Disney’s Hugh Johnston & Minneapolis Fed’s Neel Kashkari 8/6/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. A tale of two American economies. Is it slowing down? President of the Minneapolis Federal Reserve, Neal Kashkari, thinks maybe. And the Fed might have to cut interest rates soon. What are the ultimate effects of tariffs going to be on inflation? And what I'm realizing is we may not know the answer to that for quarters or a year or more. But Disney's CFO Hugh Johnston sees another picture. Are Americans spending on fun? There's lots of concern about the consumer in the United States right now. We don't see it.

0:41President Trump takes a fight against Wall Street a step further, saying he was debanked. It wasn't just January 6th. It was DEI. It was ESG. It was fossil fuels. It was guns. I think all this is going to come out as this executive order gets put in place and maybe there's an additional investigation. So I don't think the story is over. Let's hope not. Plus the rest of today's news, vaccine wars, the end of a Doge tradition and ChatGPT's parent company's eye-popping valuation. Half a trillion dollars without ever going public. That is astounding. It's a very busy Wednesday, August 6th, 2025. Squawk Pod begins right now.

1:24Stand Becky by in three, two, one. Cue, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan. Andrew will join us a little later in the show from the Aspen Economic Strategy Group meeting. White House Envoy Steve Witkoff arrived in Russia earlier today looking for a breakthrough to help end the Russia-Ukraine war. This comes just ahead of a deadline set by the president, President Trump, for Russia to agree to peace or face some new, tougher sanctions. Russian media is reporting that Whitcoff met with Russian President Vladimir Putin.

2:05President Trump has threatened to hit countries that buy Russian oil with heavy tariffs. He told us yesterday on Squawk Box he could hike India's tariff rate within the next 24 hours. Even India has been buying a lot of Russian oil. But so is China. Yeah. But they would say, well, it's not our fault. We couldn't. They said they turned off. They couldn't get their regular supplies that had been diverted to Europe as part of this. But I mean, this is that tricky situation that the Biden administration faced. They wanted to put sanctions on Russia, but they didn't want oil prices to go up. It's a fungible market.

2:40Totally. And so they kind of winked and nodded and allowed that oil to be sold in other places. if President Trump actually does crack down on this, and he said that it's funding the war in Ukraine, if he actually does crack down on it, it's going to be a big change. And we've had oil people again and again say, saying Russia never had a problem. Never had to deal with, right. Never had a problem selling its oil. Right. Ever. You know, you try it here, and it's like whack-a-mole. Stop something here, it's going to go. People buy oil. They're going to buy oil. Unless you put sanctions on people who are buying that oil and they have to find other ways to come up with it.

3:19And then you see global oil prices rise potentially as a result. In the meantime, sources tell CNBC that OpenAI is in talks with investors about a potential stock sale that could value the company at about half a trillion dollars. Those talks are said to be in early stages and would involve a secondary sale with shares being sold by current and former employees. Sources say that current OpenAI investor Thrive Capital could lead the potential round. Bloomberg was first to report on these latest OpenAI talks. The company announced a$40 billion funding round in March at a$300 billion valuation. This latest news on valuation comes as OpenAI released so-called open-weight language models for the first time in years.

4:04That means you can use it and try and build things on top of it. that it's not completely open source, but it is as open source as you're probably going to get. OpenAI says that they're meant to be lower cost options that developers and researchers can easily run and customize. But half a trillion dollars without ever going public, that is astounding. And you can imagine the demand, if the company did go public, even with that valuation, it could open it a trillion. Forget about Figma. It could open it a trillion dollars. Trump administration officially ending the drive by Elon Musk to get government staffers to send a list of, and everything comes in fives, he wanted them to send a list of five things they accomplished each week to supervisors, not four, not six.

4:56Many federal agencies had already phased out compliance with the weekly email. It was launched by Musk in February and mirrored moves at his other businesses, but it sparked tensions with the government bosses and confusion among the rank and file employees. And I mean, in total, they couldn't come up with two things, probably much less five. The thing is, if you're somebody who actually is a producer, it's annoying to have this. I actually had a boss one time. You don't think that in the government it's like. every three hours what I had done in the last three hours. So I got to the point where I started going into his office to tell him every hour, to the point where he finally closed his door to keep me away from him.

