Kevin Mayer and Hans Vestberg announce 12 months of Disney+ for free

First on CNBC: CNBC Transcript: Verizon CEO Hans Vestberg and Disney Direct-To-Consumer Chairman Kevin Mayer Speak with CNBC’s David Faber Today

Hans Vestberg and Kevin Mayer

Image source: CNBC VIdeo Screenshot

WHEN: Today, Tuesday, October 22, 2019

WHERE: CNBC’s “Squawk on the Street

The following is the unofficial transcript of a FIRST ON CNBC interview with Verizon CEO Hans Vestberg, Disney Direct-To-Consumer Chairman Kevin Mayer and CNBC’s David Faber on CNBC’s “Squawk on the Street” (M-F 9AM – 11AM) today, Tuesday, October 22nd. The following is a link to video of the interview on CNBC.com:

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Verizon will give customers 12 months of Disney+ for free: Interview with kevin mayer and Hans Vestberg

All references must be sourced to CNBC.

DAVID FABER: We do have a busy morning at post nine. Verizon CEO Hans Vestberg, he’s a frequent guest at this desk. But here’s another guy we don’t see very often: Disney’s head of Direct-to-Consumer, Kevin Mayer, joins us as well

JIM CRAMER: That’s unbelievable. How did you get these guys?

DAVID FABER: You know, you pick up the phone and good things happen.

JIM CRAMER: I saw a couple guys down there, I said, ‘I think I know those guys. What do they -- can we get them?’ Now here they are, they’re right here.

DAVID FABER: Guys, thanks for being here today. You’ve got some news, we’re going to break it right now in terms of Disney Plus, of course, which Kevin you oversee at Disney. November 12th is the rollout date. A lot of people may have already started to see the advertisements that are starting to post frequently. And Hans, as well, you are partnering with them to provide your wireless customers, your unlimited, your Fios customers as well, with Disney Plus. Tell us about the deal.

HANS VESTBERG: I can start. You know, we are, of course, extremely excited to partner with Disney. We are going to offer to our customers—both the wireless customer, the Fios customers, the 5G home customers, basically exclusive with Disney Plus. We will bring that one year for free and, of course, this is part of our strategy and we’re extremely happy to partner with Disney with the super content they have and this extremely exciting Disney Plus they’re coming out with.

DAVID FABER: Kevin, why are you -- why is Disney doing this deal? And we should make it clear, it is going to be free for a year to unlimited wireless customers of Verizon.

KEVIN MAYER: Correct.

JIM CRAMER: That’s amazing.

DAVID FABER: Why are you doing that?

KEVIN MAYER: Well, we like to partner with some of the -- with the top brands in the industry. And Verizon is at the top of the game with wireless. And we think we’d like to offer their customers the opportunity to look at Disney Plus and experience it. And we think it is a great channel. We have other direct-to-consumer channels, we have partnerships with Microsoft or Xbox, with Google for Chromecast and Android devices and Roku and others. But this, we think this is a great wholesale partnership. And we’re very pleased to be in it.

DAVID FABER: Well, it would seem, there is so much focus, of course, on the rollout of Disney Plus, how many subscribers you’re going to have, what metrics you’re going to share with us. It would seem at least that rather the box gives you a big subscriber -- potential subscriber number? I mean, we’re talking about tens of millions of potential customers who at least I would think would want to sign up if it’s going to be free for the first 12 months.

KEVIN MAYER: I think it will help. It will certainly boost our numbers somewhat. But we also think it is great for consumers. And it is a brand that we’re really happy to be in partnership with, actually.

HANS VESTBERG: I just need to say, we want to give our consumer choices. This is one of the best choices we can give them. On top of our network, we have a great network. We’re building 4G and 5G and of course, our Fios network. So, on top of that, giving our customers this opportunity is a great sort of consumer experience.

DAVID FABER: Hans, if want it sign up for Disney Plus, though, starting November 12th, I’m going to spend about 84 bucks a year. I can maybe do less, right, if --

KEVIN MAYER: $69.99 for a year.

DAVID FABER: 69 for the year?

KEVIN MAYER: Yes.

DAVID FABER: So, are you paying – obviously, there is some compensation going to Disney as a result of this discount you’re giving your customer base?

HANS VESTBERG: I think we have a really good commercial agreement within this. And I think we both are happy with it. We think it both will boost the customer for Disney and for Verizon. And I think that’s the most important for us. You know, I think, again, it is part of our strategy. I mean, I outlined our strategy a year ago, where basically, we have the best network, we have the best brand, and we have the distribution. We are going to work with the best brands. And Disney is there.

DAVID FABER: Are you going to spend marketing dollars as well supporting this, and supporting Disney Plus?

HANS VESTBERG: Yes. Of course. We’re going to jointly, of course, market this to our customers. And you--

KEVIN MAYER: And we’re going to market to our customers, too. It is a good win-win deal, I think. And it’s been a very great process to work with Verizon.

