In this episode of MarketFoolery, host Mac Greer talks with analysts Emily Flippen and Tim Beyers about some of today's biggest business news. Tim explains why he's so deeply unimpressed by the launch of Disney+ (DIS 0.34%), and why this doesn't actually threaten Netflix (NFLX +0.27%) as much as you might think. Burger King is beefing up its plant-based options, further cementing its leader status over the other fast-food giants in the flexitarian space. Alphabet (GOOGL +1.37%) (GOOG +1.09%) subsidiary Google wants to offer you a checking account -- kind of. Emily explains why it's slightly more complicated than it seems, and what Google gets from this. Tune in to find out more!
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This video was recorded on Nov. 13, 2019.
Mac Greer: It's Wednesday, November 13th. Welcome to MarketFoolery! I'm Mac Greer and I am joined in studio by Motley Fool analysts Emily Flippen and Tim Beyers. Tim, joining us from Motley Fool Colorado. Welcome!
Tim Beyers: Thanks, Mac!
Emily Flippen: Hey!
Greer: How are you doing, Emily?
Flippen: All right!
Greer: Good, good! Well, we've got lots to talk about. We've got Google checking accounts. Yes, I said Google checking accounts. Are you signing up for that? Are you interested?
Flippen: Well, we'll get to it. We'll get to it. I have some strong thoughts.
Greer: OK. And, I've got some Impossible news from Burger King. See what I did there?
Beyers: Yes, I like that. Well done, well done!
Greer: But let's begin with yesterday's big story -- Disney's streaming service is officially here. Disney+ launched on Tuesday. $6.99 a month gives you Disney+. $12.99 a month for the bundle that also includes Hulu and ESPN+. I was so excited, I confess that I signed up first thing Tuesday morning. Yeah, there are some glitches, some growing pains, but loads of content. When you sign up, the first thing you see on the screen is this rotating carousel of content. Then you see five brands listed right below it. From left to right, Disney, Pixar, Marvel, Star Wars, National Geographic. Tim, it's game on!
Beyers: It is game on, but I have to say, this is the most anticipated disappointment of 2019.
Greer: Really?!
Beyers: Really, and here's why I say this -- because of the pricing. This is an amazing service. I'm very bullish on Disney+ as a service.
Greer: $6.99 a month!?
Beyers: $6.99 a month gets you Disney+. If you go to $12.99, that gets you ESPN+ and that also gets you Hulu, but it gets you Hulu with ads. If you want -- and I think everybody wants this -- if you want Hulu, you want it without ads. If you want it without ads, you're going to pay $18.99. If you're paying $18.99 a month, you're actually paying more than you're paying for either base Netflix at $12.99, or, if you have multiple TVs, Netflix at 4K, you're paying $17.99. I had originally thought that the pricing for Disney+ was a real game changer. I thought it was the catalyst and I thought that it could actually hurt Netflix. I no longer believe that. I think this is an interesting play, but it does nothing at all to hurt Netflix.
Greer: To be clear, you are comparing the bundle and the value proposition of the bundle that includes Disney+, Hulu, ESPN+, comparing that to Netflix.
Beyers: Yes.
Greer: Disney+ is still $6.99 a month. That doesn't get you interested?
Beyers: It gets me interested. It just doesn't tell me that is a disruptor. I can't see this as a disruptor in any way.
Greer: You can't --
Beyers: Not at all.
Greer: Let me hit you with five words again. Disney, Pixar, Marvel -- actually, more than five words -- Star Wars and National Geographic.
Beyers: Those are great brands, but if I go around the world, and Disney+ is going to launch around the world, just the way Netflix has. They're going to take this a country at a time. They will get to the point where they become as omnipresent as Netflix is today. But it's going to take them some time to do that. Remember that right now, largely, Disney+ is exporting American content to other countries. That is not Netflix's strategy. Netflix does have content that is designed specifically in-country for many different countries around the world. They spend a lot of dollars doing this. They get a lot of expertise to do this. Netflix has seeded the world in a way that we haven't seen before. It's going to take a while for Disney to catch up to that. I love the idea, I love the content, but let's remember what this is. This is a largely American bundle that is going to try and go global, and it's going to take some time to do that. I would have thought it was going to go faster if there was a significant price advantage, but the only significant price advantage is if you're just comparing Disney+ to Netflix overall. Maybe that's fair, but I think people signing up for this want all three. I really do.
Greer: OK, Tim Beyers, not feeling the magic. Emily, what about you?
