Q3 2020 Discovery Inc Earnings Call

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Ladies and gentlemen, please standby your conference call will begin momentarily. Thank you for your patience and please standby.

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Ladies and gentlemen, thank you for standing by and welcome to the discovery Inc. third quarter 2020 earnings call.

This time, all participants lines on a listen only mode. After the speakers presentation and will be a question and answer session.

Good question during the session you will need to press Star then one of your telephone.

Please be advised that today's conference maybe recorded if you require any further assistance. Please press star and then zero.

I would now like to hand, the conference over to your Speaker today, Mr., Andrew Slaven Executive Vice President Global Investor strategy, Sir you may begin.

Good morning, everyone. Thank you for joining us for discoveries Q3 earnings call. Joining me today are David Zaslav, Our President and Chief Executive Officer, and who interviewed and build our Chief Financial Officer, you should never sees earnings release, but if not please feel free.

Access it on our website at Www dot corporate stuff discovery Dot com.

On today's call, we will begin with some opening comments from David and sooner and then we will open the call to take questions before we start like to remind you that comments today regarding the company's future business plans prospects and financial performance are forward looking statements that we make pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 995.

These statements are made based on management's current knowledge and assumptions about future events and they 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 2019 and ourselves when filings made with the U.S. Securities and Exchange Commission and with that I'd like to turn the call over to David.

Good morning, everyone and thank you for joining our Q3 earnings call.

I'm pleased to report another very strong quarter instead of operating results, even amid continued challenges from Colby and market uncertainty.

Discovery continues its strong steady and stable operating performance.

Despite the secular challenges across the industry.

Discovery remains uniquely constructed to navigate and grow during this time of uncertainty disruption and accelerated change.

Our core strategic advantages differentiate discovery and give the company a distinct late in which to attract audiences and drive success.

Discovery is the leader across multiple popular.

Family friendly verticals with Universal appeal.

Anchored by brands and personalities that resonate globally.

And help people cure rate.

We own and control the vast majority of our content.

Almost all of which is unencumbered across all regions and platforms were above the globe.

And we were able to monetize our content across one of the broadest global footprint in the industry across traditional linear ecosystems.

Putting both free to air in pay TV as.

Well its direct to consumer streaming platforms.

These advantages coupled with a flexible low cost production model give discovery, a super efficient programming and content model to drive industry, leading operating margins and free cash flow conversion.

We are a free cash flow machine that's.

That supports our ability to invest in strategic high growth Nexgen opportunities.

Our plans for an aggregate of direct to consumer offerings have come into clear focus.

We look forward to providing a look at our product.

Road map and go to market strategy in early December.

We believe you will come away as enthusiastic as we are about where we're going with our global direct to consumer screaming strategy.

As you know the cornerstone of discovery strategy has always been and will continue to be nursing entertaining and delighting our fans around the globe with programming anchored by personalities that are recognized trusted and love.

Across durable genres in verticals that connect directly with viewers.

Our content and beloved brands more resident today than ever before you see that in that the viewership scale that we've achieved globally.

Increased significantly over the last six plus months.

The global pandemic has refocused all of us on what matters most.

The people family and friends in our lives.

Reordering of priorities and interesting content that is positive safe and enriching.

Our brands personalities and content.

Magnet for those seeking comfort and familiarity during a time of great unease and uncertainty all over the world.

In many respects we are seeing this play out with our audiences in a meaningful way.

Everywhere around the globe.

And our content and John Morris fits squarely into this moment.

To that point, our share of viewing both in the U.S. and across most key international markets are up substantially.

In the U.S., we have gained the most share among prime time, T.D. viewers 18 to 49 year to date.

<unk> by 130 basis points.

And then the third quarter.

Even during a heavy news cycle, we have grown share by 150 basis points as viewers 18 to 49 are turning to our discovery channels.

In fact, our top network T.L.C.

Every one of the cable news nets in the third quarter.

Internationally, we achieved our fifth consecutive quarter of year over year share growth up 5% in the third quarter.

Well, our audience increased 10% year over year outpacing putt level growth.

