Scott and Ed open the show by discussing Disney, Novo Nordisk and Uber’s earnings. Then they break down Spotify’s results and discuss Chappell Roan’s Grammy speech criticizing the music industry. Scott outlines how she could drive real impact in the industry, while Ed explains why he doesn't think Spotify is to blame for the struggle of artists. Finally, they unpack Google’s earnings, with Scott highlighting the biggest red flag for shareholders and Ed explaining why he remains bullish on the company. Subscribe to the Prof G Markets newsletter Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: What are the latest earnings highlights from Disney, Novo Nordisk, and Uber?
Yeah, a good amount of my friends do ketamine. I can't tell if you're serious. You know it's illegal to just do it.
There's a few things I do that are illegal, and I continue to engage in them, Ed.
Okay. Just making sure you're clear.
I know you did it the legal way. Pot's legal now, so yeah. Edibles are legal, so that's not a problem. Right, yeah, exactly. Actually, I don't do that much that's illegal.
And, you know, the way people do it is they snort it. You're really going to go out and... Oh, really?
I was hoping to stick something up with my – I was hoping to find an attractive woman with some gloves handy.
I have to pay for that. Now cough, Nurse Ratched. Anyways.
Well, I'm excited to see you in a couple of hours. I'm going to come over and hang out at your house.
Oh, that's right. We have a team meeting. You're all presenting your business plan.
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Chapter 2: Why is Disney's streaming strategy under scrutiny?
You excited to see me?
Get to the headlines, Ed.
Let's start with our weekly review of Market Vitals. The S&P 500 inched up throughout the week. The dollar declined, Bitcoin was volatile, and the yield on 10-year treasuries dropped. Shifting to the headlines. Disney earnings beat expectations on the top and bottom lines. However, Disney Plus lost 700,000 subscribers with another modest drop expected in the current quarter.
The stock fell 4% following that earnings report. Novo Nordisk saw strong fourth quarter demand for its weight loss drugs, with Wegovy sales more than doubling and Ozempic sales rising 12% year over year. Profits also exceeded analyst expectations, up 29% from a year earlier. The stock rose on that news. And finally, Uber's fourth quarter revenue beat expectations, rising 20% year over year.
However, Operating income was lower than expected, and the company issued weak booking guidance for the current quarter, and Uber's stock fell 7%. Scott, your reactions, starting with Disney's earnings. A beat, but the stock did fall.
It's clear who the number one is in streaming, but they're all fighting to be number two. They're like, okay, the number two will survive, and it's not entirely clear who's number two.
And the race for number two is between, in my opinion, the artisanal sort of HBO that's created an incredible culture that produces kind of the water cooler zeitgeist moment of content, and then Disney, which has just such singular clear positioning around family, and then bundling Hulu and ESPN. I think it's ESPN+. It's a pretty good offering.
Now, they were able to raise prices of 4%, which isn't a huge price increase, but it is a price increase, and basically... They lost $700,000, but they would argue that's flat. That does kind of communicate that they have some pricing power. I would argue that's a good thing. Netflix's churn is 2% while Disney's is 5%. That may not sound like a lot, but it's huge.
It means that every three years, Disney has to reinvent their entire customer base that Netflix does not. In addition... you have this incredible transfer or means of production. What do I mean? What Japan did Detroit, Netflix is doing to Hollywood.
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Chapter 3: How is Netflix's global content production impacting the industry?
Yeah, I think these earnings, I mean, Wall Street did not react well to these earnings, and I think rightly so, because I think this was just unimpressive on so many levels. I mean, Disney Plus subscribers declining, not by much, it was around 1%, but still a decline. And Disney Plus' response, or Disney's response, was, well, you know, we rose prices, so this is expected.
and by the way, that's kind of what you said too, but you look at Netflix, Netflix also raised prices last year and they still added 19 million subscribers. So I don't fully buy the, you know, we're raising prices and therefore subscriptions are going to fall off. We've seen it with Spotify too. Spotify raised prices and their subscriptions are still continuing to climb.
You also mentioned the churn rates. I just see this as... such a big issue in all of streaming that it makes me believe that streaming is in a lot of ways, uninvestable over the long term. Apple TV's churn rate is 8%. Peacock's churn rate is 9%. Disney's churn rate is on the low end, but still it's really high, it's 5%.