5:34One of your nearest government-run agency in New Jersey. You know what the five things they accomplished at some of these places? I'm not going to out anyone, but we picked where we're going to go to lunch to send out is what we accomplished today. You can, you know, get your driver's license later. My point is it's probably not super effective. because you could come up with a list of five things that you make up if you're somebody who is actually working really hard. I always figure, like, the people who go to the brown bag lunches, if you're looking to lay people off, go find them because they're not too busy.

6:06We get up at 3.35, we could say that. 3.45, yeah. 3.45? I get up at 3.45 now. How do you do that? I rush. Oh, you rush. And HHS, that department of health and human services, is canceling contracts and pulling some funding for some vaccines being developed to fight respiratory viruses like COVID and the flu. These focus on messenger RNA technology, which experts credit for helping to slow the 2020 coronavirus pandemic. HHS Secretary Robert F. Kennedy Jr. announced$500 million worth of projects will be halted. On his social media accounts, Kennedy criticized mRNA vaccines. Instead, he said he'd prioritize the development of safer, broader vaccine strategies like whole virus vaccines.

7:00Although there have been questions about whether he's a fan of that either, about whether he'd really allow any of that to go forward. They've made some substantial changes in terms of the vaccine board. I think this week, they announced that the AMA and some other patient groups and doctors groups would not be allowed to participate anymore in that panel. I think the official word from HHS was that they represented groups and so they could be, you know, they didn't want special interest lobbies in there. Although I think it's hard to say that the AMA is a special interest lobby or that doctors representing patients would be special lobbyists.

7:39I guess in years we will know after some well-designed studies about the safety, because it's a powerful technology. Oh, the mRNA. Yeah, it's very controversial. I'm talking about broad vaccines, not just mRNA vaccines. I'm talking about what they're doing with vaccines at large for that approval process. Right. But this is a much quicker, easier. It's almost like a vaccine 2.0 platform that, you know, was hailed with great promise. We don't know. I mean, some people will tell you it's been a disaster. And I just don't. I think we need studies to know about long COVID or whatever it is that, you know, there are people that, you know, still say they're finding spike proteins.

8:30I don't know. I just I don't know enough to say it. I've had no. I think I had three, maybe. Yeah, I think I did, too. I think I had Moderna's. I think three. I had Pfizer's. So whatever's wrong with me. It's not your fault. Yeah, maybe I don't tie it to the messenger. All the problems I have. I think it's about age. Yeah. All right. When we come back. So Andrew, where he's in Aspen? Aspen. Aspen close. There's a conference coming up in Toledo. No. How about one? Detroit, are all the elites ever going to... It's always Aspen. Isn't the Aspen Ideas conference up there, too? Yeah, that's why. Sun Valley.

9:13Sun Valley. Conference. Sun Valley. Jackson Hole Symposium. That's where Leisman goes. That's where they all... They go to these places where, you know, it's amazing. They're nice places. Duh. I just feel bad for, this is Passaic, New Jersey. There's no way, right? They're hosting anything, anytime. Allentown. Allentown? And we're living here in Allentown. There's a song for every one of these. Cheese will be next. Coming up on Squawk Pod, Disney's chief financial officer Hugh Johnston. The House of Mouse reported strong earnings today, thanks to good performance from its theme parks and streaming businesses.

9:55And there are a couple of headlines to flag. I think the notion of sports being the one thing that's holding cable together is a highly overrated concept. I really do. Subsidiary ESPN has announced a deal to acquire 10 percent of the NFL and is launching a direct streaming product to bring sports to consumers without cable subscriptions. So Disney is pulling out the stops to entertain America and staying away from culture wars. Do you think you're in sync now with the current administration on cultural issues? I mean, you've scaled back. Right now, what we are is we're reflective of where America broadly is right now.

10:33Those comments while the president accuses another industry, banking, of playing politics. Big business and big opinions when we come back.

