First on CNBC: CNBC Transcript: Disney CEO Bob Chapek Speaks with CNBC’s Julia Boorstin on “Closing Bell” Today
WHEN: Today, Wednesday, February 9, 2022
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC interview with Disney CEO Bob Chapek on CNBC's "Closing Bell" (M-F, 3PM-5PM ET) today, Wednesday, February 9th. Following is a link to video on CNBC.com: https://www.cnbc.com/video/2022/02/09/our-strong-content-drives-subscribers-says-disney-ceo-bob-chapek.html.
All references must be sourced to CNBC.
JULIA BOORSTIN: Melissa, thanks so much and Bob Chapek, Disney CEO, thank you so much for being here today to talk about what's going on at the company, a better-than-expected quarter on a number of accounts. But let's start with streaming, you added 11.8 million Disney+ subscribers. I know there's a lot of concern after a slowdown last quarter. What drove those numbers?
BOB CHAPEK: Well, our great content is what drives our numbers and you're right. We had a great quarter across the board, whether you're looking at the Disney+ sub adds of 11.8 million, if you're looking at a record setting domestic parks performance, you know, coming right on the heels of COVID. That's very, very encouraging. And just the overall performance of the company with earnings per share of a buck six. That's a really strong performance. And we've always said we're in this for the long-term. This is a long-term game, not really a quarter-to-quarter type of proposition. And I think the long-term health of Disney content really drives the day and to be honest with you, our great cast members, we have roughly 200,000 people that work tirelessly every day to get us through the pandemic and drive us to these kinds of results.
BOORSTIN: So to go back to Disney+ in particular because I know that Disney shares really dropped on the Netflix warning that there was gonna be slower growth in this quarter. What are you seeing right now just so far into 2022 and what's your sense of your ability to hit those long term targets that you use that for 2024?
CHAPEK: Well, we're reaffirming our guidance of 230 to 260 as we gave last December. That's been our target that continues to be our target and really what's driving us is what we've said, great content. We'll have more franchise added content on our big franchises added this fiscal year, double what we had in '21. So that that new content really is what drives it, you know, quarter to quarter because of the pandemic. You know, we have a little gaps here and there in terms of the content. So it's not a straight-line growth every quarter but we're reaffirming that to 230 to 260. We feel very good about that.
BOORSTIN: Now, I have to know the opening Encanto poster behind you, that was a film that you put in theaters for a shortened exclusive window. I'm curious how the growth this quarter with films like Encanto makes you think about the importance of investing more in content and putting more theatrical releases on the platform sooner rather than that traditional window?
CHAPEK: Well, we've always said we're gonna have a flexible distribution strategy right now and the reason is, is because we're in a world of flux, changing consumer behavior because the availability of titles in homes and homes our consumers have had a chance, our viewers have had a chance to enjoy that. They love it. And at the same time, lagged recovery if you will, from COVID in theaters, and so we'd like to remain as flexible as possible, but we do believe in the future of the theatrical business, particularly for our big temple titles. Obviously, there are certain demographics that are slow coming back, the family films, that's one thing that's been a little bit slower, and the films that sort of go outside the big blockbusters, those are slower to come back. But we believe that we've got a lot of options between our theatrical exhibition releases as you saw with Encanto with a short window or direct to our service as you're seeing with Turning Red coming up in March, we're really really excited about the options that we can give to our audience.
BOORSTIN: Netflix talked about ramping up spending. They say they're gonna have a big movie on the platform every week. So give us a sense of how much you feel like you need to invest more in that content. You did lose more than expected in this direct-to-consumer division.
CHAPEK: We're investing heavily. We said last year when we gave the investor conference that we were going to go ahead and double our investment spending and we're doing that last quarter. We said that we're going to be increasing our investment in our international local content. We're now producing 340 new productions there. And yeah, it's a, it's a hungry beast to feed the direct-to-consumer platforms, but our consumers really love it and it's a good investment for us. It's a good investment for our shareholders.
BOORSTIN: And do you think it's necessary to buy more sports rights in particular to bolster ESPN+ and the rest of that family? I mean, I know that there are NFL rights up for grabs, and also Indian cricket rights.
CHAPEK: Well, we have a very strong portfolio of sports rights and I think 95 of the last 100, the top 100 shows that got the highest ratings last calendar year were sports. So, we think we're investing in a great area. And the future sports, it's not just about the linear rights, it's really about the direct-to-consumer options that we give consumers that they're voting more and more for with their pocketbooks. But at the same time, you've got the sports betting option, which really adds something material we believe to that proposition as the new younger audience wants to be a little bit more engaged in the outcome of the game, but at the same time, we think that there's an more interactive, a more gaming component to it as well so less of a sit back and more of a lean forward type of experience. So we think that those rights combined with all those other benefits that we're working on building into the sports viewing process really will, you know, take ESPN and reinstate it as a big growth business for us.
BOORSTIN: Very quick question. Are you going to buy the rights to NFL Sunday Ticket?
CHAPEK: Well, we're bidding for it. And you know, we always say that if an investment is accretive to our shareholders, we'll go ahead and do it. But the moment that it's not we'll back out and we hope it is.
BOORSTIN: So, I want to pivot over to the parks. What drove those better than expected results? And is it pricing, is it spending and what is the trend you're seeing so far this year as people book for spring and summer?
CHAPEK: Well, essentially what we're doing is providing a lot of options for customization and personalization so people can, you know, if they want to come to the park at a relative value, they can come in. We've kept the lowest price ticket price the same for the last three years both at Disneyland and Walt Disney World. But at the same time, we want to give people the options if they want to upgrade their package, and we're giving that to them with Genie and Genie+ and our laying options and by and large to a very surprising extent, about a third to 50% of our consumer base are actually our guests in the park are choosing to upgrade to Genie+, which is way above what we expect and I think speaks to the desire for customization and personalization so we're yielding our guests, we're making sure that they we give them a great customer experience no matter when they come if they come the second Tuesday in September, or if they come the day after Thanksgiving. And our guests, our guests' score shows that.
BOORSTIN: So the lowest price days have stayed the same. But the truth is, is that the more crowded times, the more popular times those prices have gone up. There's been backlash online. People want to be able to afford to take their families, how do you address those concerns and what is driving those prices up? Is it inflation, is it labor shortages?
CHAPEK: Demand. This is a supply and demand business. Unfortunately, unlike say Disney+, we have a fixed supply and we commit to our guests to give them the absolute best Disney experience no matter when they come. And, you know, one of the ways that we do that is by taking those guests that want to have a more bespoke, more personalized, more customized, more expensive day and using that essentially to keep the lower prices on again, the second Tuesday in September. And so, it's really demand that drives it.
BOORSTIN: Before we let you go, I want to make sure to ask you about the metaverse. The last time we did a post earnings interview, you said this is something you're very interested in and saw potential and here we are three months later. What can you tell us about your plans to bring Disney into the metaverse?
CHAPEK: I'm so excited about this. To me, it's a third dimension of the canvas that we let our creative people paint. And it's going to take all the great things that we as a media company have with Disney+ and use that as a platform for the metaverse but at the same time we have something that no one else has and that's the physical world, a world of our parks. And so, if the metaverse is the blending of the physical and the digital in one environment, who can do it better than Disney?
BOORSTIN: Well, it sounds like you're not going to give any more details, but I hope we'll get to learn more and maybe do an interview in Disney's metaverse next time. Bob Chapek, thanks so much for talking to us on the heels of those better-than-expected Disney earnings. Guys back over to you.