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All right, let's get back to Disney. I'm told the market can't make up its mind. I'm interested to see what the experts think we got, Paul. Let's get Keitha either wrong Nathan Boomberg, Intelligence, Senior analyst on US Media.
All right, Keitha, what was your biggest takeaway here from Disney?
Really solid quarter for them, Alex and this is a really strong start for them for fiscal twenty twenty five. So you know, the big numbers, of course that we constantly look for when Disney reports is how did it do on the streaming subscriber front? And we did expect them to lose a good amount of subscribers, just kind of given the price increases that went in effect date last year, almost fifteen to twenty five percent price increases, but churn was very very limited, so came in much
better than they had expected, than we had expected. And then again the parks numbers. Now, remember, you know we have been seeing some demand moderation at the parks, but they actually again held up better than expected. So all of those you know, you put all of that together, including streaming profits, you had over a forty percent increase in adjusted EPs. So financially, I think the company is off on a solid footing and off to a very good start for twenty twenty five.
What could be a less than positive view of this quarter here because I'm seeing the stock kind of all over the place, gith it teams like maybe the market can't really decide, So what are some of the concerns out there? Maybe from this quarter?
I think what was slightly disappointing, Paul, is that they didn't raise guidance. So you know, they did deliver forty percent increase in EPs, but they're still talking about fullier EPs only growing in the high single digits. I think that's where maybe the market is slightly disappointed again with
the parks, also, they didn't necessarily raise guidance. And remember with the parks, there is a little bit of concern about what competition can potentially do when a new theme park from Comcast NBC Epic Universe opens this May, and there's still like, you know, really conflicting views about this, although management seems to think that it's actually it's kind of this rising tide that lifts all boats, so they've downplayed it, but I think there is still some concern
about that. And then the other big thing that you know, everyone's kind of looking at or waiting for, is the launch of what they call Flagship ESPN, which is the first time that ESPN, the full blown product will be available without a PATV subscription. So that's going to happen sometime in the fall of this year, and so again there are going to be some launch casts where that product prices, what the subscriber outlook will be, so a
little bit of uncertainty there as well. But overall, really really strong results and.
The streaming operation in Film Studio look me in like a thirty percent thirty one percent gain and operating income.
For the quarter. Was that really driven by price hikes for streaming.
For streaming, yes, it was a lot of it was driven by you know, we saw really solid our pool growth. What we're going to continue to see Alex through the rest of the quarters is what you know, exactly what Netflix did. You know, Disney's kind of taking a page out of that Netflix playbook with what they call page sharing or cracking down on passwords sharing, and so we're going to see that kind of really ramp up in
terms of the streaming profitability numbers. And then you pointed to, you know, content, the box office has absolutely had a marvelous run kind of reversing so many of you know, the misfires that we had in earlier years, and they're going to continue to build on that. And as some of those movies come on to the streaming platform again, they expect that to drive subscriber growth as well.
So, Keith, what's the market thinking about profitability for streaming at Disney? We kind of you look at the Netflix margins and is there a belief that this isn't can at least get approached. The Netflix profitabiliting absolutely, I think so.
I don't think it's going to be immediate though, Paul. I mean for this year they are guiding to about a billion dollars in profit. They did say that they will get to double digit margins in fiscal twenty twenty six. Now, remember Netflix is already close to thirty percent margins. So you know, you still do have that big delta ten percent versus thirty percent. But I think that's where all
of the upside really is with Disney. I mean, this is a complex story with many many different moving parts, but streaming is obviously one of the you know, huge positive catalysts and I think we're going to see that streaming profitability continue to build, especially as they have a lot of pricing power and all of these other different initiatives. And remember, for them, as opposed to Netflix, one area
where Disney is better than Netflix is advertising. They've got all of those different you know, all of the plumbing is in place. They are the biggest digital advertiser right now out there in the market. They make even more in connected TV advertising than YouTube does, so you know, they obviously have you know, an advantage of first moved advantage, I would say with respect advertising.
Okay, so you mentioned how that flagship ESPN.
Area will do.
What's your biggest question now going forward?
Yes, it's really going to be how exactly. So again with with ESPN, we have a little bit of you know, questions in terms of where exactly the subscribers will trend for that product. A lot of it I think will depend on where the product prices. So that's a little bit of a wait and watch story. And then with parks, you know, yes, we do have confidence that they do have a lot of positive levers. We know that, you know, the international parks are performing extremely well. Cruise lines is
something that they're really expanding into. And if you just kind of look at the cruise line trajectory, I mean, this was a two billion dollar revenue business in twenty twenty four. We think this will potentially get to about ten billion dollars by you know, twenty thirty. And at that point, Paul, you know, we think it could make well over three four billion dollars in ibade, which means it's bigger than ESPN at that point. So, you know, cruises is going to be a big portion of their
park story. So I think the diversification you know, story is playing out really well for them with barks. But again there's a little bit of weight and watch. I think twenty twenty five is still a little bit of a transition year for them.
