Warner Bros. Discovery, Inc.

Ladies and gentlemen, thanks for standing by, and welcome to the Warner Brothers Discovery Inc. Third Quarter 2022 Earnings Conference Call. At this time, all participant minds are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Additionally, please be advised that today's conference call is being recorded. I would like to hand the conference over to Mr. Andrew Slavin, Executive Vice President, Global Investor Strategy. Sir, you may now begin.

Good afternoon and welcome to Warner Brothers Discovery's Q3 earnings call. With me today is David Zaslav, President and CEO, Gunnar Wiedenfels, our CFO, and J.B. Perret, CEO and President, Global Streaming and Games. Before we start, I'd like to remind you that today's conference call will include forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include comments regarding the company's future business plans, prospects, and financial performance. These statements are made based on management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our Form 10-K for the year ended December 31st, 2021, and our quarterly Form 10-Q for the quarter ended September 30th, 2022, that we expect to file with the SEC today, as well as our subsequent filings made with the SEC. A copy of our Q3 earnings release, trending schedule, and accompanying slide deck is available on our website at ir.wbd.com. And with that, I'm pleased to turn the call over to David.

Hello, everyone, and thank you for joining us. Let me start by saying I am pleased with all that we have accomplished in just our first six months as a combined company. We have had to work through a number of really tough issues, some anticipated, some unexpected. And we continue to make the difficult decisions that we know are necessary to position our company for long-term growth and success. As you would expect with a deal of this magnitude in a dynamic and changing industry and amidst a more challenging economic environment, a significant amount of change is required. In fact, we see this as presenting a meaningful opportunity, one that we have seized wholeheartedly. This is an opportunity to look inside each one of our businesses and really determine What's working? What's not working? Is it structured properly? Does it have the right assets, people and resources to be effective and the best of class in the environment we face today? None of this is easy and nothing happens overnight. That said, we are fully committed and laser focused. I believe we have the strongest hand in the industry in terms of the completeness and quality of our portfolio of assets and IP across sports, news, nonfiction, and entertainment in virtually every region of the globe and in every language. Six months in, we now have a full, strong, and energized leadership team in place. And we are confident we have the right strategy and are making the structural and strategic changes to successfully achieve our goal of becoming the greatest media and entertainment company in the world, capable of generating significantly higher earnings and free cash flow than we are today and creating real long-term sustainable shareholder value. Last quarter, we laid out three strategic priorities that serve as our guiding principles and influence our decision making. strategically, operationally, and financially, starting with content. Content is the heart of everything we do, and we are investing at historic levels in the highest quality storytelling, sports, and news. All of the hard work we are doing now will allow us to continue making meaningful investments in content to support our plans going forward. Our best in class portfolio is led by the strongest content and creative executives in the business. And one of the things that differentiates these leaders is that they do more than just pick shows and write checks. They support and nurture our creatives and talent and help them to bring their bold visions to life on screens large and small. There are doers who have spent time in the control room developing films and TV shows, writing scripts, working closely with talent and creatives. They know their crafts inside and out, what it takes to create compelling, unforgettable experiences for fans worldwide. And they know how to replicate that success and storytelling over and over. No one embodies this creative commitment more than our new heads of DC studios, James Gunn and Peter Safran. who have said that running DC Studios is a passion project, not just a job. James is a brilliant storyteller who has the distinction of being the first and only filmmaker to direct a movie for both Marvel and DC. Peter is a prolific producer whose credits include DC's highest grossing movie, Aquaman, as well as the entire Conjuring universe, the most successful horror franchise of all time. We could not be more thrilled to have them join our leadership team. And I'm excited for what is to come. I've spent a lot of time over the last few months with James and Peter talking about our strategy and long-term plans for the future of DC across TV, animation, and film. They have a powerful vision and blueprint that will drive a more unified, creative approach that will enable us to realize the full value one of the world's most iconic franchises. They're hard at work right now. Our teams company-wide are working hard every day to ensure that Warner Bros. Discovery is the place creatives choose to come and tell their stories. We have a huge advantage. Warner Bros., with its 100-year legacy and ability to launch films in every corner of the globe, tied together with Warner Bros. TV, the biggest maker of television in the world, and HBO, two of the most prolific storytelling studios in the world. Together, it creates an unparalleled, full-service entertainment ecosystem. To that end, we recently signed a long-term deal with Matt Reeves, who co-wrote and directed The Batman, and created the upcoming new series, The Penguin, for HBO Max. Todd Phillips will begin filming the highly anticipated Joker sequel next month. We signed an overall deal with Quinta Brunson, a trailblazer who brought us the hugely popular Emmy-winning TV series, Abbott Elementary. And our longtime partner, the prolific Chuck Lorre, is producing his first series for HBO Max, the upcoming comedy, How to Be a Bookie, with Sebastian Maniscalco, just to name a few. We're very excited about our robust film slate for next year. We are back in business with a lineup of features that is truly supportive of a distinct theatrical window. The slate includes The Flash, Shazam!, Dune II, Aquaman, Wonka, a prequel to the classic film, The Color Purple, produced by Steven Spielberg, Oprah Winfrey, and Quincy Jones, and Blue Beetle, DC's first superhero movie starring a Latino character. directed by Angel Manuel Soto, as well as exciting new series for HBO and HBO Max, including The Idol from the brilliant Sam Levinson, who created Euphoria and starring The Weeknd. The Last of Us, based on the post-apocalyptic video game, along with new scripted original series for TV, such as Lazarus Project, set to air on TNT next year. We also have projects underway with incredible on-screen talent, including Joaquin Phoenix and Lady Gaga for Joker 2. Ryan Gosling has joined Margot Robbie for Ocean's Eleven prequel. Robert Pattinson will return as Batman. Robin Thede's Emmy-winning HBO comedy series, A Black Lady Sketch Show, has begun production on its fourth season. The award-winning cast of Succession, will return next spring for its fourth season also. And the list goes on and on. Our unparalleled IP also allows us to grow our consumer products business and extend our characters into games. One of the fastest growing media segments with titles such as the must anticipated Hogwarts legacy game built around the amazing world of Harry Potter and launching in the first quarter next year. and leveraging incredible IP, such as Mortal Kombat, which is celebrating its 30th anniversary this year and still going strong. On the sports side, we just re-signed Ernie Johnson, Charles Barkley, and Kenny Smith, the multi-year deals. We've also got a long-term deal in place with Shaq. We're thrilled to have the four of them continue to host TNT's flagship studio show inside the NBA. I believe the best show in all of sports. And this further reflects our deep commitment to sports and providing fans with the programming they can't live without. CNN's new show, CNN This Morning, with hosts Don Lemon, Poppy Harlow, and Caitlin Collins, kicked off this week with great buzz. No one knows morning television like Chris Licht. And the show is one of the many building blocks he and his team of putting in place as Chris leads CNN into the future with great courage