Disney & Charter End Their Spat, and China’s Latest Campaign Against Apple 9/11/23

0:01Live from the NASDAQ Markers 8 in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. Done deal with just hours left before the kickoff of Monday Night Football. Charter and Disney strike an agreement to bring ESPN back to millions of Spectrum customers. But has broadcast TV really dodged a bullet or is this the beginning of the end for the bundle? Plus, Twinkies and Jam, two staples in the grocery aisle, announcing a five billion plus dollar merger today. What it could mean for snack foods and how the weight loss drug phenomenon factors in. And later, China versus Apple, the nationalist campaign being waged on social media in Beijing, and how it could deal a blow to the world's biggest tech company.

0:39I'm Melissa Lee coming to you live from Studio B at the NASDAQ Market Site. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. And we start off with football fans breathing a sigh of relief ahead of Aaron Rodgers' New York Jets debut. Disney and Charter inking a deal to end a blackout that was keeping ESPN and all of Disney's cable linear channels blacked out for all Spectrum customers in New York and around the country. Shares of both stocks higher today. But who came out on top in this deal? CNBC's Julia Borson's got the latest. Julia. Well, Melissa, sources on both sides are describing this as a win-win.

1:14Disney and Charter are calling it transformative, calling this deal transformative as it combines linear TV rights and also digital distribution. And it gives new appeal to Charter TV's business while at the same time dramatically increasing the reach of Disney Plus with ads and also Disney's payment for that app. Now Disney Plus ad supported tier will be included in Spectrum's TV Select video packages at what they call a wholesale arrangement for all of Spectrum's video subscribers. Now ESPN Plus will be included in Spectrum TV Select Plus video packages and when ESPN launches its direct-to-consumer flagship service it will be made available to Spectrum TV select customers as well.

1:55Plus, Charter says it will sell all of Disney's direct-to-consumer services to its broadband-only users. Now, Guggenheim, with a buy rating on Disney, writing, quote, we believe that today's deal reflects a trade-off from linear economics, but positions both Disney and Charter to drive value amid the shift towards streaming in a digital future. So there are some signs of the bundle certainly getting skinnier. Charter is dropping some of Disney's smaller channels, including Freeform and Disney XD. But for this, but the benefit for Disney is far outweighing that because they're going to get new compensation for Disney Plus.

2:30And that reach, expanding the reach of Disney Plus with ads also increases the potential for that streaming ad business. Meanwhile, Charter has a new appeal, all these extra access to apps in order to hold on to its pay TV subscribers and retain that part of its business. Melissa. All right, Julia, thanks. Julia Boorstin on this deal. Is there really a win-win situation, Tim, as a shareholder of Disney, I ask you? It's really hard for me to understand this. On some level, and the Journal coined this like a referendum on the future of TV. And, you know, whether this really helps define that, it seems like Disney had major, major concessions here in terms of their ability to control their product.

3:12And it was always supposed to be about DTC. The problem is if you don't control the pipes in a lot of the cases, this is where you end up. It does seem to me we learned a couple of things. ESPN, probably more valuable than it seemed yesterday. I believe that's one of the outcomes here. ESPN Plus appears to be more like garbage than it did yesterday. So it is a case where I just think Disney maybe finds that the broader distribution is the more profitable model. And again, it kind of gets back to the new form of TV. I mean, whether it's Netflix that started this with an ad supported tier, is this kind of that, by the way, very positive for Netflix.

3:51So if you think about it, maybe this is just linear TV 2.0. I mean, it's obviously not linear, but it does feel like people are ready to watch TV with ads and ad supported model. And that's where everybody wants to be again. I think it's it's it's six of one half dozen of another. It's not clear right now who won. I think it's sort of win-win. When I look at the alternative, it was bad to disaster. Bad for charter, not a disaster, though. But for Disney, I think it would have been a disaster, actually. So that we didn't end up there, I do think that's better for each side. But it does seem, if you look at the stock's reaction, that charter shareholders felt happier about the deal than Disney shareholders.

4:34But I do think it's still, I mean, all right, this wasn't the break that we were expecting, the huge change, but it's a change, and it's not like it's over. The dynamics in place that made this change are going to continue. Yeah. I don't know if it's a win-win. I mean, it just seems like 11th hour, needed to get something done. I mean, the way Disney traded today, it wasn't particularly, I don't know, all that inspiring. Opens on the highs, basically closes, not on the lows, but around the lows. No bounce whatsoever. Didn't trade a lot of volume. Traded 25 million shares today. Typically trades 15.

