Transcript: Disney's Next Decade
A new 'sports Hulu', gaming and the future of linear TV and film come into focus
Elaine Low (00:04):
Welcome to The Ankler Podcast. This is Elaine Low here in Los Angeles on Thursday, February 8th. I'm joined by Richard Rushfield here in Los Angeles, where that massive SoCal storm has finally passed us by. Richard, I've never had so many people send me videos of the LA River looking like an actual river. Have you recovered from our collective four days of gloom?
Richard Rushfield (00:25):
Recovered? I want it back. That's my weather. It was great to finally have it.
Elaine Low (00:30):
In case, listeners, if you were wondering what happened to Sean McNulty of The Wakeup newsletter, surprise, he's also here dialing in from earnings land in New York City, which is why, class, I'll be your substitute teacher for today. Now, Sean, is it true what the Wall Street analysts are saying? Are we indeed having a great quarter, guys?
Sean McNulty (00:48):
At some places, sure, yeah, some places not so much, so read between the lines here.
Elaine Low (00:53):
Well, we're going to dig into that in a little bit. But before we get into this week's topics, The Ankler's new partnership with LA's number one NPR Station, 89.3 LAist, formerly known to some of you as KPCC, officially kicks off this week. Now, of course, LAist is Southern California Public Radio's flagship radio station and digital news site, and The Ankler team will be on air for entertainment segments throughout the day on Entertainment Thursdays. During its following shows, we'll have Morning Edition, AirTalk, and All Things Considered, where Ankler reporters, including Peter Kiefer, Sean McNulty, Janice Min, Richard Rushfield, and myself will be on from time to time. We'll be covering breaking news as it happens as well as our own stories. Just as a reminder, you can read Richard, Sean, and myself here at the podcast anytime at podcasts@theankler.com.
(01:46):
So a big Q4 earnings week this week with Fox, Spotify, and the New York Times all reporting their end of 2023 numbers. But the company getting the most attention this week is Disney. So for the numbers nerds out there, let's take a quick look at that. It beat on per share earnings. It came in slightly under revenue expectations and lost about 1.3 million Disney+ subscribers after increasing its price, so now it still has around 111 million subs, which is nothing to sneeze at. But that was not the biggest news coming out of the company, was it Sean, which is still, by the way, in a proxy fight with Nelson Peltz. The House of Mouse is taking a hefty $1.5 billion stake in Epic Games, the studio behind Fortnite, and is entering a sports streaming service joint venture, which means that its own ESPN will sit alongside Fox and Warner Bros. Discovery. So, Sean, friends become enemies, enemies become friends. What's old is new again? How big of a deal is this?
Sean McNulty (02:43):
You didn't mention Taylor Swift. [inaudible 00:02:45]-
Elaine Low (02:45):
Oh, we'll get to Taylor Swift.
Sean McNulty (02:47):
Oh, oh, I'm sorry. Did I spoil the lead here? I'm like, "The big news?" I'm like, "Wait a second." You buried the lead here, Elaine. I put a Voltron GIF in The Wakeup this week, three powers, not five, but uniting here to come together to save the bundle, the Hollywood studio system, sports. I'm not quite sure which analogy you want to take here, Elaine. Yeah, they each own a third of this JV, which does not have a name yet.
Elaine Low (03:13):
Sports Hulu.
Sean McNulty (03:13):
It's supposedly going to launch... Was it? Sports Hulu?
Elaine Low (03:16):
Sports Hulu.
Sean McNulty (03:18):
Yeah, [inaudible 00:03:19] them that, too.
Elaine Low (03:18):
That's kind of what it is, right?
Sean McNulty (03:19):
I know. We got to workshop this. I don't know. I couldn't think of it. I went with Sports Super Streamer, which is not a good name either. The thing is to note they each have a one-third ownership stake in it, but, say, if the price is $40 a month, their cut is not the same, because ESPN, the per sub fee is much larger than TNT and FS1 and Fox. So Disney's probably going to get a much larger cut of the subscription fee, but they have a one-third ownership stake. We'll talk about your jobs piece in a bit. But this is a new company, Elaine. This has no employees. It has no name. This is a separate entity from all three companies. So they got to hire some folks. This has to launch in six months.
Elaine Low (03:59):
In theory, right?
Sean McNulty (03:59):
That's not bad. In theory, they'd better. I don't want to be on that earnings call in six months if this thing doesn't take off. To your point, the deals are not signed. They make clear this is an intent or whatever the word is they put in the PR release. If this doesn't happen, Elaine, that would be a big face plant in the history of Hollywood, for sure.
Elaine Low (04:22):
CNBC's reporting that it's likely to cost somewhere between $45 and $50 a month. Is that reasonable, if you're a sports fan?
Sean McNulty (04:30):
Yeah. I put a poll in The Wakeup to see what people are thinking about the biggest... It was kind of a split, but $35 to $45 seems to be where people are landing on this, which is about where I would think it is as well. I'll put a hint. I'm going to do a little math on this in The Wakeup on Friday to at least see what the actual costs here are for the networks, because each network gets a small fee, per sub fee, so that's already set. The fees that they're paid by cable companies for carriage, the quote/unquote, affiliate fees, those are going to be the same, so they're not going to cut each other in on a deal. So whatever Comcast pays ESPN for the right to carry ESPN every month, that'll be the same fee that this new company will be paying ESPN per subscriber. So the math is kind of out there.
(05:15):
The question is, how much of a profit margin, Elaine, do you want to take on this and how greedy or whatever you want to call it? How much overhead do you have to support here? Advertising's still part of the mix. This is a mini-bundle, so it's 14 networks together. It's essentially just a small cable bundle that's streaming only that's owned by the three studios. There's not anything much else to it. So we shall see.
Elaine Low (05:38):
There was a lot of other news that came out of Disney. You mentioned Taylor Swift.
Sean McNulty (05:42):
Oh, yeah.
Elaine Low (05:44):
Obviously, the Eras Tour-
Sean McNulty (05:44):
Obviously, March 15th.
Elaine Low (05:44):
... coming to Disney+.
Sean McNulty (05:44):
Elaine, has it on her calendar. Come on. That's it. Four new acoustic songs, Elaine. Come on.
Elaine Low (05:49):
Yeah. Come March 15th, I'll be tuning in after my children are done watching Bluey.
Sean McNulty (05:56):
Yeah, if you can get the TV back. Yeah, exactly.
Elaine Low (05:58):
But any other highlights that we should note from the Disney call?
Sean McNulty (06:01):
Well, you alluded to a little, the investment in Epic Games, so certainly the home of Fortnite, best known as, $1.5 billion. It's a minority stake. It wasn't described to what that percentage is. They're going to build essentially a, quote/unquote, Disney World inside or adjacent to Fortnite with your favorite Pixar or Marvel or Star Wars characters. You can make your own games. Honestly, I have not been in Fortnite, so I'm just going with whatever Iger said on the call. But you can also buy virtual merch, maybe some IRL, real merch. Bob said you can maybe some watch some things, watch streamed stuff in there. He seemed very excited about it.
(06:39):
Epic, of course, had the big battle with Apple over the cut that Apple takes in the app store, the lawsuit that kind of went Apple's way in the end. But with Disney being an investor now, they have a stake in Epic's total revenues here, so they certainly are into that app store fight in a bigger way. That was the other probably biggest headline that came out was certainly the Epic Games announcement. Disney has tried before. I'm sure you were a big fan of Club Penguin back in the day, Elaine.