Daybreak Weekend: Disney Earnings, Portugal Web Summit, China Singles’ Day

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens It's smart, calm and to the point And it fits into your morning You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris On Apple, Spotify, YouTube or wherever you get your podcasts

1:02Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our daybreak anchors all around the world. Straight ahead on the program, some big entertainment earnings are coming out this week. We'll break down what to expect from Disney and Paramount Skydance. I'm Nathan Hager in Washington. I'm Caroline Hepker in London, where we're looking ahead to Portugal's Web Summit as the country pivots to tech and AI. I'm Doug Krissner looking ahead to Singles Day in China. That's all straight ahead on Bloomberg Daybreak Weekend.

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2:01Good day to you. I'm Nathan Hager. We begin today's program with a look at some upcoming earnings reports in the entertainment sector. We get results this week from both Walt Disney and Paramount Skydance. For more on what to expect from both these entertainment giants, we are joined by Bloomberg Intelligence analyst Geetha Ranganathan and Bloomberg Surveillance co-host Paul Sweeney, who spent a better part of his career covering the media. Great to have both of you with us on the weekend program. And let's start with Disney, obviously the biggest entertainment company in the world. Geetha, what are some of the key things we need to watch from the House of Mouse this time around?

2:43Yeah, so I think, as usual, the big thing that we're watching for is the parks segment. This is the biggest segment for Disney, brings in about 60 % of their profits. So obviously, you know, any trends, any consumer trends are very, very important. And one of the key things that, you know, people have been concerned about for Disney for this year is the competition from the opening of Epic Universe in Florida, which happened in May. When they reported last, they actually showed really good results. They were able to hold their ground despite all of that competition. So I think we're expecting to see more of that, you know, resilient demand going into the quarter.

3:25And then the other big thing that we're watching for is really the streaming business. So in August, ESPN launched its streaming platform for the very first time. We're going to look to see if Disney management team provides any numbers in terms of early adoption and just to see how that launch has been going. Paul, you, of course, follow this company very closely as well. I mean, I got to admit, when it comes to Disney streaming, I sometimes forget about my Disney Plus subscription. I mean, am I part of the problem here? I mean, how do you see Disney navigating the very competitive streaming universe?

4:04Yeah, I think, Nathan, it all comes down, as it usually does in the media business, to content. And Disney has some of the absolute best content in the world, including live sports. So when you put that all together, it's just a question of how you deliver that content to people. And when I came up in the business, it was through the cable bundle. It was through satellites like DirecTV. Now it's streaming. And so you just got to figure out how do you most efficiently get that content to your client, your customer, when they want it, where they want it, and charge a price that is profitable for you.

4:38And Disney has a great track record of doing that. Netflix paved the way in streaming and really showed kind of the world how this new media models can be. And now what we've seen from the legacy media companies over the last 10 years or so, as Geetha writes about with her research, is these legacy media companies are trying to catch up. They're trying to transition from a model where the cable TV bundle was really the way to go to now streaming. And Disney is really doing a good job. And I think The Street believes that they can certainly be a really big player in the streaming business. Yeah, Geetha, we've talked before about how Netflix has expanded its own streaming strategy with live events, getting into sports as well.

5:19And now with Disney introducing its own streaming sports platform with ESPN Plus, is it kind of like legacy media playing catch up again? Yes, a little bit of that. But, you know, the way that they're kind of positioning ESPN. So Disney has to be really careful. They're kind of walking a tightrope here because, remember, they have the leading brand when it comes to linear TV with ESPN. ESPN generates about$15 billion from the linear TV model year in and year out. You know, we're talking about affiliate fees. They are the highest affiliate fee generator across the industry. They charge something like$10 per month per subscriber.

6:01So absolutely way, way above competitors who charge maybe, you know, or other channels that are at like$1 or$1.5 per month. So obviously, they have to be very careful to protect that legacy TV model. But at the same time, they want to be able to appeal to consumers who are outside the pay TV ecosystem. And there are a lot of consumers, by the way, outside the pay TV ecosystem. We're talking about 65 to 70 million households that do not take a pay TV or that do not subscribe to a pay TV bundle. And so it's really important to be able to provide access to sports content. And that's exactly what ESPN is going after.

6:39and we think that so far you know they've done a really good job with that in terms of putting their their content out there you talk about catch-up and are they a little bit late to the game yes maybe in terms of Disney plus but again with ESPN they had to be really measured really deliberate make sure that they don't cannibalize you know their linear tv business which is really their cash cow and Paul you mentioned the the content slate that Disney has as well we haven't even talked about their traditional business, what's coming in the box office. What are we expecting there? You know, it's interesting.

