Warner Bros Discovery at MoffettNathanson: Strategic Growth in Streaming

On Thursday, 15 May 2025, Warner Bros Discovery (NASDAQ:WBD) presented at the MoffettNathanson 2025 Media, Internet & Communications Conference. The company showcased its strategic achievements and future outlook, emphasizing a cultural shift towards collaboration and accountability. While CFO Gunnar Wiesentheld expressed confidence in the company’s growth potential, he acknowledged challenges such as the undervalued share price and the need for disciplined investment.

Key Takeaways

• Warner Bros Discovery is targeting at least $1.3 billion in streaming profit for 2023.
• The company has paid down nearly $19 billion in debt since inception.
• A rebrand of HBO Max aims to emphasize quality content.
• WBD’s studio business is set for a significant transformation with a $3 billion profit target.
• The linear network segment continues to deliver leading margins.

Financial Results

Warner Bros Discovery has made substantial progress in its financial performance:

• Nearly $19 billion of debt has been paid down.
• The target leverage ratio is set between 2.5 and 3 times.
• Streaming has turned around from over $2 billion in losses to close to $1 billion in profits over the past year.
• The studio business is aiming for a $3 billion profit target, with a strong second quarter expected.

Operational Updates

Significant operational changes are underway:

• HBO Max is being rebranded to focus on quality content and will expand into international markets.
• The studio is improving processes and collaboration to enhance performance.
• Linear network revenues have grown internationally for five consecutive quarters.

Future Outlook

Warner Bros Discovery is optimistic about future growth:

• The company expects continued growth in the streaming business, particularly in international markets.
• Plans are in place to leverage global scale with local content.
• A disciplined approach to sports rights investment is emphasized.

Q&A Highlights

Key insights from the Q&A session include:

• The company’s share price does not reflect its true value, according to CFO Gunnar Wiesentheld.
• The rebrand from HBO Max will highlight the quality of content.
• Wholesale deals are proving beneficial in terms of average revenue per user (ARPU).
• The Polish network TVN is considered a core asset in the portfolio.

In conclusion, Warner Bros Discovery is strategically positioned for growth across its streaming, studio, and linear network segments. For further details, please refer to the full transcript below.

Full transcript - MoffettNathanson 2025 Media, Internet & Communications Conference:

Unidentified speaker: Nice vest.

Unidentified speaker: Thank you. I appreciate it. There you

Unidentified speaker: are. Yeah.

Unidentified speaker: Thank you, Gunnar Wiesentheld. Obviously, CFO, Warner Brothers Discovery. We really appreciate you being here. You’re gonna bring our whole conference home for us. So thank you very much for coming

So let’s start big picture, Gunnar. So looking back on the long road since acquiring WarnerMedia assets, there’s clearly been a lot of disruption in the business. Let’s just start with what do you think often gets overlooked as part of the achievements and the success stories that that you’ve made so far?

Unidentified speaker: Sure. And thank you thank you for having me, and welcome everybody. It is indeed feels like a long time ago that we started as WBD, a lot has changed in the industry. We have achieved a ton in the meantime. If you just look at our three segments, we got a linear business with leading margins in the industry.

We have turned a streaming service around from more than $2,000,000,000 of losses when we started to a trailing twelve month, you know, close to $1,000,000,000 of profits. And we’ve laid a foundation in the studio for, you know, I think enormous asset value creation to happen over the next few years, and we’re starting to see some of that impact coming through. What I have enjoyed the most myself, though, is really the cultural change that we’ve been able to achieve as a team, you know, from collaboration to just the discipline, the professional management, accountability, data driven approach. And I believe in professional management and I think there’s going to be dividends from that for for many, many years to come.

Unidentified speaker: Okay. As part of the professional management, there’s been a a very, intense focus on growing cash flow. Correct. I think that’s fair. But I’m also wondering, given the challenges of the linear ecosystem, can you explain to us what gives you the confidence that Max and Warner Brothers Studio is enough to continue to grow cash flows, for the company over the next few years?