and strategic vision. Our second strategic priority is maximizing the overall value of our content through an omni-channel distribution and monetization strategy. The fact is we cover more surface area than any other media company. And that optionality allows us to distribute our content in multiple ways. No matter where consumers go or what their preferences are, premium, pay TV, free to air, theatrical, streaming, gaming, we are there around the globe and able to monetize our content and IP in ways that maximize audience and profitability. Optionality has never been more important. And we continue to refine what the right windowing and distribution model is so that we can reach even more consumers and maximize profitability. As we said last quarter, we will be aggressively attacking the Avod market with our own fast offering in 2023. As the company with the largest film and TV library in the industry, we have a unique opportunity to increase our addressable market and drive real value, and we plan to move quickly. Stay tuned. Finally, Our third strategic priority is operating as one company. One plus one does equal more than two when it comes to working collaboratively and supporting individual efforts across our many businesses. In many respects, this is a significant departure from the previous norm. We've already had some real success with our cross promotional initiatives, such as with Shark Week, Elvis, House of the Dragon, and Black Adam. The fact is, with our huge viewership share in the US, our broad portfolio of networks and global platforms around the world, we have an amazing ability to efficiently cross-promote across our lineup. Our one team philosophy is a core tenant to the critical work we continue to do to transform the organization for the future. And nowhere is this more evident than with our ongoing commitment to driving synergy enterprise-wide. Success requires all hands on deck, and we're seeing it. In fact, I'm pleased to share that we have increased our synergy target to at least 3.5 billion from 3 billion. Gunnar will take you through the details, but the key point is this is more than just a dollar tally of what we've saved on an expense line. It is more than just a number. We are fundamentally rethinking and reimagining how this organization is structured and we are empowering our business unit leadership to transform their organizations with an owner's mindset and a view on quality and accountability. And you see this reflected in our numbers and some of the strategic decisions we are making. We're making real progress and we're driving toward the end game. Like everyone in our industry, We are managing through some cyclical headwinds and secular challenges, including lower than expected ad sales and faster pay TV subscriber declines. Gunnar will say more, but I do want to make a couple of quick points. First, regarding our advertising sales, which have been impacted by a number of factors that include the macroeconomic downturn and the strength of the NFL and college football on other networks. The good news is, On Turner, we just had Major League Baseball's American League Division and Championship Series on TBS. Both saw substantial double-digit growth in viewership compared to last year, though a shortened Championship Series wasn't ideal. The NBA is off to a great start on TNT, delivering its most watched regular season coverage since 2017, with viewership up 29% season to date. And with March Madness in the spring, along with our first ever coverage of the Stanley Cup finals, from now through the summer, we have a large share of professional sports, both here in the U.S. and internationally. On the advertising side, we had a great upfront where we outperformed the market. And we spent the last four months reorganizing the ad sales team. We had a broad restructuring, including having sports and news be organized and sold with entertainment and nonfiction as one full service offering. It was an awful lot of work and we're glad to have it behind us. The team is led by the superb John Steinloff, who has a great track record of outperforming the market and did so for us in the five years following the Scripps acquisition as he led our team at Discovery. So the team is now in place. Attacking the market with the full suite of tools. Every way a brand wants to engage with consumers, whether through traditional commercials, product placement, or dynamic targeting. We will offer those touch points. With respect to direct-to-consumer, we added nearly 3 million net global direct-to-consumer subs this quarter. And we expect a healthy inflection with the launch of our combined service and expanded global footprint. With that, we are excited to announce that we have moved up our U.S. launch date from summer of 2023 to spring. We've been very hard at work. We can't wait to make the service available to consumers around the globe and get the business running on all cylinders. While our team is hard at work preparing for the launch of our combined offering, we're also actively experimenting and testing our hypotheses about the future product, in large part to address some of the deficiencies of the existing platform. And we're seeing some positive signals. A few quick examples. One is related to the product user experience. Previously, when a series concluded on HBO Max, there was no end card that would then recommend additional programs for the user to enjoy, an obvious way to drive greater consumer engagement. We've started rolling this out and are already seeing very promising engagement uplift. A second example around content. We've begun experimenting with bringing D-plus content onto HBO Max, starting with select Magnolia network shows such as Fixer Upper, The Castle, which was a top five show after only its first few days on the service. These early green shoots bolster our strategic thesis that the two content offerings work well together, and when combined, should drive greater engagement, lower churn, and higher customer lifetime value. And lastly, on churn, we've implemented a number of initiatives to improve customer retention, and these have helped drive our voluntary churn rates to record lows in the last few weeks. We've still got a long way to go. but these early signs are certainly encouraging. As we said, we plan to roll out the new service here in the U.S., followed by Latin America in 2023, then in Europe and APAC thereafter. We see significant opportunity across the globe, and we're excited to resume expanding our distribution in countries where we are currently not represented. As you would expect, we made the strategic decision to hold off on active expansion until our new offering is set to launch. Before I turn it over to Gunnar, I was recently asked if I thought the golden age of content was over. And I said, absolutely not. There's nothing more important than content. People are consuming more content than they ever have. But it has to be great content. It's no longer about how much, it's about how good. And ultimately, it is the consumer who tells us what is good. And the consumer is telling us right now with House of the Dragon, Euphoria, Batman, Harry Potter, Friends, Big Bang Theory. You take a look at the portfolio of 10 Paul assets across Warner Brothers Discovery and and the breadth is large and the opportunity is real. No one has a better or more recognizable hand of content, IP, brands, franchises, and personalities than we do. That said, I believe the grand experiment, chasing subs at any cost, is over. Let's face it, the strategy to collapse all windows starve linear and theatrical and spend money with abandon while making a fraction in return all in the service of growing sub numbers has ultimately proven in our view to be deeply flawed we believe there is a real opportunity to do things differently to deliver the content consumers want and will pay for while getting the full value of our offering as we said last quarter Our focus is on delivering $1 billion of EBITDA in streaming by 2025, and we expect to make significant progress toward this goal next year. Profitability, not purely subcount, is our benchmark for success. While we've got lots more work to do and some difficult decisions still ahead, we have total conviction in the opportunity before us. At Warner Brothers Discovery, We've got the best assets in the industry reach that extends from premium basic pay TV and free to air to theatrical streaming consumer products and gaming exceptionally talented people across this great company and the right strategy and financial framework to set us up for long-term success. With that, I'll turn it over to Gunnar and he'll walk you through the financials for the quarter.

