Disney swings to a quarterly loss as pandemic pressures parks, while Disney+ subscribers top estimates. Benjamin Dunbar, Gerber Kawasaki Managing Partner joins Yahoo Finance to discuss.
ADAM SHAPIRO: All right, Disney, the house of mouse has popped right now. This is after hours, the shares are trading higher, almost up 6%. Let's bring in Benjamin Dunbar, he is Gerber Kawasaki Managing Partner, and there's a lot here that looks really good, especially when you look at the streaming service subscription numbers. What was it, 73.6 million? Do you read that as a plus with much further growth for them, or is there a negative in this that we should pay attention to?
BENJAMIN DUNBAR: Yeah, well, look, Disney is two different stories right now. You have the parks, which talk about a worst case scenario everything going on with the pandemic, and that was typically their profit generator. But you have these great subscriber numbers. I mean, a huge beat there, and you look at what the market valuation is for Netflix and what they apply to each subscriber, and I mean, Disney subscriber numbers are great, and these are going to continue to grow. There's so much legacy content, and they're still going to continue to grow subscribers a lot.
SEANA SMITH: Ben, how much, though, can this really offset some of the pain that we're seeing in some of the other areas? Because when you take a look at their parks division or when you take a look at other parts of their entertainment division, the fact that so many movie theaters across the country remain closed, how long can the Disney success offset some of that weakness?
BENJAMIN DUNBAR: Yeah, well, it's expectations, right? So Disney, it is not a story for the next six months, OK? Parks are not going to be back. They're not going to have their main profit generator back at all online, right? So we have that huge issue, even if we have this vaccine starting to get distributed, there's nowhere near going to be a makeup for how much money they make there. But when you look at the subscriber growth that they're likely going to have between Disney Plus and also Hulu, which a lot of people don't really think about.
I mean, Hulu's subscriber numbers have been growing substantially, and they're putting out a lot of good content. And right now, we're spending so much time at home, and content is king, right? And so with Disney, it's going to take some time, obviously, to grow those subscribers, and it does not offset the park. But the story isn't the next six months or year, it's really the next multiple years from there.
ADAM SHAPIRO: So this figure that we got for fourth quarter broadcasting revenue, in the last segment I asked a guest if old media was time to put a fork in it, but $2.49 billion was up 9.9% year over year, is that a reflection of political ad spend, or is there something really here that makes that segment sustainable?
BENJAMIN DUNBAR: Yeah, I think that numbers a little bit skewed. I mean, I'm a millennial. I look at my friends, and there is a lot more of us watching more cable type television those type of networks, so I think we probably have a little bit a skew of data there, but it's not going away, right? We still have a population that watches those networks.
There's still some value there, but it's very interesting, because even if you're looking at sports, which I've always grown up loving sports, and I kind of look at a lot of my peers, and sitting and watching an entire football game is pretty dang tough, right? And the amount of, like just as millennials, Gen Z, all of us, we just, we need a little bit more action. So I think just the traditional media is still figuring out how they can be attractive to us, how they can get us back on their content more often. And hey, look, the debates and all that was pretty entertaining for us.
SEANA SMITH: But when you look at what Disney did with "Mulan" a couple of months ago, do you see them moving some more of those big chemical like films direct to consumer? Is that going to be more a common occurrence for Disney going forward?
BENJAMIN DUNBAR: They have to, they have to. And I'm sure deep down, they don't really like it, because they love the big theater experience, but it is changing. Look, I don't go to movie theaters, and I know there's some people that love going to movie theaters, but I prefer to watch the movie at home and have whatever food I want, you know, whatever it may be.
And so when you look at it, it's just, you're going to get people like me, you're going to get a lot of these people that don't want to go out to theaters, even post-pandemic, right? And so this is something that maybe they don't want to, but Netflix has kind of forced their hand, the pandemic has kind of forced their hand, and they need to be smart. And look, that keeps subscribers loyal if you're a subscriber and you can get a deal on these movies, things like that is going to keep people on the platform definitely.
ADAM SHAPIRO: Well, as a Gen Xer, I'm going to tell you, I miss going to movie theaters.
I'm looking forward to their return. But there is a transition, because if you look at that media networks revenue of 7.2 billion, a year ago, the 7.2 billion would have been park revenue. So after pandemic, let's look a year and a half later. Do the parks ever regain their number one segment role as the number one generator of revenue, or is that going to diminish going forward after the pandemic?
BENJAMIN DUNBAR: It's a good question. You look at how profitable the parks are, right? So the streaming service is not as profitable. So what their profit margins on the park, what that's going to look like, the parks are going to generate substantial profit, and there's going to be so much pent up demand, that they can charge you so much for these tickets, and everyone's going to go in and spend so much time on great merchandise, right?
So when you look at how much profit it's going to generate, yeah, the park's going to dominate. But when you look at substantial future revenue and that built in reoccurring revenue model, I mean, that could very likely be more moving forward. It's not going to happen next year, it's not going to happen the year after, but it's something moving forward that is going to be a substantial revenue driver, and we can't discount it at all.
SEANA SMITH: So with that said, the importance then of the parks, what do you make of this recent reorganization where Disney combined all of their content into a single business? Does that type of move make sense to you?
BENJAMIN DUNBAR: Yeah, look at Netflix's valuation right now, right? Netflix is trading at a very close market value, market cap to Disney, right? And so by focusing in and kind of marketing that direct to consumer segment to investors, people are looking at that and thinking like, wow, look at these subscriber numbers, right? Netflix has 200 million subscribers. Disney now has over 100 million, even though Disney Plus was just released a year ago, and obviously that includes all Hulu, ESPN Plus and Disney. But by focusing on those numbers, it's kind of distracting, if you may, investors from the parks and kind of separating that out is really important, and that is an amazing story.
The park story is going to be a bad story for a while here, OK? We're not done with this pandemic. We have a lot of huge issues. We're seeing huge tick up and daily cases every single day, and the thought of going to a super crowded park is just an absolute worst case scenario. And so we got to get through this, and it's not going to be over the next few months, for sure.
ADAM SHAPIRO: OK, so a year ago was acquisition. You look at the 52 week range on the stock here, and they're almost back to the high that they had been before pandemic. Should they perhaps be divesting themselves with something, whether it be ABC or even dare I say ESPN, is it time to maybe sell?
BENJAMIN DUNBAR: That is one of the most challenging questions to ask, because we've had this major decline in ESPN and all of those, but it is still this unique brand. It still holds a certain market. And so, you know, you mentioned, you're a Gen Xer, right? You're still watching ESPN, correct me if I'm wrong, right?
ADAM SHAPIRO: Still watching.
BENJAMIN DUNBAR: Yeah, and so I still think that we have this market that we need to keep online and keep on the Disney platform. And so keeping the Gen Xers, keeping the little quote, "older people," Gen X isn't that old, don't worry.
ADAM SHAPIRO: It's old, you can say it.
BENJAMIN DUNBAR: Ah, It's-- no, you're good. My gray hairs are coming quick, even as a millennial, so I'm with you. But look, we want to keep you on the platform, right? And Disney can keep so many people on the platform by keeping some of these franchises. Now, if they need cash, if the pandemic lasts a lot longer and the vaccine is a total bust, which it really doesn't seem like that's the case right now, at least they have those where they can raise some cash. But most likely, we want to keep them just so we can keep more people on the platform.
ADAM SHAPIRO: You want to be old? My brothers went to summer camp with Chris Berman. That's another story.
Benjamin Dunbar, Gerber Kawasaki Managing Partner, good to have you here on Disney earnings.