Unidentified speaker: Well, let’s start with what we’re already seeing today. We’ve talked about this as recently as during our first quarter earnings call. In the international business, we already see the lines crossing for international affiliate revenues for five quarters in a row now across the entire portfolio, we’ve seen actual growth in revenue with our affiliates coming to us and, you know, looking for integrated solutions whereby we give a little on the linear side, we take a little more on the streaming side, and in the aggregate we’re growing. To some extent, not as consistently, but we’re also seeing it for ad revenues. And, you know, the so that’s what we already see.

If we look at the situation here in the domestic market, slightly tougher starting position, but, you know, the way we manage the affiliate deals last year, the first very encouraging signs coming out of Charter as they implement their bundled strategy giving me a lot of confidence that we can see some positive results here as well. And then if you look from if you go from linear over to the streaming of the studio businesses, you know, there is enormous opportunity still ahead. Again, starting with streaming, I already mentioned the profit turnaround. We have a target for at least $1,300,000,000 of profit in 2023, but all of that is still, you know, the very early innings. We have just launched in many of international markets.

We have three more major markets coming up in 2026. And in all of those markets, our penetration is still relatively low compared to what the total addressable potential is. And so, you know, with all that said, with the content lineup that’s coming down the pike, I have no doubt that we’re going to be able to generate very significant revenue growth and that we’re going to be able to get a very nice operational gearing in terms of, you know, sense falling through to the bottom line of every dollar of revenue growth. So there’s tremendous opportunity there. And for the studio, we’ve talked about the under monetized nature of that asset.

You’ve seen some improvements in Q4, Q1, at least on a profit side. Q2 is going to be phenomenal. And but that’s only, I think, the tip of the iceberg because what you don’t really see yet is the fundamentally different approach that we’re taking at the studio. There’s obviously the phenomenal performance of our creative teams on the one hand, but then there’s also a very different focus on process, metrics, discipline, collaboration that will allow us to be more successful, you know, in the hit scenarios and have less financial pain in the inevitable cases where we miss. And that’s at the very beginning and is going to drive very significant improvement over the next few years.

Unidentified speaker: Okay. So we’re gonna come back and unpack a lot of that, but you mentioned, q one earnings. So right after earnings, David Faber on CNBC reported that we could see an announcement of a split in the not too distant future. So maybe if you could just help us think about, you know, the recent board appointments and the completion of the internal reorganization that you did talk about on earnings. How should investors think about the timeline for strategic action to ensure, in your view, that that the equity properly reflects true value?

Unidentified speaker: Well, you know, I’ve I can’t give a specific timeline, and there is no specific timeline. But, you know, we should definitely share the view that our current share price is not reflecting the value the underlying value of our company. And so going back to, you know, what we announced in in December, the the internal reorganization that we have been able to, you know, work through in in in pretty short order. That gives us a lot of flexibility. There are a couple of things that it addresses.

One, you know, we cleaned up a legal entity structure that was still the result of, you know, the the two mergers. So we had Scripps, we had Discovery, we had WarnerMedia entities, etcetera. So that’s all cleaned up. It also creates a lot more transparency. We went to a great level of detail to really make sure that these these, you know, two divisions that were created really truly reflect, you know, the the linear business and the studio and streaming business with very different very different profiles.

And that’s going to be visible going forward as we report in this structure. And then in terms of the strategic optionality, look, David has been talking for a while about the generational disruption in the industry. There’s a lot more openness to discuss options, opportunities, and we’re just gonna make sure that we are in a position to take advantage of whatever opportunity arises, and and I feel that we are in that position.

Unidentified speaker: Okay. You you touched on this little bit, but now that they are the two formally separate parts of of the business on the network side and the streaming studio, can you just help us explain a little bit more behind the scenes? Like, how are you operating them any differently or strategically? Is there any sort of takeaway that happened from the whole process?

Unidentified speaker: Well, you know, we’ve already had three different segments, the the the network segment, the streaming segment, and the and the studio segment, and we’re continuing to to operate that way. We continue to make use of, you know, one WBD opportunities, but we also have greater flexibility to change that if we so wish.

Unidentified speaker: Okay. Let’s shift to streaming then. So there is a big announcement this week, in terms of a brand change that that I’m happy to show off here. So if if you if you can help us really just take a step back here, there’s been a lot of strategic shifts within streaming business over the past couple years, right, given the the road that we talked about earlier. It seems like the the shift away from more is better to better is better, including bringing the the HBO brand back.