Another positive sign for the popularity and durability of our content categories and brands around the world.

In terms of commercial success behind the firming advertising marketplace around the globe, we have posted healthy sequential improvement again in our advertising revenue growth.

Which while still negative year over year.

Showing demonstrably improvement around the world.

We have seen advertising partners, we surface around the globe and as measured by our performance in the recent upfront market here in the U.S. we.

We are very encouraged.

With respect to the upfront now that his wrap I'm proud of what our team has accomplished we will methodical.

Confident in the popularity of our brand and demand for our categories.

We held firm in our assessment of our deliverables and.

And I believe we took another big step forward toward achieving fair value for our reach and engagement, resulting in continued growth in share of wallet.

We've seen great momentum from what we refer to as our Premier product, which is really breaking out we offer advertisers and unduplicated broadcast equivalent reach across our portfolio.

At a far more competitive CPM than broadcast.

And a very significant premium to even our highest realize cpms on our individual networks, it's a win win.

Girl, who will take you through Q3 on our outlook, but we remain confident that as we return to a more normalized operating environment television will continue to demonstrate its value and importance within the media ecosystem.

And perhaps even more so now given the increasing fragmentation and viewing patterns and difficulty in reaching eyeballs.

With regard to the distribution, we continue to hold our own.

Elections, the value we bring to the table.

An environment, where many of our peers are being priced down aggressively add or tier.

We grew modestly in the U.S. helped by recent renewals and I'm pleased to note that just recently, we completed mutually beneficial renewals with Mediacom and NCTC.

Those deals are on top of the positive deals and concluded early in the year with Comcast charter and Cox.

And very soon we look forward to addressing the many homes in the country that currently do not receive our content.

The narrative is similar.

It's not a bit more advanced internationally, where we have begun to lean in more intently directly to consumers.

In markets like Norway, Sweden, and the UK, we have entered into a win win deals with distributors hybrid partnerships that expand our longstanding linear distribution relationships to also include B to B to C.

With additional flexibility to go directly to the consumers our selves.

Our new direct to consumer partnership with Sky in UK exemplifies this approach where they will offer our UK based aggregated profit discovery plus there are millions of sky Q customers starting this month.

It's early days no doubt, but given our share of market, which in certain regions is north of 30%.

Secured by highly valued local content we.

We are optimistic that the path. We're on we will address the opportunities that are surfacing from evolving consumption patterns around the globe.

We remain well positioned strategically operationally and financially.

To advance and further refine our direct to consumer approach.

Management team has evolved on the strong technology product and content leadership.

And we have a definitive path to drive engagement and scale.

And unparalleled library.

Oh loved brands and personality driven content.

Which will support a roster of exclusive and windowed content.

All culminating in a platform that is global infocus and local in appeal.

It's a critical time for our company and our leadership team I know.

I look forward to sharing more about why we are so enthused with the next chapter of discovery in early December.

With that let me turn it over to garner to take you through the quarter and a financial update.

Thank you David and good morning, everyone.

Nine months into the global pandemic at the macroeconomic followed resulting from it I am very pleased with our performance at the command and control we have demonstrated over our business. Despite the uncertainties that exist here in the U.S. and around the globe.

We continue to be laser focused on efficiency across our global cost footprint and reallocating capital to higher growth next generation initiatives.

We are also proud that we have been able to return nearly $230 million to shareholders through our share repurchase plan that third quarter for which we noted we would allocate approximately 50% of our free cash flow. This amount represents essentially just that from the time, we reengage in our program.

Turning to our third quarter results and starting with U.S. networks advertising revenues decreased 8% year over year. This was largely a result of covert related weakness in demand as well as continued declines a pay TV subscribers, leading to lower universe estimates.

We were however helped by healthier scatter cpms in the quarter, which were up high single digits year over year.

Fusion revenues increased 2% year over year as affiliate rate growth offset subscriber declines subscribers to our core fully distributed networks, which account for nearly 80% of our distribution revenues declined by 4%, while our total portfolio subscribers declined by 6%. You'll note. This is a slightly lower decline than in previous calls.