Flippen: I feel like it's compelling if you're already paying for one of these services. I'm not going to say it's going to disrupt Netflix. I agree with Tim. I think that Netflix has, for a long time, had a very strong value proposition, and I think they'll continue to retain it. I think it could cause them pricing pressure. I think it does challenge Netflix a little bit more. They're no longer the only game in town. But, Mac, I'm hung up on a couple of things here. The first being, it's Disney, Pixar, Marvel...
Greer: Star Wars.
Flippen: That's where I'm stuck. Is Star Wars its own thing now? National Geographic? Star Wars!?
Greer: Star Wars has been its own thing since it came out in the 70s.
Flippen: Maybe I need to subscribe to Disney+ just so I can watch the apparent boatload of content that is associated with Star Wars that I never knew about.
Greer: You've got the movies, spin-offs, all sorts of things.
Beyers: They got into original programming, the Mandalorian.
Greer: Which has gotten good reviews. Now, I will say -- I'm obviously more bullish on it than I think Tim is. I think that's a fair statement. I will say, I was a bit disappointed, because we've got a Samsung Smart TV, but apparently, it's not that smart, because it does not support Disney+! What's interesting is, we watch Amazon it and we watch Netflix on it. It's a few years old, but it's too old, at least right now, for Disney+. So we're going to have to find a workaround. There are plenty of work arounds. But I was a little disappointed there.
Beyers: Don't you think that has less to do with your Samsung TV and more to do with Disney+? Remember, one of the key advantages of Netflix -- we can go back, say, five years ago -- Netflix was the only one that had a platform where you could, say, start a video on your smartphone, then go to your TV, and it would pick up exactly where you left off.
Greer: They'd meet you where you were. They're great at that.
Beyers: You know what? YouTube couldn't do that for a long time. Hulu couldn't do that for a long time. Amazon couldn't do that for a long time. They finally caught up. So, to me, this is a swing and a miss on Disney's part.
Greer: Wow! It's a day old!
Beyers: Maybe I just have high expectations for Disney. But I do think this is one of those things where, when you roll out a technical product, there are some really base things that you've got to do, and you have to do it right out the gate. Being able to be compatible on as many devices as possible is really important. I don't think it's a huge miss from Disney. But, at minimum, they filed it off.
Flippen: Let's be nice here. Disney is not used to handling lots of people, lots of content, lots of IP. This is stuff that's completely new to Disney!
Beyers: I'm not buying it --
Flippen: I'm totally joking! Disney should have been more prepared for this than they were.
Greer: I want to read to you from a 1971 New York Times story, October 1st, 1971. "Walt Disney World, widely heralded as the new Colossus of Florida tourism, opened today on a day that was perfect, except for one thing: the $400 million attraction drew only a paper thin crowd." How'd that work out for Disney World?
Beyers: It worked out pretty well. But, two things stand out. First, paper thin crowd for Walt Disney World. That's staggering. But even more staggering, can you imagine what is $400 million in 1971? What is the return on investment in Walt Disney World in the years since? The point there that I take is, there are some glitches here. I think the storyline has been that Disney+ was going to do a lot of damage to Netflix. I am not buying that all.
Greer: What about Disney+ plus Hulu plus ESPN doing damage to Netflix?
Beyers: I don't buy that at all either. What I do buy is, over the long term, you now have Netflix and you have Disney+, I do believe that Disney figures this out, and I think you are now seeing the emergence of the two global brands that dominate entertainment for the next 20 years.
Greer: I'm a shareholder in both Disney and Netflix. Should I keep on holding?
Beyers: Yes, I would.
Greer: This has me nervous about Netflix.
Beyers: I'll kick it to Emily here -- I think it would be a huge mistake to sell Netflix at this point. In fact, given where the stock has been and where it is now, if you had no position in Netflix now, I'd seriously consider opening one.
Flippen: Yeah, I would definitely not say to sell your Netflix now. I would say, I don't think it's going to be completely easy sailing. There's a lot of competition now for content. There's a lot of competition for brands. Netflix is still really competitively positioned, but when you look at not just Disney+, including ESPN and Hulu, but when you look at HBO Go and you look at typical cable channels that are now launching their own streaming services, the battle for content is bigger now than it ever was. Netflix is going to need to compete in terms of compelling content to retain what they have today. I think they will, but I don't think it's going to be a smooth process.
Greer: As we wrap this up, any other winners or losers from Disney+?
Beyers: I'll go with Roku on this. I believe that Roku does a very good job of aggregating content. I think Disney+ has accelerated the move to cut your cord. In a world where there is Disney+, you will see more cord cutters, because we now have -- Emily's point is a really good one. We now have more investment in content than there ever has been before, and you can buy it directly. Roku is a great aggregation platform for that, whether you're just using your phone, your laptop, or your Smart TV. Roku is a winner here.