So can you help us understand, how did you reach this conclusion, number one? And strategically, how does that position now HBO Max for that future?

Unidentified speaker: Well, so, you know, what hasn’t changed, what’s always been a big differentiator is, you know, HBO has always stood for quality. Right? But if we if we, you know, dial a clock back a few years, you know, at the at the time, 2122, there were a lot of, you know, everything for everyone, in the market. And, you know, we obviously came out of the gate with a combined portfolio with, you know, our Discovery Networks and and and HBO. And, you know, we’ve had a tremendous success story on the streaming side.

You know, we continue to dynamically grow. There is a lot of momentum even though we’re just getting started in a lot of the international markets. And, you know, as we analyze, you know, the data and what our subscribers are telling us, you can see that there is a lot of viewership on all kinds of content. 25% of the engagement is on, you know, linear network content on the streaming platform. But what really differentiates us, what really swings the needle when it comes to, you know, the positioning, the the the gross ads, the the growth momentum, it’s quality.

It’s the it’s the quality content that that we can produce in a way, that nobody else can. And, you know, that’s become more and more evident. And, you know, as we’re sitting together in these in these business reviews and and and talk about how, you know, the market has spoken here and quality is the real differentiator, that’s when when David said, look, know, we’ve got the brand that stands for content quality like like no other brand. And that’s, you know, how that’s how that change was made. And and look, we are we are incredibly successful with the the content pipeline that’s coming out of, you know, Casey and his his unbelievable team and and Channing and her team and then the the film group as well.

And we’ve done much better job recently, I think, in sequencing it the right way so that you can go from from the pit to the last of us, hacks, etcetera. And that way, sort of, you know, creating much more consistent stream of of of great quality content. And, you know, that seems to work out, and we’re doubling down on it.

Unidentified speaker: Okay. You mentioned the the $1,300,000,000 profit, target, I think, this year, and the 50,000,000 subscriber target. So maybe just help us think about in this new what is old context again, how how does that change at all? Or or are you even more confident given given the strategy in terms of the profitability and that balance with subscriber growth?

Unidentified speaker: No. We have we have gotten increasingly confident in our ability to grow this business. You know, remember, you know, we went out three years ago with that $1,000,000,000 target for ’25. You know, we’re blowing through that. And, you know, with every with every quarter, we have more data under the belt, the the the new platform rolled out globally, etcetera.

So we’re gathering more and more data and information, but that’s obviously all reflected in in our projections and our targets for for 2026. And, you know, we we continue to see great, opportunity for progress. The the European markets, that are currently in our relationship with Sky are gonna be a major, factor that that, will provide another push in in 2026, but we feel great about the the opportunity.

Unidentified speaker: Okay. Awesome. So let’s dig into to HBO Max in a little bit more detail, thinking about The US. And so we’ve done some work that shows, you know, the monetization per engagement hour. HBO Max clearly punches well above its weight.

Do you think, again, I’m guessing I know the answer based on the rebrand, but can you help us think about the how is this a function of the premium nature of HBO given its viewership? And do you think that there’s even more potential in terms of that monetization, obviously, both from the subscription side, but also if you wanna talk about advertising?

Unidentified speaker: Yes and yes. I think it is clearly a reflection of the the the high quality that HBO has always stood for and Max and now HBO Max stands for. There’s no question about it. And HBO has monetized above market forever, but, you know, adequate to the the quality that it delivers to its subscribers. And so I’m not surprised, you know, that that continues to be the case.

There’s a spectrum with maybe Fast on on on one end and and, you know, the likes, you know, of of our HBO shows on on the other end. So that is that’s how it should be. I also think, though, that there is a very significant additional opportunity from to grow from here. You know, I I do believe that the market as a whole is still under monetizing relative to the amount of, content and amount of content spent, and there has been a pretty consistent trend over the years, to increase pricing. And then on the advertising side, we have a very unique opportunity at HBO Max because a lot of our content still has a very, very low ad load partly because of the, you know, the legacy positioning of the of the brand.

But, you know, with with greater scale, greater reach, and we’re growing our ad lite subscriber base pretty, pretty dynamically. We’ll have better monetization opportunities, and, that is both when it comes to the inventory and when it comes to to, the pricing.

