Paramount Global

Yeah, so last time we had a thing where the questions, you guys were typing the questions on the screen, yeah?

Yeah, I think James can do that.

That didn't work that well, actually. Can she just have like a doc open and write the name of the person? Because we don't need to see the queue. You guys need to see the queue on your screen.

Good morning, my name is Elliot and I'll be the conference operator today. At this time, I would like to welcome everyone to Paramount Global's Q2 2022 earnings conference call. All lines have been muted to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. In order to get as many of your questions as possible, we ask that you please limit yourself to one question. At this time, I would now like to turn the call over to Anthony DiClemente, Paramount Global's EVP, Investor Relations. You may begin your conference call.

Good morning, everyone. Thank you for taking the time to join us for our second quarter 2022 earnings call. Joining me for today's discussion are Bob Backish, our president and CEO, and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results, Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information, and in each case can be found in the investor relations section of our website. Now I will turn the call over to Bob.

Good morning, everyone, and thank you for joining us. I'll start this morning by talking about Q2 highlights and preview what's next. Then I'll turn it over to Naveen. to take you through financial and operating details, and we'll wrap up with a Q&A as usual. Big picture, while we're clearly navigating some near-term headwinds in the macroeconomic environment, Q2 shows we have the assets, strategy, and ability to compete and win over the long term. Q2 shows a company that's taking market share in streaming, in broadcast, in box office, and in upfront dollars. It also shows the company increasing its penetration of the most important growth market in media, streaming, as evidenced by our over 5 million D2C subs added in the quarter. And Q2 shows how we leverage investments across multiple platforms that unlock multiple revenue streams. This, combined with our fiscally disciplined approach, including with respect to cost management, provides a real advantage in these challenging times and beyond. At the center, of course, is our hugely popular content, big, broad, and beloved. Just think of the biggest movie in the world, Top Gun Maverick, the most popular TV show in the country, Yellowstone, perennial global hits like the CBS crime procedurals NCIS and FBI, or the world's most popular preschool franchise, Nickelodeon's Paw Patrol. Our content consistently attracts and entertains mass audiences. When I say audiences, I don't just mean kids or adults. I mean the whole household. Not just the coast, but the entire country. Not just the U.S., but the entire world. Not just the streaming audience, but the TV, theatrical, and streaming audience. Part of the reason is that we don't just make popular content. We also make content popular by leveraging our powerful platforms. After all, to drive best-in-class marketing and distribution, you've got to have best-in-class assets, like the number one broadcast network in America, the largest broadcast footprint globally, the number one free ad-supported streaming TV service in the U.S., and one of the fastest-growing premium SVOD services. The combination of our content, platforms, and strategy ensures we can reach the largest total addressable market, generate strong returns on content investment, and create devoted fan followings taking full advantage of our deep and growing library of valuable IP. All of these advantages came to life in Q2. So let me show you how, starting with film. Nowhere is our popularity more evident than at the box office. Look no further than Top Gun Maverick, which is already the biggest film of 2022 and our fifth number one title this year. In fact, Top Gun Maverick just cleared 1.3 billion at the global box office and became one of the top 10 domestic movies of all time. Here, we leveraged our portfolio of brands, including CBS and MTV, to execute a major cross-company consumer campaign that resonated with audiences everywhere. a strategy that has been proven to be highly effective when deployed against our major assets. Success like this, five number one films at the box office, Top Gun, Scream, Jackass Forever, The Lost City, and Sonic the Hedgehog 2, which, by the way, also made history as the biggest video game opening of all time, success like this isn't a given. It requires the right strategy and strong execution. In the early stages of the pandemic, we were very selective with our releases, holding certain films until market conditions improved. While we could have released Top Gun Maverick and The Lost City earlier, we held off because we knew these phenomenal stories would bring audiences back to theaters. That proved to be the right call. Paramount continues to shine at the box office with numbers that outperformed even our own expectations. And we're excited about the future. We'll end this spectacular year with Damien Chazelle's Babylon, starring Brad Pitt and Margot Robbie, which begins its theatrical rollout in December. And our 2023 slate is anchored by fresh commercial takes on some of our most popular and new franchises, from Transformers and Teenage Mutant Ninja Turtles to Dungeons & Dragons and Paw Patrol. to name just a few. But our amazing content isn't limited to the silver screen. Viewers hungry for incredible storyteller are also turning up in ever greater numbers to our flagship streaming service, Paramount+. This quarter, Paramount+, added 4.9 million global subscribers and revenue grew 120%, further cementing Paramount+, as one of the fastest growing premium streaming services Based on third-party data, Paramount Plus is the number one premium service in the U.S. in sign-ups and net subscriber additions, both this quarter and year-to-date. And based on other third-party data, Paramount Plus is also the most popular premium streaming service in the U.S. to add among switchers. That means people who dropped the service in the last 12 months were more likely to add Paramount Plus than any other service. Yet again, evidence we are taking market share. The success of our streaming platforms speaks to the power of our content strategy. From movies and sports, to shows and news, to events and more, the diversity and quality of our content is unrivaled, especially on Paramount+. Box office hits like Lost City and Sonic the Hedgehog 2 came to Paramount Plus in May. generating terrific engagement across all demographics. Their success demonstrates that our strategy of a big theatrical release with a fast follow to streaming is by far the most effective way to maximize the return on our investments in movies. Meanwhile, hit CBS originals like NCIS, which consistently dominate ratings in linear, have drawn significant viewership to Paramount+, and driven engagement there. ASHAB must see sporting events like the UEFA Champions League Final in May, which aired on CBS and Paramount+. Additionally, the power and strength of our franchises, existing and new, was on full display this quarter, thanks to strong performances from Star Trek Strange New Worlds, 1883 of the Yellowstone Universe, and our latest South Park special, South Park, The Streaming Wars, as well as Halo, which has become a top driver globally for subscriber acquisition and engagement. And we're just getting started. We've got more captivating content on the way, and our multi-platform approach will drive even more viewers to streaming. Later this year, the biggest show on television, Yellowstone, returns for its fifth season to the Paramount Network in the U.S. Importantly, Yellowstone's linear premiere will support the streaming launch of Taylor Sheridan's latest original for Paramount+, Tulsa King, which debuts November 13th and stars the one and only Sylvester Stallone. Paramount Plus will also debut a Criminal Minds revival, building on what is already a fan favorite. In September, another season of the NFL and SEC college football also returns to CBS and Paramount Plus in the U.S. The momentum of Paramount Plus is not just the product of its strong and diverse portfolio of content. It's also the product of a smart distribution strategy, which is bringing our flagship streaming services to more audiences than ever before. For instance, Paramount Plus continues to expand internationally, leveraging our rich heritage as a truly global operating company. With the help of partners Sky and CJ Entertainment, we just launched Paramount Plus in the UK, Ireland, and South Korea. Hard bundle deals like these allow us to quickly unlock a healthy volume of subscribers at zero acquisition costs and with very low churn. In September, we're using that same strategy to launch Paramount Plus as a hard bundle in Italy with Sky Italia. Later in the year, we'll do the same with Sky in Germany, Austria, and Switzerland, and with Canal Plus in France. Meanwhile, in markets like India and Eastern Europe, we're focused on balancing long-term market growth with a smart allocation of capital. As exemplified by our deals with Viacom18 and Reliance, with whom we're partnering to bring Paramount Plus to India, and with our Sky Showtime partnership with Comcast, which will launch later this year. By the end of the year, inclusive of Paramount Plus and Sky Showtime, we expect to have our subscription video-on-demand services in 60 total markets. Moving forward, we'll continue to harness this strategy of ubiquitous distribution, which includes direct-to-consumer as well as channel partners like Roku, Amazon, and Apple, in addition to the aforementioned hard bundles, so that Paramount Plus can reach as large an audience as possible. We're also seeing the power of partnership bring Pluto TV to greater heights. Pluto TV is already the number one free ad-supported streaming television service in the U.S. And this quarter, monthly active users grew to nearly 70 million globally. And through partnerships with Viaplay Group and Chorus, we are now expanding Pluto TV's international footprint in the Nordics and Canada, respectively. With Pluto, we provide a global platform and global libraries. And our partners provide compelling local content and local ad sales capabilities. It's a powerful and efficient global model. Now, because our assets continue to perform impressively across TV and streaming, advertisers are taking note even amid broader market uncertainty. We've long known what makes us the ideal advertising partner, our ability to deliver both scale and efficiency, all wrapped around premium content. On scale, our multi-platform strategy is a clear advantage. Our audience reach across broadcast, cable, ad-supported SVOD at Paramount+, and free ad-supported streaming TV in Pluto TV represents a connected viewing ecosystem that produces over 1 trillion ad impressions per year in high-engagement, premium environments that are proven to drive outcomes for clients. But in a competitive market, scale isn't enough. To attract the best partners and build the best business, you've also got to make it easy and efficient for advertisers to reach their audiences of choice. And at this scale, we offer advertisers access to a wide variety of audiences across every demographic at competitive pricing that makes Paramount a must-buy for marketers who need to efficiently aggregate awareness around their products. We see our partners responding enthusiastically. As evidence, it is worth noting that we recently had our strongest multi-platform unified upfront yet. We had broadcast and cable pricing increase at the same high single-digit rate. And we grew digital volume in the range of 30%. Most importantly, it's pretty clear that we grew share. Premium content with cross-platform scale and efficiency It's this robust combination that differentiates Paramount in the ad marketplace and makes us a must-have partner for advertisers. So in closing, we're continuing to create value across our business, from theatrical to streaming to advertising. Millions of new customers are signing up for our streaming services. Fans are headed back to the theaters to watch our films. Viewers keep turning to our networks for their favorite content. and advertising partners are eager to get a share of it all. We couldn't be prouder. With an iconic Hollywood film studio that owns more than a century of IP, with the number one broadcast network in the U.S., with some of the most popular cable brands and content in the world, with the fastest-growing premium streaming service in Paramount+, and with the leading free ad-supported streaming TV service in Pluto TV, It's a powerful combination, which we will continue to lean into for the rest of the year and well into the future. And in a world where people are more and more focused on the financial envelope, particularly around streaming, the benefits of our multi-platform strategy, powerful content engine, and IP ownership will become clearer and clearer. We have always executed with financial discipline, and we continue to be laser focused on it. Now, I'd like to turn it over to Naveen to jump into our financial results for the quarter and walk you through our expectations for the second half of the year. Naveen? Thank you, Bob.