Greer: So, Disney+ might not be a Netflix killer, but could be a cable killer.
Beyers: Yes, I agree.
Greer: Emily?
Flippen: [laughs] Cable has already been dead to me for a while now. I actually have a hidden loser for you. I think Amazon is slowly losing its competitive positioning in the video space. They've always had one foot in, one foot out. It was great when they had all the capital to put behind their business. They were competing on a smaller level with Netflix. Now it feels like to me, wow, there's so much content out there. They have a couple of good shows. Marvelous Mrs. Maisel, I will plug that here.
Greer: Such a great show!
Flippen: If you haven't seen it, definitely go watch it on Amazon Prime. But, with the exception of a few shows like that, it does seem like every day as time passes, content comes out, they're losing a little bit of ground.
Greer: Let's move on to a story that we mentioned in the open. Google will begin offering checking accounts next year, according to Wall Street Journal reports. The accounts will be run by Citigroup -- I've heard of them -- and a credit union at Stanford University. An interesting partnership there. What do we think about Google checking accounts, Emily?
Flippen: I'm actually a little sad the way the media has run with this title. Labeling it a Google checking account's a great way to get clicks, but not entirely representative of what it seems like the plan is. Granted, this is early stage rumors. I'm sure the rumor will change as time goes on. While they are planning on launching a checking account with Citigroup and help of this local credit union, it's not going to be branded under Google's name, at least that's what the rumors say.
Greer: So, was that misleading, what I just did there?
Flippen: It's not inaccurate, but it does make it seem like you're going to be logging into your Google checking account, when in actuality -- in a very similar way, for instance, Uber, when they teamed up with Barclays to launch Uber card, you weren't going to Uber's platform to check your balance and pay. You're going to Barclays. It seems like it's going to be a similar thing, where it's actually Citigroup that's holding the account. It's labeled with Google's name. I think where they're going with this might be just integrating people who have those accounts deeper into that Google ecosystem, making the process of paying more seamless when you're using Google or using Google platforms. That's probably where they're headed with it. I'm not terribly surprised to see this move. We've seen these tech giants try to get into the finance space really strongly over the past few years. So, it's not terribly surprising. We just need more regulatory guidance to say, where do we draw the lines with companies like Google or Facebook (FB 0.23%)? At what point are they doing a little too much?
Greer: If I redo the read, I'll say Google will begin putting its name on checking accounts next year. Is that better?
Flippen: It sounds to me, as it is written today, the more accurate statement.
Greer: Tim, what do you think?
Beyers: Well, I wonder where Android Pay fits in all this. This isn't the first time that Google has been in the payments business, or thinking about being in the payments business. Let's say that. How does this fit? I do think, ultimately, this is Google saying, "Look, we want to make it easy for you to put money into the platform and use your money on Google services, in the Google Cloud, with books or movies or music, what have you." Ultimately, I don't see this as a very altruistic move. I'm not sure what the benefit is. I didn't read that into the story. Frankly, I think Emily's, right. This has been happening so much. How different is this from Libra? Facebook wanted to have its own currency. Google wants to give people more access to checking accounts. The tech business wants more of your money, and also wants us to trust it with our money. I have some hesitancy about this, Mac.
Greer: You mentioned Facebook, Tim. We got news this week that Facebook Pay is launching on Facebook's core platform and their Messenger app. Later, it will be available on Instagram and WhatsApp. Facebook Pay, does that get you excited at all?
Beyers: It makes me a little nervous. I'll tell you the reason it makes me a little nervous. Two reasons, and I'll give you a good reason. The two reasons I'm nervous about it is, we just got through having hearings about Libra. This was Facebook's try at cryptocurrency. Now, we're going another route with another payments platform. Where does this end? And what is Facebook strategy, really? And then, what else are we going to need to see from regulators to offer some guidance on this? Now, the good thing is, there's a lot of payments that come through mobile devices. That does make sense. Strategically for the company, it probably makes a lot of sense.
Flippen: Yeah, I'm actually not as concerned as Tim there. It feels like to me that the vast majority of companies who use payments aren't doing enough in the way of security or privacy. I don't know if it's a generational thing, but I expect the worst at this point. In no way am I going to go out of my way, I guess, to use Facebook Pay. But I will say, if they're integrating it, like you mentioned, into Instagram and WhatsApp, that's a very, very strong value proposition, as somebody who uses WhatsApp to communicate with all my friends from college, my family members. It would make my life a million times easier to be able to send money to them over WhatsApp. If that ends up happening, I will likely end up using it. I will just keep a much closer look at my bank statements as a result.
