Adobe Inc. (ADBE) Earnings Call Transcript & Summary

Welcome, Dana.

Thank you so much for having me. Appreciate it.

Great to have you.

A very nice introduction.

Thank you. Okay. So let's start. Let's kick us off. Let's start with a discussion about technology. So Sky has demonstrated, I mean, amazing resilience in a very tough ecosystem. How has technology innovation helped? And how are your customers benefiting?

Thank you. Yes, it's no doubt been an interesting 5 or 10 years to use your benchmark. And I think the last time I was here, we were talking about how we were using technology to move from satellite to IP platforms. So we were talking about our streaming Glass platform and the Entertainment OS platform that powered that globally for Comcast and for Sky. And so I'll build on that narrative, I guess, you would say, and say, what have we done for using technology in order to keep relevant to customers over the past year. So I think my favorite example would be sport. I spent a lot of time internally talking about my passion for sport. And what we were able to do because of our conversion to IP and even the Q boxes actually are fed by IP for stream, we've been able to increase the volume of sport by 50% just in the last year. And so we're able to do 100 streams simultaneously. We have what I like to call essentially the Olympics on screen every weekend in terms of the average number of games. And it gives customers more range and choice, whether it's EFL, ATP, WTP, Formula 1, but the volume of sport that we're able to give to customers is -- and choice is very different than what it would have been 10 years ago in the 2015 era. We just simply couldn't have put that many events onto the broadcast stream. And so our conversion in technology has allowed us to do quite a lot of renovation in sport and even some of the use of technology for studio space like Monday Night Football, which I'm really passionate about that studio, the entire exercise is completely digital. The floor on the bottom is a computer. We have effectively avatars that jump up and allow you to reposition people on the field. Our use of data in order to show people what it looks like if you're standing in the goalie's position versus the striker's position, it's just a dramatically different world than it was in 2015. So we're really proud of the innovation and how it's bringing new experiences to consumers in sport. And we'll go again on that this August as we have a big step-up in our Premier League rights with 80% of the game. So we're going really well on that. And then on the second thing I would say that we've built on is we just announced today a very big new release on our Glass platform. So Sky Glass Air, we've come out with a GBP 6 a month TV. And so you're able to have a QLED TV and our GBP 15 package for Sky Entertainment. So for GBP 21, you have a TV and your Sky Entertainment, including Netflix, all wrapped in. So we're really innovating both the on-screen experience in the UI as well as how we're packaging and making that simple for customers. And this weekend, we finished our global replacement of our NOW platform. And so we -- across all of our territories, we're now on the upgraded global platform from Comcast. We have 71 countries now operating on a very, very sophisticated, much more personalized, really sophisticated merchandising engine for the content across the NOW Platform. And soon, we'll be launching our Gigafast speed WiFi experience in the home using the R&D from the cable expertise over at Comcast. So what we're trying to do is, given the level of disruption we're seeing across the markets, is making sure that we always have that believe in better, I guess, you would say, ambition in front of us and innovating to improve the customer experience and make sure we're always their first choice. That's sort of how we look at the world.

And it's really been a story of bringing together your capabilities around data with your ability to deliver content. So the art and the science and bringing that effectively super boosting productivity, but at the same time, taking that creativity to a whole new level. So -- and at the same time, never stopping, what's been really impressive to see is the continual innovation. So never being satisfied that you've ticked that milestone off. Certainly, we've seen in recent years, just this unrelenting pace and acceleration, but always with the audience and the customer in mind. So you should be congratulating on that.

Thank you. I really appreciate that.

Okay. So you are also one of the largest marketeers in the U.K.

Don't tell our CFO.

Yes. Chatham House rules. And you are a sizable advertising platform as well. So how do you see technology transforming marketing for Sky?

So this is a big one. I actually think that it's probably one of the projects in the business where I'm getting the most energy where I just -- I find it really, really exciting. We took a team of executives effectively on a field trip to learn what the future of marketing looked like from the world experts in that because we always want to be at the very forefront of what's going on. And I guess the best way of explaining maybe the journey that we've been on is maybe to think about our start of season sports campaign over the 3 years. It's probably the best way to bring it to life. And so in 3 years ago, 2023 start of season, we conceived that campaign, which at that time was called the greatest show on earth. It was a TV-inspired campaign, e.g., the TV ad was the epicenter of the campaign and then everything else hung off of that, and it was mass market, and it was pretty traditional. The next year, we were launching our new EFL package, where we had 72 teams showing at least 20 games this season. And so that was a major revolution in terms of the English football rights that we had. So we went to a hyperlocal approach. So we took multiple executions of the creative by team. So we had 72 different executions of the creative. We worked with hundreds of clubs. We worked and -- Instagram promoters. And we really, I guess, you would say, manage that through brute force. It was an enormous effort of people taking volumes of creative and connecting it to smaller audiences, and we did that really through brute force from a human standpoint. This year, what we're doing is automating as much of that as possible. So we're taking the localization deeper. We'll have hundreds of permutations of the sports execution. We're automating the connectivity between how the asset is created and how it shows up in social, and it's much more social-driven than it is TV-driven in many respects. And so that just shows you the evolution and what we would expect that by next year, and I'll invite you into this because you're helping us with this, we'll have the entire chain hopefully automated from start to finish. And that's the sort of journey that we've been on. I would note that you all are helping us with that, and you probably have a better bird's eye view of the evolution of marketing because you're one of the globe's biggest marketers. So maybe you'd like to say a few words.