Good morning, everyone. Second quarter results demonstrate the value of our diversified media business and expansive monetization platforms. We delivered 19% total company revenue growth through continued strong B2C momentum and record performance at the box office. Affiliate and subscription revenue grew 12% in the quarter. Advertising was down 2% year-over-year or flat on a constant currency basis due to macroeconomic headwinds, and licensing revenue grew 27%. Today, I will highlight some of the key financial and operational drivers behind our second quarter results and share some insight on expectations for the second half of the year. Starting with direct-to-consumer, we added 5.2 million global DTC subscribers in Q2. Paramount Plus added 4.9 million global subs, while our other streaming services grew modestly. As of June 30th, we had a base of 63.7 million global DTC subscribers. including 43.3 million Paramount Plus subscribers. Our quarter end totals reflect the removal of 3.9 million DTC subs in Russia, of which 1.2 million were from Paramount Plus, consistent with our plan to remove these subscribers from our reporting. Q2 subscriber growth benefited from the launch of Paramount Plus in the UK, Ireland, and South Korea. as well as continued domestic growth as we added new hit content to the service. Paramount Plus saw continued engagement improvement as our content offering expanded even further. E-Plus customers are watching a greater number of unique titles today than ever before, as evidenced by sequential and year-over-year growth in titles viewed per active domestic sub. We also saw sequential growth in hours per active. And most importantly, deeper engagement resulted in sizable improvements in domestic terms. The combination of subscriber growth and engagement drove Paramount Plus revenue growth of 120%, including subscription revenue growth of 126% and advertising growth of 92%. Paramount Plus ARPU improved on a sequential basis in Q2, with both domestic and international ARPU higher versus Q1. Pluto TV added 2.1 million global MAUs in Q2, bringing our global reach to 69.6 million MAUs. Revenue grew 10% year on year. Although Pluto TV revenue growth was impacted by the macro environment, the service continues to demonstrate strong engagement with the year-over-year growth rate and total viewing hours accelerating from Q1 to Q2. Continued improvements in engagement and our compelling advertiser proposition mean that Pluto is well positioned to both gain share and benefit from organic growth. Our dual revenue stream model delivered 56% year-over-year D2C revenue growth, with total D2C revenue now reaching $1.2 billion in the quarter. This growth consisted of a 74% increase in subscription revenue and a 25% increase in advertising revenue. D2C OIDDA was a loss of $445 million in the quarter, reflecting the investments we are making in content, marketing, and international expansion in support of what we believe is a compelling growth opportunity for Paramount. The combination of continued investment and ad market softness means that DTC losses should remain roughly the same in the second half of 2022 as the first half of the year. As we said last quarter, except for the removal of subscribers to our services in Russia, our full year DTC subscriber growth expectations are unchanged. And longer term, we remain focused on our goal of reaching over 100 million global B2C subscribers and generating at least $9 billion in B2C revenue by 2024. And we continue to forecast B2C EBITDA losses will be greatest in 2023 and then improve in 2024. Turning to our TV media segment, revenue grew 1% in Q2 as strong growth in content licensing was mostly offset by declines in advertising and affiliate revenue. TV media advertising declined 6% in the quarter, as pricing growth only partially offset the impact of lower linear impressions and a 2% headwind from FX. TV media affiliate revenue declined 3% in the quarter. Importantly, the vast majority of the year-over-year decline occurred in international markets where we proactively restructured key affiliate deals, resulting in a shift of revenue from our paid TV to D2C services. Over the term of these deals, the reduction in TV media affiliate revenue is expected to be more than offset by revenue generated from our Paramount Plus hard bundle relationships, resulting in net growth to the company. Domestic affiliate revenue was flat in Q2, excluding a 50 basis point headwind from a year-over-year decrease in pay-per-view revenue. TV media licensing grew 27% in the quarter, driven by the delivery of new seasons of existing series, including Jack Ryan, the third party, as well as higher international licensing. TV media OIBDA declined 8% in the quarter to $1.4 billion, reflecting the flow-through of lower advertising and affiliate revenue. And while macroeconomic conditions are likely to continue to affect advertising demand and impact TV media financials, political advertising, as well as price increases negotiated in this year's upfront, in combination with continued expense discipline, should help mitigate market-driven headwinds, particularly in Q4. As such, In the second half of the year, we expect TV media oibida to return to modest growth on a year-over-year basis. In filmed entertainment, Q2 revenue was $1.4 billion, more than double the year-ago period. The actual revenue increased $630 million, driven by the success of Top Gun Maverick and Sonic the Hedgehog 2. Licensing revenue at filmed entertainment increased 27%, largely due to the monetization of recent theatrical releases. Filmed Entertainment OIBDA was $181 million, benefiting from the strong performance of our current year theatrical slate. For the full year, our outlook for stable year-on-year OIBDA at Filmed Entertainment remains unchanged. Turning to the balance sheet, we finished the quarter with $4 billion of cash on hand and total debt of $15.8 billion. We continue to maintain significant financial flexibility, which will increase with the addition of proceeds from the sale of Simon & Schuster. We also maintain a committed $3.5 billion credit facility that remains undrawn. In closing, we are enthusiastic about the long-term opportunity for Paramount, unlocked by powerful content and a massive and growing market for streaming. Despite short-term headwinds related to the macro environment, the value of our diversified business, and particularly our ability to monetize content across platforms and audiences, is becoming more clear than ever. With that, operator, can you please open the line for questions?

Thank you. For our Q&A, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. And as a reminder, we please ask that you limit yourself to one question. Our first question today comes from Michael Morris from Guggenheim Partners. Your line is open. Please go ahead.

Thank you. Good morning, guys. Bob, maybe you could share your thoughts on your expectation for changes to the competitive landscape for streaming advertising as we move into the back half of the year. I'm particularly interested in how you're thinking about the launches of some of these ad-supported services from Netflix and Disney+, how they could impact the CTV ad market and Paramount Plus Pluto in particular. And then if I could, Naveen, I apologize because I know it's early to discuss 23, but I'd be curious if you could provide any frame of reference for how much greater those peak DTC losses could be in 23 relative to the 2022 outlook and, you know, any thoughts on, you know, growth or swing factors and investment drivers, uh, top line that would be incremental there. Thank you guys.

Yeah, sure. Michael, let me start. Um, look, we've been big believers in the dual revenue stream model and streaming IE advertising, uh, from the start. And the fact that others are following our lead is really validation of a thesis we've had for years. So yes, there will be incremental options in the market. But really, competition is nothing new. And importantly, our competitive position in the ad market is very strong. You know, advertisers are focused on being associated with premium content. And we have a really diverse collection here across entertainment, sports, and news. and it's highly coveted by advertisers. I'd also point out that our content has been created and formatted with advertising in mind, and that's important. Second, look, we've been in a multi-platform ad business for years, and that gives us very high-quality reach and a scale of over a trillion ad impressions per year across all demographics. And then you add to that industry-leading integrated advertising and advanced advertising capabilities and really a long track record ship of partnership and customer services with agencies and their clients. And we know how to transact in upfronts. We know how to transact in scatter. We know how to do programmatic. So we got a lot of elements of strength here. And I point out that all that's not just conceptual. It translates into performance. You look at our Q2 growth rate, particularly in digital, and I think you'll find that's at the top of the industry. And it's quite clear to me that we took share in this most recent upfront. There we had digital volume up on the order of 30%. So, yes, there will be some new entrants, but we feel very good about our position, and we look forward to continuing to benefit from it.

And Mike, with respect to your question on the outlook for 2023, I'd really say two things. One, I mean, as you saw in Q2, we continue to see tremendous momentum in the direct-to-consumer business, whether you look at the growth on Paramount Plus subs, what we're seeing in terms of churn, nice MAU growth and engagement growth at Pluto, and most importantly, DTC revenue growth at very, very strong levels, 50% on a combined basis, well over 100% revenue growth at Paramount+. So what we're really navigating from an Oibida perspective is the weakness in the macro advertising marketplace. And as you said, it's really too early to know exactly what the market will look like in 2023. But we are still focused on managing the business to peak losses in 23 and then starting to see improvements in earnings both through the DTC segment and the consolidated business as a whole beyond that as we move toward our long-term DTC revenue and subscriber goals.

Great. Thanks a lot, Mike. Operator, we'll take our next question, please.

Our next question comes from Brian Craft from Deutsche Bank. Your line is open.

Hi, thanks. Good morning. I was wondering if you could talk in some more detail about the impacts of the macroeconomic environment that you're seeing in the business and particularly what you're seeing in terms of advertising demand across your own platforms. And maybe along with that, if you could talk about what you're seeing as far as specific advertiser category strength or weakness and any additional color on the outlook for Pluto in the back half of the year, you know, given what you saw in 2Q. Thanks.

Sure, Brian. Well, look, we see both headwinds and tailwinds in advertising. You know, it's true that there are some challenges in the scatter market and digital, and that really is, as you would guess, driven by the state of the macroeconomic environment. That's showing up in certain categories, things like, you know, auto continues to be impacted by the supply chain. Packaged goods is managing through inflation issues, which is really impacting their ad spending as they look to protect margins. But these aren't long-term issues, they're short-term challenges we gotta just work through. On the positive side, TV clearly remains resilient on a relative basis, and that's a function of very tight supply. And so we benefit at Paramount from having a balance across linear and digital, clearly. And I note that we are seeing some areas of category strength, including in Q2 and today, and that's travel, that's technology, Also worth noting that we're taking advantage of the current situation to increase our level of promotion for in-house assets, particularly with respect to Paramount+. That gives us incremental product visibility to the consumer, and it also benefits us in terms of third-party expense reduction. As we look ahead in this ad market, there's two things I note. First, we're really pleased with how the upfront played out. and particularly the volume dynamic in it, which was up nicely. Second, there are two important category tailwinds that we'll see probably late Q3 and certainly Q4. The first is pharmaceuticals. That came back big in the upfront. That's super important to us because it's a big category for us given our demographics and specifically demos of CVS. And the second is political. You know, we're expecting advertising related to the midterms to be very strong, given what's going on there. And I note that historically that's really a stations business, and for sure it will be a stations business this year. But also with targeting, we see IQ and Pluto playing there and therefore benefiting as well. So that's really the ad market. I don't know if you want to comment on that.

Yeah, I mean, in terms of our expectations for Pluto in the back part of the year, I'd say a couple things. We don't obviously guide to Pluto specifically. It is part of our broader D2C business, as you well know, and we continue to see very healthy levels of growth there, 56% D2C revenue growth in the quarter, and I think we'll probably finish the year with very healthy revenue growth across the segment. Thanks a lot, Brian. Next question, please.

We now turn to Stephen Cahill from Wells Fargo. Your line is open. Please go ahead.

Thanks. I just wanted to pick up on some of the Pluto line of questioning. It seems like the MAU growth is strong. I assume the engagement is pretty strong as well. And so with some of the slowdown in revenue, is the right way to think about this business that it is just a price taker in the programmatic market and that price pressure can kind of arrive unannounced? And if that's the case, I was just wondering if you could talk about some of the pricing changes that you saw late in Q2 and how those have trended as you've gotten into Q3, you know, any improvement or degradation? And then at TV Media, I think investors have been a little bit skeptical about the stable guide in Oibida. So thanks for that color on the second half growth. Could you maybe just think about what the drivers for stable guidance might be for next year, especially since you're comping political? Thanks.

Yeah, Steve, let me take the Pluto piece and then Naveen will go from there. I'd start by saying Pluto is the leader in fast in the U.S., and as you know, it's rapidly growing internationally as well. I'd note that the supply side of Pluto continues to track very strongly. We look at impression delivery, and it's in line with our expectations for the beginning of the year. MAUs are now at basically 70 million because we're getting great consumer traction and engagement. time spent, et cetera, on Pluto continues to grow. In fact, we saw an acceleration of that from Q1 to Q2. So very good supply side equation. Revenue side has certainly been impacted by the macroeconomic situation. It's really a marketplace dynamic that unfortunately we're not immune to. But even with that, some very compelling facts to focus on. You know, related to the streaming ad size, Paramount Plus grew advertising over 90% in the quarter. And you look at our total D2C ad business in the quarter, including Pluto TV, that grew 25%. That's partially because we are gaining share. You know, we have a very strong proposition in the marketplace. And another indicator of that strength is really the 30% digital volume growth, ad volume growth that we saw in the upfront. So to your question of it being a price taker, sure, we play in the programmatic market. That matters. It's an important part of the equation. But, you know, again, we're not just selling Pluto. We're selling a full range of streaming product and multi-platform product and, you know, having great traction with advertisers. And we think that is a tremendous positive for the company and will be even more so as the macro situation improves.

And in terms of the question around the stability of TV media earnings, as we said, we do expect in the near term there will be some impact because of the macro advertising environment. But longer term, we do still remain confident that once that advertising market recovers, we can deliver TV media, stable TV media, and that's enabled by a combination of a few things. rate increases in both the affiliate and advertising sides of the business, and there's been evidence of that over the last few quarters. We've done a very successful track record of putting in place new affiliate deals that either have built-in rate escalators or fixed fee components on the station side of the business. And then obviously on the advertising side, we're very happy with what we've seen in the upfront, both in terms of price increases and what we've been able to do from a volume perspective. So rate is an important part of the equation. We also expect to see continued meaningful contributions from the licensing side of that business, which is enabled by a combination of both an incredible catalog and unique production capabilities. And of course, we will continue to have a lot of innovation and discipline on the cost side of the equation, and that's true across programming, it's true across marketing, and it's true across our broader operations. So the combination of all those things will be key to delivering stable TV media OIBDA. Thanks, Steve. Next question.

We now turn to Ben Swinburne from Morgan Stanley. Your line is open.

Thanks. Good morning. I just had a couple questions on one topic, which is sort of the international opportunity with Paramount+. Bob, could you talk a little bit about how the launch went in the UK and South Korea in the quarter, sort of the strategy to drive that business, and did you see the whole benefit of the initial launch in Q2, or is some of that going to bleed into Q3? And as part of that, could you talk a little about your international programming strategy? I believe you guys have some you know, local productions, foreign language productions in the works. Can you give us a sense of your appetite to build that out as a part of the offering as you grow the business outside the U.S.?

Yeah, sure, Ben. So a couple things to say. One, we're very pleased. Well, to start with, we definitely are viewing streaming as a global opportunity, and you're seeing us move against the international standards opportunity particularly Western Europe here in 2022 two is with respect to Western Europe we obviously launched UK and Ireland in June by the way we also launched South Korea the week before those launches are performing above our expectations both of those have hard bundle elements to them. Obviously, we're in business with Sky in the UK and Ireland, and they are very pleased with what we brought to market. And by the way, the response to the launch more broadly has been very strong, including what we showed in London related to the launch event. Same thing is true with South Korea. We're working with TVing, which is a local streamer. CJ has a minority stake in it. And, you know, there we're really the global part of the global tier to their local offering. And, again, they're very happy with what we've brought to market and how it's performing. And so we're off to a very good start. To your question of is this Q2 only boost to subs or does it extend past that, it definitely extends past that. Recall that our international distribution strategy is focused on achieving ubiquity. It really has three fundamental components, hard bundle plus channel stores like Roku and Amazon and Apple and direct E2C on an O&O basis. So we'll be deploying all that in those markets. And therefore, you know, we see sub-growth not only coming from we're really engagement from the hard bundles where more and more people use it. But we also see those other two pillars of the distribution strategy beginning to kick in. And in fact, they already have. Third point I make is, you know, this is a big year for Western Europe for us. We have Italy in September. That's another launch with Sky on a hard bundle basis. That's tracking very well. And then we have Germany and Austria and Switzerland with Sky in December, I believe, as well as France with Canal Plus. All those have hard bundle elements, but again, have broader distribution elements to penetrate the TAM. Last point, your local content. All those markets do have local content dimensions. We really have So you see a dual benefit there. On the one hand, with local content, and we know local content for a long time from operating networks, things like using a local format of the Shores and making it for a market works very well. We also have, in the UK, we have Channel 5, so it has relationships that are triggering stories there. So yeah, local content is one thing, but the second element of it, a lot of that we're gonna use globally, because on a dubbed basis, you know, The streaming world has proven that works. So local is very much part of our strategy in the mix. It's not an overwhelming part, but it is part of it.

I think you covered it. I think you got it. Thanks, Ben. Next question.

We now turn to Rich Greenfield from LightShed Partners. Your line is open. Please go ahead.

Hi. Thanks for taking the question. So when Netflix published its Q2, it showed this chart that had minutes viewed. And I think CBS was actually number two behind Netflix. It didn't have Paramount Plus or Pluto, but I would assume that would close the gap between Netflix and sort of the broader Paramount company. But I think the question that sort of every investor on this call is thinking about is as the business shifts from linear to digital, meaning CBS sort of shrinks in share and Paramount Plus and Pluto grow in their share, can Paramount maintain sort of aggregate time spent and what will the margin profile of that business looks like? Because I think if you think about everyone in streaming today, like you're talking about 1.8 billion of losses for the calendar year, sort of everyone but Netflix is losing billions a year on streaming. And maybe just the way to think about this is on a revenue basis, your linear TV business this quarter had 2 billion of advertising plus and Paramount Plus was sort of in the $90 million range and Pluto at $265 or so. So I guess the point is just as this business shifts, can you capture enough time spent to have the similar profit look that your business has in legacy as you move to streaming, if that makes sense?

Yeah, sure, Rich. So a couple points there. I don't know exactly what chart you're looking at, but if you look at Q2, Paramount's combined U.S. linear delivery was bigger than Netflix. And that's even more the case if you combine linear and streaming. But that's really neither here nor there. The question on margins is really the core of what you're asking. And as we look at it, as streaming becomes bigger for us, as we gain scale, we see operating margins from streaming approaching that of TV media. Remember, Rich, we've only been in the streaming business for a short time. Others have been there for years. We need to give this a bit of time to play out. But there are real reasons that we see this path to superior margins. And at the core of it is our differentiated, as we say, playbook. You look at where we are in content, we're clearly advantaged. We've got a broad offering, many, many globally renowned franchises backed up by a deep library. I mean, the economic value of going and trying to replace that library, I don't even know what it would be. And we get tremendous engagement, i.e., time spent off the library. So that's one important economic advantage. Two, we have a platform advantage. The combination of streaming and traditional is significant. Helps our content economics. It helps our marketing economics. And it shouldn't be discounted. Third, you know, we're in the free streaming space and the pay streaming space. So what does that do? It gets us a bigger TAM. And we regularly see the value of serving consumers that don't pay for streaming as well as the ones that do, and obviously the associated ad access. And fourth, we have this global operating footprint. I mean, we deployed it in the UK. The reason we got the CJ deal done in South Korea is we've been there for years, there as a joint venture. But nonetheless, we have experience, we have assets, we have relationships, and those provide real leverage, including in streaming. So you put all that together, and we do see a superior financial envelope at comparable level of scale to someone else. And we do see this tracking to TV media-like markets, which is at the core of your question. We just have to let it play out a bit. And yes, we've got to manage through some near-term macroeconomic headwinds. But we will. So we're very excited about this transformation journey that we're on.

Thanks a lot, Rich. Next question. Operator, we'll take our next question, please.

Our next question is from Cutgun Merrill from RBC Capital Markets. Your line is open. Please go ahead.

Good morning, and thanks for taking the questions. One on content spend and one on film entertainment, if I could. So on content spend, some of your peers have clearly revisited their content spend budgets for the next few years, as there is perhaps a greater focus on getting to profitable growth. I know you're in a unique position of being able to leverage your content investments across a more diverse set of linear and digital platforms. But on the other hand, it sounds like the losses for DTC this year are shaping up to be closer to $1.8 billion versus expectations for 1.5 before. So I was curious if you had an updated view on what the appropriate level of content spend is evolving into for Paramount, whether that's for the total company or just for DTC. And just briefly on filmed entertainment, Top Gun's success has been pretty remarkable, and it seems like you have a very solid slate for the balance of this year and then, of course, more to come in 23 and 24. I know it might take some time before we get to the more profitable windows for these films to really flow through the financials, so maybe not for this year, but are we approaching a period where you can see more meaningful step function improvements in film entertainment's profitability? Thanks.

Yeah, this is Naveen. I'll take both of those. First, on content spend, You know, the most important thing to remember is that when we think about our content investment, we're always looking at it in the context of the growth and the return that it unlocks. And so, of course, when you think about it through that lens, you have to focus on the fact that we added 5 million Paramount Plus subs in the quarter. Paramount Plus revenue growth was 120%. And we continue to be very bullish about growth going forward. So our content investment is definitely working. It's producing very real results and the momentum that you've seen. And at the same time, we're very committed to our long-term growth objectives around the D2C business. And we intend to continue to invest to support that growth opportunity. continuing as we have to make those decisions prudently with a real eye toward the ROI of the investments. What we don't want to do is sacrifice a long-term opportunity by overreacting to some of the short-term headwinds that obviously exist, particularly in the advertising marketplace today. So we're continuing to move forward. We're continuing to fund the growth. We think it's an incredible opportunity. And as you pointed out, Our content dollars are used differently than many of our peers. We leverage those assets across many platforms, and it's one of the reasons that we can grow faster while spending less than others. In terms of your question on the film entertainment business, obviously we have not provided any specific long-term guidance there. But I would encourage you to think about that business more broadly, which is to say, you know, increasingly the value of our movies is not just about what they generate in the box office. Those windows are now expanding in terms of it's not just about box office and home entertainment. And then, you know, going to third parties, we can generate a lot of value out of those assets on our streaming services. We continue to monetize them from a catalog perspective. So for us, it's really about continuing to build the asset value, and we do that by having a great slate that will continue to be heavy on franchises. And we're looking forward to what that does both for the box office business and also our other channels. Thanks. Next question, please.

We now turn to Jessica Reif-Enrich from Bank of America Securities. Your line is open. Please go ahead.

Thank you. I was wondering if you could give us color on IPL, what the dollar commitment, your commitment is, and what your goals are there. And then just to go back to the content spend, could you at least talk about like step function in increasing content spend 23 versus 22 and 24 as well?

Sure, Jessica. So IPL, i.e., India Cricket, I assume. You know, that's a deal that was done by our joint venture in India, Viacom18, which recently had a transaction where they brought in Bodhi Tree as an investor and capital infusion. Their intent, and I don't really leave it to the joint venture, which, by the way, our other partner is Reliance. to speak to that and they haven't spoke to it much. But what they have said is, you know, we obviously have the streaming rights there. It's going to be part of a streaming offering for the Indian market. That Viacom 18 is going to launch in 2023. We've also said that we are going to, Paramount Plus is going to launch with it, essentially as another form of hard bundle, a tier. And therefore, you know, we're really excited about it because we get the very material benefit of cricket and, you know, cricket is the top of the food chain in India. And so it'll be a real engine for streaming and then Paramount Plus will benefit by being part of that. Even though we're not directly investing on an L&O basis, we're obviously part of the joint venture. So that's the IPL answer.

And, Jessica, with respect to the question on content spend in future years, I'd point you back to what we shared during our investor day back in February. As you know, our goal is to drive the growth on the D2C business to over $9 billion of revenue by the end of 2024. We said at that time that that would involve D2C content expense of around $6 billion. We're still operating with that in mind. We haven't provided any kind of specific cadence of exactly what that looks like from year to year, but we're continuing to invest and manage the business with those goals. Thanks, Jessica. Next question.

Our next question comes from Brett Feldman from Goldman Sachs. Your line is open.

Thanks. And just the sort of two related questions. The first is, To what extent are you seeing any inflationary cost pressures in the business? I'm particularly interested in whether that's creeping into content production costs. And then more broadly, one of the questions we get from investors as they think through the impact of inflation is pricing power. We've seen some price increases at different streaming services. I was wondering if you can give us your latest thoughts on when or whether you believe you'll be in a position to

potentially potentially start raising price on your streaming services most notably Paramount Plus thanks yeah sure Brett so you know on your first question inflation in our business we actually saw inflation a while ago really more in the production side of the house related to talent and competition they are in so we've been managing with that for a while and you know thankfully We are viewed as a good place to work if you will and we have many partnerships with important people in front of and behind the screen Working with us to make shows But so the current inflation driving things like higher fuel prices and all is not really that much of a factor for us incremental we're watching it but but I wouldn't think of that as a step function change for us like it is for example for a you know, a packaged goods company that's buying raw materials and seeing those prices increase. Very different dynamic.

And in terms of pricing on streaming services, specifically Paramount+, I think you really have to look at that in the context of ARPU more broadly. Because remember, we have a dual revenue stream model, which means that we're not entirely dependent on price increases for growth. And we are, despite some of the short-term headwinds, We continue to be very bullish about the potential for continued ad ARPU growth on our streaming services. In fact, we've seen healthy double-digit growth in ad ARPU on the Essentials tier of Paramount+, despite some of the macro headwinds. That's, of course, driven by meaningful growth in engagement and continued innovation around the ad products that we make available. Pricing will be a part of the equation, and though we don't have any imminent price changes, they will happen in the future and we'll do it while also taking into account the evolution of our content offering, looking at what sort of bundles and other promotional opportunities are available to our customers, and of course thinking about our value proposition relative to competing services where I point out I think we offer a very strong value position today. So, you know, we're continuing to look at pricing. We continue to look at how we optimize the tiering along with that, but it's part of a broader overall ARPU story.

Thanks a lot, Brett. Operator, we have time for one last question.

Our last question comes from Phil Cusick from J.P. Morgan. Your line is open. Please go ahead.

Hi, guys. Thank you for squeezing me in. I'll try not to abuse it. A couple of clarifications and a question if I can. Thank you. It sounds like you're no longer targeting 60% plus growth in DTC revenue this year. Is that right? And is there a better level we should look at? And how is the composition of ad supported versus premium Paramount Plus subs and gross ad trends sort of changed since the release in June? What does that ad load look like and revenue from here? And does that grow over time in terms of ad load? Thanks very much.

Yeah, I'll take those, Naveen. So first, in terms of D2C revenue growth for the year, you know, we continue to expect very healthy levels of D2C growth, but obviously given the macro advertising headwinds and the fact that there's a little bit less visibility in the back half of the year, it's possible we may not get all the way to that 60%. but you know I think it'll probably be relatively close and either way it's a very healthy number with respect to composition of subscribers at Paramount Plus you know it's still very balanced between the premium tier and the ad supported essentials tier and That can bounce around a little bit from quarter to quarter based on you know promotions and bundles and things that we may be doing with partners But I think it continues to be evidence that they are both very compelling products and they both serve unique and large markets So we like that strategy and in terms of the ad loads specifically I It's more a function of continuing to build out the ad products on Paramount+. We've launched advertising very recently within that service. For instance, there are certain parts of the product where advertising is not yet enabled, and that will continue to evolve over time.

Yeah, let me just jump in here. I really want to thank everyone for their time today. In closing, I hope you heard how we're deploying a very unique asset portfolio with a differentiated strategy to not only successfully compete in this challenging macroeconomic environment, but importantly, take share and continue to have real momentum, particularly in the streaming space. So we're very excited about the future. We're going to continue to manage through it, and we look forward to keeping you updated as we do. In the interim, thanks again for your time, and be well, everyone. Bye-bye.

Today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines. Thank you.

Crashing through the crowded halls, dodging girls like ping pong balls, just to reach the bathroom on time. The situation is under construction.

This might not have been the best idea.

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On the seventh day, it'll be later.

Get the freak out of here, you crazy. Thank you. Music Playing you

Good morning. My name is Elliot and I'll be the conference operator today. At this time, I would like to welcome everyone to Paramount Global's Q2 2022 earnings conference call. All lines have been muted to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. In order to get as many of your questions as possible, we ask that you please limit yourself to one question. At this time, I would now like to turn the call over to Anthony DiClemente, Paramount Global's EVP, Investor Relations. You may begin your conference call.

Good morning, everyone. Thank you for taking the time to join us for our second quarter 2022 earnings call. Joining me for today's discussion are Bob Backish, our president and CEO, and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results Reconciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedules, which contain supplemental information, and in each case can be found in the investor relations section of our website. Now I will turn the call over to Bob.

Good morning, everyone, and thank you for joining us. I'll start this morning by talking about Q2 highlights and preview what's next. Then I'll turn it over to Naveen. to take you through financial and operating details, and we'll wrap up with a Q&A as usual. Big picture, while we're clearly navigating some near-term headwinds in the macroeconomic environment, Q2 shows we have the assets, strategy, and ability to compete and win over the long term. Q2 shows a company that's taking market share in streaming, in broadcast, in box office, and in upfront dollars. It also shows the company increasing its penetration of the most important growth market in media, streaming, as evidenced by our over 5 million D2C subs added in the quarter. And Q2 shows how we leverage investments across multiple platforms that unlock multiple revenue streams. This, combined with our fiscally disciplined approach, including with respect to cost management, provides a real advantage in these challenging times and beyond. At the center, of course, is our hugely popular content, big, broad, and beloved. Just think of the biggest movie in the world, Top Gun Maverick, the most popular TV show in the country, Yellowstone, perennial global hits like the CBS crime procedurals NCIS and FBI, or the world's most popular preschool franchise, Nickelodeon's Paw Patrol. Our content consistently attracts and entertains mass audiences. When I say audiences, I don't just mean kids or adults. I mean the whole household. Not just the coast, but the entire country. Not just the U.S., but the entire world. Not just the streaming audience, but the TV, theatrical, and streaming audience. Part of the reason is that we don't just make popular content. We also make content popular by leveraging our powerful platforms. After all, to drive best-in-class marketing and distribution, you've got to have best-in-class assets, like the number one broadcast network in America, the largest broadcast footprint globally, the number one free ad-supported streaming TV service in the U.S., and one of the fastest-growing premium SVOD services. The combination of our content, platforms, and strategy ensures we can reach the largest total addressable market, generate strong returns on content investment, and create devoted fan followings taking full advantage of our deep and growing library of valuable IP. All of these advantages came to life in Q2. So let me show you how, starting with film. Nowhere is our popularity more evident than at the box office. Look no further than Top Gun Maverick, which is already the biggest film of 2022 and our fifth number one title this year. In fact, Top Gun Maverick just cleared 1.3 billion at the global box office and became one of the top 10 domestic movies of all time. Here, we leveraged our portfolio of brands, including CBS and MTV, to execute a major cross-company consumer campaign that resonated with audiences everywhere. a strategy that has been proven to be highly effective when deployed against our major assets. Success like this, five number one films at the box office, Top Gun, Scream, Jackass Forever, The Lost City, and Sonic the Hedgehog 2, which, by the way, also made history as the biggest video game opening of all time. Success like this isn't a given. It requires the right strategy and strong execution. In the early stages of the pandemic, we were very selective with our releases, holding certain films until market conditions improved. While we could have released Top Gun Maverick and The Lost City earlier, we held off because we knew these phenomenal stories would bring audiences back to theaters. That proved to be the right call. Paramount continues to shine at the box office with numbers that outperformed even our own expectations. And we're excited about the future. We'll end this spectacular year with Damien Chazelle's Babylon, starring Brad Pitt and Margot Robbie, which begins its theatrical rollout in December. And our 2023 slate is anchored by fresh commercial takes on some of our most popular and new franchises, from Transformers and Teenage Mutant Ninja Turtles to Dungeons & Dragons and Paw Patrols. to name just a few. But our amazing content isn't limited to the silver screen. Viewers hungry for incredible storyteller are also turning up in ever greater numbers to our flagship streaming service, Paramount+. This quarter, Paramount+, added 4.9 million global subscribers and revenue grew 120%, further cementing Paramount+, as one of the fastest growing premium streaming services Based on third-party data, Paramount Plus is the number one premium service in the U.S. in sign-ups and net subscriber additions, both this quarter and year-to-date. And based on other third-party data, Paramount Plus is also the most popular premium streaming service in the U.S. to add among switchers. That means people who dropped the service in the last 12 months were more likely to add Paramount Plus than any other service. Yet again, evidence we are taking market share. The success of our streaming platforms speaks to the power of our content strategy. From movies and sports, to shows and news, to events and more, the diversity and quality of our content is unrivaled, especially on Paramount+. Box office hits like Lost City and Sonic the Hedgehog 2 came to Paramount Plus in May, generating terrific engagement across all demographics. Their success demonstrates that our strategy of a big theatrical release with a fast follow to streaming is by far the most effective way to maximize the return on our investments in movies. Meanwhile, hit CBS originals like NCIS, which consistently dominate ratings in linear, have drawn significant viewership to Paramount+, and driven engagement there. ASHAB must see sporting events like the UEFA Champions League Final in May, which aired on CBS and Paramount+. Additionally, the power and strength of our franchises, existing and new, was on full display this quarter, thanks to strong performances from Star Trek Strange New Worlds, 1883 of the Yellowstone Universe, and our latest South Park special, South Park, The Streaming Wars, as well as Halo, which has become a top driver globally for subscriber acquisition and engagement. And we're just getting started. We've got more captivating content on the way, and our multi-platform approach will drive even more viewers to streaming. Later this year, the biggest show on television, Yellowstone, returns for its fifth season to the Paramount Network in the U.S. Importantly, Yellowstone's linear premiere will support the streaming launch of Taylor Sheridan's latest original for Paramount+, Tulsa King, which debuts November 13th and stars the one and only Sylvester Stallone. Paramount Plus will also debut a Criminal Minds revival, building on what is already a fan favorite. In September, another season of the NFL and SEC college football also returns to CBS and Paramount Plus in the US. The momentum of Paramount Plus is not just the product of its strong and diverse portfolio of content. It's also the product of a smart distribution strategy, which is bringing our flagship streaming services to more audiences than ever before. For instance, Paramount Plus continues to expand internationally, leveraging our rich heritage as a truly global operating company. With the help of partners Sky and CJ Entertainment, we just launched Paramount Plus in the UK, Ireland, and South Korea. Card bundle deals like these allow us to quickly unlock a healthy volume of subscribers at zero acquisition costs and with very low churn. In September, we're using that same strategy to launch Paramount Plus as a hard bundle in Italy with Sky Italia. Later in the year, we'll do the same with Sky in Germany, Austria, and Switzerland, and with Canal Plus in France. Meanwhile, in markets like India and Eastern Europe, we're focused on balancing long-term market growth with a smart allocation of capital. As exemplified by our deals with Viacom18 and Reliance, with whom we're partnering to bring Paramount Plus to India, and with our Sky Showtime partnership with Comcast, which will launch later this year. By the end of the year, inclusive of Paramount Plus and Sky Showtime, we expect to have our subscription video-on-demand services in 60 total markets. Moving forward, we'll continue to harness this strategy of ubiquitous distribution, which includes direct-to-consumer as well as channel partners like Roku, Amazon, and Apple, in addition to the aforementioned hard bundles, so that Paramount Plus can reach as large an audience as possible. We're also seeing the power of partnership bring Pluto TV to greater heights. Pluto TV is already the number one free ad-supported streaming television service in the U.S. And this quarter, monthly active users grew to nearly 70 million globally. And through partnerships with Viaplay Group and Chorus, we are now expanding Pluto TV's international footprint in the Nordics and Canada, respectively. With Pluto, we provide a global platform and global libraries. And our partners provide compelling local content and local ad sales capabilities. It's a powerful and efficient global model. Now, because our assets continue to perform impressively across TV and streaming, advertisers are taking note even amid broader market uncertainty. We've long known what makes us the ideal advertising partner, our ability to deliver both scale and efficiency, all wrapped around premium content. On scale, our multi-platform strategy is a clear advantage. Our audience reach across broadcast, cable, ad-supported SVOD at Paramount+, and free ad-supported streaming TV in Pluto TV represents a connected viewing ecosystem that produces over 1 trillion ad impressions per year in high-engagement, premium environments that are proven to drive outcomes for clients. But in a competitive market, scale isn't enough. To attract the best partners and build the best business, you've also got to make it easy and efficient for advertisers to reach their audiences of choice. And at this scale, we offer advertisers access to a wide variety of audiences across every demographic at competitive pricing that makes Paramount a must-buy for marketers who need to efficiently aggregate awareness around their products. We see our partners responding enthusiastically. As evidence, it is worth noting that we recently had our strongest multi-platform unified upfront yet. We had broadcast and cable pricing increase at the same high single-digit rate. And we grew digital volume in the range of 30%. Most importantly, it's pretty clear that we grew share. Premium content with cross-platform scale and efficiency It's this robust combination that differentiates Paramount in the ad marketplace and makes us a must-have partner for advertisers. So in closing, we're continuing to create value across our business, from theatrical to streaming to advertising. Millions of new customers are signing up for our streaming services. Fans are headed back to the theaters to watch our films. Viewers keep turning to our networks for their favorite content. and advertising partners are eager to get a share of it all. We couldn't be prouder. With an iconic Hollywood film studio that owns more than a century of IP, with the number one broadcast network in the U.S., with some of the most popular cable brands and content in the world, with the fastest-growing premium streaming service in Paramount+, and with the leading free ad-supported streaming TV service in Pluto TV, It's a powerful combination, which we will continue to lean into for the rest of the year and well into the future. And in a world where people are more and more focused on the financial envelope, particularly around streaming, the benefits of our multi-platform strategy, powerful content engine, and IP ownership will become clearer and clearer. We have always executed with financial discipline, and we continue to be laser focused on it. Now, I'd like to turn it over to Naveen to jump into our financial results for the quarter and walk you through our expectations for the second half of the year. Naveen?

Thank you, Bob. Good morning, everyone. Second quarter results demonstrate the value of our diversified media business and expansive monetization platforms. We delivered 19% total company revenue growth through continued strong B2C momentum and record performance at the box office. Affiliate and subscription revenue grew 12% in the quarter. Advertising was down 2% year-over-year or flat on a constant currency basis due to macroeconomic headwinds, and licensing revenue grew 27%. Today, I will highlight some of the key financial and operational drivers behind our second quarter results and share some insights on expectations for the second half of the year. Starting with direct-to-consumer, we added 5.2 million global DTC subscribers in Q2. Paramount Plus added 4.9 million global subs, while our other streaming services grew modestly. As of June 30th, we had a base of 63.7 million global DTC subscribers. including 43.3 million Paramount Plus subscribers. Our quarter end totals reflect the removal of 3.9 million DTC subs in Russia, of which 1.2 million were from Paramount Plus, consistent with our plan to remove these subscribers from our reporting. Q2 subscriber growth benefited from the launch of Paramount Plus in the UK, Ireland, and South Korea. as well as continued domestic growth as we added new hit content to the service. Paramount Plus saw continued engagement improvement as our content offering expanded even further. E-Plus customers are watching a greater number of unique titles today than ever before, as evidenced by sequential and year-over-year growth in titles viewed per active domestic sub. We also saw sequential growth in hours per active. And most importantly, deeper engagement resulted in sizable improvements in domestic churn. The combination of subscriber growth and engagement drove Paramount Plus revenue growth of 120%, including subscription revenue growth of 126% and advertising growth of 92%. Paramount Plus ARPU improved on a sequential basis in Q2, with both domestic and international ARPU higher versus Q1. Pluto TV added 2.1 million global MAUs in Q2, bringing our global reach to 69.6 million MAUs. Revenue grew 10% year on year. Although Pluto TV revenue growth was impacted by the macro environment, the service continues to demonstrate strong engagement with the year-over-year growth rate and total viewing hours accelerating from Q1 to Q2. Continued improvements in engagement and our compelling advertiser proposition mean that Pluto is well positioned to both gain share and benefit from organic growth. Our dual revenue stream model delivered 56% year-over-year D2C revenue growth, with total D2C revenue now reaching $1.2 billion in the quarter. This growth consisted of a 74% increase in subscription revenue and a 25% increase in advertising revenue. D2C OIDDA was a loss of $445 million in the quarter, reflecting the investments we are making in content, marketing, and international expansion in support of what we believe is a compelling growth opportunity for Paramount. The combination of continued investment and ad market softness means that DTC losses should remain roughly the same in the second half of 2022 as the first half of the year. As we said last quarter, except for the removal of subscribers to our services in Russia, our full year DTC subscriber growth expectations are unchanged. And longer term, We remain focused on our goal of reaching over 100 million global D2C subscribers and generating at least 9 billion in D2C revenue by 2024. And we continue to forecast D2C EBITDA losses will be greatest in 2023 and then improve in 2024. Turning to our TV media segment, revenue grew 1% in Q2 as strong growth in content licensing was mostly offset by declines in advertising and affiliate revenue. TV media advertising declined 6% in the quarter, as pricing growth only partially offset the impact of lower linear impressions and a 2% headwind from FX. TV media affiliate revenue declined 3% in the quarter. Importantly, the vast majority of the year-over-year decline occurred in international markets where we proactively restructured key affiliate deals, resulting in a shift of revenue from our paid TV to D2C services. Over the term of these deals, the reduction in TV media affiliate revenue is expected to be more than offset by revenue generated from our Paramount Plus hard bundle relationships, resulting in net growth to the company. Domestic affiliate revenue was flat in Q2, excluding a 50 basis point headwind from a year-over-year decrease in pay-per-view revenue. TV media licensing grew 27% in the quarter, driven by the delivery of new seasons of existing series, including Jack Ryan, the third party, as well as higher international licenses. TV media OIBDA declined 8% in the quarter to $1.4 billion, reflecting the flow-through of lower advertising and affiliate revenue. And while macroeconomic conditions are likely to continue to affect advertising demand and impact TV media financials, political advertising, as well as price increases negotiated in this year's upfront, in combination with continued expense discipline, should help mitigate market-driven headwinds, particularly in Q4. As such, in the second half of the year, we expect TV media oibida to return to modest growth on a year-over-year basis. In filmed entertainment, Q2 revenue was $1.4 billion, more than double the year-ago period. The actual revenue increased $630 million, driven by the success of Top Gun Maverick and Sonic the Hedgehog 2. Licensing revenue at filmed entertainment increased 27%, largely due to the monetization of recent theatrical releases. Filmed Entertainment OIBDA was $181 million, benefiting from the strong performance of our current year theatrical slate. For the full year, our outlook for stable year-on-year OIBDA at Filmed Entertainment remains unchanged. Turning to the balance sheet, we finished the quarter with $4 billion of cash on hand and total debt of $15.8 billion. We continue to maintain significant financial flexibility, which will increase with the addition of proceeds from the sale of Simon & Schuster. We also maintain a committed $3.5 billion credit facility that remains undrawn. In closing, we are enthusiastic about the long-term opportunity for Paramount, unlocked by powerful content and a massive and growing market for streaming. Despite short-term headwinds related to the macro environment, the value of our diversified business, and particularly our ability to monetize content across platforms and audiences, is becoming more clear than ever. With that, operator, can you please open the line for questions?

Thank you. For our Q&A, if you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. When preparing to ask your question, please ensure your device is unmuted locally. And as a reminder, we please ask that you limit yourself to one question. Our first question today comes from Michael Morris from Guggenheim Partners. Your line is open. Please go ahead.

Thank you. Good morning, guys. Bob, maybe you could share your thoughts on your expectation for changes to the competitive landscape for streaming advertising as we move into the back half of the year. I'm particularly interested in how you're thinking about the launches of some of these ad-supported services from Netflix and Disney+, how they could impact the CTV ad market and Paramount Plus Pluto in particular. And then if I could, Naveen, I apologize because I know it's early to discuss 23, but I'd be curious if you could provide any frame of reference for how much greater those peak D to C losses could be in 23 relative to the 2022 outlook and, you know, any thoughts on growth or swing factors and investment drivers, a top line that would be incremental there. Thank you guys.

Yeah, sure. Michael, let me start. Um, look, we've been big believers in the dual revenue stream model and streaming IE advertising, uh, from the start. And the fact that others are following our lead is really validation of a thesis we've had for years. So, yes, there will be incremental options in the market. But really, competition is nothing new. And importantly, our competitive position in the ad market is very strong. You know, advertisers are focused on being associated with premium content. And we have a really diverse collection here across entertainment, sports, and news. and it's highly coveted by advertisers. I'd also point out that our content has been created and formatted with advertising in mind, and that's important. Second, look, we've been in a multi-platform ad business for years, and that gives us very high quality reach and a scale of over a trillion ad impressions per year across all demographics. And then you add to that industry-leading integrated advertising and advanced advertising capabilities, and really a long track record ship of partnership and customer services with agencies and their clients. And we know how to transact in upfronts. We know how to transact in scatter. We know how to do programmatic. So we got a lot of elements of strength here. And I'd point out that all that's not just conceptual. It translates into performance. You know, you look at our Q2 growth rate, particularly in digital, I think you'll find that's at the top of the industry. And it's quite clear to me that we took share in this most recent upfront. There we had digital volume up on the order of 30%. So, yes, there will be some new entrants, but we feel very good about our position, and we look forward to continuing to benefit from it.

And Mike, with respect to your question on the outlook for 2023, I'd really say two things. One, I mean, as you saw in Q2, we continue to see tremendous momentum in the direct-to-consumer business, whether you look at the growth on Paramount Plus subs, what we're seeing in terms of churn, nice MAU growth and engagement growth at Pluto, and most importantly, D2C revenue growth at very, very strong levels, 50% on a combined basis, well over 100% revenue growth at Paramount+. So what we're really navigating from an OIBDA perspective is the weakness in the macro advertising marketplace. And as you said, it's really too early to know exactly what the market will look like in 2023. But we are still focused on managing the business to peak losses in 23 and then starting to see improvements in earnings both through the DTC segment and the consolidated business as a whole beyond that as we move toward our long-term DTC revenue and subscriber goals.

Great. Thanks a lot, Mike. Operator, we'll take our next question, please.

Our next question comes from Brian Craft from Deutsche Bank. Your line is open.

Hi, thanks. Good morning. I was wondering if you could talk in some more detail about the impacts of the macroeconomic environment that you're seeing in the business and particularly what you're seeing in terms of advertising demand across your own platforms. And maybe along with that, if you could talk about what you're seeing as far as specific advertiser category strength or weakness and any additional color on the outlook for Pluto in the back half of the year, you know, given what you saw in 2Q. Thanks.

Sure, Brian. Well, look, we see both headwinds and tailwinds in advertising. You know, it's true that there are some challenges in the scatter market and digital, and that really is, as you would guess, driven by the state of the macroeconomic environment. That's showing up in certain categories, things like, you know, auto continues to be impacted by the supply chain. Packaged goods is managing through inflation issues, which is really impacting their ad spending as they look to protect margins. But these aren't long-term issues, they're short-term challenges we gotta just work through. On the positive side, TV clearly remains resilient on a relative basis, and that's a function of very tight supply. And so we benefit at Paramount from having a balance across linear and digital, clearly. And I note that we are seeing some areas of category strength, including in Q2 and today, and that's travel, that's technology, Also worth noting that we're taking advantage of the current situation to increase our level of promotion for in-house assets, particularly with respect to Paramount+. That gives us incremental product visibility to the consumer, and it also benefits us in terms of third-party expense reduction. As we look ahead in this ad market, there's two things I note. First, we're really pleased with how the upfront played out. and particularly the volume dynamic in it, which was up nicely. Second, there are two important category tailwinds that we'll see probably late Q3 and certainly Q4. The first is pharmaceuticals. That came back big in the upfront. That's super important to us because it's a big category for us given our demographics and specifically demos of CVS. And the second is political. You know, we're expecting advertising related to the midterms to be very strong, given what's going on there. And I note that historically that's really a stations business, and for sure it will be a stations business this year. But also with targeting, we see IQ and Pluto playing there and therefore benefiting as well. So that's really the ad market. I don't know if you want to comment on that.

Yeah, I mean, in terms of our expectations for Pluto in the back part of the year, I'd say a couple things. We don't obviously guide to Pluto specifically. It is part of our broader D2C business, as you well know, and we continue to see very healthy levels of growth there, 56% D2C revenue growth in the quarter. And, you know, I think we'll probably finish the year with very healthy revenue growth across the segment. Thanks a lot, Brian. Next question, please.

We now turn to Stephen Cahill from Wells Fargo. Your line is open. Please go ahead.

Thanks. I just wanted to pick up on some of the Pluto line of questioning. It seems like the MAU growth is strong. I assume the engagement is pretty strong as well. And so with some of the slowdown in revenue, is the right way to think about this business that it is just a price taker in the programmatic market and that price pressure can kind of arrive unannounced. And if that's the case, I was just wondering if you could talk about some of the pricing changes that you saw late in Q2 and how those have trended as you've gotten into Q3, you know, any improvement or degradation. And then at TV Media, I think investors have been a little bit skeptical about the stable guide in Oibida. So thanks for that color on the second half growth. Could you maybe just think about what the drivers for stable guidance might be for next year, especially since you're comping political? Thanks.

Yeah, Steve, let me take the Pluto piece and then Naveen will go from there. I'd start by saying Pluto is the leader in fast in the US, and as you know, it's rapidly growing internationally as well. I'd note that the supply side of Pluto continues to track very strongly. We look at impression delivery, and it's in line with our expectations from the beginning of the year. MAUs are now at basically 70 million, because we're getting great consumer traction, and engagement time spent, et cetera, on Pluto continues to grow. In fact, we saw an acceleration of that from Q1 to Q2. So very good supply side equation. Revenue side has certainly been impacted by the macroeconomic situation. It's really a marketplace dynamic that unfortunately we're not immune to. But even with that, some very compelling facts to focus on. You know, related to the streaming ad size, Paramount Plus grew advertising over 90% in the quarter. And you look at our total D2C ad business in the quarter, including Pluto TV, that grew 25%. That's partially because we are gaining share. You know, we have a very strong proposition in the marketplace. And another indicator of that strength is really the 30% digital volume growth, ad volume growth that we saw in the upfront. So to your question of it being a price taker, sure, we play in the programmatic market. That matters. It's an important part of the equation. But, you know, again, we're not just selling Pluto. We're selling a full range of streaming product and multi-platform product and, you know, having great traction with advertisers. And we think that is a tremendous positive for the company and will be even more so as the macro situation improves.

And in terms of the question around the stability of TV media earnings, as we said, we do expect in the near term there will be some impact because of the macro advertising environment. But longer term, we do still remain confident that once that advertising market recovers, we can deliver TV media, stable TV media, and that's enabled by a combination of a few things. rate increases in both the affiliate and advertising sides of the business, and there's been evidence of that over the last few quarters. You know, we've done a very successful track record of putting in place new affiliate deals that either have built-in rate escalators or fixed fee components on the station side of the business. And then obviously on the advertising side, you know, we're very happy with what we've seen in the upfront, both in terms of price increases and what we've been able to do from a volume perspective. So rate is an important part of the equation. We also expect to see continued meaningful contributions from the licensing side of that business, which is enabled by a combination of both an incredible catalog and unique production capabilities. And of course, we will continue to have a lot of innovation and discipline on the cost side of the equation, and that's true across programming, it's true across marketing, and it's true across our broader operations. So the combination of all those things will be key to delivering stable TV media OIBDA. Thanks, Steve. Next question.

We now turn to Ben Swinburne from Morgan Stanley. Your line is open.

Thanks. Good morning. I just had a couple questions on one topic, which is sort of the international opportunity with Paramount+. Bob, could you talk a little bit about how the launch went in the UK and South Korea in the quarter, sort of the strategy to drive that business, and did you see the whole benefit of the initial launch in Q2, or is some of that going to bleed into Q3? And as part of that, could you talk a little about your international programming strategy? I believe you guys have some local productions, foreign language productions in the works. Can you give us a sense of your appetite to build that out as a part of the offering as you grow the business outside the U.S.?

Yeah, sure, Ben. So a couple things to say. One, we're very pleased. Well, to start with, we definitely are viewing streaming as a global opportunity, and you're seeing us move against the international standards opportunity particularly Western Europe here in 2022 two is with respect to Western Europe we obviously launched UK and Ireland in June by the way we also launched South Korea the week before those launches are performing above our expectations both of those have hard bundle elements to them. Obviously, we're in business with Sky in the UK and Ireland, and they are very pleased with what we brought to market. And by the way, the response to the launch more broadly has been very strong, including what we showed in London related to the launch event. Same thing is true with South Korea. We're working with TVing, which is a local streamer. CJ has a minority stake in it. And, you know, there we're really the global part of the global tier to their local offering. And, again, they're very happy with what we brought to market and how it's performing. And so we're off to a very good start. To your question of is this Q2 only boost to subs or does it extend past that, it definitely extends past that. Recall that our international distribution strategy is focused on achieving ubiquity. It really has three fundamental components, hard bundle plus channel stores like Roku and Amazon and Apple and direct E2C on an O&O basis. So we'll be deploying all that in those markets. And therefore, you know, we see sub-growth not only coming from we're really engagement from the hard bundles where more and more people use it. But we also see those other two pillars of the distribution strategy beginning to kick in. And in fact, they already have. Third point I make is, you know, this is a big year for Western Europe for us. We have Italy in September. That's another launch with Sky on a hard bundle basis. That's tracking very well. And then we have Germany and Austria and Switzerland with Sky in December, I believe, as well as France with Canal Plus. All those have hard bundle elements, but again, have broader distribution elements to penetrate the TAM. Last point, your local content. All those markets do have local content dimensions. We really have So you see a dual benefit there. On the one hand, with local content, and we know local content for a long time from operating networks, things like using a local format of the Shores and making it for a market works very well. We also have, in the UK, we have Channel 5, so it has relationships that are triggering stories there. So yeah, local content is one thing, but the second element of it, a lot of that we're going to use globally, because on a dubbed basis, The streaming world has proven that works. So local is very much part of our strategy in the mix. It's not an overwhelming part, but it is part of it. Devine?

I think you covered the – Oh, I got it? I think you got it. All right. Thanks, Ben. Next question.

We now turn to Rich Greenfield from LightShed Partners. Your line is open. Please go ahead.

Hi. Thanks for taking the question. So when Netflix published its – Q2, it showed this chart that had minutes viewed, and I think CBS was actually number two behind Netflix. It didn't have Paramount Plus or Pluto, but I would assume that would close the gap between Netflix and sort of the broader Paramount company. But I think the question that sort of every investor on this call is thinking about is, as the business shifts from linear to digital, meaning CBS sort of shrinks in share and Paramount Plus and Pluto grow in their share, can Paramount maintain sort of aggregate time spent and what will the margin profile of that business looks like? Because I think if you think about everyone in streaming today, like you're talking about 1.8 billion of losses for the calendar year, sort of everyone but Netflix is losing billions a year on streaming. And maybe just the way to think about this is on a revenue basis, your linear TV business this quarter had 2 billion of advertising plus and Paramount Plus was sort of in the $90 million range and Pluto at $265 or so. So I guess the point is just as this business shifts, can you capture enough time spent to have the similar profit look that your business has in legacy as you move to streaming, if that makes sense?

Yeah, sure, Rich. So a couple points there. I don't know exactly what chart you're looking at, but if you look at Q2, Paramount's combined U.S. linear delivery was bigger than Netflix. And that's even more the case if you combine linear and streaming. But that's really neither here nor there. The question on margins is really the core of what you're asking. And as we look at it, as streaming becomes bigger for us, as we gain scale, we see operating margins from streaming approaching that of TV media. Remember, Rich, we've only been in the streaming business for a short time. Others have been there for years. We need to give this a bit of time to play out. But there are real reasons that we see this path to superior margins. And at the core of it is our differentiated, as we say, playbook. You look at where we are in content, we're clearly advantaged. We've got a broad offering, many, many globally renowned franchises backed up by a deep library. I mean, the economic value of going and trying to replace that library, I don't even know what it would be. And we get tremendous engagement, i.e., time spent off the library. So that's one important economic advantage. Two, we have a platform advantage. The combination of streaming and traditional is significant. Helps our content economics. It helps our marketing economics. And it shouldn't be discounted. Third, you know, we're in the free streaming space and the pay streaming space. So what does that do? It gets us a bigger TAM. And we regularly see the value of serving consumers that don't pay for streaming as well as the ones that do, and obviously the associated ad access. And fourth, we have this global operating footprint. I mean, we deployed it in the UK. The reason we got the CJ deal done in South Korea is we've been there for years there as a joint venture. But nonetheless, we have experience, we have assets, we have relationships, and those provide real leverage, including in streaming. So you put all that together, and we do see a superior financial envelope at comparable level of scale to someone else. And we do see this tracking to TV media-like markets, which is at the core of your question. We just have to let it play out a bit. And yes, we've got to manage through some near-term macroeconomic headwinds. But we will. So we're very excited about this transformation journey that we're on.

Thanks a lot, Rich. Next question. Operator, we'll take our next question, please.

Our next question is from Cutgun Merrill from RBC Capital Markets. Your line is open. Please go ahead.

Good morning, and thanks for taking the questions, one on content spend and one on film entertainment, if I could. So on content spend, some of your peers have clearly revisited their content spend budgets for the next few years, as there's perhaps a greater focus on getting to profitable growth. I know you're in a unique position of being able to leverage your content investments across a more diverse set of linear and digital platforms. But on the other hand, it sounds like the losses for DTC this year are shaping up to be closer to $1.8 billion versus expectations for 1.5 before. So I was curious if you had an updated view on what the appropriate level of content spend is evolving into for Paramount, whether that's for the total company or just for DTC. And just briefly on filmed entertainment, Top Gun's success has been pretty remarkable, and it seems like you have a very solid slate for the balance of this year and then, of course, more to come in 23 and 24. I know it might take some time before we get to the more profitable windows for these films to really flow through the financials, so maybe not for this year, but are we approaching a period where you can see more meaningful step function improvements in film and entertainment's profitability? Thanks.

Yeah, this is Naveen. I'll take both of those. First, on content spend. You know, the most important thing to remember is that when we think about our content investment, we're always looking at it in the context of the growth and the return that it unlocks. And so, of course, when you think about it through that lens, you have to focus on the fact that we added 5 million Paramount Plus subs in the quarter. Paramount Plus revenue growth was 120%. And we continue to be very bullish about growth going forward. So our content investment is definitely working. It's producing very real results and the momentum that you've seen. And at the same time, we're very committed to our long-term growth objectives around the D2C business. And we intend to continue to invest to support that growth opportunity. continuing as we have to make those decisions prudently with a real eye toward the ROI of the investments. What we don't want to do is sacrifice a long-term opportunity by overreacting to some of the short-term headwinds that obviously exist, particularly in the advertising marketplace today. So we're continuing to move forward. We're continuing to fund the growth. We think it's an incredible opportunity. And as you pointed out, our content dollars are used differently than many of our peers. We leverage those assets across many platforms, and it's one of the reasons that we can grow faster while spending less than others. In terms of your question on the film entertainment business, obviously we have not provided any specific long-term guidance there, but I would encourage you to think about that business more broadly, which is to say increasingly the value of our movies is not just about what they generate in the box office. Those windows are now expanding in terms of it's not just about box office and home entertainment, and then going to third parties, we can generate a lot of value out of those assets on our streaming services. We continue to monetize them from a catalog perspective. So for us, it's really about continuing to build the asset value, and we do that by having a great slate that will continue to be heavy on franchises. And we're looking forward to what that does both for the box office business and also our other channels. Thanks. Next question, please.

We now turn to Jessica Reef-Enrich from Bank of America Securities. Your line is open. Please go ahead.

Thank you. I was wondering if you could give us color on IPL, what the dollar commitment, your commitment is, and what your goals are there. And then just to go back to the content spend, could you at least talk about like step function in increasing content spend 23 versus 22 and 24 as well?

Sure, Jessica. So IPL, i.e., India Cricket, I assume, you know, that's a deal that was done by our joint venture in India, Viacom18, which recently had a transaction where they brought in Bodhi Tree as an investor and capital infusion. Their intent, and I don't really leave it to the joint venture, which, by the way, our other partner is Reliance, to speak to that, and they haven't spoke to it much. But what they have said is, you know, we obviously have the streaming rights there. It's going to be part of a streaming offering for the Indian market. That Viacom 18 is going to launch in 2023. We've also said that we are going to, Paramount Plus is going to launch with it, essentially as another form of hard bundle, a tier. And therefore, you know, we're really excited about it because we get the very material benefit of cricket. And, you know, cricket is the top of the food chain in India. And so it'll be a real engine for streaming, and then Paramount Plus will benefit by being part of that. Even though we're not directly investing on an O&O basis, we're obviously part of the joint venture. So that's the IPL answer.

And Jessica, with respect to the question on content spend in future years, I point you back to what we shared during our investor day back in February. As you know, our goal is to drive the growth on the D2C business to over $9 billion of revenue by the end of 2024. We said at that time that that would involve D2C content expense of around $6 billion, and we're still operating with that in mind. We haven't provided any kind of specific cadence of exactly what that looks like from year to year, but we're continuing to invest and manage the business with those goals. Thanks, Jessica. Next question.

Our next question comes from Brett Feldman from Goldman Sachs. Your line is open.

Thanks. And just the sort of two related questions. The first is, to what extent are you seeing any inflationary cost pressures in the business? I'm particularly interested in whether that's creeping into content production costs, and then more broadly, one of the questions we get from investors as they think through the impact of inflation is pricing power. We've seen some price increases at different streaming services. I was wondering if you can give us your latest thoughts on when or whether you believe you'll be in a position to potentially start raising price on your streaming services, most notably Paramount+. Thanks.

Yeah, sure, Brett. So on your first question, inflation... In our business, we actually saw inflation a while ago, really more in the production side of the house related to talent and competition therein. So we've been managing with that for a while. And thankfully, we are viewed as a good place to work, if you will. And we have many partnerships with important people in front of and behind the screen working with us to make shows. But so the current inflation driving things like higher fuel prices and all is not really that much of a factor for us incremental. We're watching it, but I wouldn't think of that as a step function change for us like it is, for example, for a packaged goods company that's buying raw materials and seeing those prices increase. Very different dynamics.

And in terms of pricing on streaming services, specifically Paramount+, I think you really have to look at that in the context of ARPU more broadly. Because remember, we have a dual revenue stream model, which means that we're not entirely dependent on price increases for growth. And we are, despite some of the short-term headwinds, we continue to be very bullish about the potential for continued ad ARPU growth on our streaming services. In fact, we've seen healthy double-digit growth in ad ARPU on the Essentials tier of Paramount+, despite some of the macro headwinds. That's of course driven by meaningful growth in engagement and continued innovation around the ad products that we make available. Pricing will be a part of the equation, and though we don't have any imminent price changes, They will happen in the future and we'll do it while also taking into account the evolution of our content offering, looking at what sort of bundles and other promotional opportunities are available to our customers, and of course thinking about our value proposition relative to competing services where I point out I think we offer a very strong value position today. We're continuing to look at pricing. We continue to look at how we optimize the tiering along with that, but it's part of a broader overall ARPU story.

Thanks a lot, Brett. Operator, we have time for one last question.

Our last question comes from Phil Cusick from J.P. Morgan. Your line is open. Please go ahead.

Hi, guys. Thank you for squeezing me in. I'll try not to abuse it. A couple of clarifications and a question if I can. Thank you. It sounds like you're no longer targeting 60% plus growth in DTC revenue this year. Is that right? And is there a better level we should look at? And how is the composition of ad supported versus premium Paramount Plus subs and gross ad trends sort of changed since the release in June? What does that ad load look like and revenue from here? And does that grow over time in terms of ad load? Thanks very much.

Yeah, I'll take those, Naveen. So first, in terms of D2C revenue growth for the year, we continue to expect very healthy levels of D2C growth. But obviously, given the macro advertising headwinds and the fact that there's a little bit less visibility in the back half of the year, it's possible we may not get all the way to that 60%. but you know I think it'll probably be relatively close and either way it's a very healthy number with respect to composition of subscribers at Paramount Plus you know it's still very balanced between the premium tier and the ad supported essentials tier and That can bounce around a little bit from quarter to quarter based on you know promotions and bundles and things that we may be doing with partners But I think it continues to be evidence that they are both very compelling products and they both serve unique and large markets So we like that strategy and in terms of the ad loads specifically I It's more a function of continuing to build out the ad products on Paramount+. We've launched advertising very recently within that service. For instance, there are certain parts of the product where advertising is not yet enabled, and that will continue to evolve over time.

Yeah, let me just jump in here. I really want to thank everyone for their time today. In closing, I hope you heard how we're deploying a very unique asset portfolio with a differentiated strategy to not only successfully compete in this challenging macroeconomic environment, but importantly, take share and continue to have real momentum, particularly in the streaming space. So we're very excited about the future. We're going to continue to manage through it, and we look forward to keeping you updated as we do. In the interim, thanks again for your time, and be well, everyone. Bye-bye.

Today's call is now concluded. I'd like to thank you for your participation. You may now disconnect your lines.