Orders as we benefited from additional distribution of certain networks as a result of our recent renewals as well as continued strength from virtual NBP d.'s, but we remain well distributed across the many operators.

As David noted we are pleased to have recently completed additional distribution renewals with NCTC Nvidia.

Now turning to international networks, which I will discuss on a constant currency basis.

National advertising revenues decreased 9% year over year led primarily by sequentially stronger advertising momentum in many of our key European markets, Indeed markets, such as the UK, Germany, Spain, and Finland, all finished with positive year over year growth for the quarter.

Our European region was down high single digits in the third quarter.

In Latin America, well keep markets appear to have bottomed and trends have sequentially improved the overall retrans recovery will likely follow an uneven path and the Asia Pacific region. Our smallest was approximately flat year over year during the quarter with some markets now generating positive year over year advertising world.

International distribution revenues decreased 4% year over year like last quarter, but as they got was a modest headwind to year over year growth. Additionally, our schedule of sporting events is condensed while the number of events that have been delayed still have not aired which obviously impacts subscription revenues as well as advertising revenue.

Finally, we're seeing a modest pickup in churn from the more economically sensitive segments of the pay TV ecosystem in Latin America, primarily from subscribers were delinquent on payments and are no longer being reported by distributors.

We expect this to be more covert related and the shorter term disruption.

I'd also like to offer an update on that sales for the fourth quarter.

October has been strong by this year standards with domestic AD sales roughly flat and international AD sales down just slightly.

This may not be a trend we wouldn't necessarily extrapolate however for the full quarter given number one some tailwinds from political advertising in the U.S. in October and.

And number two risk from rising cold case numbers globally, and beginning government countermeasure, especially in Europe, which pose risk the back end of the current quarter that said, we are confident to see sequential improvement in the fourth quarter versus Q3, a gun total operating expenses for the quarter were up 2% ex FX.

Cost of revenues were up 7% FX effects largely due to sports given the number of postponed events from the first half of the year like the French open at the tour de France, which were rescheduled into the third quarter.

Q4 should look like Q3 from a content ramp perspective from both linear as well as direct to consumer where we also increased our investment in sports initiatives like all sense going in Sweden.

Which is primarily available as a premium tier on deeply. Furthermore, content production is almost back to normal with only 10% of our current production still paused, primarily due to travel or local restrictions.

Total SGN eight decreased 6% ex FX behind reduced marketing and travel and entertainment spend year to date total operating expenses are down 2% ex FX and we remain on track for total operating expenses to be flat ex FX for the full year.

Moreover, we continue to expect total operating expenses for our traditional linear business will be down mid to high single digits year over year ex FX with the savings reinvested in our next generation initiatives.

During the third quarter, we recognized a deferred tax benefit in the UK and the benefit from a favorable multi year state resolution.

Year to date, our effective book tax rate is 21% for the full year, we expect an effective tax rate in the low 20% range GAAP.

GAAP diluted EPS increased 26% to 44 cents per share due to the abovementioned tax benefit this quarter versus a tax expense in the prior year quarter as well as the goodwill and intangible asset impairment charge taken in Q3 2019 related to our Asia Pacific region.

Adjusted EPS on the other had decreased 7% to 81 cents per share.

Tailwind on revenues and around 15 million dollar headwind on a of it for the fourth quarter, we expect foreign exchange impact to revenues to be a 5 million dollar tailwind and a 15 million dollar headwind unable of it lastly, as we head into the final weeks off a year and prepare for 2021 I am encouraged.

My discoveries position in the media landscape, even in the face of macroeconomic and secular challenges head globally, I believe or a solid financial footing will enable us to whether the macroeconomic storm, while supporting our strategic initiatives to meet the secular challenges head on.

We remain very enthused and excited about our strategic pivot and the news that we plan to share with you in the coming weeks.

David and I are happy to take your questions.

Thank you.

And gentlemen, if you have a question at this time. Please pass the star followed by the number one key on your replies sounds telephone is there a question has been answered or you wish to remove yourself from the queue. Please pass the bounty.