DAVID FABER: And why Verizon as opposed to perhaps another wireless provider and/or others out there --

KEVIN MAYER: Well, Hans, here. Hans, obviously.

HANS VESTBERG: It’s an easy question.

DAVID FABER: It’s just you, Has. It’s just you.

KEVIN MAYER: We think it is -- it is the world class network. It’s a great brand. It’s the kind of brand we’re proud to be associated with. And that’s why we did it with Verizon.

CARL QUINTANILLA: Everyone is talking about the Twitter threat. Right? The Disney Plus made, all day long, all the content. It makes it feel like the tone is going to be about legacy content as opposed to new original content. What -- where should our heads be on that?

KEVIN MAYER: Well, we have both, obviously. We have a large library and we have – we’re very proud of the content that we have that we’re serving that we’ve already produced and has been exposed to consumers over decades. But we have a lot of original content. We have more than 25 original series that we’re coming out with in the first year. More than ten movies and specials and as we go forward in time, there’s going to be a lot of originals that we produce. We’re going to produce – we’re spending over a billion dollars in the first year and over $2.5 million five years out as we announced at our Investor Day six months ago. We’re spending a lot of money and we’re creating great content—originals.

JIM CRAMER: Is this go to be it or are we going to see more deals, T-Mobile, AT&T or is this exclusive?

KEVIN MAYER: No, this is exclusive. You won’t see another wireless deal.

JIM CRAMER: And why was it – you know, there are very few things that are kept as – this was secret. I didn’t know. I kept thinking –

HANS VESTBERG: We broke the news here and now.

KEVIN MAYER: Yeah, we wanted to break it here.

DAVID FABER: You’ve got a problem with that?

JIM CRAMER: Well, no. I just want to kind of mention that it is seminal. I mean, I was thinking – big box, Disney was going to break down. I didn’t think they had –

DAVID FABER: It gives Disney, I would, think right out of the box, a potential audience and subscriber numbers that are going to be very strong. But Kevin, you know how many investors are very much focused on your early subscriber numbers, what you’re going to be willing to share with the investment community in terms of your expectations. Can you give us a sense here?

KEVIN MAYER: Well, periodically we’ll be able to share subscriber numbers for sure. I mean – asked in our Investor Day back in April, that by ’24, our fiscal year ’24, to have 60 – 90 million subscribers, about a third domestic, two-thirds international. And we feel confident we’ll hit that. And over time we will be releasing numbers.

DAVID FABER: What have the early -- can you give us a sense in terms of – I’ve heard there was some -- in the Netherlands you guys have been offering -- I’m not sure exactly what I’m hearing. And 450,000 people have signed up.

KEVIN MAYER: We’re not announcing how many people signed up in the Netherlands. But we have a trial launch there to test the technology and test the product and to see how consumers like to interact with it. And we launched that September 12th. It’s been up for about 6 weeks. And it is doing very well. We have a lot of free trialists. They gave us their credit card, and unless they cancel, they’ll become paid subscribers on November 12th – when we’ll unleash all of the original programming--

DAVID FABER: Over this couple of – well, not even -- six weeks or so, anything -- any takeaways, in terms of feedback?

KEVIN MAYER: Well the big takeaways are: the consumers like it. We’ve got a lot of positive feedback. I think there’s been some good press about it. It was a technical test. We wanted to see if there were technical issues with the service in the app. And I’m glad to say nothing major appeared. So, I think we’re in good shape for the long-term—

DAVID FABER: The Netherlands?

KEVIN MAYER: Well, the Netherlands has a lot of broadband. There’s a big over-the-top SVOD business there. And we have a lot of -- our content is not very encumbered in the Netherlands. So, we can offer most of our library content.

DAVID FABER: This is also for new Fios customer, which you make the point as well.

HANS VESTBERG: Yes.

DAVID FABER: 5G.

HANS VESTBERG: 5G Home.

DAVID FABER: But it is much to your existing base of customers, who are --

HANS VESTBERG: It is also new customers of course joining us.

DAVID FABER: Right. But I guess my point is, how do you view it from a -- it is a plus for those of us who are already Verizon Wireless Unlimited customers? But at the same time, you believe it is going to allow you to attract new customers.

HANS VESTBERG: Definitely. I think we learned a lot. We had a sort of an exclusive agreement on music with a big brand in Silicon Valley, and we learned a lot about how that is really resonating with our consumers. And I think this is just up an alley and now we can offer it also to the home people, consumers and the Fios. So, I think it’s big for us. We have hundreds of millions of subscribers on our wireless network that are going to get this offer. And again, for us, using our strength. But we also are doing other things from our partnership. I mean, dense populated areas, like the theme parks, we’re talking about 5G together with Disney. We’re actually having drone discussions, as well—how we want to use our drone technology at Verizon.