All right, Githa, let's back up. We you know, I think there's a fair level of confidence in the Disney story how about some of the other companies.
I think about.
Warner Brothers Discovery, I think about Paramount. What are companies like that do this in this world? How do you think that plays out?
Yeah, So I think for Warner Brothers Discovery, Paul, I think there is still going to be a lot of focus on how the TV business is going to perform. Ironically, I think this year TV is actually in good shape. I mean why I say ironically is because they actually lost the rights to the NBA, and so everybody was kind of very, very fearful of how exactly, you know, Ibadah was going to be, how affiliate revenue was going
to be for this year. But they actually got two huge deals in place, one with Comcasts, the other one with Charter, which basically kept their affiliate fees flat. So the revenue trajectory looks decent. I would say for Warner Brothers Discovery, I think the problem really for them is going out, you know, into the future, and what they decide to do. Is consolidation going to be a big thing. It could be a big thing for them. I mean, we already know that Comcast is kind of spun out.
It's cable networks. We don't know if Warner Brothers is kind of going to follow suit and you know, maybe do some kind of transaction with Comcast. So that's a little bit of a wait and watch. And again with Paramount again, we're kind of in limbo here because we really don't know what sky Dance is going to do
in terms of strategy for the new company. I mean, they're already facing some regulatory hurdles, but assuming the transaction goes through, we really have to kind of wait and see exactly what sky Dance wants to do with the assets again, whether they're going to let go of some of those linear TV assets, what their real trust is going to be.
Great stuff, Thank you so much. Gita really appreciated best analysis. Along with Paul on the street. The two of you like cannot get any better than that, Either wrong or anthen a Bloomerg Intelligence Senior US media analyst.
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This is Bloomberg Intelligence Radio.
We're broadcasting to you live from Interactive Broker Studio right here in Midtown Manhattan. You can also check us out on YouTube dot com. I should point out like my daughter still loved Mowana to and Mohana had a sister Mowana too, so cute, so that worked.
Did you miss Tom singing the Moana song this morning?
I did. That's sad for you. It's good for you. That's all right, because I was to like this song.
I was also singing one of the Little mermaid songs and break, so we can all have a Disney sing fest.
All right.
Back to the markets and the question marks, the question marks right now, coming very much from DC. I want to get more intake right now with Henry de Tris, Managing partner and director of Economic Policy at Beta Partner. She joins us from Louisiana. Henritta, Last time we talked, you said you're going to be looking for signals from what happens to Trump's cabinet nominees. Who protests, who doesn't? Do they sail through? To me, everyone's sailing through. So what does that tell you?
Yeah?
Absolutely, it tells me quite a few things actually, which is really helpful and constructive. Number One the Senate Majority Leader John Dune does not want to hear Trump reiterate his calls for recess appointments, which takes quite a bit of power away from the United States Senate to advising consent, which they take very seriously.
So they're picking and choosing their battles.
And why is that Because we have a massive legislative agenda heading their way and they want to be able to override the House Republican leadership. So this comes into play with a one or two reconciliation bill strategy, and as of this afternoon, Senate Budget Committee Chairman Lindsay Graham is going to start exerting his power to run over the better legislative agenda intuitions of the House Republican leadership.
So this to me signals that the Senate's trying to keep Trump happy knowing that they're about to run rough shot over the House, which is very normal, and that they also want to avoid the idea of recess appointment constructive guidance coming from just their actions here.
All right, from the White House. Henriette Tariff's on Tariff's off, Tariff's delayed, is there? What's the sense in Washington, DC about what the strategy is maybe a President Trump administration.
I think a lot of members are sort of not even bothering to pretend that they know strategy, but are instead giving us also really important context clues about what they're expecting to factor in from tariff revenue on the next tax bill or the next immigration, military spending.
Energy package.
They are factoring in some level of revenue from tariffs, and the estimates are anywhere between seven hundred billion and one trillion dollars. So it's not really a question of how the President goes about landing on putting tariffs in place. There's obviously been fits and starts, thirty day delays with Canada, Mexico.
Maybe there will be a phone call with President she and China. But they're really more.
Giving us the valuable guidance that they are going to be being tariffs in their revenue scores, which means that they expect tariffs to go on. However the President decides to impose them, so again instructive just in their directionality of incorporating tariff revenue into their forecast.
