaker 3: winners in all of this.
Speaker 2: So they've obviously been with us.
Speaker 3: ESPN the third quarter had forty nine percent market share
Speaker 3: of sports viewing, which is obviously a terrific number. So
Speaker 3: we have the a package with the NBA. We'll have
Speaker 3: the NBA Finals for the next twelve years. Beyond that,
Speaker 3: I'd be speculating is to get into what their decision
Speaker 3: making process was, But I think in general they're quite
Speaker 3: pleased with what we've been able to do for them,
Speaker 3: and obviously we're happy with what they've been able to.
Speaker 2: Do for us.
Speaker 3: And you combine our NBA rights along with college football
Speaker 3: along with the NFL, we've locked up sort of the
Speaker 3: most important sports to us in terms of being big
Speaker 3: and quite popular for an extended period of time.
Speaker 2: So we feel good about where we sat.
Speaker 1: Hugh.
Speaker 5: I know there's a different price point whether or not
Speaker 5: you want to be an individual that has to sit
Speaker 5: through advertisements. Are you seeing an uptick of political ads
Speaker 5: given the season we're in.
Speaker 3: No, we really haven't seen much in that regard, so
Speaker 3: I can't certainly say that.
Speaker 2: So do you expect that to happen?
Speaker 5: I mean everyone says after Labor Day, this is when
Speaker 5: the campaigns are going to be in high gear up
Speaker 5: until November. Are you expecting an uptick of political ads
Speaker 5: on any of your streaming services?
Speaker 3: Yeah, it's a great question. I couldn't tell you the
Speaker 3: answer to that one. So what I can tell you
Speaker 3: more broadly is the advertising market right now is incredibly healthy.
Speaker 3: We grew advertising as a company eight percent in the quarter.
Speaker 3: Our upfronts for next year were quite successful. The upfronts
Speaker 3: were up five percent, and in addition to that, the
Speaker 3: streaming service saw a twenty percent increase in advertising and
Speaker 3: ESPN saw a seventeen percent increase. So generally speaking, the
Speaker 3: ad market is healthy. The biggest place is that it's healthy.
Speaker 3: Are consumer and then technology?
Speaker 4: Are you a.
Speaker 5: Concern that consumers right now potentially are going to shrug
Speaker 5: off the price increases, because what we hear from a
Speaker 5: lot of companies is that we do see consumers trading down.
Speaker 5: Why do you think they're willing to pay for a
Speaker 5: higher price point?
Speaker 3: Well, I think the biggest reason is it's always important
Speaker 3: to focus on this. The consumer receives value and what
Speaker 3: they pay is price. And because we're delivering so much value,
Speaker 3: I mean, really an enormous amount of value in terms
Speaker 3: of the hits that I just met.
Speaker 2: But then in addition to.
Speaker 3: That, the combination of Disney plus Hulu and then we're
Speaker 3: going to have an ESPN Tile and ultimately ESPN flagship
Speaker 3: on our streaming service. That's a huge amount of value
Speaker 3: for consumers, and as they're allocating their entertainment dollars, I
Speaker 3: think they're going to view us as a great place
Speaker 3: to put them.
Speaker 1: So you mentioned, hurlu just how close are we to
Speaker 1: an agreement with Comcast? Where are we?
Speaker 3: Yeah, we're in the middle of an arbitration right now,
Speaker 3: and as always I'm not going to comment on arbitration
Speaker 3: outcomes and all of that. My guess is it's going
Speaker 3: to take a little while, but ultimately we'll get to
Speaker 3: a good place for the Walt.
Speaker 1: Disney's got a decent idea of what the timeframe is here.
Speaker 1: What a little while.
Speaker 2: Is Yeah, probably talking a matter of a few quarters.
Speaker 3: It'd be my guest, But that's just a guess.
Speaker 2: So take it as that.
Speaker 1: Well, just to guess is one on the theme parks
Speaker 1: as well. I just want to know you down on
Speaker 1: that too. You talked about the middle of next year
Speaker 1: for the theme park business to be sort of bouncing
Speaker 1: back to where it was. The guidness has sort of
Speaker 1: shifted out here. What's the firm guidance coming from the
Speaker 1: company now, Because I remember it was going close to
Speaker 1: year end, we'd get that bounce what happened.
Speaker 3: Yeah, the consumer came in a little bit softer, and
Speaker 3: it was really the consumers that I mentioned earlier. The
Speaker 3: lower income consumer is choosing to spend a little bit less,
Speaker 3: and again the higher income consumer is doing more overseas
Speaker 3: and outside the US. But again I'll remind you, we're
Speaker 3: still growing in that business. So it's not a question
Speaker 3: of the business has gotten way off track. It's just
Speaker 3: a little bit softer than it was before because we're
Speaker 3: seeing toward the end of the quarter, we saw a
Speaker 3: few consumer trends.
Speaker 1: You have quite a unique advantage point of course. You
Speaker 1: I used to talk to you when you were over
Speaker 1: at Pepsi during the pandemic, coming out of the pandemic,
Speaker 1: and now with Disney, so you have a very very
Speaker 1: unique view of where the consumer is. What gives you
Speaker 1: the confidence just looking at your dashboard that it bounces back,
Speaker 1: that it comes back. Where does that come from?
Speaker 3: More than anything, I do believe there's resilience in the
Speaker 3: US economy. Obviously, markets are very very sensitive right now
Speaker 3: and very fragile of you, as you all been talking
Speaker 3: about in terms of news, but I think the US
Speaker 3: economy is a little bit stronger. People are giving a
Speaker 3: credit for and the consumer will come back as the
Speaker 3: economy continues to strengthen.
Speaker 1: Interesting. You appreciate your time as always, Hugh Johnston. There
Speaker 1: the Disney CFO on where the consumer is right now