Latest / Bloomberg Intelligence / Bloomberg's Ranganathan on Disney's EPS, BAMtech Stake (Audio)

Transcript

Bloomberg's Ranganathan on Disney's EPS, BAMtech Stake (Audio) · Bloomberg Intelligence

• 0:02
  Speaker 1: Global business news twenty four hours a day at Bloomberg
• 0:05
  Speaker 1: dot com, the radio, plus mobile lap and on your radio.
• 0:08
  Speaker 1: This is a Bloomberg Business flag from Bloomberg World Headquarters.
• 0:13
  Speaker 1: I'm Charlie Pellett. Just getting the latest quarterly numbers out
• 0:16
  Speaker 1: of the Walt Disney Company. Third quarter adjustin EPs of
• 0:19
  Speaker 1: a dollar sixty two estimates There were for a dollar
• 0:22
  Speaker 1: sixty one third quarter revenue of beat as well, fourteen
• 0:25
  Speaker 1: point three billion estimates there for fourteen point two billion.
• 0:29
  Speaker 1: Digging a little deeper into the third quarter report, media
• 0:32
  Speaker 1: networks revenue five point nine one billion estimates, there were
• 0:35
  Speaker 1: four six billion. Parks and resorts revenue there four point
• 0:39
  Speaker 1: three eight billion estimates four point four two billions. Stay
• 0:43
  Speaker 1: with Bloomberg. We've got more on the Disney story coming
• 0:46
  Speaker 1: up right here on Bloomberg Radio. Also just one additional
• 0:49
  Speaker 1: headline to pass along to you. It is buying a
• 0:52
  Speaker 1: minority stake in BAM Tech SMP up a point today one,
• 0:57
  Speaker 1: a gain there of less than point one percent. Down
• 0:59
  Speaker 1: in US Reels up three, little change there and has
• 1:02
  Speaker 1: Stack Advancing twelve a gain of two tenths of one
• 1:05
  Speaker 1: percent to fifty five Gold up four or fifty out,
• 1:10
  Speaker 1: a gain of three tenths of one percent. I'm Charlie Pellet.
• 1:13
  Speaker 1: That's of Bloomberg Business Flash. This is taking stock with
• 1:19
  Speaker 1: pin Box and Kathleen Hayes on Bloomberg Radio. Disney, the
• 1:24
  Speaker 1: Walt Disney Company, reporting quarterly results that exceeded analysts estimates
• 1:29
  Speaker 1: by a penny. Right now, taking a look at the
• 1:32
  Speaker 1: shares in the after hours trade, they are higher by
• 1:35
  Speaker 1: about one percent. Here to tell us more about Disney
• 1:40
  Speaker 1: and all things media, is Geita Raganathan, technology and media
• 1:46
  Speaker 1: analyst for Bloomberg Intelligence, joining us from our office in Princeton,
• 1:51
  Speaker 1: New Jersey, and you can follow geta at n gone one. Alright,
• 1:57
  Speaker 1: Keith tell us about Disney. I was looking at the
• 2:00
  Speaker 1: else today and I think the most interesting thing, at
• 2:02
  Speaker 1: least for those that don't know about bam Tech, is
• 2:05
  Speaker 1: that bam Tech, which Disney announced they're taking a third
• 2:10
  Speaker 1: thirte pent steak Um was previously formed by Major League
• 2:14
  Speaker 1: Baseball was part of the digital rights business of Major
• 2:19
  Speaker 1: League Baseball. Correct, yes, exactly exactly. I think the most
• 2:23
  Speaker 1: interesting part of this steake by Disney kind of really
• 2:27
  Speaker 1: shows their commitment now towards the whole digital consumption of media,
• 2:32
  Speaker 1: and I think it demonstrates UM that they are willing
• 2:36
  Speaker 1: to take some form of ESPN or at least some
• 2:38
  Speaker 1: content from ESPN and kind of go direct to consumer
• 2:42
  Speaker 1: or kind of have some UM digital offering with that content. UM.
• 2:47
  Speaker 1: So I think that definitely is going to be reassuring
• 2:49
  Speaker 1: to investors. Well, under the terms of the transaction, Disney
• 2:52
  Speaker 1: says is going to pay a billion dollars in two installments,
• 2:55
  Speaker 1: one now and one in January twenty seventeen, and also
• 3:00
  Speaker 1: has the option to acquire majority ownership in the coming years.
• 3:05
  Speaker 1: Does Disney need this, this kind of network, this major
• 3:10
  Speaker 1: league baseball, this band tech that was separated from the
• 3:13
  Speaker 1: broader digital business. Yeah, I think it is going to
• 3:16
  Speaker 1: be instrumental for Disney and kind of launching UM and
• 3:19
  Speaker 1: over the top service, if you will. Disney has kind
• 3:22
  Speaker 1: of really taken a very cautious approach because they get
• 3:25
  Speaker 1: a lot of revenue from their traditional pay TV operators
• 3:29
  Speaker 1: almost nine billion dollars in affiliate fees for ESPN and
• 3:33
  Speaker 1: its sister networks from the traditional operators, so they have
• 3:36
  Speaker 1: to be really careful when they go all out with
• 3:39
  Speaker 1: a digital product. And I think this investment so they've
• 3:42
  Speaker 1: been so they've never really made an announcement to launch
• 3:45
  Speaker 1: and direct consumer product, at least for ESPN content. But
• 3:49
  Speaker 1: this investment kind of shows they're willing to take at
• 3:51
  Speaker 1: least a small step in that direction. And so we'll