So if you just wanna stay flat in any given quarter, you basically have to grow your subscribers by 5% every single quarter, which is just, insane. I mean, I just don't see how that is a sustainable business model. And then the second thing that makes me concerned about Disney was their box office results, which were exceptional, but it was all because of this one movie, Moana 2.
And that was kind of what saved these earnings. Without that movie, this earnings report would have been pretty terrible, which again begs this question, like, how sustainable is this business where you're basically riding on your growth vehicle, which is Disney+, is pretty stagnant, and then... you're also relying on these sequels every single year.
I mean, Moana 2, Inside Out 2, Deadpool and Wolverine. At what point are people just going to get bored of these sequels? Who's going to watch Moana 3 and Moana 4 and Moana 5? How much longer can this go on for?
You do start to see fatigue. I would even argue... Like Deadpool and Wolverine, I love both those actors. I think they're fantastic. And I'm like, I'm not sure I'm gonna see the next one. I'm like, okay, I think I'm sort of done with this franchise. Anyways, what's really interesting here though is that the parks did well.
And that is, and if you think about it, AI can't replace the parks, or at least I don't think it can. There's still something especially wonderful or especially horrible if you're the parent about Walt Disney World, right? Netflix is going to have a tough time. And to Universal's credit, they spent the money and the decades to build those franchise businesses.
But Atoms are, this is your notion, that Atoms are more important than bits. But the Disney business right now, the strongest part of the business, as far as I can tell, is the parks, the cruises, and the resorts. Because it's hard for Netflix to spin up a cruise ship business. These things take a long time and they're good at the in-person stuff. Absolutely.
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Chapter 4: What challenges does Novo Nordisk face in the pharmaceutical industry?
Or a boy or a scared 16-year-old boy.
No, my boy's decided you can make a left on a red light if you just stop first. That's what he's decided. It's like, wait, you just need to stop. And then you go, no, no, no, no. Anyway, so this thing went out very hesitant, and it figured it out. So the notion that we're waiting, it's just so ridiculous. Tesla, in my view, has already lost. Waymo's doing a great job. Uber has massive...
I mean, the number of Teslas is dwarfed by the number of Uber rides out there every day. And you got to give, I think Dara Khosrowshahi has done a fantastic job because in their DNA, if you think about a lot of the companies that have outperformed the market, they're asset light, right? They don't have big cap backs. Airbnb, Uber said, no, we don't want to be in the business of owning real estate.
We don't want to be in the business of owning cars. We're going to leverage other people's CapEx investment.
So Dara said, rather than go into AI and announce big partnerships and that we're putting $10 billion into AI and autonomous, he just said, no, I'll draft off of other people's CapEx, in this case, Google and Waymo, which has spent kind of 15 years and tens of billions of dollars, and I'll give them – I'll co-brand. I'll have an offering. This is kind of how you do it.
And by the way, Uber had their own autonomous vehicle unit, which they scrapped in favor of this. And I think the market said, oh, they don't know what they're doing. Actually, it's a smart move for exactly the reason you said.
And no one's complaining that Apple didn't go deep into AI spending. They said, OK, similar to how Uber evaluated autonomous and said there are other people spending more money then we need to. We'd be playing catch up. Why don't we just become a remora fish off of that giant spending?
And despite the deep seek meltdown, Apple has not registered a loss in their stock because they never decided to get into this arms race. So I really, I'm shocked. I think Uber arguably, I don't want to say it's been the biggest turnaround, but I think that You needed someone sort of crazy and irreverent and provocative and build fast and break things in Travis Kalanick.
I don't think he gets enough credit for what he envisioned and what he built. I think it's extraordinary. But Dara came in and has just made a series of very what I'd call smart, thoughtful moves. I was about to sneeze. Sorry. That's my pre-ketamine face. By the way, if you run into me tonight and I like me, it means I've tried the ketamine.
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Chapter 5: What is the significance of Uber's partnership with Waymo?
But when Spotify Wrapped came out, it was the first time I was like, maybe I should switch because this just sounds fun to have this little... presentation about me and all of my music habits. So I think that would be the answer.