7:14As Geetha writes in her research, Disney is just in a phenomenal place from a content creation perspective. They've got obviously all the Disney product that has propelled the company for decades, but then they also have the Star Wars stuff and the Marvel stuff. And it just seems if they see something good out there over the past 10 or 15 years, they went out and bought it. So they have the best content in the business, And they usually lead box office by a wide margin, although Warner Brothers is having a very good year this year. So, again, Disney's at a spot. You know, they bought the media assets, including the studio from Fox.

7:48So they have all of that content as well. So from a content perspective, nobody really can compete against them. And so they're in a great spot there. And they monetize it better than anybody else, whether it's through the cable bundle, through the streaming service, bringing some of the content to their theme parks. That's kind of been the magic of Disney as a company and as a stock over the years, their ability to really monetize their content as well or better than anybody else out there. You know, we haven't even talked about the linear networks yet. They've got ABC as well. And I think this is going to be the quarter since the controversy surrounding Jimmy Kimmel, isn't it?

8:28Is this going to be a hindrance potentially, the traditional broadcast and cable networks, Keita? Yes, I mean, you know, one thing that all media companies, this is not just Disney, have to contend with is cord cutting is a lot of pressure with the linear TV networks. Of course, you had the Jimmy Kimmel, you know, controversy. One thing that we're going to be looking for when they report is whether that Jimmy Kimmel suspension actually hurt their streaming numbers, because we did get reports that users were kind of canceling, you know, their subscriptions. Again, I don't think it's going to be material, but this is something that all media companies have to contend with.

9:06What is the plan that they have for their networks? For Disney, ABC is a very important property because it shares a lot of the sports rights with ESPN. You know, they do show a lot of Monday night football games. You know, they have NBA games. There's a lot of college football. So, you know, ABC is still a very, very important property to them. Yes, they have a whole bunch of other cable TV networks. Think about the whole Disney Suite, National Geographic, all of those channels that are definitely in secular decline. But so far, there are no plans, at least publicly, that Disney has said that they want to necessarily separate that business or sell that business.

9:51So again, we're kind of contending here with a melting ice cube. And Nathan, you know, interesting on this subject, Laura Martin, a research analyst at Needham and Company, came out with a really provocative note about a month ago saying that Disney should just shut down the ABC network. Make it go dark. Don't sell it. Just shut it down. It's a declining business. And it's really the only business that is under federal regulation. And if you want to get out of the way of President Trump and maybe some heavy-handed regulation, just sell it or just shut it down, which I thought was an interesting topic.

10:21Yeah, really interesting indeed. We're speaking with Paul Sweeney, host of Bloomberg Surveillance, and Geetha Ranganathan of Bloomberg Intelligence. Let's shift over to Paramount Skydance, the first quarter that they're going to be reporting as Paramount Skydance under the new ownership with David Ellison at the helm. A lot of job cuts, a lot of changes. Geetha, how could that play into the results? Yeah, we really expect, you know, the upcoming results to be a big reset in the whole Paramount Skydance outlook. look, I mean, this will be the new management team's first big reveal of its operational, of its financial plans.

10:58As you just mentioned, there's going to be a mix of major cost cuts to improve efficiency, and there'll probably be some major investments that they announced to support, you know, long-term growth, especially on both on the content side as well as on the tech side. We have to remember that this was a company that was under-managed, under-invested in for years. So, you know, really looking forward to see what they have to say. But of course, the big looming question other than results is, are they going to make or are they going to increase their bid for Warner Brothers Discovery? That is really the big, big question.

11:31Absolutely. I wanted to get into that with you, Paul. Is Paramount Skydance going to have to become Paramount Skydance Warner Brothers Discovery or whatever other names they're going to have to put at the end of their title? Yeah. You know, it's interesting. They have an enterprise value of$30 billion. And at one point in time, that was a big media company. In today's world, it really is not. And I think, you know, it's kind of a lot of folks will call it, you know, substandard in size. But you take a look at Warner Brothers Discovery, it is three times the size of Paramount at$90 billion of enterprise value.

12:02So it's, it's really a big something a big pill to swallow there. So they're going to need some help. Now, it's nice when Larry Ellison is the CEO's father, that lends some support there, but they're going to need some partners probably if they want going to pursue this here. So it'll be interesting to see how it plays. And as Geetha well knows, this is a company that is now officially in play. I mean, the CEO has said it, the board has said it. And so it's just a question of who and when, I think, and at what price. Yeah, it would be fascinating to see, given the merger between Disney and Fox just a few years ago, if we see yet another major media entertainment merger like this, where could that position Paramount against Disney with competing giant content slates, Geetha?

12:50Yeah, I think it puts them really within striking distance of Disney. It puts them within striking distance of even, I would say, Netflix, because they're going to have a fantastic content budget. They're going to have some best in class, I would say, IP. So really, really puts them on the map, because right now, if you kind of look at Paramount, they have about 80 million streaming subscribers. You put that together, though, with HBO Max, which has about 130 million, you already get to 200 million, which is above what Disney has in terms of streaming subscriptions. So definitely makes them a major player, you know, somebody that you have to take note of and gives them a lot of firepower in terms of growing both the studio business as well as streaming platforms.

13:33Yeah, really busy entertainment earnings week on tap for us. Thanks to both of you for this. That's Paul Sweeney, co-host of Bloomberg Surveillance, and Geetha Ranganathan, media analyst for Bloomberg Intelligence. And coming up on Bloomberg Daybreak Weekend, we'll preview Portugal's Web Summit, one of the largest of its kind in Europe. I'm Nathan Hager, and this is Bloomberg.

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14:37This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Up later in our program, Singles Day in China is coming up. We'll get a preview. But first, Portugal. It's looking to accelerate the growth of its AI, technology, and startup industries. For more than a decade, the country's been luring top international business talent through its Golden Visa program. but now it's also playing host to billion-dollar investments from the likes of Microsoft and NVIDIA in new AI data centers. With the Web Summit in Lisbon taking place in the next few days, we want to get more from Bloomberg Daybreak Europe anchor Caroline Hepker in London.

15:16Nathan, Portugal's Web Summit, which Bloomberg once dubbed the Davos for Geeks, is one of the largest tech summits in Europe. In the next few days, the forum in Lisbon will hold discussions on topics ranging from AI to cybersecurity to fintech, whilst playing host to speakers from Meta all the way to tennis legend Maria Sharapova. It comes as the country looks to consolidate its status as a tech haven and to court investment in its burgeoning AI and startup industries. Now, in the last few weeks, investors have grown increasingly concerned, though, about the prospect of stretched tech stock valuations and maybe even an AI bubble.

15:59NVIDIA's Jensen Wong spoke to Bloomberg's Ed Ludlow and tried to calm the market's nerves. I don't believe we're in an AI bubble. And the reason for that is we're going through a natural transition from an old computing model based on general purpose computing to accelerated computing. We also know that AI has now become good enough because of reasoning capability, research capabilities, its ability to think, it's now generating tokens and now generating intelligence that's worth paying for, to the point where I'm paying lots of it. That was NVIDIA's Jensen Wong speaking to Bloomberg's Ed Ludlow.

16:35Well, as tech CEOs then seek to reassure investors that AI spending shows no signs of abating, Portugal is positioning itself as one of the beneficiaries of Europe's AI build-out. How far, though, can the country's growing tech scene thrust its economy into the 21st century. Joining us now is Bloomberg's Portugal Bureau Chief, Sofia Orta e Costa. Sofia, good to speak to you. So should we start with the Web Summit, which is one of the largest of its kind in Europe? What do the main themes this year that they'll be talking about actually kind of tell us about Portugal's priorities? It's kind of a greatest hit of the biggest talking points across AI and tech at the moment.

17:19So we do have AI and ethics really exploring how to govern this increasingly important industry in Europe and how really to kind of align it with human values. We also have the future of work, climate tech, growth in startups, you name it. And we do have the finance minister from Portugal attending and expected to speak. So that really shows you where the priorities lie for this new government that followed the elections earlier in May this year. That's really kind of throwing investment and subsidies at this industry, trying to position Portugal as one of the forefront economies to invest in in the European Union.

18:01Sophia you've been writing about the town of Sinj which is on Portugal's dramatic Atlantic coast that actually this could be a data centre a tech hub not just for Portugal but maybe for Europe tell us about what's been happening there in terms of deals and breaking ground. So this is really interesting because this is a very small town about 15 ,000 residents I went down there it's about an hour and a half's drive from our Lisbon office. And what's happening there is investment from Chinese, US, European investors, and quite a lot of it. So my interest was, you know, why are billions of dollars pouring into this really small Portuguese town?

18:50And one of them is what's set to be one of the biggest data center projects in the European Union. And it's 1.2 gigawatts. Now, Caroline, I have no idea what 1.2 gigawatts is. So just to put it in context, that's about as much as the entire metropolis of Lisbon consumes. So it's quite a lot of energy. Now, why does this matter? I mean, this is a big investment. It's a 10 billion dollar data center. This is huge for Portugal. And Portugal is really trying to say, hey, we're not just tourism, even though it accounts for about a quarter of GDP and a lot of jobs. So incredibly important, obviously, still for the economy.

19:31But that was important to bring the economy out of the crisis, out of the not just the financial crisis, but the sovereign debt crisis. But now, OK, let's invest in the future. This is where it's at. The government is making it easier for these companies to come here. I spoke to the Start Campus data center CEO and he said, you know, we were welcomed with open arms. And the Chinese battery maker, Kalb, is the fourth largest battery maker in the world. So this is quite significant as well. That's a two billion euro investment. They just broke ground on their first battery factory outside of China.