Thank you, David, and thank you, everyone, for joining us this afternoon. I'd like to start out by building upon what David said earlier. We are very pleased with our overall synergy program and the broad canvas on which we're transforming this company. To that extent, I'm now confident to commit to a $3.5 billion synergy number, as we have had an opportunity to further assess our operations in more detail and refine our workstream plans. That means we're now adding $500 million of incremental potential beyond the targeted $3 billion. And we are still working on detailing out the financial impact of a list of further initiatives beyond what has already been quantified. As always, I will keep you updated as these plans reach the level of detail and certainty we require for them to be included in our total synergy estimates. Regarding the actual execution of our transformation program, we expect to have realized approximately $750 million in synergies by the end of this year and an incremental year-over-year $2 billion in 2023. From a high level, and as David said, the opportunity at hand goes well beyond just the synergy capture dollar value. This is a fundamental transformation across and throughout the organization, a refocusing on how WBD is organized, how it's managed, how the teams are incentivized and evaluated, all of which results in an ability to pivot and evolve in this dynamic media ecosystem. And we are starting to see the financial impact materialize. The 11% SG&A reduction XFX in Q3 is an important early proof point. And we are on track for around 20% SG&A reduction in Q4. We've seen great traction on a number of fronts early on. First, in global marketing efforts, such as with television and theatrical releases, House of the Dragon, Elvis, and Black Adam most recently, leveraging the broad footprint of our own and operated media assets like never before, helping to drive global awareness in a very cost-efficient and effective way. Second, in content workflows, where across WBD there are numerous teams facilitating the important processes of content customization, languaging, administration of rights, participations and residuals, et cetera. Following substantive analysis, we have made the decision to centralize many of these critical functions and to harmonize the processes across the organization. In some cases, we'll collapse 10 to 12 versions of essentially the same process across the company into one best practice, unlocking hundreds of millions of dollars in efficiency gain. Third, on the streaming side, the previous strategy was to build largely duplicative organizations between HBO Max and the traditional international business. we have now embraced the powerful combination of global capabilities from our streaming team in areas like product, engineering, data and analytics, and marketing, married with local expertise from our international team in areas like distribution, content creation, and ad sales. This has already led to a clearer strategic direction, streamlined processes, and decision-making, while at the same time reducing significant duplicative cost. Fourth, Procurement is another great example of how professional management will impact our financial performance. For the first time, there is a full mandate across all of WBD to leverage the outstanding capabilities, experience, and expertise of our global procurement team, and we are on track to deliver hundreds of millions of P&L impact. And finally, we've begun the process of streamlining virtually every corporate and supporting function with a lot more to work through into next year and beyond. Our focus is on the hard work and the tough decisions in the spirit of repositioning this company operationally and strategically so that in a more constructive market environment, we're better positioned to capture upside revenue opportunities, which, after having restructured our cost base, should result in an amplified impact to our bottom line and in an ultimate earnings power of the company significantly above current levels, with real upside for long-term shareholder value. Turning quickly to the results for the quarter, Given we're still in the first year following the closing of our acquisition, I will discuss all P&L elements on a pro forma combined XFX basis. Starting with the studio segment. Studio's revenues decreased by 5% due to lower home entertainment revenues as last year benefited from COVID driven demand and fewer new releases year to date resulted in less theatrical revenues and less titles hitting the home entertainment and pay one window during the quarter. This was partially offset by a 34% increase in other revenue thanks to the reopening of our studio tours. The revenue decline was more than offset by lower content expense for theatrical and TV, as well as lower marketing expenses from fewer theatrical releases, leading to studios' adjusted EBITDA growth of 43%. Networks' revenues decreased 8%. Specifically, advertising revenues decreased 11% globally, primarily given the softening demand amid well-noted global macro headwinds. We have been quite transparent about the risk in the environment since the summer. Obviously, this is something impacting all players across not only the advertising industry, but the broader economy, which has more or less continues thus far into the fourth quarter. Worth noting are a few items impacting comparability with Q3 last year. namely the Olympics and the NBA playoff schedule, creating a few hundred basis points of additional headwind in the third quarter. Given the strong value proposition of our platforms and reach, tailwinds and digital advertising solutions from products such as dynamic ad insertion and continued pricing opportunities, we feel very well positioned and stand ready for when the market environment improves. Distribution revenues declined 2% primarily due to pay TV subscriber declines in the U.S., and lower affiliate rates in certain European markets, partially offset by higher affiliate rates in the U.S. and premium sports packages in LATAM. Content revenues declined 37% against the prior year comp from sublicensing the Olympics broadcast rights in 2021. Networks adjusted EBITDA decreased 2% as lower content expense, primarily due to the Olympics last year, as well as lower personnel and marketing costs, partially offset the revenue decline. DTC revenues decreased 6%, predominantly due to the expiration of the Amazon wholesale deal, which we have now fully lapped, partially offset by retail gains. Advertising revenues more than doubled during the quarter, driven by subscriber growth on our DTC ad-supported tiers. Cost of revenues increased 22% due to growing programming costs, while SG&A decreased 18% as we continued to take a more measured approach to marketing as well as better coordinating the utilization of the invaluable promotional firepower of our own platforms. Adjusted EBITDA losses worth $634 million during the quarter, and we continue to expect that 2022 will be the peak year for adjusted EBITDA losses in the segment with healthy improvement next year on the back of cost synergy initiatives and positive inflection and revenue trends following the launch of the newly combined product. Turning to consolidated results and free cash flow. Both revenues and adjusted EBITDA decreased 8% during the quarter. And while still down, our year-over-year EBITDA trend saw significant sequential improvement over Q2, and I expect further sequential improvements in Q4 and into 2023. Reported free cash flow was negative $192 million. And let me provide some more detail here. Cash flow from operations decreased nearly $700 million, primarily due to seasonality from the semi-annual cash interest payment on a large portion of the acquisition debt, as well as merger and integration-related costs, which totaled nearly $400 million during the quarter, including payout of retention bonuses to legacy WarnerMedia employees put in place prior to the closing of the transaction. This brings the year-to-date total to approximately $650 million. Furthermore, we reduced the balance outstanding on the securitization facility by $500 million from $5.7 billion to $5.2 billion, which also negatively impacted Q3 free cash flow, managing the program in line with a seasonal cadence of collections and revenue. As previously mentioned, we repaid $2.5 billion of debt during Q3, bringing the total debt repaid since the closing of the transaction to $6 billion. We ended the quarter with $50.4 billion of gross debt and $2.5 billion of cash on hand. Turning to guidance. Now, with two months left in the year, we see adjusted EBITDA for 2022 landing towards the middle of our guidance range of $9 to $9.5 billion, or about $9.2 billion. This is notwithstanding the incremental drag from currency and continued and greater than originally anticipated headwinds in the advertising market across much of the globe. It also includes the additional amortization of HBO content we have implemented following the detailed assessment of our content assets. We continue to see reported free cash flow for the year at $3 billion and now see net leverage at the end of the year at approximately five times. Building off of this projected baseline and looking to 2023, we continue to target and our teams are working towards $12 billion in adjusted EBITDA. And in a more normal advertising environment, we believe that target should be achievable. That said, the lack of visibility on advertising globally creates a more challenging path towards achieving our targets. given advertising is by far the greatest variable impacting our financial performance for 2023. I'd also like to offer a couple of other puts and takes to bridge from this year to 2023. First, synergy will be a healthy tailwind, and we expect $2 billion of incremental EBITDA impact year over year, as I detailed earlier. Second, the first half of 2023 should see an additional tailwind of a couple hundred million dollars from the impact of our course correction measures implemented over the last several for example, CNN+. And third, FX trends and overall pay TV trends are naturally outside of our control and difficult to project. We continue to expect our free cash flow conversion rate to be in the 33% to 50% range. In addition to the factors described above, free cash flow will depend on the timing and size of the cash restructuring costs to be realized from 2023, as well as on content and working capital dynamics. To close, I'd like to reiterate that the future and mid- to long-term earnings power of this new combined company is as vibrant as ever, and we are decisively taking the necessary steps to enhance our operating structure and emerge as a leaner and stronger global media company, which will position us to take advantage of the eventual market recovery. We continue to focus on and invest in high-quality content and platforms with a flexible approach to monetization to drive growing and sustainable free cash flows which we believe will ultimately maximize long-term shareholder value. And with that, I'd like to turn it back to the operator, and David, JB, and I will take your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. If you would like to withdraw your request, please press the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. Our first question comes from Kenan Vankateshwar with Barclays. Your line is open.