5:08Maybe if it traded 65, 70 and closed on the highs of the day, we'd have a conversation. Charter is interesting. 11 times next year's numbers. They speak at a conference on the 13th. This stock, even with a 30 % bounce over the last year or so, has still been cut in half from its all-time high. But at least you can make, I think, a case that there's some momentum. There's no momentum behind Disney right now. It's funny. You know, I go back a year ago. It was the Code Conference. And Bob Iger, before he was back as a CEO, sat down with Kara Swisher. And for all intents and purposes, he said linear TV is dead.

5:39He was praising Netflix. Remember, we had Julia on that day, I think, talking about it on the show. So it's interesting when Tim just said it's about the pipes again. It's about distribution, that sort of thing. Just look at the outperformance. We're talking about it right now, a Comcast, a charter, that sort of thing. So the jury's still out on here. I do agree, though, with ESPN. I mean, like, that is the thing. That is the thing that they are going to quickly move to monetize. And I do think it's interesting. We talked about it a few weeks ago. So I think Bob Iger brought back Mayer and a couple of guys who are, you know, very instrumental in, you know, helping him prior to his, you know, leaving the company a few years ago to figure this thing out.

6:17And I think that this is obviously going to be a really important thing that, you know, this move, whatever they do, I think really determines the future of this company as like, you know, a media company, you know, X parts. Yeah, I mean, I think it does underscore the weakness in terms of the offerings on ESPN Plus. I mean, you as a viewer were looking to watch U.S. Open on ESPN Plus and were disappointed. So what is this package serving? And where's Disney's strength in the streaming business? It can't kill off linear TV at this point. Not that it wants to, but I mean, that seemed to be sort of the inevitability, right, that people were jumping to, that this is going to be eventually the march to the end of linear TV.

6:55Hasn't really done that. There's a place for both, at least for now. Yeah, it was it was a tough weekend in my house for a lot of different reasons. I'm not even sure there is football in New York after last night. So let's be clear. I just think that the fact that we're talking about a Spectrum Plus bundle that's going to include, you know, content that Disney. I mean, you know, on some level, that sounds really bullish. It sounds like. And again, the fact that we're going back to an ad supported model when DTC and streaming and we're going to charge, we're going to have pricing power was supposed to be the model.

7:25It's changing before our eyes. And that's something that kind of brings you back to the legacy player. So I realize that the content that Disney has, at least, I think the sports content is worth paying for. I want it. I just need to make sure I have it in the right vehicle. And I don't need the underwater basket weaving that also comes on someone that they're dedicated offering. So sorry, I'm a little frustrated. But, I mean, the bottom line is I'm frustrated with the stock. I'm frustrated with the sports. And I don't think we know right now, other than we know, that Charter seems like they got what they wanted.

7:55Right. I mean, don't laugh at me. Come on. Is it that on the Ocho? Is that when they do those? The Ocho, when they have those crazy events? Can they throw up a 10, 15-year chart of Disney? It's truly absolutely astounding. Like, literally, it's flirting with those March 2020 lows, right, where it basically, you know, everything was being thrown out then. And then if you've got to go all the way back, I think it's 13 or 14, when we started talking about the streaming capabilities, we talked about how Disney wanted to capture a little bit of that Netflix pixie dust, right? and they were making some content moves.

8:26They were making some digital technology moves, that sort of thing. And that stock went from 50 to 100. Do you remember that? Like, I think about a year, year and a half or so. And then if you just look at it, it's right back below those levels here. And it really feels like there's just, I don't know, I mean, there's lower lows. The streaming multiple was something that Disney got in the early days of announcing Disney+. And they were getting something like a lot of analysts in the street were doing the hybrid multiple. They still do this. In other words, they value the parks at one thing. And then they put a revenue multiple on the streaming business.

8:56But that revenue multiple, the street used to be between eight to ten times the streaming number. And then they'd layer in the multiple on parks. Now they're at four times if I'm just looking at J.P. Morgan's report here. And I think that's fair. And again, it was the growth that they were getting the benefit from. Meanwhile, Netflix now is not about the growth. It's really about the profitability and the free cash flow. And that's something that's pretty extraordinary and what makes, again, their streaming business very different. So getting back to the stock reaction, I mean, that is the case.