I mean we are always customer zero on Adobe Tech. Many of you who would know our global CEO. For the last 2 years, he's been doing the interim CMO job. So he likes to stress test our capabilities to see if they're really delivering on what marketers and creatives want. So we redesigned -- before we were talking to Sky about the whole content supply chain and creativity and velocity of content, he tasked us with redesign ours first before. And we went through that. And as a result of that, the journey that we've been on is -- and it's not really about spending less, if I'm really honest, it's about sweating your cash and your investments more. And as I said in my opening, making sure that your technology is proving itself quickly. No longer are companies willing to wait a year for an ROI on a piece of software. So we have to take down quick wins. And that's what we're now applying in our relationship with you. So it has been stress tested, and we continue to be customer zero for all of our content supply chain GenStudio for performance marketing capabilities. Yes.

More to come.

More to come. Okay. So talking about creativity, one of the most challenging issues in our industry is how AI is affecting creativity. So maybe you could talk a little bit about the Sky approach to this and how you're thinking about that?

Absolutely. So we're thinking about AI as a cultural movement inside of the organization. And so if you think about kind of long-term utilization of AI, you want to make sure -- we feel we want to make sure that as many people across the business are using it as an amplification of how they do their jobs. So a way of accelerating and being able to do their jobs even more efficiently or better. So we've created a huge training exercise and also a couple of, I guess we would say, really exciting initiatives like a Dragons' Den for AI initiatives across the whole company and across multiple territories to really invite everybody in the business to be thinking about how AI can help transform us. How we're using it in creative is, as I think you know, we have our own creative agency inside of Sky. So we produce most of our promos, most of the video-based advertising that you see in terms of the entertainment side would come from our creative agency. And we're using it as a way we're using AI actually quite prolifically in that group in order to increase both the volume of personalized executions of whether it's poster art or an ad piece and also the speed with which we're doing it and the efficiency. And so that group has always been at the bleeding edge, I guess, you would say, of our technology adoption. In our creation from a show standpoint, we use AI as the first-generation tools, as you would expect. So things like translation of language, things like ADR, which is the automatic dialogue replacement, all of those just to post production to make that more efficient. And so we're -- I guess you would say we're in those early innings on the content creation side. On the sports side, what we're really looking forward to is embracing AI to have personalized highlights. So you're going to want a different highlight than I'm going to want for whichever sport we're interested in and being able to be very bespoke and personalized in that, I think, is really exciting. I think the challenge with AI, of course, is the IP protection that sits within it. We've been, I guess, you would say, fighting the IP protection wars for a long time. Thanks to Enders for doing that amazing report on piracy. Sky is one of the leading forces in trying to fight against piracy and illuminate the issue that, that creates across our society. And as I look ahead to AI, what I would say is this is a very big protecting copyright is a very big issue in AI. And I think some of the consequences of the opt-out TDM that's being -- that is impossible to police. It's impossible to head in that direction. And if we, as a large organization, spend the resource that we do fighting for IP rights, I can't fathom how a small producer keeps up with a change of that nature.

Yes. It's really going through the sort of challenges that the music industry had many years ago, isn't it, that whole piracy.

It's very hard to put Genie back into the bottle. So we really need to get it right now.

And at Adobe, we are very mindful in our Firefly products. We only use content in our models that we already have licensed within, for example, Adobe Stock as well. So it is a mine field, but we need to also get it right. I think it's really important. Very conscious of time. I mean one last question before we wrap. I mean the change that you've been driving, Dana, with Sky has been formidable. I mean you've successfully navigated that. You remained relevant with customers. You've identified brand-new audiences. And some other organizations have struggled to evolve. So how do you lead through that change? Because it's very demanding, particularly at that as we talked about earlier, that scale and the pace of innovation and change. How do you lead through that?

We think about it in 3 key constituents: customers, stakeholders, leaders and employees. And we've talked about some of the innovation with customers. And previously, we've talked about moving the stakeholder, the model to partnerships and to much more collaborative engagement there. If you think about what we're -- then it leads you to the third constituents, which is leaders and employees. And what we've been doing there is really connecting strategy, purpose with culture and values and using that as an accelerant to help build followership and enthusiasm and excitement about all of the journey that we're on. So when you think about our purpose is really about believe and better, it's about bringing the joy of a better experience to U.K. consumers. So that requires us to keep striving for more. We've then connected that with our value system of simple creative welcoming and doing the right thing. And when you think about welcoming, that's a very unusual word, and you can see it even showing up in some of ours. So welcome to the show is our kind of articulation of our sports campaign last year. So we're really like linking these threads. And I think how it shows up on screen for consumers would be Jackal would be a really good example. So we took a symphonic approach across the whole company. We said this is one of the most important assets we've ever created. We had huge hopes for Jackal. And we aligned everything from our sports department all the way through our creative ad agency and our broadband department to say quarter 4 is all about Jackal, we need to be -- we need to trust each other. We have to be collaborative. We need to work towards the enterprise goal. And I think I'm pleased to say I think it worked in the viewership. I think you couldn't move in London for seeing a Jackal advertisement. So we're really using the alignment across the organization to create a build on the very strong culture Sky already had, but making a bit more welcoming a bit more collaborative.

And as a partner, Adobe feels that as well. So thank you for that. Right. With that, I'm very conscious that the clock is flashing red. So I could have gone on for much longer, but unfortunately, we are at time. Ladies and gentlemen, please show your appreciation for Dana. Thank you very much.