Thank you. Maybe we're going to start off with the synergy guidance for next year. When we look at the 12 billion EBITDA number and the free cash flow number, obviously, as you mentioned, it's subject to a lot of macro variables as well as things like cord cutting. I know these are low visibility items, but could you help us with some kind of sensitivity in terms of how your EBITDA or free cash flow could get impacted if the macro environment was to get worse or better one way or the other? And then, David, from your perspective, when you think about the organization right now, It looks like structurally it's mostly in place in terms of org structure as well as the people in different seats. And so as you go into next year and beyond strategically, as you roll out HBO in a bigger way in the new form in the US as well as around the world, how big of a focus is pricing compared to where we are from an ARPU level right now? And how do you expect that to evolve?

Let me start with your first question, and I'll take a bit of broader perspective here. Let's start by the environment that we're seeing today, because I think that's an important baseline. And as you know, we have been pointing to risks from the macroeconomic environment around us for quite some time. surprised. But the reality is, as you can see in our numbers, we came in at minus 11 for ad sales, which is the lower end of our guidance. We see those trends continue into the fourth quarter. Now, keep in mind, for us specifically, as we have pointed out last quarter, there were some prior year comp impacts, most importantly from the Olympics. And also, obviously, we're talking about the the network segment separately now. And so there were some positive growth drivers in the D2C segment. If you take that all together, you know, our number would have looked more like mid to high single digits down. But the reality is, as I said, those trends continue into the fourth quarter. And I don't want to give any more specific guidance for next year. That's why I laid out what we have control over. And I'll go through that again. You know, let's assume the midpoint of our guidance range for 2022, you know, call it $9.2 billion, there will be a couple hundred million of impact on the positive side in the first half of next year as the full effect gets realized of the decisions that we have made in the second half of this year. And then we have full visibility and full conviction of $2 billion of incremental synergy impact, right? So if that takes you to the, call it, you know, $11.5 billion range for next year, And then to your point, the key question is the environment that we operate in. And I don't want to make any predictions here. You guys can all form your own views. But we do, you know, we do have $10 billion in advertising revenue. So that is a very material driver. Now, that said, we are very, very bullish when it comes to the B2C segment for next year. Obviously, not only a great synergy opportunity, but also, you know, as you heard from David, The launch date for our combined product looks a little earlier now than we had anticipated when we spoke three months ago. I do think that there is a real infection point that's available to us when it comes to D2C revenue on the back of that relaunch. We have a much more robust film plate on the studio side, et cetera. So there's a number of drivers impacting our performance for next year here. And as I said, with a somewhat more normalized ad environment, $12 billion is what we're working towards, what the team is budgeting for. But it's certainly, I'm not in a position to put that in the bank here today. I don't know if that's helpful.

On the pricing, JB, we've been doing a lot of work. Our peers around the world, we've been experimenting outside the US, We're not going to talk specifically about our pricing, but you could talk specifically about how we're approaching it.

Yeah, Kenan, I'd say pricing is one of four things that makes us particularly optimistic about the products coming together. Obviously, content aggregation and pulling all the content pieces together. The second being the broader positioning that allows us to moving from a product that may have that slightly more tailored approach to a fewer number of people in a household to a product that actually appeals to everybody in a household. The product improvements, David mentioned one in his remarks earlier, but there's a whole myriad of other product improvements that we need to execute on the platform that will greatly enhance engagement and retention. And then pricing, we think, is one of the meaningful ones. Two data points on that that I think are important. Number one is by 2023, HBO Max will not have raised price since its launch. So it'll have been three years since pricing has moved, which we think is an opportunity, particularly in this environment. And number two, when we look internationally, our wholesale and retail ARPUs are meaningfully lower than the market leaders. And for us, that spells opportunity and ability as we think about the new product coming to market and even some initiatives before the new product comes to market for growth on ARPU internationally.

