Key Points
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The Walt Disney Company (NYSE: DIS) has fully acquired Hulu from Comcast for $467 million, signaling a strategic push to solidify its position as the leading multi-brand streaming provider behind Netflix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN).
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Disney’s streaming business turned profitable for the first time, giving Wall Street greater confidence in the company’s digital strategy as it aims to scale subscriber growth across multiple platforms.
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While streaming garners attention, investor focus should shift to theme park traffic, which management sees as the critical earnings driver given rising pricing pressure and potential economic headwinds.
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Transcript:
[00:00:04] Doug McIntyre: The Walt Disney Company, after a couple years of taking a real beating after. Once in future King Iger came back, he just Yes. Couldn’t get anything right in streaming. He just couldn’t work before. Things have changed there. So what’s up?
[00:00:22] Lee Jackson: Well, as we’ve discussed, and you pointed out, it’s not that the movie business is saving them, but they’re having some success, but they, I recently saw they finally, when it went, they went to Comcast, who was their partner with Hulu and bought them out, which was, kind of surprising, which, and it wasn’t cheap.
[00:00:43] Lee Jackson: It was 467 million bucks for a division. That, and not that’s a ton of dope at Disney. they can raise that kind of capital easy. But, for a division that doesn’t make all that much money. like we’ve told our viewers o over the last, few sessions, they, did eke out a gain in the first quarter and they probably will this quarter, but they now own all of that.
[00:01:06] Lee Jackson: So maybe they will spend more efforts on their streaming business.
[00:01:11] Doug McIntyre: Well, I look at it a different way. It’s, very clear that Netflix will never be caught. No, Amazon is a juggernaut. Right. They’re not gonna be caught. So how do you get into a solid third position? And it’s not going to be by having one brand.
[00:01:31] Doug McIntyre: Okay. The, single brands have already hit their stride. They’re, if they’re not at their peaks, they’re close enough. So they’re gonna start to get hit with real churn if they try to, go out and buy more customers. Right. Is doing is they’re saying if I can’t make it on a single brand, I will be the big multi-brand streaming guy.
[00:01:54] Doug McIntyre: And what I’ll do is I’ll get to my 200 or 300 million, subscribers. By spreading it across three or four brands, I’m not gonna make it by being Netflix.
[00:02:05] Lee Jackson: Well, and as we’ve discussed, Hulu is basically the over the top version of cable. because they have everything on there, there’s a demographic part of the population that still wants that.
[00:02:16] Lee Jackson: And granted it’s probably older people like ourselves, but, they have everything. and so it makes it a workable system for hotels and, places like that, that are trying to move from cable to streaming. So it’ll be interesting to see because, the cable business is what I find amazing to still be in business.
[00:02:38] Doug McIntyre: It’s, believe me, that’s not gonna last forever. the other thing with the Hulu arrangement is that finally Disney made money in streaming. Yeah. So if you’re a Wall Street, let’s say that I’m an investor. You buy Hulu and you’re losing your shirt on your existing streaming business, there’s a lot of skepticism on Wall Street.
[00:02:59] Doug McIntyre: Then if you’re making money on your streaming business, then somebody looks at it and say, okay, they’re doubling down on what has turned out to be a good sector. Yeah. Disney can now say, we figured it out. We, it’s going in our direction, and so we’re gonna add, basically we’re gonna put more on our plate when it comes to streaming.
[00:03:20] Lee Jackson: Yeah. and, there’s a good bet because they’re good content creators. There’s a good bet that they will leverage that up as well, because, I mean, come on, it’s Disney,it’s not Comcast, or someplace like that. It’s an entertainment corporation. So one, one would think that they will really start to push more original content as well.
[00:03:40] Doug McIntyre: Yeah. And listen, they do have, one of the biggest and most years, the most successful studios in terms of box office, so yeah. Yeah, so we’ll see
[00:03:52] Lee Jackson: it. It’ll be interesting to see it. and again, we’ll be talking about this in just a couple of weeks, but when earnings start coming out, that’s where the rubber will hit the road.
[00:04:01] Lee Jackson: So, we’ll really be looking at a lot of the companies that we cover to see how the quarter went.
[00:04:08] Doug McIntyre: To me, the thing that moves the Disney stock now that the Hulu thing has done is theme park traffic. Yep. it’s the same thing as is true with streaming. At some point, you charge enough so that you start to cap out the number of people who come through.
[00:04:25] Doug McIntyre: that balance between what you get per person and how many people you get. I’m always worried that Disney is gonna bump up against that at some point. And they’re gonna start to see some struggle in the theme parks.
[00:04:40] Lee Jackson: Well, if the economy rolls over, you’ll, you will see it. But, the upper middle class and people of that nature, they don’t have any problems spending, a couple of grand to take their kids there.
[00:04:50] Lee Jackson: But one thing that has helped is airfares are cheaper this summer and, ’cause flights are, yeah, So that, that probably helps a little bit. And there’s probably more package deals and so it’ll be interesting to see, we’ll, get the full effect of the summer in the third quarter earnings, but it’ll be interesting to see how this was.
[00:05:08] Doug McIntyre: Yeah. I think for people who are following Disney, the boring thing is what’s gonna move the stock. Forget stream, you’re gonna look at it, it’s gonna be fine. Watch the theme parks. That’s the action. If you’re an owner of this stock, you think about being an owner. The action’s, the theme parks.
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