Once again to ask a question. Please press star and then one now.

And our first question comes from that is mitchelson from credit. Please your line is open.

Oh, thanks, so much good morning, everyone. David I wasn't for David went for Gruner, David The T mobile relaunch of of streaming live T. V service was certainly interested in you talked on this call about distribution they've been relatively broaden on all platforms with the discovery networks and the stand alone you know $10 a month vibe service separate from a news sports focus.

40 dollar bundle of channels can you talk about the strategy there and and then whether this would be what allow other distributors to pursue a similar strategy and then for Gunnar I was just hoping for an update I know you gave the the cost and investment in you know digital initiatives, but not the revenue I was hoping for it up there.

Where 2020 shaping out in terms of losses on the digital investments and what's the path forward Ah Ah from here into 2021 and beyond for that thank you both.

Great. Thanks, Doug.

Good morning, everyone.

We were very surprised without T mobile decided that they were gonna bundle on networks.

Particularly because we have a clear agreement where our networks are required to be recapped to be carried on all their basic tiers O T T offerings.

So, let's just characterize it this way we're in active discussions with them to quickly resolve that issue.

We don't believe they have a right to do what they're doing right now and they know it's very clear to them then they're focused on it so.

That's that's interesting thank you.

Okay, Doug and.

On revenues and losses from the.

From our next generation initiatives.

Remember, we started the year with the guidance of 1 billion plus in revenue and lots of roughly $600 million is obviously pulled that but what I can say is that we have continued to enjoy some revenue growth all of our numbers include contributions from our direct to consumer portfolio, obviously not at the at the level that we originally and visit a visit.

But but we're very pleased with the with the progress. We've also redo some of the investments, but continued prioritizing the strategic build out of the portfolio. So.

We still expect a highly increased investment number here for the year and what we'll say more later and also for 2021, it's a little bit too early but again, we're fully committed to the discovery future in a direct to consumer stays more will make all efforts to support that David if they could.

David if you might be following up because you didn't mention that you had a lot of the cable deals done. This year have you already sort of <unk> do you have line of sight on partnerships for the launch of your O T. T service in the United States. In other words is the distribution partnership and you know or already wrapped up or or well enough underway that you have line of sight.

And visibility or is there more to do there before you really ready to launch that service.

Yeah.

We're gonna go into real detail, we're gonna do an extensive discussion with full disclosure in early December which were super excited about where it will take you through in every category, where we're going how we're going why we think we're advantaged how globally. We think we can attack it who's helping.

<unk>.

We have been the whole company has been focused on this so I'd like to.

In early December will come out with the whole package I think you'll like it very much we've had the benefit of being at this for a very long time direct to consumer around the world in different ways. We've learned a ton we see areas, where it's really working and why it's working and so what you'll see.

Will will be the benefit of all of that and as you as you know as as we announced.

At our last call and as you saw.

As we talked about this morning already.

We certainly recognize the value of having distributors.

Multiple distributors.

Supporting N and distributors have recognized the value of having unique content that helps their platforms and a good example of that is sky.

As well as multiple distributors across Europe that we've already announced that will be helping us just one other point.

We've had a really strong year on this issue of how do we get great content that people engage them in our brands grow our viewership and.

And it's really reflected in the fact that we've been able to get all of our affiliate deals done this year here in the U S. With some of the some great distributors large distributors with very strong pricing with all of our channels being carried.

And it's a great deal really for both of us because we're way over delivering they're selling into our channels and when you look at the overall package today.

The real value here with so many reruns, it's basically sports news in us.

And who knows what's gonna happen now with with political but news looks like it could potentially go back to normal in which case there'll be really a big added benefit, but we've been able to get full coverage of all of our channels with big increases and I think that really reflects the great work and the and the great IP that we have.

Domestically here in the U S and the fact that we're number one for women or number two for women and where we have a real broadcast equivalent.

Or higher on many nights, then broadcasters and we'll talk about that later, how we're advantages ourselves on it.

Thank you both.

Thank you.