Thank you both.

Our next question comes from Doug Mitchelson with Credit Seat. Your line is open.

Thanks so much. I guess a clarification on the advertising. How much of this is market and is any of this ratings trends at the Lanier Network? And anything specific about market color that either Dave or Guter you would give us in terms of what's driving the softness as we try to all figure out whether it's going to sustain or get worse or get better? and um you know david you talk about about the the content that you're manufacturing it's interesting you know reading articles every now and then about the concern that you're going to pull back from investing in in in big content you gave a pretty long list is there a better idea at this point how content spending will evolve the next few years at this company i mean you've got probably more detailed plans around the relaunch of streaming probably a better idea on linear and and the film slates already already cooking next year so Any help with understanding just how much content spend might grow the next few years would be helpful. Thank you.

Thanks, Doug. Look, we're a content company. That's the business we're in. It's our advantage. The fact that we have these tent poles, the strength of HBO right now by people domestically and around the world where we do have HBO in a few markets as being the highest quality, best curated service, as well as the production of content coming out of Warner Brothers. That's really our strength. We intentionally referenced the content coming up because we're leaning in, we're spending more money this year than we've ever spent historically. And there's been a lot of view of what's going on and the remix of this company coming together and it is messy, it's challenging. But it's taken real courage to restructure this company. It hasn't been restructured and reimagined for the future in a decade and a half. And so having this company work as one company and putting it all together and looking at content across the platform, promoting it across the platform. But as part of that, we had the luxury because of the spend across each platform to take a look at how it's working. And so Casey Bloys was able to look at all the content on HBO and when 37 series went away, he was able to look over the last year and a half. What are people watching and what are they not watching? Where are people spending time? Where are they being nourished? We have the ability to look at across our cable channels. What are we spending on shows and where are they working and where are we getting a good return? And all those write-offs, that we we took shows off these platforms we didn't take one show off a platform that was going to help us in any way it's going to help us to get it off the platform so that we could now invest in with the knowledge of what is working and replace those shows with content that has a chance to be more successful have larger larger audience and we're reallocating the capital How much should we be spending on HBO? How much more investment should we be making at Warner Brothers Television? And in the end, we're fully committed to content. You'll see that. We're committed to sport. We're committed to news. And we're focused now on how do we deploy that capital in a way to generate real value and get the content that's not working off.

And we're in the process of developing one lens through which we look at it. It's one company, one view on returns and revenue. I see a lot of opportunity there from the perspective of reallocating the capital. Doug, on the advertising market, look, the truth is delivery, obviously, across the ecosystem is down. But that said, we have been able to grow advertising in a meaningful way with exactly that level of delivery. So my view is this is first and foremost a market issue. Now, as I said, the sports schedule did have an impact and put us at a little bit of a disadvantage in the quarter. For the fourth quarter as well, there's some additional tailwind in local, which obviously, as you know, we're less well positioned to participate in. But the reality is that the scatter market has been pretty dry right now. So, it is what it is. As we know from experience, these periods pass. But it's not a very constructive environment right now, as you have heard from a number players, peers, and across the broader advertising market over the past three, four weeks.

Great. Thank you.

Our next question comes from Jessica Reeve with the Bank of America Securities. Your line is open. Thank you.

I guess just to start, you have these cyclical and secular challenges, as we all know, but you also have more tools and assets than most companies to combat, to meet this challenge. I'm just wondering how you can, you know, if you could talk a little bit about, you know, how you'll use your scale, what are the levers you have? You mentioned fast coming next year, which is, you know, should be upside. Like how should we think about that? How are you thinking about potentially asset sales? And then, A second question, I guess, more for JB, or, you know, can you address some of the challenges and opportunities in launching the combined service? Like, how are you thinking about TAM? What are you thinking of the mix of AVOD versus SVOD? I mean, with Discovery+, we saw that the ARPA was higher on the AdLine product. So, any color you can give us on how you're thinking about that.

Thanks, Jessica. Just quickly on FAST, we have We have HBO Max, and we'll relaunch that product in the spring as a premium product and as an ad-light product, and we'll begin to roll that out globally. As JB said, we've begun to experiment with moving some of the Discovery Plus content in there. We also have a platform that is really deficient right now. And so we're holding on and we're growing. The fact that we were able to grow almost 3 million subs outside the U.S. without a lot of promotion and with a platform that's not that great, we really think is encouraging as we begin to look at rolling out more broadly. But we also see fast as a real opportunity for us. And I think it's unique for us. We have the largest TV and motion picture library. And so there's content that belongs on HBO Max when that product launches, whatever it's called, as well as the ABOT service. But we can see now what are people consuming on those platforms, There's also a huge amount of content that's not even on that platform that's sitting with us that hasn't been put to monetize in the marketplace. Some of that we will sell, which we've talked about, and we've started to sell. Some of it will sell non-exclusively, some of it, but we have the ability on the fast side to build a service without buying content. Most of the players in that space are out buying content. and then looking to sell that content and create a VIG effectively where they get a return on that content based on what they spent on it. We can take content we already own, a lot of it where we have no participants, some of it where we have participants but it's at a fraction, and get ourselves into an AVOD service, which I think makes us full service. And most of that has been fully amortized. or almost all has been fully amortized. And it gives us effectively a full service, which you'll see as we come into the end of 23, which is a premium service that we're driving globally with no ads, an ad light service, which will have a robust and attractive advertising opportunity where even in a difficult market, we're getting very good pricing. And then finally, there's always a huge number of people that do not want to pay because And we'll be able to have them spending time with us, we think, with an economic model that's much advantage versus our peers. And then as we learn more, we can move the content through that ecosystem.