10:47This is Squawk Pod, now with Added Andrew. I'm Andrew Ross Sorkin. It is 5 a.m. where I am, Aspen, Colorado, along with Becky Quick and Joe Kernan. What happens is I call a Bank of America routinely because when I was president, this was after I got out, by the way, I call a Bank of America routinely and I speak to him and I speak to a couple of people and they have zero interest. Brian was kissing my ass when I was president. And when I called him after I was president to deposit a billion dollars plus and a lot of other things, more importantly, to open accounts. And he said, we can't do it.

11:29No, we can't do it. That was President Trump on Squawk Box yesterday, speaking about being debanked. Now, yesterday afternoon, right here in Aspen at the Aspen Economic Strategy Group's session, I asked Bank of America CEO Brian Moynihan to respond to what he saw in the morning. I'm telling you, I'm still trying to unsee some of the visuals that he created with his commentary. But look, the president's after the right thing, which is the laws, rules and regulations around our industry became used to cause things to happen. It's whether it's B-S-A-M-L, whether it's K-Y-C, whether it's reputational risk.

12:04And you heard Tim Scott quote about it. It is right to go look at these rules because at the end of the day, they are causing decisions to be made that can be looked at in retrospect and made differently. We should get these rules right. And guys, just to put a little context around what may have happened, and I don't think we know the details about exactly why a Bank of America might not have taken on the president or the former president at that time. You know, this was post January 6th. There was a number of investigations, including lawsuits and other cases that were taking place. A lot of banks, irrespective of politics, when things like that are happening, if you happen to be a target of potential criminal investigations or other things, which in that case were taking place, a lot of banks will not do business with you.

12:54So just a little bit of context about why that might have been happening, potentially irrespective of the politics, at least at that moment. I also asked Brian about what he sees in the economy, which is a big topic here in Aspen, and the debate over how strong it is or not. What we have that's unique is we get to see the data, what our consumers are doing. And so if you look at them during the second quarter, April, May, June, April, May slowed down a little bit, Liberation Day. June kicked back up and July has been stronger. So for the month of July 2025 versus the month of July 2024, our consumers pushed 5 % more plus into the economy from their accounts.

13:33In terms of spending? Credit card, debit card, checks written, money out of cash out of the HMs and spent, Zelle payments, wires, ACH, all this, 5%, 5.5 % more. So they're an economic indicator, perhaps, that things may be better than some of the other data that we've been seeing. Joe, I don't know if I cut you off there because I know we're on a little bit of a delay. Were you about to say something? Yeah, I was under the impression that it was regulatory overreach and it wasn't just January 6th. It was DEI. It was ESG. It was fossil fuels. It was guns. It was climate change. Oh, I think that there's a bigger question.

14:13All kinds of pressure. All kinds of pressure from the government. not specific to uh donald trump's uh personal situation i was trying to explain why i think bank of america to the degree that they were not banking him that there was some color there i do agree with you i think that there was definitely he gives you ask him off camera what really happened because he's he basically was saying yeah that needs to be fixed almost acknowledging that it happened, but not really saying, yeah, it happened. Well, I think the other piece of this, Joe, is, you know, you talked about guns, you talked about other kinds of things, oil, things like this.

14:55But you could do guns, for example. Part of the issue, and that has nothing to do with Trump on a personal basis, there have been over the years a view that banking, the gun industry, is not as good a credit, if you will. That was actually the issue with crypto and some of this anti-money laundering stuff. And because I think there was a huge uptake within the conservative movement around crypto, for example, or around guns, relative to what you'd say were liberals who don't buy guns or whatever you think, that that might have shaped why there's a view that it's, quote, unquote, political. But I think that's what's, that I think is, at least explains a little bit about what's going on behind the scenes.

15:44And it is possible that regulators, and it was the Biden administration, came down on banks to say don't give, is that not possible that that happened? Whether you call it January 6th or whatever excuse you want to use, but isn't that possible? They said, don't give this guy, don't let this guy do business with you. Look, I don't think that that's what what happened. I don't think there were directives from the White House about who somebody could do business with specifically or not. I think there were rules. And I think there was a anxiety among the banks about going to regulators and saying we're doing this or we're doing that.

16:24Less about the names, per se, and more about the kinds of business. But nonetheless, look, I think all this is going to come out as this executive order gets put in place and maybe there's an additional investigation. So I don't think the story is over. Let's hope not. Well, we love this kind of stuff. Yeah. All right.

16:46We're moving on here. Disney earnings are out this morning. Earnings beat estimate revenue just slightly below. Joining us now is Hugh Johnson, Disney CFO. Julia Borsten is here as well. The stock, Hugh, it's good to see you. And I don't know where you want to start. Maybe start with earnings, because I think on the other news, the stock was reacting positively. It's up, I think, 122. Now, I think 117, 116. After, I guess, maybe the Julia pointed out, you've been beating revenue estimates in recent quarters. So a slight miss here. You want to start with that? Yeah, happy to go through the earnings.

17:22So overall, very good quarter for us. 2 % revenue, 8 % operating profit, 16 % EPS. Most importantly, in a lot of ways, the two strategic businesses for us, the direct-to-consumer business had a great quarter, made$350 million, well ahead of estimates, grew subscribers by 2.6 million, and revenue was up 9%. And then experiences where there's been a lot of concerns, of course, because of the new Universal Park down in Florida, we really blew away the quarter. 8 % revenue, 13 % operating income, and Walt Disney World had its biggest Q3 ever. So certainly feel good from the perspective of those businesses.

18:03Traffic was solid, up a little bit, and then per caps were up very, very solidly. So I know there's lots of concern about the consumer in the United States right now. We don't see it. Our consumer is doing very, very well. You know, the stock's been on a roll, obviously. But the promise of DTC and streaming and Disney Plus got that stock up. I mean, people were ahead of themselves. So excited back in, you know, I guess during COVID. It was almost$200 a share. Yeah, it had a moment. It didn't last long, but it had a moment. That was when everything was going to be streaming forever. And Hulu was worth$12 trillion and all that, you know.

18:41And we came back to Earth a little bit. But now you've got$350 million to talk about. Well, that's it. The business, we raised the guidance on that business from a billion dollars of profit this year to a billion three. And just as a reminder, it was only a couple of years ago we were losing a billion dollars a quarter on that business. Right. It was trading purely on subs and not on financial results. We now really have a solid foundation. What I like is strategically we're in a different spot than our competitors in that if you think about Disney, ABC News, Marvel, Pixar, are we make most of the content that we put on the streaming service, whereas our competitors rent their content.

19:19Even ESPN really adds a lot of value and makes a lot of its own content. And I think that's the differentiator for us. And it's going to allow us to continue to grow. It's also part of the reason we're adding 10 million subs in Q4. So all of this news you just announced for ESPN and this big deal with the NFL, how does that change your outlook for this ESPN app that you're now launching on August 21st? And what does that all mean for this bundle that you're going to be pushing to consumers? Yeah, so we're excited about the bundle, certainly, because what it does is it gives people yet another reason to not trade out and to churn out of the business.

19:57So as you know, churn is the thing that you really are trying to manage, and ESPN is another good reason not to churn. In terms of ESPN itself, to me, we're really innovating for the sports consumer because if you have a connected phone or connected uh tv or you have a mobile app you're going to be able to do so much more than just watch sports you'll be able to do multi-view of games you'll actually be able to get a personalized sports center so joe for you you'll be able to see the bengals and and be able to see the reds basically a sports center that is just created for you. And in addition to that, betting, fantasy sports, e-commerce, all of that we think is going to make it really, really sticky.

20:40And we're making the price attractive. At$29.99, you get not only ESPN, ESPN, Disney Plus, and Hulu. Is that enough? $29.99, is that enough to make up for what you would have gotten from the cable bundle? Because people always talk about trading analog dollars for digital dimes. Yeah. Nickels. It's closer at this point, Becky, to tell you the truth. And in addition to that, we think we're going to pick up a lot of people who are either cord cutters or cable nevers. So they're gone anyway. And for us, the purpose of ESPN is to reach sports fans however they want to get there. That's the objective.