Unidentified speaker: Okay. So maybe taking that, can you help us think about that vision in terms of the ad tier strategy and pricing strategy for HBO Max versus the premium ad free tier? Do do we think that that should be relatively indifferent to you at at a certain point in time? How close are we to there? Maybe just help us really understand, like, the the economics of that.

Unidentified speaker: The yeah. The high level answer is yes. It should we should In an ideal world, you know, we we allow our subscribers to choose what what model they prefer, you know, more ads for for less money or no ads for for more money. You know, obviously, there there are a thousand complications underneath.

And, you know, right now, you know, I I’d say that it’s directionally the case in the aggregate for for retail subscribers. But then, you know, in in in some markets, it may be different in those markets where we have more, you know, hybrid or wholesale driven deals, you know, to some extent activation and and engagement needs to catch up with with with the subscriber growth. But by and large, we’re trying to manage towards, you know, indifference between the two models.

Unidentified speaker: Okay. You just mentioned retail subscribers. So I’m curious when we think about the wholesale deals which are coming more prevalent in The U. S. And clearly you have already made a lot of inroads internationally on that, Help us frame the economics when we compare the wholesale deals relative to the retail deals both in terms of pricing but also, you know, to to the lifetime value of those subscribers because assuming much lower churn.

Unidentified speaker: Yeah. You you mentioned you mentioned the most important term here, that’s lifetime value, right, because that’s really what we’re optimizing for, and we’re we’re managing the business by looking at lifetime value opportunity, you know, relative to the subscriber acquisition cost for for any given subscriber. And there are very, very different roads to success here. Right? You know, if you start with a traditional retail subscriber, relatively expensive to acquire, very high ARPU, and and but relatively high churn as well.

So that gives you sort of an index of a lifetime value of a of a standard retail subscriber. And then there are a couple of different approaches. If you take our Disney partnership, which has worked phenomenally well, that’s almost the the best of all worlds because, you know, these subscribers are are great in ARPU. There’s no distributor that’s taking a toll out of out of the out of the the profit pool. Subscriber acquisition is relatively efficient because of the important big brands that are involved here.

And churn is very low. So you get, you know, an enormous upside in lifetime value. And then you have our, you know, traditional wholesale or or or hybrid deals where, inevitably, you’re gonna want to give the the distributor a share. So your ARPU trends trends lower than than average. But at the same time, you’ve got someone else doing the marketing for you, so there’s not a lot of subscriber acquisition cost.

And especially in those cases where you really get into a hard bundled relationship, churn comes down very dramatically. So with a, you know, potentially significantly lower ARPU, you’re still able to get very attractive lifetime values. And, you know, what makes things complicated is we have every permutation of that in every market with all kinds of flavors. Okay.

Unidentified speaker: Something we we’ve talked about many times in in different iterations over the years is the licensing strategy

Unidentified speaker: Yes.

Unidentified speaker: As it relates to to the overall company. But but let’s specifically talk about as it relates to to streaming. What content should be exclusive to HBO Max in this rebrand? And can you maybe share the current strategy for licensing, you know, the hit shows of HBO and Warner Brothers to third party streamers today?

Unidentified speaker: Yeah. The so so the answer to to that first question is there is no hard and fast rule here. What matters is that we have the instrumentation in place, the data, and and and the workflow to make those decisions in a professional way. And that is actually one of the areas that I’m super happy with because, you know, as you know, we have a a combination of both. We have certain titles that are that are on HBO Max, and they will be on, and they’re gonna be exclusive.

And then we have others where we have made the trade off decision to go co exclusive. What’s what’s important is number one, you know, except for markets where we don’t have our own streaming service, we never sell our content. We, in in in certain situations, have coexclusive windows, but we never we never sell it. Number two is we have a very, very good view now on the value of our content across different windows and different monetization models. And so we know, you know, what the contribution of a certain title to the Max platform success is, and we know what the market value is.

And so we can make these decisions on a case by case basis with a very, very informed view. It doesn’t mean that, you know, JB or Casey or David might not say, you know what? I get it, but this one is worth, you know, ring fencing. But in many other cases, you know, we have seen real success stories. There are examples where, you know, Bennett Brothers is one of my favorite example.

