Comcast at JP Morgan Conference Notes

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Mike Cavanagh – Senior Executive Vice President and Chief Financial Officer

W think DWA should do $200m in EBITDA per year

” financially, you think about DreamWorks as a company that making two animated films a year, which is what their capacity is a little more than that, but if that’s what you believe they should do and that was their intention. You look at most analyst reports and say that business with the TV business and other products in there should earn close to $200 million of EBITDA a year. We believe that is well.”

Can cut costs on distribution deal and SG&A

“couple of things that are obvious there on the cost side is there is a distribution deal. So, about $75 million or so a year is what’s paid somewhere else to distribute the films, and in about 2 years’ time, we will take that in and immediately add that to the core earnings power of the company. The other big cost driver is the company today spends about and saw public about $250 million a year on SG&A. So, it really doesn’t make sense to have a public company that makes only two movies a year. So, we will be able to do quite a good job over a period of time to capture synergies there.”

We think we paid a high single digit EBITDA multiple

“So, in our minds, taking those couple of things together turns it into a deal that is high single-digit EBITDA multiple. On top of that, you have got the opportunity for the DreamWorks team did a great job building a TV animation studio, something that Universal has yet to do.”

Sticking to a strategic slate has been key to success of the film business

“film business last year was the first studio ever to have three movies in 1 year do more than $1 billion each in global box office. We crossed – we have $4 billion total of international box office, $6 billion of global box office and again for $1.2 billion of operating cash flow, driven by franchises, so Fast and Furious 7, Fifty Shades, Jurassic World, Minions. And so the theme of the business from 5 years ago when Comcast acquired the business from GE was to really focus on in Steve’s words increasing the ongoing cruising altitude of the business. So what happened was a lot of focus on what’s called strategic slate, so not throwing lots of darts at the wall with similar types of movies because it’s what came through and got green-lighted without deliberation. So much more focused, we are going to make x number of movies a year. We want two of them to be animation. We want two or three tent poles. Each of those cases, we want sequels and one new, mature comedy, etcetera, etcetera. And sticking to a strategic slate framework is a major part of the ongoing sort of change in the business approach.”

Globalizing the marketing side has also been important

“Another big change was globalizing the marketing side of the movie business, taking all of that in instead of having different regions of the world kind of doing their own thing and deciding how many screens and which operators to go with and which markets on which dates, all that’s done globally now out of L.A. And then finally, in an important market like China, we didn’t have people on the ground China 5 years ago, now we have a robust team. We have gone from being represented by third-parties to distributing the movies ourselves.”

Fast 7 did 400m box office in China, which is more than US

“so as an example, Fast and Furious 7 last year did $400 million in box office in China, which is more than it did in the United States. And so the ramping up of those three aspects strategic slate, global marketing and China distribution, are what’s contributed to the story in film.”

Smaller slate of films this year

“you are right. This year, much smaller slate of films in ‘16 versus ‘15 and we are coming off a record year. So we expected this to be a down year relative to a record. We have a start with a weak performance by Huntsman which affects us in the first half of the year, but then we have Bourne 5 and Secret Life of Pets and some other titles coming out in the second half of the year. ”

Sports key, made money on London games

” the importance of sports rights and how in the whole ecosystem, live, big sports events are just a key to engagement both on the advertising side and the importance in the affiliate relationships of wanting to carry channels and the like. So we love the Olympics. We have it at a low cost escalator going from here through 2032.”

There are so many content buyers out there

“there are so many different buyers out there for content. It’s a great time to be a content creator. And you see that for all the reasons we just described.”

We don’t think having owners economics in wireless is interesting to us now

“We don’t think having owners economics in the wireless business today is something that’s interesting to us now if – we reserve the right to have a different view of the future, but as we sit here now, no.”