20:10They picked Singe, this tiny, tiny town, as the gateway into the European Union. And this was really heralded by both sides of the political spectrum as a big step forward for Portugal in terms of the green energy transition. Yeah, lots of visitors, but a population in Portugal, only just about 10 million people. but the focus on data centers you know raises the same question for portugal as across europe which is that the ai boom is power hungry there will be growing power demands there's a worry about whether it's going to strain portugal's energy system i mean we did see blackouts in portugal earlier this year and that was blamed on a number of factors but one of them was you know the green and clean energy system there, is the infrastructure going to be able to cope?

21:03So that's the big question. And there's been a lot of discussion at the government level, but also at the company level, over who really should take the lead on investing in the grid infrastructure here. We actually had EDP, that's Portugal's biggest utility, today saying that it plans to allocate a significant amount of money into investing in the grid here in Portugal, but also in Spain, where they have a market. And I'll just tell you that number, 3.6 billion euros in electricity grids and infrastructure through 2028. That's a big number, Caroline. So the problem here, or I mean, I guess the issue, I wouldn't call it a problem, is that Portugal uses renewable energy for about 70 % of its energy consumption.

21:53So that's a pretty big proportion. And it still also imports a bit of energy, a lot of that from Spain. So whether to kind of reduce the reliance on the Spanish grid, that's one question. Whether to improve the infrastructure here and whether it makes sense for private companies to do that and share the load with the government. These are all still questions and there's still a lot of looking into what happened around that blackout. Portugal does like to blame its neighbours in Spain for that. Indeed. In terms of startups, Portugal's also got an interesting scene there. Sword Health, this startup that uses AI for medical rehabilitation, for example, and that has raised quite a lot of money and is now more valuable than everything other than about five listed companies in Lisbon.

22:47Is that part of a kind of growing scene as well? If you're seeing data centres, you're seeing all of this interest. Is there also a bit of a growing startup scene in Portugal? Yeah, there is. And, you know, there has been an attempt for the past decade or so to really nurture startups in Portugal. But I think this one really grabbed my attention, Caroline, because it was valued at$3 billion in a financing round last year. And this year in June, it was valued at$4 billion. And as you said, this is pretty significant for Portugal. It's one of the most valuable private companies for sure. And one of the most valuable companies, you know, full stop in Portugal.

23:29And it's also backed by founders funds. So very high profile investors looking at this company. And what it does is obviously quite interesting. it's looking at pain management solutions and physical rehabilitation using AI obviously a buzzword for investors at the moment but you know the fact that you can found these companies in Portugal you can also stay here not necessarily have to go all the way to Silicon Valley to scale suggests that the country is taking these things more seriously is understanding that these companies need more of an infrastructure around them. And the government actually just recently said it would cut taxes for companies, which would be a big help as well.

24:13Okay, that's interesting. In terms of what the government is hoping for, and what the public in Portugal make of all of this, Portugal still got a GDP per capita that is amongst the lowest in Western Europe. So there must surely be a desire for the economy to do well. But what is the government's political ambition, what's the response from the public? So there's always a tension between the foreign money that's coming into Portugal, which has obviously been hugely important for the economy, not just these kind of investments into tech, but also from overseas residents coming to live here. Portugal has seen a big rise in American, Chinese, Russian citizens coming to live here.

24:59There's a tension between that and what it can do for the country and the country's economy. But actually, you know, what that means for the locals who have always been here and are seeing the price of real estate go up beyond affordable levels. The housing affordability in Portugal has actually seen the worst decline in the European Union in the past decade. So it's a huge tension point for the Portuguese public here. And actually, when I went down to Sioux and spoke to locals there, you know, they said it's all good and we respect what the government's trying to do in bringing Chinese and American investment here.

25:40But our buildings are crumbling. We only have one health care center. The hospital's far away. The roads are cracking. you know where is the investment actually in in locals and in what we care about and in creating jobs for people who who really still struggle to to pay the rent and and and the rising energy bills and send their children to school so there's always that tension between local interests and what the government is doing at the macro level which is attract as much foreign investment as it can very interesting sofia thank you so much for spending some time with us that is Bloomberg's Portugal Bureau Chief Sofia Orta e Costa.

26:23Of course, this comes ahead of the Web Summit, which takes place in Portugal in the next few days. And we'll continue our full coverage and analysis of Europe's AI build out here on Bloomberg Radio. I'm Caroline Hepker in London. You can catch us every weekday morning for Bloomberg Daybreak Europe beginning at 6am in London. That's 1am on Wall Street. Nathan. Thanks, Caroline. And coming up on Bloomberg daybreak weekend, Singles Day in China is approaching. We'll check in on what's become the largest shopping day in the world. I'm Nathan Hager, and this is Bloomberg.