Greer: Now, you say you expect the worst. I've got to ask you, have you heard this formula that happiness equals reality divided by expectations?
Flippen: Oh, that's a great formula!
Greer: Do you subscribe to that?
Flippen: I do subscribe to that. Low expectations have done me well in life.
Greer: I'm going to push back a little. Shouldn't we all have expectations of each other? Basic kindness? That's what I struggle with. For a while, I was like, "OK, that makes sense. Happiness equals reality divided by expectations." But the more you think about it, wait a minute, we should be able to expect something of each other. Right?
Flippen: Well, if you want to be unhappy.
Greer: Kindness? Courtesy? Do you really want to have zero to low expectations --
Flippen: Of Facebook? Yes!
Greer: [laughs] OK. In case of Facebook, you'd like that formula.
Let's move on to Burger King. Doubling down on plant-based burgers. In August, Burger King started selling the Impossible Whopper throughout the U.S. As you may have heard, that was a big hit. Apparently, there is plenty of room for meatless burgers. So now, Burger King is launching a plant-based Rebel Whopper -- yes, Rebel Whopper -- across Europe. Burger King will also test more plant-based burgers in the U.S. Emily Flippen, you follow this industry. What do you think?
Flippen: I think that I'm afraid to use the term that I want to use in front of Tim. That's flexitarian. I know it's a trigger word for Tim.
Beyers: It is. I'm triggered right now.
Greer: Explain what a flexitarian is.
Flippen: It's somebody who has not gone full vegetarian, but is trying to reduce meat consumption in their life. This move by Burger King is a testament to the fact that, at least for the time being, there seems to be a lot of people who are either very interested in trying the Impossible Burger -- I'm sure that's a large part of that business, especially the business that they saw over the last quarter, as people tried the Impossible Whopper -- but I do think there's an increasing number of people that are generally trying to eat less meat. The more options you provide them, whether it be kids menus, adding the Impossible Whopper to the kids menu, adding an Impossible Whopper cheeseburger -- cheeseWhopper? -- and spreading it across Europe. Those are the sorts of things that play upon this flexitarian trend.
Greer: Tim, what do you think?
Beyers: It is a trigger word for me, Emily's right. I have a hard time understanding the flexitarian market. That's why it's a trigger word for me.
Flippen: I think flexitarians have a hard time understanding the flexitarian market themselves.
Beyers: Fair enough. But, I like this a lot. The reason I like it a lot is, it makes me wonder where Impossible Foods is on the spectrum of getting public. The more you can do to introduce this option to different markets, different populations, and do it in a very clear and simple way -- to me, this very much mirrors Tesla. Tesla starts with the Roadster, get that niche market, own it and then start coming down. This feels the same way. Plant-based meat, where is the market where we get the least objections? If we can make a plant-based burger taste like something that is delicious that is bad for you, but not really, and then we can go from there, we can start seeding this market in a big way. I like the move a lot. I think it's good for Beyond Meat, actually. I'm more interested in this space than I was about two months ago.
Greer: OK, let's talk about that. You mentioned Beyond Meat. Impossible Foods is private. They've said recently, no IPO in the near future. We don't know when or if they may go public. Beyond Meat has just had an incredibly volatile run. Let's roll the tape here. They go public in May. They hit a high of north of $230 this summer. Then they come crashing down. They now trade somewhere around $77. What does Beyond Meat tell us potentially about Impossible Foods? Or are they two very different animals?
Beyers: I think they're two very different animals --
Greer: Plant-based?
Beyers: Yes, they're two very different plants, in the sense that right now, Impossible Foods is private. Maybe if Beyond Meat is the sugar cane of the market -- I don't know my plants very well. But, sugar cane vs. rice? I'm not entirely sure here.
Greer: So, Impossible Foods, more nutritious? You see that as having more long-term value?
Beyers: I'm not entirely sure, but what I like about it is, where I meant these two things are different is the strategy has been very different. Beyond Meat came out and went straight to the grocery store, and then has found its way into restaurants. Impossible Foods was coming out through the restaurants and has found its way into the grocery store. They've converged. I think, to the degree that these things continue to converge, it's good for the market. It's good for the overall market. It does seed ground for a good IPO for Impossible Foods. I think Beyond Meat was coming out amid hysteria, so the pricing was completely out of whack.
