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