Yeah, I thought we were going to get that g Trump call yesterday, So I don't know. I'll keep waiting for that one. So actually, let's combine these two points then, because if we do expect to see some form of tariffs because of that revenue estimate that you talked about, and we do see no one wanting to torpedo the Trump agenda on their Republican side, does this mean that the tax bill has a significant chance of getting through and getting through quickly.
No, definitely not.
What's never reminds the Senate is about too, it's exactly the opposite of that. I think the House Republican Conference is effectively nowhere on a budget. They have a very fractured conference and only one seat to spare in terms of votes, so they don't have a path.
Forward on one big bill or maybe even two.
However, what the Senate is doing is they're trying to give President Trump a legislative win, especially going into his Joint Address to Congress on March fourth. They have an ambitious online where they're going to try to get budget reconciliation instructions done in February and early March. Tea up actually writing the bill in April, but this would be on the smaller immigration and military spend package the tax bill.
In my opinion has been consistent. It's not going to pass until December.
We're talking about five trillion dollars worth of negotiations that takes months, indeed almost a full year, and they've known that this is coming since twenty seventeen when the tax bill passed. So we still have a lot of work to do, and in the intervening months we have to deal with a government shutdown on March fourteenth, a debt ceiling negotiation over the summer, another perspective, government shutdown September thirtieth.
There's a lot of opportunities for Democrats to throw wrenches in the gears of the Republican legislative agenda, and to me, that point's a pretty clear experienced picture that the tax bill won't happen until December.
Henryette, I guess it's to be no surprise to observers that President Trump sucks most of the air out of the room most of the time. Are you surprised that we don't hear more leadership from either congressional Republicans or Democrats.
I think that they have been out of session, to be fair, and now that they are back in session, they have to deal with things like Hey, are we going to occupy Gaza. What's going on with DOJE, what's going on with potentially the DOGE team being able to access treasury payment systems. There's so much out there that they're really just flying with it and negotiating behind the scenes on those legislative agenda items. Especially on the Republican side.
I think Democrats have not found their footing at all. I do see some opportunity for them to coalesce behind that March fourteenth deadline for a government funding bill.
If they can come together with the appropriators.
And leadership and say we want one percent more in federal spending in twenty five, we want aid to the California wildfires, etc.
They can get in a cohesive place. But right now they're just letting Trump.
Have the show.
So what is up with doche.
What's up with those That's a great question. I think that is the question right now. They've implemented a number of freezes and that is something that's obviously creating a lot of lawsuits, and two judges have stayed those actions. They are going through and combing through the trade repayment systems.
There's reports that Elon Musk has been at the VA going through some of those payment systems potentially, And the question is, really, have they identified via their AI tech savvy any duplicatus payments, any payments they.
Are going to people who are no longer with us?
You know?
Is there any kind of abnormalities? Those are the areas where they're trying to find savings. And then obviously you have that idea of cutting the overall federal employee base. But all told, those are really small dollar amounts, less than one percent of federal spending.
And by the things that.
I just listed a moment ago, aid to the wildfires, aid to farmers, as we prepare for the trade wars.
Continued spending on the tax side.
And one percent increases in twenty twenty five, spending hundred billion dollars in military spending. Whatever Dude is able to find, Congress has already spent. So I'm not seeing a lot in terms of functional deficit reduction or spending cuts that will offset what Congress will do.
Okay, Henriette, thank you so much for that great synopsis. There a lot of moving parts down there in Washington, DC in Congress with all those bills that Hendriyette was laying out for us. Henrietta Tres, managing partner and director of Economic Policy of Bervada Partners, kind of laying it all out for us.
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In the streets.
You know what they impact stuff?
State business?
Oh yeah, it does.
It's a real estate business. Lisa Need joins us, managing partner and head of real Estate for Eisner a Forerd, joining us here in.
Our Bloomberg Interactive Brokers studio.
Lisa, let's talk about that. I mean, it looks like rates are coming down, but maybe not as fast as people like.
How's that impact?
I think just commercial real estate probably defined what are you seeing out through with your clients?
What a great segue. Thank you for having me. So it's exactly the perfect way to start talking about this is that with interest rates being where they are and the unknown of what's going to happen going forward, we're sort of at a standstill and valuation however, the activity in real estate for twenty twenty four was up, and we do predict twenty twenty five having a lot more trading people going back and forth and trying to figure out some deal flow, which means that valuations have to come,
which is tied to interest rates. It's not going to get back up to where we were in twenty seventeen. But I think everyone's really optimistic for twenty twenty five that there is going to be some things happening in there. When we talk about interest rates, and you know, we just heard from Mike McKee where the settling is and
what the Feds are doing, it's interesting. Once rates are still low for the people who have existing mortgages and things, it's not going to make us able to go out and sell our houses because we still have very low interest rates, and so all of that is going to affect you know, multi family home buyers, it's going to affect office to trickle through the rest of all the
sectors of real estate. So, yes, you're right, it's a great segue into real estate is where we are on interest rates, and that's the big unknown and waiting and seeing with the inflation being where it is and the economy doing well, it's a wait and see approach.