You know, wonderful show. It had been sort of, you know, on on the Max platform for years. And we had an opportunity to monetize it, you know, put it put it out. And when it came up on Netflix, we actually saw viewership come up, and I I’m convinced that we have done something positive for the for the brand, for that content brand and and financially. So those are the examples.

And we have in house examples as well where, you know, you heard about The Pit, you know, coming back on TNT before, you know, this the the second season comes up on on HBO Max early next year. So we’re we’re gonna continue to make those decisions cape case by case without any religious beliefs but following, you know, following what makes sense from a business perspective.

Unidentified speaker: So taking all that, I’m curious how you think about the nonexclusive licensing in some of the international territories. If you wanna talk specifically about The UK deal with Sky, do do we think that that strategy actually limits the potential for increasing, you know, the the the HBO Max subs going forward because the content’s also gonna remain on Sky? So how how do we think about that balance?

Unidentified speaker: Well, I wouldn’t use the word limit. I would say it’s the opposite. It maximizes the value creation out of our content portfolio because we we have the ability in a market like The UK to, you know, go with a licensing deal, which was, you know, a path that that WarnerMedia had chosen before or to to go it alone with our own streaming service or, you know, to come up with a solution that maximizes value. And that’s what we went after where we have, a great opportunity now to tap into the hard bundle Sky subscribers, but also still have the opportunity to launch independently and potentially strike other deals in the market. And we believe that that’s that’s the value maximizing strategy.

And, you know, it’s done in The UK and and we’re I’m hopeful that we’re gonna get great outcomes in in in Germany and and The UK as well. What’s important to remember is the we operate a studio that is an independent studio in and of itself. Right? And as part of that, for for for WBD’s success, we have to treat it as a as a studio as well, which means that a lot of it is gonna a lot of the output is gonna end up on on Max, but we’re also open for business with with with other players in the market.

Unidentified speaker: That’s a probably a good segue. So when we think about growing HBO Max on the global stage, maybe help us think about how much you’re going lean into the international, even local content. Is that an opportunity that you think can accelerate or is there not as good of returns depending on the the premium nature of of the content that you’re looking for?

Unidentified speaker: There is a great opportunity, and it really isn’t the beginning, but it’s already in flight. You know, one of our our big advantages is we’ve always had a very strong international footprint. We’ve we’ve had boots on the ground in virtually every key territory globally. We’ve been spending billions of dollars on international content creation for years already, so we’re not, you know, starting from scratch. That said, in the wake of this international expansion, a lot of our growth in content spend is going into international markets.

And to your question about the profitability, it has to be a combination. You know, we have to have to leverage our global scale and and the utilization of the of The US originated content. But, you know, you won’t be successful if you don’t supplement that with with the right amount of local content in many markets, local sports rights, local news to some extent. It’s that combination that that drives the success, the global scale with the local expertise.

Unidentified speaker: Okay. I’m in the context of of the rebrand, but just even more generally, you know, thinking about the future of the streaming strategy. How does sports fit into this now? Because clearly after losing the NBA rights in The U. S.

But you still have very important sports rights internationally. So how do you think about that balance of of leaning into sports versus other potential avenues for for monetization?

Unidentified speaker: Yeah. I mean, you already made made the differentiation between domestic markets and international markets. You know, we’ve we’ve obviously experimented with sports and streaming here in The US and and have concluded that the the best strategy for us is to to have the sports on the on the on the more premium tiers. We have different models in in in certain international markets. And I would say is, you know, whether streaming linear or otherwise, the the general approach to sports is the same.

Right? It is it is the one fail safe way to buy mass audience. Right? You know, you know, for a certain price, you know what you’re gonna get. But that also means that there’s, at times, irrational competition for these rights, and we will approach it with that in mind.

You know, a great opportunity to, you know, to really engage passionate audiences, but the discipline to really figure out what it’s worth and and know when to walk and and where to strike. And and, I mean, you know, over the years, we’ve we’ve had great opportunities for for really, really attractive deals in sports, but it also requires to walk away from some if if if the math doesn’t work out.

Unidentified speaker: Okay. Well, I think we’ll we’ll come back to that in one second, but just a quick follow-up. Would you be open to sublicensing your sports rights in The US? Clearly, there’s another rebrand that that happened with ESPN, not flagship, just ESPN. So what would you be open to?