9:22I mean, do you think that any part of the valuation changes based on this deal? Because if the answer is no, then it's no surprise that Disney stock barely moved. I think the market told you. I think the market answered that question today. I don't think, in my opinion, I don't think they're rewarding it at all. So I don't think it has. I don't think it means it. Obviously, it means something. In terms of stock, in terms of investors and traders, they don't seem to care about this. It's trading to me like this wants to have a 75 handle at some point. And then you have a day where it trades maybe 100 million shares and washes everybody out.

9:53And you have your capitulation moment. We haven't seen that yet. All right. For more on the Disney Charter deal, let's bring in media analyst Rich Greenfield of Lightshed Partners. He's on the fast line for us tonight. Rich, great to have you with us. I'll pose the same question to you. Is this really win-win or was there really a winner here? I mean, look, Disney had to do this deal, Melissa. Like when you look at the existential risk to ESPN from a permanent drop. And you've got to give it to Chris Winfrey. He really pushed harder than we've ever seen anyone push on Disney and more specifically on ESPN.

10:26But Iger, look, Iger is an amazing negotiator, and he got a deal done. Did Charter get everything they want? No, I don't think Charter got everything they want. They certainly wanted lower penetration requirements for ESPN in terms of packaging. But, look, they got Disney Plus being included at a very low wholesale rate. That's a clear win for Charter and more importantly for Charter subscribers, meaning the consumers who are watching Fast Money right now. Disney caved on that and that's not something Disney wanted to do heading into this negotiation. So I think you have to give Charter the win, but it's not as big of a win as Charter would have liked.

11:03And Disney avoid the existential collapse of ESPN. Did the NFL bully these guys into coming to a deal? I mean, that's a really good question, Melissa. I don't know. I mean, I'd say every sports league, you think about Disney is wedded to, you know, every sports league is wedded to ESPN or the vast majority are wedded to ESPN, not to mention things like UFC as well. Everybody wants ESPN to survive. I don't think ESPN was viable if it lost all Charter's 14 million subscribers. I don't think you could recover from that. And so I think this gets you to survive. Obviously, there's still going to be significant financial headwinds.

11:46I mean, I would look at there's two choices. You had two doors for ESPN, bad and worse. You know, bad was accepting a deal you probably didn't want to take. Worse was not being carried at all and having to suffer through step ups in sports rights fees. And so this is better than the worst case scenario. But I don't think so. The reason why you guys were talking before I got on about the stock's reaction, I think the reason the stock's reaction was muted is like this is not a clear, like obvious, huge win for Walt Disney. This is doing what they need to do to continue to have an ongoing linear business.

12:20But there's still real challenges with how they transition ESPN into a viable D to C business. I don't mean ESPN plus. I'm talking the true core ESPN going fully D to C. That's not an easy transition to pull off. Richard, it's Karen. Let me ask you, how do you think this? What do you think the future holds for then a Warner Brothers discovery of Paramount? How do you think those play out? Karen, you are asking the most important question out of all of this today. As she does. Is this is this a new paradigm? Like, is this a new construct of which all just all programmers, meaning media companies?

12:57I don't care whether it's your parent company, NBC Universal. I don't care whether this is Paramount. Does everybody now, when they're doing a deal for linear cable networks or broadcasting cable networks, do you have to include your streaming at a wholesale rate as part of that bundle? That's obviously something that never happened before. Charter has deals coming up with several other big media companies in the next 18 months. I believe all of them are going to have to do this. That's going to be table stakes now, given that Disney just agreed to it. And does this become what Comcast does? I mean, if you think about Comcast, they used to include Peacock as part of your video package.

13:33They started making you pay for it. I wonder if that holds up or whether it's Peacock or Paramount Plus. Does everybody who subscribes to linear TV packages just get all of these streaming services? And that really changes the future of streaming. It's more about the bundle again. Funny enough, it's more about the bundle and less about actually being D2C. Maybe that's just recognition. D2C is really hard. And most of these companies are not cut out to compete with Netflix. That also makes it seem like like these streaming services will be offered more ad supported. If that is the case, they're going to be offered free within the bundle.

14:07But on the flip side, it could be an opportunity for people to sample this and say, you know what, I'm willing to pay for it without ads. Look, I think that's absolutely true. And I think one of the questions that I have is, you know, when you think about the ad supported, do people like do people want to upgrade and pay a little bit more to get rid of the ads? I assume Charter will offer. I mean, I don't know this, but I would guess there's like a, hey, get it for free as part of your package, but can you pay an extra$4 or$5 to get rid of the ads? That's the way Peacock launched when it first launched on Comcast systems originally.

14:39There's a lot we don't know yet. I mean, a lot that's in process. But look, I think the good news for the consumer is if you were already paying for the big bundle, because you're a diehard sports fan, you're now getting more stuff. As part of that, your price is obviously going to keep going up, which is the negative. But at least you're not having to say, hey, I'm paying for Disney Channel in the bundle, and I'm paying for Disney Plus out of the bundle. And if you think about what happens with Hulu and Hulu probably gets included with Disney Plus over the next 12 months, this does seem to be a net positive for consumers as you look at it, forgetting about what it means for the companies.

15:15And I'm really curious whether every other company has to follow suit now. Rich, thanks so much for phoning in. Appreciate it. Rich Greenfield, Light Shed Partners. Guy, how do you think about this? I think it's Disney to me. You wait for the capitulation. You haven't seen it yet. Charter seems to have some tailwinds. The stocks rallied 30-something percent from the low, but I still think it has some room to the upside. But I think Tim mentioned earlier, Netflix is the clear winner still. It's Netflix world, especially with this writer's strike. So sports great. Everybody's yay, yay, Packers, and the Jets play tonight.

15:45Are those teams? They don't play the Packers. I'm just kidding. But, I mean, as disappointed as I am today, enjoy it while last night, Jet fans. You might be in the same boat tomorrow. Why is Disney not a value stock, Aaron? Debt, for one thing, right? I mean, that's something in common with both Warner Brothers and Paramount. Debt. It's interesting that Tim was so frustrated over the weekend. And I know it wasn't just the Giants. But, you know, some of this stuff, it's getting really complicated. Okay? So, like, for instance, it used to be you sign up with Spectrum. You got your cable. You got your Internet.

16:19You got your line. They put a box in there, and you got all the channels. You're just like a la carte. Now you got Internet. All right, so here's what I do. I have YouTube TV, and I get the red zone. I get all – I mean, now we have a lot more access to cool stuff that we couldn't get before. So if you wanted, you know, the DirecTV, you know, all-access plan for NFL and that sort of thing. But then you have to go start picking off all these things, right? You know what I mean? Sounds complicated. Sounds like, I mean, a lot more complicated than most people want to do. They want to get back to the bundle.

16:44It really is. But somebody's going to bundle it. It's the streaming plus bundle with an ad-supported model, which is the same thing I have when I watch cable TV. I admit, I watch cable TV because there's three things I want to watch, including CNBC, ESPN, and news. And that's it. I mean, you know, sometimes you walk into a New York City diner, you open the menu, it's like 12 pages long. It's really hard to make a decision. That's kind of what it is. Guy still gets a steak. No, no, no. I'll tell you. Well, you went down the road. So I'll tell you what I get. What do you get? I know those menus.

17:13Hot open roast beef. Fries with gravy. Corn if they have it. What does it mean? Roast beef sandwich with gravy on top? That's not on every menu. In the Army. That's not every menu. Stop it. That's the greasy spoon in your neighborhood. And a chocolate shake. We've got a news alert back to news on UPS. The company just announcing financial details of its contract with the Teamsters union. Frank Holland's got the details. Hey, Frank. Hey, Melissa. You know, the details just crossed. But important to note, UPS shares, they've fallen about 5 % since July 25th when the Teamsters announced$30 billion in new money in a tentative deal with UPS that would eventually be ratified to avoid the costliest strike in the U.S.

17:53in the last 100 years. Today, as you mentioned, UPS released their take on the financial details. We also sat down exclusively with CEO Carol Tomei. It's not a$30 billion deal. It's a great deal for our people. It's a great deal for all the stakeholders. When I look at the economics of the Teamsters deal, the compounded annual growth rate of that deal is 3.3 percent. To put that in perspective, the yield on the five-year Treasury today is 4.4 percent. And even if you look at the historical average of the five-year Treasury, it's 3.7 percent. So we came in a number that was under a five-year Treasury yield.

18:35That's pretty good. All right. Well, we did ask again, but Carol Tomei would not release the exact cost of the Teamsters contract. However, UPS did say that 46 percent of the cost of the contract would be borne out in the first 12 months of that deal. And tomorrow on Worldwide Exchange, we will have the full interview with Carol Tomei on the Teamsters deal on the holiday peak and also the increasing use of A.I. and machine learning in their operations. It'll be a great interview. You don't want to miss it. Again, that's tomorrow on Worldwide Exchange. Melissa, back over to you. Frank, thank you.

19:06Look forward to that. Frank Holland was surprised to you, Karen. I mean, I didn't know the numbers would be exactly. I guess it's a little bit better than I thought. I like UPS here. I like Carol Tomei. Very good. I mean, she said we will not have a strike. She said that way before. Maybe this should gave up some negotiating power, but I think it's better overall. I'm a huge Marissa Tomei fan. Spelling's a bit differently, but neither here nor there. 158. Go back to February of 21. Go back to last October. This stock has bounced from that level. I think it's trading 160. You have something to trade against, is my point.

19:38Valuation is OK. The stock has gotten whacked. This might be sort of a catalyst for a stock to trade higher in the near term. Well, we've got some big union contracts to discuss. And so, you know, I'm not saying these may be apples to oranges, but they're not. Right. Coming up, we're watching Oracle in the after-hour session. That stock's on the move after reporting results. We'll bring you the details from the quarter next. Plus, Diamond not banking on banks. why JP Morgan's CEO isn't so optimistic about his own sector. Don't go anywhere. Fast Money's back in two.

20:15Welcome back to Fast Money. We've got an earnings alert for you on Oracle shares at after hours lows after the company's report. Let's get to Christina Parts and Nebulas for more. Christina. Well, Oracle's pushed into the cloud infrastructure business is what had many analysts excited for this earnings report. and exactly how Oracle CEO started the earnings call, which is underway right now, pointing out that business, which is called OCI, grew 66 % year over year in Q1. Sounds great, but that's less than last quarter. So it's already starting to slow down. Oracle still weighs away from Amazon's AWS, Google Cloud, Microsoft Azure in this category.

20:46And it's not just cloud. Hardware, services, cloud licensing segments all came in lower than estimates and contributed to the slight revenue miss of$12.4 billion. Oracle CTO Larry Ellison spoke about future growth and press relief saying, quote, as of today, AI development companies have signed contracts to purchase more than$4 billion of capacity in Oracle's Gen 2 cloud. That's twice as much as we had booked at the end of Q4. For guidance, it was going on just as I came downstairs. I just heard the CEO, Safra Katz, say that total Q2 revenue should grow about 3 % to 5 % in constant currency. And that means a non-GAAP EPS should also increase about $1.27 to$1.31, which is a little lower than the$1.33 adjusted estimate, and probably why we saw the stock just drop even more from that 4 % negative level to now 8 % lower.

21:39She talked about CapEx spend being very similar in fiscal 2024, but still, all of that information, not enough to get this stock up. Yep. Christina, thanks. Christina Parts Netlis. Slowing growth in a key growth area at a time when the stock is up 55 % year-to-date guy. Right, exactly. Flip side of that coin is valuation is OK. Trades at a market multiple. Now, if this was traded at 55 times next year and you have this number, I'd be like, not good. The stock should be down 10 percent, 15 percent. This is a reasonable valuation. And by the way, cloud services plus license is now 77 percent of the revenues.

22:15I mention that because that's highly visible recurring revenue. You should be rewarded for that. So there was a time when IBM used to be rewarded for their recurring revenue, traded a huge multiple. Oracle is not enjoying that for whatever reason. The stock's had a huge run, but I think it's overdone to the downside. Well, it's interesting. You know, if you go back and look at June, the gap there. And so when the company reported and they guided and they were talking about some of the great trends here, and obviously this is a company that's going to benefit off this, you know, a much lower base than some of their larger competitors.

22:43Some of those growth rates that they just had up there are kind of eye-popping, but the stock is probably 15 % in the last month. So when you think about the multiple that Guy is speaking to, It's also very expensive for this company that doesn't have the sort of scale that many of its competitors do. So when Larry Ellison's on there and I was looking at the press release also, he says, you know, is this one of the biggest, you know, technological shifts? Yeah, maybe with an exclamation point, not a question mark. OK, so they have to speak this way. But if the growth rates are not, if they're decelerating, that's what we saw out of Q2 earnings and Q3 guidance.