21:15So we think it's going to be accretive to overall earnings for us. Do you have a sense, though, when it comes to the overall cable business? I remember when Bob Iger told me years ago that he realized that there was this trend that they needed to address by shifting into streaming in terms of this trend, in terms of cord cutting. Do you have a sense of how the overall ecosystem will be impacted, especially now that you have all this additional NFL content? Will you see cord cutting maybe more broadly for your other channels as well? It's a great question. And candidly, no one really knows the answer to it.

21:49I think the notion of sports being the one thing that's holding cable together is a highly overrated concept. I really do. Because there's a lot of reasons why people retain cable. And as we've seen, the cord cutting is leveled off a little bit anyway. So I'm not that worried about that. To me, what we're trying to do as Disney is we try to be pretty indifferent as to where the consumer wants to go. If they want to stay in cable, we're there for them. If they want to stream, we're there for them as well. And if you think about what Bob did a few years ago when he came back, he laid out four planks of creativity and sports and streaming profitability and then turbocharging the parks.

22:28Then a year ago, he said we were going to move from fixing to building. And now we're really in a mode where we're doing things for the consumer. We're building for the consumer. So I think that's what makes Disney a little bit of an entertainment company like no other, because we can kind of be where the consumer wants to be. Hey, Hugh, just the origins of this deal with the NFL. Again, pretty unusual deal, one that really has captured a lot of people's attention. You said it was finalized a week ago. Where did those initial conversations take place between Bob and Roger Goodell? Yeah, from what I understand, Becky, they've been ongoing for almost 10 years.

23:0710 years? It's been off and on for a long, long time. And, you know, as these things go. How did it kind of like formulate? Finally come together? I think in a lot of ways, it's just the opportunity for us on DTC to improve the product by doing this. And from the NFL's perspective, the belief that ESPN was really a good growth business, the timing just became right. As we know, the NFL has been looking at options for the NFL network and their media assets for a while. I think it finally was the moment where there was an overlap enough in terms of their interest and our interest that we were able to bring it together.

23:45And we're excited about it. I mean, we'll now with this, we'll have more NFL games than we've ever had on ESPN since 1979, the founding of ESPN. Do you feel like you lock out some of the other competitors who are trying to get those NFL games? Because it's been whittled away by places like Amazon coming in. You know, there's just a lot of places, whether that be Peacock or other places that are kind of going after it. Do you feel like you have a better stronghold on the NFL as a result? Yeah, I don't think so. And here's why. There has not been a sports league in history that has monetized their assets and their rights better than the NFL.

24:22They are absolutely spectacular at it. So I think what this will do is we'll certainly be in each of our interests to work together. But the NFL is always going to operate in their interests of their players and their owners to maximize the value of their sports rights. Hugh, everybody has to think about this, I think, at this point. Do you think you're in sync now with the current administration on cultural issues? I mean, you've scaled back, I mean, significantly. DEI, there's no such thing as reimagine tomorrow anymore. That's totally gone. You're in the sweet spot now. You feel like you're not on the radar.

25:01If the president's watching, he's going, ooh, Disney. I don't know. I actually think right now what we are is we're reflective of where America broadly is right now. I really do. Were you two years ago? I don't know. I was a Pepsi. I can tell you you weren't. I can tell you seven imaginary, whatever the hell they were. No, I think where the company is right now is in a good spot. And by and large, we're not here to be political. We're here to entertain. Right. We're here so people can get away from all of that. That's a shift because you were for a while. Well, before you were there, I'm here to talk about today and all those right wing snacks at Pepsi that you used to have.

25:38Oh, yeah, sure. That I love. As do I. You do, when you watch sports. 100%. They're synergy there for sure. See, I told you. Snacks and sports, they go together. Just like snacks and Pepsi. Absolutely. Just like content and theme park. Generating your, that's been like. And making content and distributing content. It's a super combination. If you think about where Disney is going to be right now, You'll have all of those great assets. The only thing we're missing from Disney Plus right now is CNBC. If I subscribe to CNBC streaming and I subscribe to Disney Plus, I have everything. You might have a chance to buy us at some point.