Unidentified speaker: I wouldn’t I wouldn’t speculate speculate about that right now.

Unidentified speaker: Okay. So let’s shift to linear then. So, again, we had the opportunity to hear from the NBA yesterday about its new deal. I’m curious how would you characterize the impact of of losing the NBA rights on Warner Brothers Turner in in The US? Could you call it even a win?

Like, is is that the right characterization after securing the the recent distribution deals? Maybe help us think about have we overthought, you know, the the importance of sports rights?

Unidentified speaker: You know, I think that’s too general a statement, but there is no question to me that our outcome of that NBA negotiation is a huge win for for WBD. We did exactly what I just laid out. You know, it’s a it’s a phenomenal sport. It’s a phenomenal entertainment product, and we know what it’s worth. And we know where the point is where, you know, we just start handing more cash over to the league than than we’re making with the product, and that’s where we have to draw the line.

And, frankly, that’s what we did. And it’s know, I’m proud of, you know, how the team, you know, handled that because to your point, there was a lot of, you know, external pressure and a lot of, you know, preconceived, you know, viewpoints on on what’s must have, etcetera. You know, we’ve done the work, and, you know, we I I mentioned this on our earnings call. We’re gonna benefit from a very significant step down in in in sports cost in 2026. In an interim in 2025, if you exclude the Olympics for a moment, which we had in 2024, sports rights are gonna step up because Luis Silva Wasser and the team were able to bring together, you know, a lot of new rights, some of which don’t perfectly align with the end of the the NBA.

But the bottom line is we were able to secure our affiliate deals with rate increases with a much, much more efficient sports portfolio. And that in the end is our job, right, to, you know, to find the right balance between, you know, what we really need and and, you know, in the interest of our shareholders, you know, paying fair value for for rights and and walking away where we believe that, you know, we we would be losing billions of dollars on on an investment.

Unidentified speaker: You you mentioned Olympics, so so maybe if we we can go there for a second. How how do we think about the ROI on that type of investment? That that was a renewal. So what did you learn from the last deal, and and how did that, transform the the way that you approach the the newer deal?

Unidentified speaker: Yeah. It’s interesting. These deals are very different. The last deal was a wholesale, deal. We essentially just, you know, we’re a one stop shop, opportunity for for the IOC.

We took all the rights, and then we broke them up into, you know, different packages, you know, utilize what we what we could effectively monetize ourselves. In some markets, we had to, you know, sublicense to, you know, public service broadcasters for regulatory reasons, etcetera. So it was a much greater, much more involved deal that was was a game changer at the time for us because it really allowed us, you know, to reposition Eurosport as a network and and redo a lot of affiliate deals at the time. The renewal now is much more targeted where we really just cherry pick, you know, what what what we need for our specific platforms. And it’s it’s it’s gonna be a profitable deal.

And it is it is a great it is a great product because, again, talk about the passion and and and the audience engagement and our ability in a in a streaming world to really deliver every moment, you know, as opposed to in the past where, you know, people had to choose in a linear ecosystem, you know, what the what the highest profile moments would be.

Unidentified speaker: Okay. So I guess putting those kind of two different juxtapositions of of how approaching sports deals together, how do you plan to invest more on on sports rights going forward? Do you plan to take some of that savings that that you talked about for the NBA and reinvest that, or how how do you understand, like, what that right balance is between having enough sports or too much sports?

Unidentified speaker: Yeah. That that is a that’s a great question, and and the honest answer is there’s no perfect like, there is no mathematical answer, but what we have learned is that our portfolio is is strong as it stands right now with, you know, the college football playoffs that Luis brought in, Roland Ross, NASCAR, you know, a lot more of the college sports. The, you know, the the the preparation over two years, you know, for that for that change moment with the NBA was very well executed, and we’ve got a great hand right now. And from a forward looking perspective, we’re gonna continue to do the same thing. You’re gonna see us in every in every discussion around every available right, but you always should expect us to come in with a view of what it’s worth.

