Dot.LA chief correspondent and former senior Disney analyst Kelly O’Grady joins the Yahoo Finance Live panel to discuss the latest outlook for Disney ahead of the company’s earnings report on Thursday.
Video transcription
AKIKO FUJITA: Disney shares rebounded in the session and hit a new high today, up almost 5% before their big earnings report on Thursday. Probably Disney + will be the big focus again, with the streaming platform already boasting almost 90 million subscribers.
Let’s get Kelly O’Grady. She is the Chief Correspondent of the point. LA And Kelly, we should point out, 90 million, certainly not much compared to where Netflix is today with over 200 million, but Disney has set some really ambitious goals. Are we likely to have any surprises when they report on Thursday?
KELLY O’GRADY: You know, I don’t think there will be any big surprises. Their Investor Day, I think, was the big revelation with their streaming plan for the next three to four years, all the content they hope to release. I think you will see a very strong performance when it comes to subscribers.
Third-party data indicates that monthly active users have increased significantly, probably due to the launch of “Soul” on the platform in late December, as well as increased use in Latin America, specifically in Brazil. You know, I find it interesting to think about them in the context of their peers. The Netflix you just mentioned, of course, exceeded subscribers’ expectations, although we’re realistic, it’s probably because of everyone’s favorite show, and this “Bridgerton” show and all the other content they’ve released.
I think you will see strong performance and an increase in the number of subscribers, but I would not expect them to come close to the 100 million mark that some people have reported. Because, let’s remember, that number of 86.2 million was in early December. That was not the last third quarter profit they were hovering over – or fourth quarter profit, 73 million subscribers. So, I think we will see a good performance at Disney +, but I am not expecting any great news like the one we saw on Investor Day.
ZACK GUZMAN: Yes, that kind of rumor we always prove. I mean, we were discussing this when we saw some special releases on Disney +. But “Soul”, another one of those who stood out and kind of trying to figure out how much people would be willing to pay or what kind of incentive are coming, you know, specific moves from the title here.
On the park side, however, this is something we’ve been waiting for updates on, as they managed to keep COVID under control with their Florida park. But what are your expectations about how they might portray this construction, given the many unknowns about where they go in California?
KELLY O’GRADY: So I hope to see some optimism about the reports from the parks. There is a new bill being introduced in California that will allow Disneyland to be opened ahead of Governor Newsom’s plan here. It would be in layer three, orange, against layer four, which is now.
Now, that would only be at 25% capacity, of course, but we are seeing outdoor dinners starting to open again here. So I think you will start to see some optimism, especially with the launch of the vaccine. And you know, there’s – there’s a big question, are you going to see the parks recovering? Will there be pent-up demand?
And I think you’re starting to see, especially with the performance of Walt Disney World in Florida, that there is such a demand. There is that increase in attendance. They were able to go from 20% to 35%. And they are seeing the desire to return.
And so I think there is going to be some optimism, because this pent-up demand, if we see it happen with – with the continued rollout in Florida, as well as potentially in California earlier than expected, it will be off a leaner cost base. , because they made so many cuts to try and make this possible when we can go back. And I mean, you know, Tom Brady and Gronk are going to Florida today, so that must mean something, right?
AKIKO FUJITA: Yes, Florida and California, very different situations now. But you know, what you pointed out, the headwinds on the side of the park, has led to many debates about how actions should really be evaluated. And as for your point, there may be some optimism about what’s to come in California, but we’re still months away from really seeing the significant recovery from where people actually go to the parks. How do you think people should look to Disney’s future now? Yeah – even with the parks reopening, is this really about the momentum around streaming and the potential that they are likely to see with more content coming on board?
KELLY O’GRADY: I am very happy that you asked this question, because it has been something that has made me a little anxious when I see the actions continue to reach new levels. I think you are absolutely sure that it really is around that optimism with streaming and what Disney might look like three, four years later, against an optimism that the parks will be magically fixed overnight, because they are not. There are still months to go, however much I would like to go there for my birthday this year.
But I think there is this philosophical question of, you know, every teleconference that they release some great news, right. These are the numbers of Disney + subscribers or, on Investor Day, the big news about your investments in content or changes in leadership. And that has always given the stock a big boost.
Now, most people who invest in Disney are playing the long game here, but it makes me wonder if there will be any leveling at some point in the future, because at some point there will be more news to release, and it will be just about execution. At this point, I hope they address this concern about how many of these Disney subscribers are Indian Hotstar, you know, subscribers within the Disney + range, because that has a lower average revenue per user than most other countries.
So, up to that point about OK, there is optimism for the future, but we need to start thinking more about execution and what it really means from a profit standpoint. So I think there will still be a boost coming from the conference call, because there will be new numbers of subscribers that are likely to be higher than we expect. But I’m not sure how long this will last without a really difficult execution behind it.
ZACK GUZMAN: And not. It is a very good point. And it’s also coming, as we may see some of these subscription benefits. You know, Verizon, our parent company, offering a free Disney year and a few people arriving to see if they want to renew and start paying.
But when you look only at the last point, just to go back to what we saw with “Mulan” and this idea of buying Premiere with “Raya and the Last Dragon”, that would be the next big problem, I think, that people will be curious, I mean, what do you expect to see when we get these updates from Disney, if we can this time, about the pricing power that could come from Disney + and how is this fan base so attached to maybe paying a premium?
KELLY O’GRADY: Right. I mean, they had the ad during the Super Bowl. It will cost $ 30 for the Premiere access fee. The same as “Mulan”, will also be released in theaters. But March is going to be a bit difficult in terms of returning to the cinemas. But I am hoping that they will solve this.
There is a possibility that they may also feature some of the other films. I mean, “Black Widow” will arrive in May, “Jungle Cruise”, I believe, will be released in July. These were supposed to be great support films for them. But I really hope that they will give us some data on “Soul”, because they will be able to potentially inform how “Raya” could fare, even if “Soul” was available for free on the platform.
But also, if they decide to make some of these films, depending on how we are doing, you know, in a bad or good way in the summer, what can we expect in terms of purchasing power. Because you’re right, there are a lot of subscribers, but that extra $ 30 fee is going to be difficult, unless you contextualize the fact that, yes, you know, you would be buying popcorn, you would be buying movie tickets for a family of four people. So, when you think that way, it’s actually not that bad. But I think the $ 30 tag price creates a lot of anxiety for potential buyers.
ZACK GUZMAN: Yes, a lot of – a lot of snacks to keep our eyes open for when we have that later on at Disney earnings. But Kelly O’Grady, dot.LA Chief Correspondent, thank you for coming here to talk, as always.