Yeah, and just how quickly like we've rerated really like we're looking at just over like forty basis points of couz priced into world imply probability. Morgan Stanley sees just one cut now in June, round than two in March and June.
How quickly does that feed through to like prices?
It actually feeds through quicker than it's even announced. It's almost like people know before and anticipate it. So the valuation is already baked into it, and so it feeds in immediately. And so when you think that FEDS are going to announce it and things are going to move drastically, it's already moved once the anticipation is there, and what they think are going to do, what they think is going to happen with those rates.
You know, office work, Yeah, are there any what are the trends here in office? I guess the first question is does anybody going to call a bottom? Has anybody called a bottom? Is anybody think about that?
Do you want me to make a prediction right here? Should we do it?
Fun?
Okay? So prediction that I heard was twenty twenty six New York city is going to have a shortage of office available, a shortage because there's been a lot less construction. We do have some conversions, not a lot, but there will be some conversions to residential. The trophy buildings are occupied, which is going to help the a's and b's and so you know, we know that tech is back, is going back to work. We've heard those announcements today. This place is the busiest it's been I think in a
long time. And media has made announcement that they need to start coming back to work. So with everybody making those announcements of back to work, there's been less office coming on the market in the last two years or three years because of construction costs. And so prediction that New York City, you want another prediction, Yeah, sure, don't write off San Francisco yet. And why I know we're very bleak on that. But seventy two cents of every
AI dollar is going into San Francisco. And so with all the money going into something that because people their work there, eighty three point two and I think that's the right statistic. Somebody will write, oh, it's not of the talent is in San Francisco based and so the VC venture capital firms that are funding the AI are mandating that they want to see the people and they
want that in office experience. And so if eighty three point two percent of our talent is in the San Francisco Bay Area who are funding and working on the AI, we see where the future is and so maybe not to write off San Francisco. So a little bit of optimism. I think in office. We'll see in a year from now how off I was, but we'll be optimistead have.
We've seen many transactions of note in New York City that gives you a sense of where valuations are.
Yeah, there's been a bunch of movement. I think there was a fifty seventh Street there was a property that just was acquired, and so people are moving and the values are, strangely enough, they're holding up. And so the whole thing is is the buyer and the seller is willing to come up to where they think prices are. And I think yesterday there was a large transaction that just happened on fifty seventh Street, which is which is noteworthy.
I think, yeah, definitely, what do you think the bottom looks like?
I'm hoping we passed it. I think we're headed to a really good direction from So, I.
Guess what the trajectory from now until twenty twenty six does look like like?
Is it bumpy? Is it a straight lineup?
Is it a curve?
So everyone was hoping for a soft landing, and I think we got the soft landing. And so when you're looking for the future to where you know, people are seeing where we're at, secondary markets are going to be really really hot. So is the live work play environment and that type of world. Now New York is live work play, but look at the secondary markets that are
going to create that live work environment for them. And so if you look at you know, we could go into this another time, the history of the malls, but that's really what was supposed to be created. It wasn't supposed to be a mall with two anchors with seventy acres of parking. It was supposed to be houses, hospitals, schooling, you know, businesses created around the malls. That's what people
want and that's what we're going to start creating. And so once we give people that sort of environment, I think it's going to really really work. And then looking at operational real estate data, centers. Yeah. Right, So there is a lot of optimism out there in real estate as to what we're looking forward and then just watching interest rates really closely.
You know, I have to admit when I'm still surprised every day I walk out on Lectionington Avenue that retail space has not solved.
But they're doing it. It's now rented because that space the gap used to be, but.
It still feels like there's so much unrented retail in mid time men that and it really.
Surprised me and Upper West Side too.
Yeah, but when you look at it that there was so much more, and we know that retail was doing horribly, you know, years ago, and it is making that comeback of changing what's that retail experience for. I mean, I know that we read the five five or four big boxes that are closing stores, and so that scares everybody a little. But again it's coming back to that live work play and finding balance of what people want in
that area. This is still relatively commercial here, yeah, and not as residential, so you're not really living where you're working here, and so it'll be interesting to see and without the bloomingills is still a very large anchor to this area, so I think it's going to get least up over time.
I don't want to live where I work anyway.
Lisa, thanks a lot. Always great to get your perspective. It's so fantastic. Lisaknee managing partner and head of real estate for Eisner Amper, and she comes with predictions.
Oh boy.
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