And, you know, chances are, you know, we’re not going to go for a lot of it because, as I said earlier, you know, we all know that sometimes the pricing ends up in a less rational, less financially viable area. But, you know, the there there there have time and time again been great opportunities for for a really successful deal making. I mean, especially if you look at our international business, you know, our ability to, you form that joint venture with BT Sports, TNT UK, that was a phenomenal deal. And those are all opportunities that you only get access to if you’re, you know, in the deal flow, if you’re in the discussions and then, you know, really get a sense for where, you know, where there is an opportunity to strike.

Unidentified speaker: Let’s shift over to part of the reason why everyone’s here this week is is the upfronts. So again, you guys had your presentation as well. You help us think about, and we heard on the earnings call, but just the cyclical versus secular dynamic advertising going on the linear networks, how does shift to CTV and these other platforms impact the conversations that you’re having today with with advertisers?

Unidentified speaker: Well, the look. The the the secular trends are are continuing. There’s no question about it. I think that Bobby and Ryan did a great job laying out what we can do as partners in that space and how linear can be a lot more data driven and much more solution oriented for our advertisers. I think that is incredibly important.

And we’re also seeing a lot of demand for our, you know, streaming and digital inventory that comes to the market. And as such, we’re continuing to go to market with a convergent approach. And you should assume a continuation of that shift of dollars over, but leveraging the strength of both businesses. And as we already said, the interesting observation is that so far, if we look at scatter bookings, we’re still not really seeing any meaningful impact of the macroeconomic uncertainty, which is phenomenal. But as we said before, you know, for for the upfront market, you know, we’re expecting a slightly slower pace maybe initially than than than otherwise.

Unidentified speaker: One more for you on networks and we’ll switch to studio. You recently concluded to not go forward with the sale process of the Polish network TVN. I’m just help help us think about how you evaluate. What when is the right time to, you know, look to sell off some some networks in in your very large and expansive global portfolio?

Unidentified speaker: Yeah. Look, that’s it’s public company life, right? And and and certainly some some great people on our Polish team weren’t weren’t happy to, you know, read rumors in the press, etcetera. But the reality is, you know, when we get the sense that there’s, you know, significant sort of unsolicited inbound interest, we gotta evaluate, you know, what what what’s the best strategy as a as a company for for all of our assets. And and the answer is, you know, TVN is a phenomenal asset that is that is core to our portfolio.

And, you know, it is I have looked at a lot of TV, you know, broadcasters and TV players in Europe. What Kasia Kiele is is doing there is just, you know, phenomenal. She has an unbelievable operation, you know, running at at margins that are that are unrivaled anywhere in in Europe. And we have a very significant upside opportunity from here because there there there are a lot of, you know, market specific factors. Number one, the market itself continues to grow.

You know, talk about, you know, current advertising trends. But there are also, you know, specific company specific opportunities that we believe we can capture over the next, you know, three to five years. There there is a lot more fun to be had with that asset.

Unidentified speaker: Right. Speaking of fun, you’ve had some recent successes at Warner Brothers studio, Minecraft and Sinners. Obviously, Superman is probably the biggest driver of the year still to come at least. So can you help investors think about what the right level of normalized studio profitability is? You’ve put out Yeah.

The the 3,000,000,000 target, but but how do we think about that normalized level?

Unidentified speaker: I don’t know if there’s a normalized studio profitability. You know, one of the one of the difficult things about the studio is that it is there is no normal state. Right? You have to look at longer term trends. You have to look at a slate in the aggregate.

It is a hit driven business. You’re inevitably gonna win some and you’re gonna lose some. What we’re working towards and a lot of that in addition to the creative quality, you know, the the the team and and and the ideas and the access to talent, a lot of what we focused on is to put the process discipline in place, to have a to have the right mix between, you know, filmmaker driven, you know, original films on the one hand, you know, some bigger sort of IP driven tent poles on the other and then, you know, some you know, especially with New Line Cinema, we have the opportunity to put in pretty low risk and very consistent performers into the slate. And I think that the team is doing a better and better job. And look, the second quarter is a great example.

You’ve got that, you know, very commercial Minecraft success. You have centers, which which was a big swing, and and it’s hit pretty big as well. And so again, we have that $3,000,000,000, you know, normalized level that we put out there. The studio is always going to have hits and misses, but again between the collaboration, the process discipline, the execution discipline, and then importantly, the franchise management and the full utilization of all of the ancillary opportunities, consumer products, experiences, etcetera, a lot of that is completely underdeveloped, and we’re, you know, in the early innings still of of of building that out. But it’s not a coincidence that you saw, you know, the hype around Beetlejuice, Beetlejuice, you know, Minecraft, McDonald’s promotion being sold out, you know, in in in two or three weeks.