And that's actually, I think that's, in terms of scale, Jessica, that's one of the most exciting points, the way we're now able to look at content decision making with people, you know, providing a perspective from the various business units, providing data. and the ability to make these decisions on a group level in the best interest of Warner Brothers Discovery as opposed to optimizing individual business units. The other more recent point I would like to highlight where we're really in the first inning is just the marketing power of this company. If you look at the Black Adam campaign that David mentioned in his opening remarks, This is as broad, as comprehensive as we've ever seen it. And we're just getting started. Now we're going to be able to gather all the data and drive all the insights from executing a campaign like that. We can already see what the impact of ticket sales has been, what's worked, what hasn't worked. We're able to tackle this in a way that I don't think anyone has done. And again, we're just getting started. And on the App Sales side, again, it's early days, but if you look at what Kathleen has been able to do after Scripps and what JB back in the day did at Discovery on the international side, I have no doubt that Kathleen and Louise and Chris and Gerhard are going to drive this network portfolio hard. And it just makes so much sense that optimizing this combined comprehensive portfolio with one centralized approach is going to drive enormous delivery.

And remember, on average, we might be 25% of viewership on any given night. But during the NBA, we could be up to 40% of viewership. Live sports, live news, entertainment, nonfiction. During March Madness, our numbers will be even higher. And so the ability to use live news, particularly live sports, which others did with the NFL and college football during a difficult market. But the fact that we're such a big part and effective part of the overall viewership in America gives us a chance to go to advertisers on digital, news, sports, entertainment. And so that opportunity, I think, should give us a huge advantage if and when the market comes back. And we expect it will. We just can't predict when. And finally, on the distribution side, We did very well at Discovery with our traditional nonfiction package. Turner did very well with their news, sports, and entertainment. Together, we make up most of the high quality and valuable piece of the basic cable bundle. And so together, we're really aligned with the distributors. They want the bundle to remain robust. We want it to remain robust. And with all the discussion of the decline of of the traditional bundle. And we could see that it is in secular decline. But the real optimistic point here is that almost all of the sports, all of the sports are on free to air and cable. And the numbers for sports have gone up dramatically. March Madness was up 40%. The NBA is up 25, 30%. And so it is the platform where people are watching sports and that sports is going to be on cable for the next 10 years. And so there are certain trends you see. On the other hand, you see a very big uptick on sport and long-term commitment to sport on the platform, which I think will provide a steadying force. And it'll likely, you know, when there was some discussion by Rutledge this morning, a great operator of, you know, some challenges ahead, I think one of the things that the operators are concerned about is when it comes to the Big 12 and the increase in sports rights, that they're going to have to pay the lion's share of that. It increases.

And then, Jessica, maybe just to close on your ad light and TAM question, we see, if you exclude the non-accessible markets of China and Russia and India for a second, just given the scale and different ARPU dynamics of that market, we think there's about around 2 billion people around the world that are consumers of free ad-supported entertainment. And we look at about 20% to 30% of that group being addressable on the subscription side. And in the subscription side, we ultimately do see the add light offering that now obviously everyone is leaning towards as an incredibly important growth initiative for us. We were frankly a little surprised in the HBO Max add light offering that more people have not moved to that offering. And I think it says two things, which are both positive for us. Number one is we believe there's actually some pricing advantage for us on the ad-free service that we can probably move north of where the prices are today. And secondarily, that we can drive, particularly as we bring the product together, a lot more adoption of that ad life here, as we saw with the Legacy Discovery Plus product. And lastly, on monetization of that tier, today we have about two to three minutes of ads in HBO Max ad life. That's about half of what we have on Discovery+. So we think we have, as we roll the two combined products, almost 100% growth in the inventory available to us as we look to combine the ad loads of those two products.

Great. Thank you.

Our next question comes from Philip Cusick with the JP Morgan. Your line is open.

Hi, guys. Thank you. I appreciate it. One clarification, and this sounds silly, but there's been some debate with the definition of notwithstanding. I think it's pretty clear, but just to be so, you're guiding toward a headline number of about $9.2 billion in EBITDA this year. Is that fair? And then what's the impact from the accelerated HBO amortization in that? And then if I can ask a real question, maybe help us with outline the changes in what markets should be sort of DTC versus wholesale or partner markets as you look at going internationally, both with new markets and then potentially with some of the ones that are already out there. Thank you very much.

So let me quickly knock out that clarification question and then pass it to JB. So what we're saying is, $9.2 billion is best estimate pretty much in the middle of that guidance range that we've given. So essentially, on a year-over-year basis, sequentially, another improvement after Q3, now Q4 better. And then, as I've said, I expect much more improvement as we go into next year. And this is net of the headwinds that we have digested to get to that number. Most importantly, FX has been a pretty significant headwind this year, as you know. We're expecting that to be roughly $160 million for the full year. The amortization policy change for HBO content is in a similar ballpark, a little more for the full year, but was roughly $150 million in the third quarter as we had some catch-up effects. So that's all baked into the $9.2 billion number.

And on the international wholesale and partnerships Obviously, the rollout we laid out in August assumed essentially a rollout of the new product over the next two years in the existing HBO Max markets, other than a handful of additional ones that we talked about launching in Europe in 2024. Next year, it's really focused on U.S., LATAM, which are all existing HBO Max markets, so there is no incremental launches in that number. As David mentioned earlier, you know, we really were focusing on getting the product to market, getting launched, and then reassessing as we get the product launched whether there's any opportunities to do more and more markets in the years to come, but that's not something obviously we have any visibility of at this moment. Lastly, on the partnership side, we do view, as we have in the legacy discovery side, that there are a number of different partnership opportunities, and in fact, in the last few months as we've been out in market talking to partners, a long list of partners eager to engage on conversations about how they can help us accelerate the rollout of the future product as we come to market across all the markets we're coming into. So we're excited to work with the existing partners and some new partners to figure out there's ways to accelerate the rollout and potentially lessen our marketing costs and sack through those kind of partnerships that we've done historically.

Thank you.

Our next question comes from Ethan Cahill with Wells Fargo. Your line is open.

Thank you. Maybe first to kind of pick up on Doug's question on content and ask it a slightly different way. David, you know, between the content write down and a lot of the changes to personnel you've made, I'm just wondering how you could characterize the content strategy now It seems like it was a little bit broken under WarnerMedia before. And when you think about what content is going to look like in the future, I was just wondering if you could kind of say how it's going to be different under Warner Brothers Discovery than what it is under WarnerMedia. And then, Gunnar, maybe just a follow-up on the free cash flow impact from the synergy. When we talk about the incremental synergy guidance, I know that next year there's probably a cash headwind from Cost to Achieve. So in 2023 specifically, is the increased energy guidance going to be helpful to free cash flow? Is it going to be neutral to free cash flow? Could it be a drag on free cash flow? We'd just love to understand how we think about the free cash flow dynamic for 2023. Thank you.