• 3:54
  Speaker 1: see how it plays out. And obviously the option for
• 3:57
  Speaker 1: them to go out and acquire the entire unit suggests
• 4:00
  Speaker 1: that they're they're willing to make a bigger commitment. All right,
• 4:03
  Speaker 1: let's go through some of the other areas. For example,
• 4:06
  Speaker 1: the Media networks posting income operating income of two point
• 4:11
  Speaker 1: three seven billion. The estate was for two point four billion, right,
• 4:16
  Speaker 1: and so I'm just digging through the numbers here, and
• 4:18
  Speaker 1: it looks like UM as expected. You know, the ad
• 4:21
  Speaker 1: revenues were fine, but then the decline and subscribers kind
• 4:25
  Speaker 1: of is tending to weigh. And this has been a
• 4:27
  Speaker 1: drag on the media networks business ever since Disney spoke
• 4:31
  Speaker 1: about subscriber losses last summer UM and it continues to
• 4:35
  Speaker 1: be an overhang. But I think the bigger, the bigger
• 4:38
  Speaker 1: concern now is going to be the increase in programming
• 4:42
  Speaker 1: costs UM. I mean, Disney has something like about fifty
• 4:45
  Speaker 1: three billion dollars in just sports commitments alone. The big
• 4:50
  Speaker 1: worry for investors really is, you know what happens when
• 4:54
  Speaker 1: affiliate phase kind of level off, but sports costs continue
• 4:57
  Speaker 1: to rise, and that's exactly what we are seeing both
• 5:01
  Speaker 1: in this quarter as well as going into fiscal twenties seventeen,
• 5:05
  Speaker 1: when we're going to see a huge step up in
• 5:07
  Speaker 1: NBA fees. Um. You know, that's almost gonna be at
• 5:11
  Speaker 1: increase in sports rights with the twenty four billion dollar
• 5:14
  Speaker 1: deal that innbated with ESPN and Turner, So I think
• 5:17
  Speaker 1: that is definitely going to be a big source of concern.
• 5:22
  Speaker 1: Do you believe that this is one of the reasons
• 5:24
  Speaker 1: why the stock is down eight percent year to date
• 5:28
  Speaker 1: is people are concerned about this spending. Yes, absolutely, I
• 5:32
  Speaker 1: think it's It's been one of the biggest, um biggest,
• 5:35
  Speaker 1: biggest causes for for worry. Um. You know, the sports
• 5:39
  Speaker 1: rights um have been very, very expensive, and Disney has
• 5:42
  Speaker 1: continued to go out and acquire the best of the
• 5:44
  Speaker 1: best content, but then as you know, affiliate fee pressure
• 5:48
  Speaker 1: has been increasing. I mean, investors are really worrying about
• 5:51
  Speaker 1: how they're going to defray those expenses. Well, just to
• 5:55
  Speaker 1: give you more detail on that, bam Tech minority acquisition
• 6:00
  Speaker 1: band Techs roster of sports includes the National Hockey League
• 6:05
  Speaker 1: of obviously Major League Baseball, the p g A Tour,
• 6:08
  Speaker 1: as well as Ice Network, the leading digital platform for
• 6:13
  Speaker 1: professional figure skating. So they're gonna have a lot of
• 6:15
  Speaker 1: sports that they can use over there many different media properties.
• 6:20
  Speaker 1: Well that in any way affect the park and resort business.
• 6:26
  Speaker 1: I don't think so. I think their park and resort
• 6:28
  Speaker 1: business has been, um, you know, a very very steady performer.
• 6:32
  Speaker 1: It contributes about of overall company income. Now, domestic attendance
• 6:38
  Speaker 1: has been slightly weak. Um, it's it's been weakening a
• 6:42
  Speaker 1: little bit. And then there have been you know, there's
• 6:44
  Speaker 1: been some concern who's given all the incidents in in
• 6:47
  Speaker 1: Orlando and and probably you know, weakening trends and attendance
• 6:51
  Speaker 1: international also especially with the events and in Paris and Brussels. Um,
• 6:56
  Speaker 1: you know, euro Disney has kind of taken a hit
• 6:58
  Speaker 1: there a little bit. But in the big cat list
• 7:01
  Speaker 1: and I think we'll get more color on this during
• 7:03
  Speaker 1: the call. Has been the launch of Shanghai Disney and
• 7:06
  Speaker 1: that should be a big driver for that segment um
• 7:10
  Speaker 1: going forward. It leads into the next three to five years.
• 7:13
  Speaker 1: Thank you very much for spending time with us on
• 7:15
  Speaker 1: a day that I know you're looking to get on
• 7:17
  Speaker 1: that conference call. Geta Ranana Thumb. She is the technology
• 7:22
  Speaker 1: and Media analyst for Bloomberg Intelligence. Shares of the Walt
• 7:26
  Speaker 1: Disney Company right down, right now are down about a
• 7:29
  Speaker 1: quarter of a percent in after hours trading. Thank you
• 7:33
  Speaker 1: for listening to taking stock. I'm pim Fox and this
• 7:36
  Speaker 1: is Bloomberg. Yeah. Coming up, Bloomberg Law will be talking
• 7:48
  Speaker 1: about Chevron's victory in a long running court battle over
• 7:51
  Speaker 1: toxic waste in Ecuador. We've got the details, but June
• 7:56
  Speaker 1: Grasso