Let me just give you a little insight into the role that streaming music plays in mating. If you're ever at home with your girlfriend and you're thinking, I don't want to have kids and I don't want to have sex.
I know it's coming. I know it's wrong.
Just play ad-supported Pandora. Yeah. Nothing says do not mate with me. You are taking the evolutionary pool down a couple notches if you have sex with someone who has ad-supported Pandora. I play, I love, I still have ad-supported streaming radio and I think it's hilarious. I play it and I'm like, oh my God, the commercials are so bad. Listen to this commercial.
Anyways, but back to, I'm shocked. I thought you would have had Spotify. I absolutely love Spotify. And also they have the best party. Just so you know, they have the best party at Cannes, Ed. Oh, really? I'll take you. You can be my date.
I would love that invite. Well, let's just go over some of the numbers here because I think they're pretty incredible. So Spotify's monthly active users hit 675 million. beat estimates by 10 million, which means that one in 12 people on Earth is on Spotify. Premium subscribers grew 11% year over year. That was despite the price hikes. Average revenue per user up 5%.
First profitable year in the company's history, which I think is a very big deal, and stock is now at an all-time high, $620 per share. We should probably think about what could go wrong for Spotify. I think one potential issue is this growing public resentment towards Spotify and specifically towards Spotify and how they pay their artists.
So a lot of people say that Spotify squeezes their artists. They don't pay them enough. They reward the top 1% and the other 99% get screwed. And that's timely because Chapel Roan, who just won the best new artist award at the Grammys, she actually called this out. She didn't call out Spotify specifically, but she called out the whole music industry of which, of course, Spotify plays a huge role.
So let's just listen to what she said.
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Chapter 6: Is Tesla losing ground in the autonomous vehicle race?
I told myself if I ever won a Grammy and I got to stand up here in front of the most powerful people in music... I would demand that labels and the industry profiting millions of dollars off of artists would offer a livable wage in healthcare, especially to developing artists.
Well, isn't that fucking precious? Well, here, if you... And if you get in front of a group of kids in high school, tell them not to be music artists because it's a shitty industry with too many people fighting over too few revenues and a series of platforms that are developed in a monopoly. So... Okay. The notion that's... That's great virtue signaling. You know, good for you.
And it's not going to mean dick. It's not... These guys are doing their job. If you wanted... All right. Are you sincere? Pull your shit off of Spotify. Are you really sincere about helping an event? Call your friends. Do you hang out with Beyonce? Do you know Taylor Swift? And pull your shit off of Spotify. Because as long as you have oligopolies, they're going to extract more and more.
And they find that the best way to get retention is to just consistently recommend Taylor Swift over and over. And the notion that she's going to bully the record labels, Spotify is not worth more than all the record labels. So if she really wanted to have an impact, let me do some virtue signaling.
When Spotify decided to not fact check Joe Rogan, who would have one legitimate doctor on one day and then an illegitimate doctor the next day and create all sorts of vaccine hesitancy and false equivalences, I called them and said, we're pulling Prof G off of Spotify. I pulled my shit down and it cost us somewhere between a quarter of a half a million.
So yeah, put your money where your fucking mouth is. Pull off of Spotify. But this notion that you're going to shame people in the audience to... paying artists who aren't making them any money, more money, yeah, good luck with that. Have at it.
No, I completely agree with you. And I think this just, it reminds me of all the dynamics that we've seen in Hollywood. And the reality is, artists have been getting screwed since the dawn of time. And, you know, historically, it's been the record labels that have screwed their artists. And I think back to the 1950s, this is probably the most famous examples, we had all of these
incredible black musicians who are suddenly dominating the charts and then none of them got rich because they signed these shitty deals that ultimately rewarded the owners of the record labels so you know this is this dynamic of artists getting screwed to an extent is nothing new but i don't think i mean a lot of people are blaming spotify for this saying that they just don't pay them enough and blaming the business model i really don't think you can blame spotify for this
Because all you have to do is look at the financials. You have to remember, this is Spotify's first ever year of profitability. So for the 16 years before this, Spotify was losing money. They were losing money to pay employees and to pay for technology. And yeah, to pay their artists. And so I'm not trying to like... make a sob story for Spotify.
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