DAVID FABER: What does that mean–you’re having ‘drone discussions’?

HANS VESTBERG: We have a company called Skyward doing drones, online on-site drones. We are discussing how that can be moved on different movie sets.

KEVIN MAYER: Not for Disney Plus. That’s for –

HANS VESTBERG: Different areas of business. So, just look, in general, we think that Disney is a great company to partner with because we are very different assets.

JIM CRAMER: Yeah, I’ve got to tell you guys, I pay a lot of money for this ESPN Plus. Am I going to wake up and find that if I subscribe with AT&T, I get ESPN plus for free? I mean, I pay -- it is one of the bills that I get. I’d like to stop paying for that.

KEVIN MAYER: Well, that’s not in our plan actually right now. There’s no plans--

JIM CRAMER: Why don’t we break some news?

KEVIN MAYER: Why not put it in there? I guess we can talk about it. I don’t know.

JIM CRAMER: I mean, you can just own everyone, if you give this to me free, right? I mean, right here, can’t you just approve that? Or you have to talk to Iger first. Is that the deal?

KEVIN MAYER: I have to talk to Iger first, exactly. Well said.

DAVID FABER: Kevin, there’s -- again, a great deal of focus on this from your investor base given the importance of it for overall for Disney. There is also concern about how much money you’re going to be spending opportunities. Are there for more partnerships, similar to this, where you’re going to get marketing dollars spent not by Disney itself?

KEVIN MAYER: There is a possibility of that. There is nothing in the works right now. We feel pretty good about our own marketing efforts. As you know, throughout the company, we have many, many millions of touch points with consumers. We’re going to utilize all of them. We spend marketing dollars of our own, too. But we feel good. The awareness is high. We do benefit from the brands, Disney, Marvel, Pixar, "Star Wars," National Geographic, all of this the brands are prominently in that service and we think we benefit from that, too. There’s built in brand equity. So, we think our marketing efforts and our direct-to-consumer touch points are going to work really well.

CARL QUINTANILLA: We should mention, Netflix, premarket just took a spill, on our conversation. I wondered whether or not you think some of the costs of tent-pole series is getting excessive or the cost of procuring a show runner, for example, is it getting stretched?

KEVIN MAYER: Well, it’s clearly getting more expensive. But I think, you know, talent like that has value. It is a scarce commodity. And while the price, the cost has gone up, we think that we’re -- we can stay in the game, make great product, do it a reasonable price and monetize it through this direct-to-consumer relationship. I think the business we are getting into has fundamentally good economics.

DAVID FABER: Although it is going to be diluted for some period of time, clearly.

KEVIN MAYER: Yes, it is.

DAVID FABER: And you haven’t told--

KEVIN MAYER: ‘24 is break even.

DAVID FABER: Say it again?

KEVIN MAYER: FY ‘24 will be break even.

JIM CRAMER: But this is still in keeping with – remember, Bob said that ‘24 is the year we should be thinking about. This doesn’t send it back to ’25, right?

KEVIN MAYER: No, no. Not at all. That’s why ‘24 is when we’re break even. So, it’s all good.

JIM CRAMER: And how is ESPN Plus right now? What numbers do you have?

KEVIN MAYER: Well, we’ll announce that on our earnings call. So, that’s when we announce the numbers. And it is doing well. It’s doing fine.

DAVID FABER: And finally, on Netflix, which as Carl mentioned, may be down a bit on this announcement, when is all of your content going to be off of Netflix? Isn’t that going to eventually be the case? I know certain deals have certain expiration times. So, eventually, you want all of that content--

KEVIN MAYER: Yeah, we do. We had our FY -- 2016 to 2018 movie slates were on Netflix. And that’s pay one and what’s called a pay two deal. So, it goes on for 18 months after it has been in theatrical and home video. And then it has a hiatus where it comes to our service and some of those titles will go back in several years for a short period of time.

DAVID FABER: And finally, Hans, what are your expectations here for your customer base? How many people do you think are going to take this offer?

HANS VESTBERG: I think we have good experience from when we did our exclusive on music. How we are materializing that together with our partner. And again, we’re doing this with the best partner, with the best brands and the best content. And that’s why I’m very optimistic. It is very transformative for us. It is part of our strategy at the beginning of the year. So, to be honest, I’m really happy with it. I think this -- I’m really satisfied with what we’re doing right now.

DAVID FABER: Well, we’ll be watching closely. Gentlemen, thank you both for joining us.

KEVIN MAYER: Thank you.

DAVID FABER: For breaking the news right here.

HANS VESTBERG: Yeah. We’re breaking the news here.

JIM CRAMER: No, that’s really worthwhile.

DAVID FABER: Do it again. We’re ready. Anytime. Kevin Mayer, Hans Vestberg.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver