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Disney earnings call: Growth drivers include Netflix and the SEC Network

  • Execs with Disney (NYSE:DIS) used the music from Frozen to set the stage for their comments on the company's FQ3 performance.
  • Theme park attendance growth has been in the single-digits, but guest spending has been boosted by the MyMagic+ program. CFO Jay Rasulo says the program has more revenue impact to come.
  • CEO Bob Iger seemed unconcerned about any revenue slowdown at ESPN. He noted advertisers are buying spots closer to the run dates and ESPN had an "extremely good" upfront.
  • The company says it's very bullish on the SEC Network. There is an expectation that 60M U.S. subscribers will watch the SEC programming beginning this month.
  • A question about Disney's relationship with Netflix (NASDAQ:NFLX) drew an enthusiastic response from Iger. No concrete numbers were thrown out, but it appears Disney will continue to benefit as Netflix grows globally. The Disney brands can be "well monetized" on the Netflix platform, notes Iger.
  • Earnings call transcript
  • DIS -0.5% premarket
Comments (1)
  • BillBrown
    , contributor
    Comments (175) | Send Message
     
    I applaud Bob Iger and think he's probably been just about the most effective CEO -- by a country mile - of the last 20 years. The "big bets" -- MyMagic+, LucasFilms, Pixar (not to mention burying the axe with Steve Jobs, almost his Day 1 accomplishment on taking over after Eisner regime finally ended), ESPN, investing in China, and did anyone mention Marvel? -- will be the stuff of business school case studies for decades to come (or should be; we are, after all, a short-attention span world, alas).

     

    He's also been a tremendous people and organizational leader. Lost on many is that he's effectively replaced his entire senior management team, at least 2x, over his tenure ... with every unit hitting new performance benchmarks (including the previously moribund Digital group). Also, there have been no sacred cows or sacrosanct units or traditions. If it doesn't work ... its been re-worked. Bob is a genius.

     

    This incredible strength becomes a tremendous question mark, as its likely Iger retires in the next 3 years. It's natural to speculate that in such a period, there will be reluctance to make further "big bets" -- for example, buying Time Warner, etc. -- and, moreover, what has worked to now may be living on borrowed time.

     

    For example: The Marvel franchise. Did anyone reading this actually SIT through the last "THOR" movie (or, for that matter, the first chapter) and conclude "That was a GREAT movie!"? NO. You are a liar if you say otherwise. The film was horrendous. Poorly written, indecipherable plot, wooden acting, awful casting (aside from the Thor and Loki characters, of course. Natalie Portman?!? Horrific). The famous "additional content" during the closing credits, however, point to the real problem -- the plot lines are running into obscure, nuanced realms of the Marvel universe, with C-grade characters that are fine in made-for-video low-budget flicks, but not for films with $175MM production budgets and additional $100MM to market it.

     

    Much can be said for the Captain America 2 sequel. Yes, it scored highly on "Rotten Tomatoes", but I am beginning to suspect that the big studios have experimented and deciphered ways to "juice" these scores through elaborate campaigns to influence the movie critics and increasingly, the key "bloggers", who influence those scores. Like "Thor 2", "Captain America 2" is a ludicrous film, with screen-chewing performances by throw-in actors like Robert Redford (!) as the "heavy". I had to endure it recently on both a cross-country flight and on an Alaskan cruise (where it showed over-and-over again, unmercifully), and this film is over-acted and simply attrocious.

     

    I have not seen "Guradians of The Galaxy" yet, and its huge opening (just shy of $100MM domestic), was an unexpected smash on all accounts, but its worth remembering how poor the competition has been, and the public was aching for ANYTHING given recent flops and a stunning lack of original programming at the box office this summer. (Godzilla. Again? Really?)

     

    Yes, "Avengers 2" will most certainly be HUGE. But its got GIGANTIC costs hung around it, and dollar-for-dollar, and adjusting for inflation, its surely to be LESS profitable than the first film. Yes, it'a also not "just" the box office, but merchandising, too ... but its hard to imagine any UPTICK given the continual presence and even OVER SATURATION of all-things Marvel in seemingly every retail store and across the web already.

     

    And don't even get started with JJ Abrams reboot/continuation of Star Wars. Is a 80 year old Harrison Ford (with an erring!) really going to resonate with a new generation of non-Star Wars initiated "fans", even if they are willing to forgive the franchise for the last THREE installments? Keep in mind: JJ Abrams seems vastly over-rated, a statement backed up by bottom-line performance. His biggest hit appears to be Star Trek 1, but Star Trek: Into Darkness way underperformed, and beyond that, if not for the reputation of "Steven Speilberg's successor", this is an empty suit. He has no other major successes (LOST? Please. Alias? Please. That they both propped up, for a brief time, a moribund ABC Network tells you more about why he was "rewarded" with Star Wars custodialship than anything else). More alarming are the HUGE BETS being placed on other Star Wars "spin-off" films. I sincerly doubt any of these will succeed to the levels necessary, even when monetized across Disney's portfolio of different touchpoints.

     

    Pixar, meanwhile, hasn't even released a SINGLE FILM in 2014. And there are rumors that what's in the pipeline, with directors being replaced and script rewrites and reworking of produtions, casting at least some "concern" (doubts?) about the continuing prosperity or even viability of that unit. The rumors of a "Toy Story 4" and "Incredibles 2" point to other woes and high concerns. You can only go to the well so many times ... what's next? "Wall-E 2" and "Up-per"?

     

    While this is only the feature film segment of the business, its become a barometer for the health of the entire company. Its the fuel that drives the "omni-channel", "omni-touchpoints" that $DIS has with its customers.

     

    Meanwhile, how long can ESPN continue to raise fees? I "cord-cutted" myself 2 years ago, and I still am able to watch the sporting event of my choice (either live or simply through "highlights" later) and I do so without the "luxury" of paying the suit-wearing former or would-be jocks/lugnuts up in Bristol one cent. In fact, they practically stream every sports cast right to my smartphone and tablet as it is, even if its not "full, live video", its getting pretty darn close (side-note: This "convenience" has had the effect of weaning me off truly "live" programming, freeing me to spend Sunday afternoons more with my kids, while still seeing full stats and replays "on-demand", which I don't see them monetizing from me to one single cent).

     

    And all these looming challenges and concerns are arriving when Bob Iger begins a 72 month or so "sunset tour", with continuing rumors that wind-bag Sheryl Sandberg is still angling to get "positioned" to replace him.

     

    Again, I applaud Bob Iger for his remarkable performance and vision. Disney has never been more relevant to more people. And maybe I'm not accounting for the globalization of the business and the still untapped upsides there. And maybe I'm not accounting for the endless appetite (er, endless "patience" for poor quality entertainment: see "THOR 2") of the American consumer. I mean, its Americans who put Disney stars Brittany Spears and Miley Cyrus on the map, who gave us "The Jonas Brothers", and fat tub of goo Demi Lovato. But it just all feels like the good times can't last forever. The planets cannot be in such perfect alignment indefinitely. And the cracks are evident. The quality of the product -- applauded by self-interested critics and investors alike -- are coming to leave a bad after-taste in growing numbers of otherwise enthusiast consumers.

     

    The company needs to, perhaps, "slow-down", and focus more on the details, the quality. There's a fine line between love and hate, and familiarity breeds contempt. As it leans more and more on "franchises" (aka: redundantly going to the well "too often"), this is the #1 concern, after Bob Iger's succession.

     

    And maybe there is this sense of these "things", these possible concerns, in the market today, to explain the tepid response in the stock price to Disney's latest blowout numbers.
    6 Aug, 11:49 AM Reply Like
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