A couple of things. One, we're going to have a real focus on franchises. We haven't had a Superman movie in 13 years. We haven't done a Harry Potter movie in 15 years. The DC movies and the Harry Potter movies provided a lot of the profits of Warner Brothers Motion Pictures over the last 25 years. So focus on the franchise. What are the big advantages that we have? House of the Dragon is an example of that. Game of Thrones, taking advantage of sex in the city. Lord of the Rings. We still have the right to do Lord of the Rings movies. What are the movies that have brands that are understood and loved everywhere in the world? Outside the U.S., Most in the aggregate, Europe, Latin America, Asia, it's about 40% of the theaters that we have here in the US. And there's local content. And so when you have a franchise movie, you can often make two to three times the amount of money you make in the US because you get a slot. And a focus on the big movies that are loved, that are tenfold, that people are going to leave home, leave early from dinner to go to see. And we have a lot of them. Batman, Superman, Aquaman. If we can do something with J.K. on Harry Potter going forward. Lord of the Rings. What are we doing with Game of Thrones? What are we doing with a lot of the big franchises that we have? We're focused on franchises. Two, we've learned what doesn't work. And this is what doesn't work for us based on everything that we've seen and we've looked at it hard. One is direct-to-streaming movies. So spending a billion dollars or collapsing a motion picture window into a streaming service, the movies that we launch in the theater do significantly better. And launching a two-hour or an hour and 40-minute movie direct-to-streaming has done almost nothing for HBO Max in terms of viewership, retention, or love of the service. The other is... The entire library, or almost the entire library, shouldn't be on HBO Max and paid for by HBO Max. We have an extraordinary library. Friends, Big Bang Theory, Two and a Half Men. There's 15 or 20 series that are loved and used and are nourishing the audience on a regular basis. But then there's a huge number of series and movies that aren't being used at all. And so the ability to see over the last year and a half What's happened to that entire library of motion picture and movies? And to see that if none of it's being used, why aren't we putting it on an AVOD where it will be used? We've looked at what people are watching on Pluto and on Tubi. It's very different. They're loving Rawhide and Bonanza. They're not watching that. They're not watching old series like Dynasty on Max. And so there is a platform where people have an expectation and what they want to watch. And we've been able to get a real um a vision into what people are consuming and ultimately that gives us a roadmap so what library is really advantageous to us and that and a lot of that stuff we might keep on there but we don't need it to be exclusive it could also be on avon we could sell it to someone else because no one's subscribing or staying on a particular on one of our services because it's it's there um and um So I think what we're really trying to understand is what has worked on the platform and what hasn't. And then based on that, we'll determine how to operate going forward.

And Steve, obviously one of the big drivers for free cash flow as well is the relationship between content cash investments and amortization. But just to go through a couple of the puts and takes, As you read in our release, $650 million year-to-date charges related to the merger, some of that cost to achieve. There's going to be a little more in the fourth quarter. And so against that baseline, next year is going to be a little higher, but it's not very significantly higher. We are going to see a little bit of a closing of the gap between content emerald and content cash as emeraldization steps up. I do believe there is significant flow through from the synergies. Again, $2 billion year over year, assuming the tax rate against that and flow the rest through. And then, you know, two more points to point out. One is, if you think about WarnerMedia as a very siloed business unit driven setup pre-combination with Discovery, I believe there's enormous potential on the CapEx You know, working capital side, those are all things we can manage much differently. That's going to take a little longer, but we're going to start chipping away at it. And then the last point I want to just be transparent about on a year-over-year basis, you know, one of the drags on free cash flow in the third quarter was the fact that we paid about $700 million of interest for merger-related debt for a bond that's on a semiannual cycle. So you will get another, you know, half a year impact of that for 2023 as well. So those are the things I think we can call out right now. And that, you know, that's why I reiterated that, you know, a third to 50% of EBITDA flow through guidance for free capital.

One last point on content. The audience will tell you what they love. They'll spend time with it. They'll watch it and rewatch it. And you can see it. You can see it on cable. and free to air in terms of the ratings. And you could see it on, we could see it on Max in seeing exactly what people spend time with. And we look at it and we look at it hard. If we have a scripted show that's seven and a half million dollars and it's getting a 0.03, then that tells us that You know, some has been written that we're not committed to scripted on TNT. We're very committed to scripted, but we want to measure what people are watching and what they're not. If a repeat of Two and a Half Men or Big Bang does three times the rating of a brand new show that was spending Another season that we greenlit of a show that's costing us $7.5 million, we're going to cancel that show, and we're going to try and get another scripted series that has a chance to really deliver and delight and engage an audience. But we are being deliberate about measuring how are the shows doing. As I said, let me be very clear. We did not get rid of any show that is helping us. Steve Bautista, And we got rid of those shows that we can focus on producing new content that will and using everything we learned on each platform to make new choices. Steve Bautista, it's a business of failure, but we'd rather take that money and spend it again and have a chance of having a show that will engage and delight on either our traditional platforms or our subscription.

Steve Bautista, Actually, Steve before we before we move on, I did want to mention one thing, because you. We're quoted a lot, got a lot of mileage out of your statement earlier this week, I think, or end of last week, that Warner Brothers Discovery has the greatest assets with the highest leverage in the industry or something like that. So I just want to comment on that while we're on the topic of free cash flow. I really view our capital structure as a huge asset. We put the structure in place with a purpose. It's cheap, largely fixed, and long-dated debt. And so from that perspective, I feel very, very good about it. Very limited maturity coming up over the next couple of years. We run scenarios, obviously, and there's, even in the most dire scenarios, no requirement for us to come back to the debt markets to refinance anything. So it really is a bit of an asset. It's not lost on us where the debt is trading. And, you know, as we're rolling in that free cash flow that I described over the next two, three, four years, I think there is enormous opportunity for us, which is going to be in the best interest of, you know, not only the equity holders, but also the debt holders. So this is a real, real asset. And I just saw, it made me laugh when your quote was picked up by the Wall Street Journal, I think, this morning.

I'll try to stay out of the news. One last question, operator, please.

Our final question comes from Rich Greenfield with Light Shed Partners. Your line is open.

