The 'problem child' facing Disney is Hulu, says former NBC Cable president Tom Rogers

Disney shares tumbled yesterday. The guidance for the streaming division left investors somewhat disappointed. Joining us now a former NBC cable president Tom Rogers. He’s the executive chairman of Orbit Gaming and Entertainment. And as NBC contributor Tom thanks, it’s good to see you the the linear business. No surprise to anyone, but still the numbers are are a little shocking. Not only revenue down 8% but operating income for linear 752 million that was down 22%. So even if if entertainment streaming finally turned a profit, you got more going out this side than you got coming in over here. Well, Joe, I am usually the Disney skeptic as you know, when the market’s gotten excited about Disney sub numbers, I’m usually pointing out that there’s another story there that isn’t so rosy on this quarter. I think the markets being far too skeptical relative to Disney performance. I actually think this was a a very good quarter setting up a a good year. You’re looking at the year that’s going to have 25 percent EPS growth, 8 billion or more in free cash flow and streaming profitability. And I think that sets things up pretty well for them. And I think it is meaningful that Disney Plus and Hulu together are profitable when you take ESPN Plus out of the equation. Contrast that with Warner that in order for streaming to be profitable, it has to put its HBO cable and satellite business into the streaming numbers to claim profitability. I, I think here to your point though about the whole game is and streaming profitability make up for the continued precipitous decline of linear. And the whole question there is, can this streaming business scale? And I think what analysts have missed here is a major milestone that Disney has hit and that is that the streaming business now after four years in terms of revenue is equal in size to the linear business. It’s run rate about 25 billion in revenues, that’s about 70% of what the Netflix revenues are and that’s a that’s a real milestone. None of the other traditional media companies can say it is scaled. It’s streaming business now to the size of its linear business. Now to your point, the linear decline continues and 22% operating income decline and when you look at the international business, 44% operating income decline on the linear side with on average linear viewing declining 10% a year. They got to continue to grow that thing. And the operating margins are a big question because of the equivalent levels of revenue to Netflix. Disney is nowhere near Netflix operating margins, but they have scaled the business in four years to a 25 billion run rate business. That is a real achievement. The the parks business, I alluded to some of your comments there. So there was some disappointment about a slowing of AI, don’t know a bounce back there, but you said prices are are higher and it shouldn’t be surprising. Yeah, I’m not surprised that the the parks business is flattening. They’ve been taking price up like crazy I think testing the limits of pricing there and at some point that was going to flatten given given how aggressive they’ve been there. I don’t think analysts have adequately pointed to the the real issue for parks going forward which is Comcast CNB, CS parent company soon to open the Epic Park in Orlando which is surely going to create some meaningful competition there for Disney World. It’s also going to bring a lot more visitors to Orlando. But Disney dominates the theme park business with the 60 billion infusion of CapEx that they planned for that it’s going to continue to dominate. I think that the issue for Disney that the the problem child that I’m looking at is Hulu. It not only has the Comcast negotiation on the buyout to deal with, which is probably not going to end up pretty for Disney, its sub numbers seem to have stalled. It’s a daily usage is down more than any other streaming service and unexplainably to me it’s ad revenue once again declined for the quarter. You have Disney CFO saying, hey, the ad market is strong and we know that budgets are increasingly being allocated to streaming services and Hulu is the granddaddy of advertising. Streaming services has much bigger ad subscribers than any other streaming service because it’s been at it much longer in terms of advertising and it’s advertising is declining. I just don’t understand it. So there that’s a, that’s a real operational area that they’re going to have to focus on. Wow.