Flippen: I eat a lot of rice and sugar, so I'll have a hard time choosing -- I'm joking. I do think that both of them are playing upon the same trends. I agree with Tim. Their strategies have been really different. I'll just add, Impossible Food is a really well-capitalized company right now. They've gone to the private market a lot to raise money. They don't need to IPO anytime soon, based off what we know right now. It doesn't seem like an IPO is something that they're particularly looking into. I think that's good, because the pressure that we've seen on Beyond Meat in the market... it's nice to be a private company as long as possible, because you can avoid people like us talking about you on-air.
Greer: Bringing it back to Burger King, Burger King trades under Restaurant Brands International (QSR +0.85%), which also owns Tim Hortons and Popeyes. When you look at Burger King doubling down on these plant-based burgers, what does it make you think about the stock?
Beyers: What it makes me think about Restaurant Brands International is that the more success on a concept level that Burger King has with the Impossible Whopper, I think you start to see opportunities for this more broadly in a Tim Hortons, and maybe at a Popeyes, I'm not entirely sure. But I think this becomes a testing ground for how plant-based meat works in other concepts and how transportable it can be. Now, we don't know what's going to happen here. But because Restaurant Brands is a holding company, they do have the wherewithal to take some data that they get from this Burger King experiment and bring it to other brands. That's a great potential move. It's very different from having, say, a McDonald's, which has, what is it, a Beyond Meat Big Mac? I'm not even sure what they sell for --
Flippen: They tested it in Canada. Unfortunately, McDonald's has been slow to come into the fake meat game. It's because of their franchise model, it's hard to get everybody on board.
Beyers: That's a really good point. To your point about Restaurant Brands International, because they have some control over the entire value chain, they can test this, they can get data, they can roll it out slowly, they can stage it, and maybe make a pretty interesting niche play in this market before a big brand like McDonald's can get in.
Flippen: Yeah, I think Burger King is saving itself here. Or, should I say, Restaurant Brands International is reviving life into Burger King because they have been so quick to take up the fake meat game, whereas companies like McDonald's have been really slow. McDonald's slow not just in the fake meat game, but in the chicken sandwich game. Can we talk about that? McDonald's has not done anything to compete with the craziness that is Chick-fil-A and Popeyes. It's sad to see them be so unresponsive to these emerging trends.
Greer: OK, let's wrap up with the desert island question. You're on a desert island. You've got five years. You've got not a whole lot to do because you're on a desert island. You're looking at these stocks and you've got to own one of them for the next five years: Disney, Netflix, Alphabet, the parent company of Google, and let's throw Facebook in there, and Restaurant Brands International. Which one are you going with?
Beyers: I'm going with Netflix because I think the pricing right now has been depressed over the past year. I love Netflix over the very long term, especially the next five years. Disney+ coming into the market validates the Netflix strategy. We're going to see this stock recover in a big way over the next five years.
Greer: You are so tough after one day. Am I going to have to read you that New York Times story again about Disney World and their opening day?
Beyers: You can read it to me again, I'm not sure that'll change my take here. You can read it again all you like.
Greer: [laughs] Emily?
Flippen: I had no idea there was so much content associated with Star Wars. I could probably spend a lifetime just catching up. So I'll go Disney, just because maybe I need to buy that now, the subscription service.
Greer: I like that this is your introduction to Star Wars, the world of Star Wars content.
Flippen: I just didn't know that it warranted, out of five buttons on the Disney+ homepage, that it warrants its own button?
Greer: Oh, absolutely!
Flippen: My mind is blown!
Beyers: How could it not? It wasn't that long ago that Disney paid $4.2 billion for Lucasfilm. This is big stuff.
Flippen: Put Lucasfilm up there! They don't only do Star Wars.
Beyers: What is Lucasfilm known for? You could say Indiana Jones. And don't get me wrong, I love myself some Indiana Jones. But what Lucasfilm is known for is Star Wars.
Greer: This is a generational thing. I understand why you would put Marvel ahead of Star Wars, especially given all of the recent movies. But there's a part of me that's like, shouldn't Star Wars come ahead of Marvel? Disney's got to come first. After that, I think it's debatable. National Geographic, I love me some National Geographic, that's got to come last.
Beyers: There's no doubt about that.
Flippen: We can all agree on one thing here, and that's it.
Greer: Yeah. We will see. It's going to be interesting! Tim and Emily, thanks for joining me!
Flippen: Thanks for having us!
Beyers: Thanks for having us!
Greer: As always, people on the show may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's it for this edition of MarketFoolery! The show is mixed by Austin Morgan. I'm Mac Greer. Thanks for listening! And we will see you tomorrow!