You know, the the the the big total company push behind Barbie, etcetera. Those are things that we’re still developing that that that weren’t in place before. And I think that all this taken together is going to allow us to book greater returns in the success cases and and and also have to live with, you know, less less difficult financial impact, you know, in the inevitable misses that we’re gonna have.

Unidentified speaker: So I’m curious. Given that volatility in the business you’re talking about and when you factor in video games and and the the much more stable TV studio, can you help investors think about what the cash flow profile is of just a stand alone studio business, Warner Brothers?

Unidentified speaker: Well, you know, and thank you for mentioning the the the TV studio because that’s, performing at a very high level. You know, Channing’s team is doing really, well, and we’re going to have a much greater year as well from a licensing and external sales perspective. So, you know, there’s always going to be fluctuation. Importantly, and we’ve said this publicly before, we want to invest more in content. And if you think about our entire portfolio, you know, we’re we’re probably gonna, you know, over the years spend incrementally less on the linear side.

But for the streaming service and for the studios, there are great return opportunities that we’re going to get behind. And so for the short term, we will not shy away from significant investment to get that business to significant organic growth.

Unidentified speaker: Right. So a couple of questions to start wrapping up here. Again, we’ve talked about all of the opportunities and we all know the industry pressures. How would you prioritize the need exactly that you talked about leaning in and investing versus maintaining investment grade rating for the debt? And then the follow-up is, you know, as you think about that potential upside from the equity, is that more of a focus or how do you walk that that fine balance?

Unidentified speaker: I think, you know, I think we can manage that really well. I I do think there is significant equity upside as I as I said before. But to your point about sort of the the the balancing the trade off investment grade and everything, I think we have done a really good job. We have paid down almost $19,000,000,000 of debt since coming out of the gate as as WBD. That is interestingly pretty close to what we laid out, you know, in the s four that we filed four years ago despite everything that’s gone on in the in the industry.

So, you know, we are very focused on that. I am also very focused on leverage. Still believe that two and a half to three times is the right target range for for a company like ours. And we will continue to dedicate, you know, virtually all of our free cash flow to delevering further. At the same time, you know, we haven’t had any meaningful situations where we have not made an investment just in order to defend the balance sheet or anything.

We we’ve been able to reallocate and and and fund what needs to be funded. But that said, we will we will make sure that we invest in the business at the at at the adequate level, And I think we can we can achieve a lot of this at the same time.

Unidentified speaker: Okay. So in closing, David has talked about the media industry undergoing, you know, generational disruption. So maybe if you could just help leave us with how Warner Brothers Discovery is positioned currently within that framework and your strategic priorities, to navigate this period over the next couple years.

Unidentified speaker: Look, I think we’re very well positioned. I think we’re we’re seeing a lot that’s working, and we’re seeing a lot of evidence for, you know, success success to come when we think about, you know, how we’re managing differently and and foundations that we have laid. And segment by segment, we’ve got a linear network segment that’s performing at margins that are unrivaled in the industry, and we will continue to be relentlessly focused on defending that free cash flow. We have shown that we can, you know, scale a a streaming business globally that we can roll out a large number of markets in very short time with with, you know, a state of the art technology platform, and we are just getting started penetrating those markets. We have one of the greatest content lineups in the history of HBO coming down the pike.

So there is going to be continued very, very dynamic growth on top of the dynamic that we already saw the first quarter. And then for the studio as well, you know, we have made the investments. We have laid the management and process foundations. And as I said, we are going to make a very meaningful step towards that $3,000,000,000 target already this year. And that is not $3,000,000,000 is not the end of it, but, you know, hopefully, the basis for a lot of, you know, dynamic further growth.

Unidentified speaker: Alright. We look forward to seeing all of that.

Unidentified speaker: And so do I.

Unidentified speaker: Thank you for being here. Thank you for taking us home. Thank you all, guys. And,

Unidentified speaker: again, nice vest. Thank you.

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