In this segment from Motley Fool Money, host Chris Hill and analysts Jason Moser, David Kretzmann, and Andy Cross discuss Disney‘s (NYSE:DIS) recently reported fiscal third quarter, which came up short of Wall Street’s forecasts despite outstanding box office figures from Avengers: Infinity War and The Incredibles 2. But more important than the past is the future, and for this company, that’s all wrapped up in the Disney streaming media service it will be launching late next year, as well as its integration of the largest part of the Fox entertainment empire.
A full transcript follows the video.
This video was recorded on Aug. 10, 2018.
Chris Hill: Third quarter results for the Walt Disney Company came in lower than Wall Street analysts were expecting, but Studio revenue was a bright spot thanks to Incredibles 2 and Avengers: Infinity War. Jason, thank God for superheroes!
Jason Moser: Thanks God for the parks, too! The parks were, again, a shining spot on the quarter. Operating leverage there is traffic, continues to grow with those parks. That’s a big advantage for the company.
But clearly, on the call, Bob Iger’s point of focus is on this Disney streaming product that’s going to be rolling out sometime in 2019, probably late 2019. This is going to be a more family oriented offering. I think they actually drew the line at rated-R movies. They’re not going to have certain content on there. It’s not going to be like a Netflix, cast this big, wide net and have something for everyone. What it’s going to do is really leverage all of this property that Disney has, including what they’re getting with this Fox acquisition.
Because they made it very clear that’s the priority, they really need to make sure they execute here. I think it’s going to get off to a slow start as they relieve themselves of these encumbrances on all this content that they’ve licensed out over the past few years. But as this product starts to grow and gain some momentum, they will continue to add to that catalog. I think that will give them the opportunity to exercise a little pricing power as time goes on.
The ESPN+ product continues to do well. They admittedly set modest expectations, but for right now, you really have to keep your eyes focused on this Disney product in 2019.
David Kretzmann: I’m a little underwhelmed about that product. They’re talking about launching it toward the end of 2019. You think about it, that’ll be almost 13 years after Netflix launched its online streaming service. The fact that Disney is sitting on their hands there, saying, “We don’t need to rush, we have good enough content,” I mean, by that time next year, Netflix will probably have 150 million or more global subscribers. I wonder if there is a little bit of overconfidence there on Disney’s part. And, the fact that they’re spending around $70 billion to acquire and integrate Fox … I just wonder if they’ll have a lot to chew next year.
Hill: It might be overconfidence. Although, Jason, it might also be a recognition that they have one shot at this. We’ve been talking about this streaming app for a while now, and they’d really better nail it.
Moser: Yeah, I think you’re right. Knowing that Iger had such a focus on this point in the call, they’re putting their money where their mouth is. If they don’t nail it, they’re going to have some real questions to answer.
To me, the real question is… they have all of these different platforms now. They have ESPN+, they have Hulu and the Hulu live streaming offering that they now have a majority share in, they’ll have the Disney streaming service. I don’t want to see this big, cluttered, “I have to have all of these different apps to experience everything I want to experience with Disney products.” It’s going to be really interesting to see how they put this all together. I think that’s where they have a big opportunity. I hope they don’t blow it, because it’s not going to be an easy task. It’s a lot of stuff they have to put together and organize and make easy for the consumer to find.
Andy Cross owns shares of NFLX. Chris Hill owns shares of Walt Disney. David Kretzmann owns shares of NFLX and Walt Disney. Jason Moser owns shares of Walt Disney. The Motley Fool owns shares of and recommends NFLX and Walt Disney. The Motley Fool has a disclosure policy.