Disney earnings: What to expect

Yahoo Finance's Allie Canal discusses Netflix creators like Shonda Rhimes pushing back against the network's plans to roll out ads, plus what to expect from Disney earnings.

Video Transcript

AKIKO FUJITA: Well, the hits just keep coming for Netflix. This time, it has to do with something the company was hoping would have positive reception. Let's bring in Yahoo Finance's Allie Canal, who has the details. And Allie, some creators not necessarily very happy with this new ad-supported model.

ALEXANDRA CANAL: Yeah, this ad tier officially rolling out last week, but now we're getting word that creatives like Shonda Rhimes, along with the producers of "The Haunting of Hill House," are upset about the midroll. Reportedly, they believe that a midroll ad is going to disrupt the flow of the content. It's not going to be an enjoyable experience. A lot of these creatives signed their deals with Netflix at a time when the platform was really staunch about not doing any type of advertising. They really took on that position for quite some time.

However, that quickly began to change once Wall Street started focusing more on profitability, less on subscribers. Now, despite all of this, I will say that consumers who choose to opt in to the ad tier, they know that there are going to be pre-roll ads. They know that there are going to be midroll ads. And Netflix, they said on a call in October that they're going to be really intentional when it comes to where they decide to put those midroll ads. They're trying to look for natural breaks.

They've reportedly told creatives that they don't expect as many people to sign up for ad-supported. They think that their ad-free version is still going to drive subscribers, which is sort of an interesting comment, considering they do need the ad tier to be successful in order to continue to drive revenue and profitability.

But I think overall, this is something that we're going to see Netflix evolve over time. They already said they want to take a crawl, walk, run approach when it comes to advertising. I think eventually, we're going to see more ad integrations. Netflix has already been doing this, but I think that could primarily be the big driver for ads moving forward because unlike linear, Netflix has a lot of options when it comes to how they choose to integrate these ads. They have a lot of innovation.

And I do believe that they are going to take this approach, that they will continue to innovate over time. But again, that's not going to happen right away. So for now, people are just going to have to be patient, including those creatives.

AKIKO FUJITA: Allie, this is something I wondered about. Because if you watch a show like Hulu or maybe sort of traditional cable, you just know, right, that before you go to break, you're going to end on a cliffhanger. And I just wonder with Netflix, how do you build that into the programming when it was sort of meant to be seen sort of all across or all in one?

Another company that's looking at the ad-supported tier, of course, Disney. They've got report-- they've got earnings after the bell tomorrow. What can we expect?

ALEXANDRA CANAL: Yeah, so right now, Disney, the analyst that I've spoken with, they're pretty confident that we're going to have a pretty strong quarter for Disney. Obviously, we've heard results from Warner Brothers, Discovery, Paramount, that ad slowdown impacting their bottom line. Disney, of course, it's going to roll out the Disney+ ad tier next month.

And a lot of people are pretty confident that the company is going to do a good job with this, especially since Hulu, as you mentioned, they've had a lot of success with ads. They could potentially roll that out across all of their channels, linear included. So that's one thing to watch.

I think in terms of subscribers, they're expecting around 9.4 million in the quarter after a surge of 14.4 million in Q3. And in terms of Wall Street, what they expect, revenue coming in at 21.27 billion, adjusted EPS at $0.51 a share, that's the expectation here. So I think overall, one thing that consumers and investors should watch is any indication of a recession.

So take a close look at the parks. If we see a slowdown in gross bookings, that could be a signal that there's more trouble to come. But I think overall, Disney has done a pretty good job at weathering the storm, especially after COVID. So overall, I do expect a strong report. But there's a few things to keep in mind and to look out for when we think about the macroeconomic outlook, moving forward.