I love batting clean up. First of all, thanks for taking the questions. David, you've been pretty clear about how many mistakes the AT&T management team made and sort of put you in sort of the situation you're now in. I guess, is abandoning Amazon channels one of those mistakes that you see? And is revisiting that decision and the subs and cash flow tied to it, is it tied to the relaunch of HBO Max sometime next year? And then second, I was just sort of thinking about your comments at the very beginning about sort of the difficult decisions you have to make ahead. And I'm curious, you know, is NBA rights one of those just given sort of the challenges, like, do you need NBA rights given the kind of where the TV world is headed right now? Just how I'm sort of just interested in like what you meant by difficult decisions or what you're thinking about in those difficult decisions would be great. Thanks.

Thanks, Rich. Um, well, if we got the, in some ways as hard as this has been, to restructure and this company and make a lot of changes in terms of people and how we approach the business, we've really seized the moment. And I think it's, I'm very proud of the leadership team. It's taken real courage to sit down and say, we have a chance to start over here. What is the business? What, how do we want to structure this business? What content should we have with the, with the ability to look at what's working and what's not working? What do we need? to be a successful business for the future, as if it was a family business. We took our wallet out, put it on the table and said, what do we want to spend our money on in order to have our best chance of succeeding? Casey did it. Channing did it. Mike and Pam did it. Chris has done it. And now we have a vision for what we believe is going to make this company strong and the most effective media company to take advantage of our diverse assets. We're not going to be right about everything. But in four or five months, as we make the turn into next year, we're about in the seventh or eighth inning here of getting this through, that we'll find over the next year that a lot of what we thought maybe was a little bit wrong, but we have conviction. We have a clear vision for the future and where we're going and what we want to do. And we have the courage. Over the last seven months, and as you see this through, what's going to, you know, people are looking at it and it looks like, look who's leaving here. They got rid of this show. They're not doing this. You know, it's almost like a mural, you know, on the side of a building. And you see a lot of stuff falling down and it's messy and it's challenging and it's difficult. It's difficult seeing people leave. But in the end, we're seeing this through and we're going to come through this a much stronger company, leaner with real fight and a real sense of What's the quality that we have that's going to help us to win? And when you see that three to four months from now, I think you're going to get a very clear picture of exactly what this company is. We'll be launching our new products. And with the diversity of content we have, I think we're going to be very formidable. And the free cash flow that we're going to be generating and the EBITDA and the diversity of assets is what many thought when we started with this company that we weren't all just the streaming company and everyone wanted to be just the streaming company that never made sense. It was like the clicks in the nineties, you know, a sub counted for a lot of money. It doesn't matter what the ARPU was. It doesn't, you know, so we are focused now on free cashflow EBITDA, but we're also focused. We believe that we should be a leader in subscription in AVOD around the world because we have the highest quality content. And to do that, you can't be the only fishing boat. You can't be the only one out there saying the only way to get me is to come through my portal. And so I'm not going to comment on what AT&T did or what Jeff Bukas and Parsons did. They all made their best argument and their best sense of how to drive this company. What we did, which is lucky, is we're Monday morning quarterbacking. It's easy to do that. We can now take a look at what What happened with the old-time Warner leadership team? What happened with the AT&T leadership? And how many subs did that actually get them? What was the engagement for that? How much money did they spend to get that? How much money are they spending in this area? And is there any return? So it's very easy for us because we can be Monday morning quarterbacks. And we're taking full advantage of that. And we're not going to make those same mistakes. Or we're going to change strategy, more importantly, because those strategies could have worked. It could have been that, you know, in many areas we could be sitting here saying, but, you know, so should Amazon and should a number of other distributors be out there sub-distributing for us? We're looking very hard at it because we need as many people. We think we got the best product. We should have as many people pushing it as possible. We have a great relationship with Amazon. There was a deal that we did with a leader in sport in the UK with our BT Eurosport Venture. And in the Champions League, we did a deal where we got 90%. We had 100% of it. In the renewal, we got 93% of it. And Amazon got seven. For that seven, we produce the content for them. We get paid a fee. We promote to them. We get a fee. We work together effectively. I was up with Andy Jassy two weeks ago at his house. Amazon is formidable. There's a lot that we've been doing together that has been helpful to us. They're buyers of our content. Before we weren't selling any content to them. Now we're selling content to them. We wouldn't sell everything to them, but they're a full, they're an important company. They have a broad reach and there are a number of other companies that also do. And so when we look at ourselves and saying, we have the highest quality content, we got a series of products and we have a huge number of libraries. How do we monetize those to build assets for ourselves? And also to build cash flow off of the value of something that we have that almost no one else has. Massive TV and motion picture libraries with leading IP and the biggest maker of content in the world. And we have chosen the path of selling new content and library to Amazon, but we'll be selective about what we do to each. On the point of NBA, we have NBA for the next three years. And we have been very successful with Adam Silver. You know, to the credit of the whole leadership team at TNT over the last couple of years, NBA Live is a fantastic show. It's the leading show for the NBA. Ratings are up almost 30% inside the NBA. And our ratings on the games themselves are higher than the competitors in the marketplace. We also have Bleacher Report. We have House of Highlights. When we're promoting the NBA across all of our platforms, And when Adam thinks about the future, he thinks about it the same way that I do. None of us love the idea that the only way to watch these games is on cable. There should be an opportunity because there's a lot of people under 25 that aren't having access to it. The good news is many of them are now tuning into TNT. That's a goodie for us. But it's not lost on Adam that we have a platform that reaches almost 100 million homes. And that we're going to be launching that new platform. And it's going to be a very, you know, the technology and the overall usability of the platform is strong. We got over 30 million people watching House of the Dragon and watching Euphoria. We're global. We're the leader in sports in Europe. We're one of the leaders in sports in Latin America. And so none of that is lost on Adam. We're having a lot of discussions with him. We love the NBA. But we're going to be disciplined. In the end, if there's an NBA deal, it's going to be a deal that's very attractive for us and very attractive for Adam. But we have a lot of tools in that. We have a lot of sports assets that no one else has. We got a global sports business that nobody else has. And we have a platform, a high quality platform like HBO Max that could generate 30 million people watching within a short period of time for a great piece of content. Imagine what that could do with sport. And we've had very good luck with sport in Europe. So I think it's an opportunity. We like the NBA, but we're going to be disciplined. I'm hopeful that we could do something very creative.

Thanks for such a detailed answer. That was super helpful.

Ladies and gentlemen, that concludes the conference call for today. Thank you for participating, and we ask that you disconnect your lines.