And our next question comes from right Greenfield Some light shed partner your line is open.

Hi, Thanks, a couple of questions. When you think about discovery strategy, that's coming I know you're gonna announce it soon but just conceptually wondering especially overseas how does eurosport fit in I mean are you thinking about having we've we've seen companies like Disney create sort of a siloed approach where sports E. S. P N plus as separate from did.

The plastic Hulu, they kind of have sports separate from everything else as you go to market is the thought when you talk about sort of and everything discovery does that include what you're doing and sports overseas or are you thinking about that as a separate product and then too you made comments uhm in the queue to release you talked about how.

Abandonment of some M V. P. D deals put pressure on subscription revenue you sort of prepare yourselves for D to see it sounds like from your commentary that that's expanding and there's more markets that were playing and beyond the nordics that were playing into that pressure. This quarter could you just help us understand sort of where you're making those decisions to sort of sad.

<unk> short term.

Affiliate revenue to position yourself better overseas for D C.

Sure. Thanks rich.

Well first we were the leader in sports in Europe, and we were the later with local IP and the real advantage that we think we have and we will get into more detail of December is you have mostly big U S services with a little bit of local.

And we have dramatic local local at the payment we have all of our our our brands and and and and <unk> and cable content in language in 200 countries and all throughout Europe, we have local sports and we do have as you know some of the locals some other local sport like the <unk>.

But one of the great things about this company because we're in 200 countries. We have the ability like we did in Denmark to say hey.

We might be able to take one step back and to forward how would it work.

If we opportunistically take all of our local content all of our local sport.

And go to market and what does it look like and what is our staff and who will work with us and how quickly can we scale.

And so when we talk to you in December.

We have a lot of learnings on what's worked and what hasn't.

There are when we can take one step back and we think that we have the goods to go two steps forward, we'll know basing it on metrics in our knowledge.

We think we can do to we think we really have a free cash flow machine.

That will continue for a very long period of time to generate we'll return with great margins, but they will be investing.

Thoughtfully and knowledgeably above the globe.

With our we've been holding our global content to go at it and now we're going to go out in a way that we think is quite unique and I've set up for a long time local content.

All of our existing genres local.

And looking at this opportunity to add local sport.

And in some cases that could also be local news, it's a big differentiator for US everybody else is looking at going above the globe or even expanding into other countries and they're facing two issues one holy cow I don't remember any of my content outside the U S. What do I do now so do I go buy it back.

Wait to create it now it's gonna take so much longer to create <unk>.

That's so that's a real a real issue. We don't we don't have that issue and we have a an extensive library as well as this the wheel local elements. So I think as you look at all the other players great players in the marketplace.

There at a huge disadvantage here.

And we think we're at a very significant advantage.

And so we're going to play into that and we're gonna play into it hard.

Thank you really helpful.

Okay.

Thank you.

Your next question comes from Michael Nathan from Moffat Nathan Your line is open.

Thanks, I have I went for David and one for good or David.

On the up front I know.

The story was it you guys definitely held out for for more pricing I Wonder if you talk a bit about what you actually achieved on the pricing side.

How much inventory would you would you sell versus the past in sequence.

When you look at your premium product enjoy the best pricing versus broadcast how.

With an with an unduplicated reach that when when an advertiser looks at us They said wow for reaching limiting their better and now the broadcasters are the traditional broadcasters either having been investing where they can invest now and so we have fresh content and so when we looked at it we said there really is a win here.

We did I believe we I know they are with it we did better than everyone, but it's more than that our cpms have been kicking up but maybe we get an extra couple of points. We established this discovery premier package.

And you know.

In in those cases were charging dramatically more so the app. So the broadcasters are 60 60 to 64 and we're in the Fortys the high Fortys to mid Fortys the low fortys.

And.

We go up 50%, but we have better reach with more original content with more engagement.

And we.

We found that really the.

The ability to reach women with us and the engagement and the brands and the brand affinity. So I think we did great on the upfront.

Much better than we've ever done I think we established all the work we've done over the last three years.

Of saying here's what we are here is why were more valuable in the long run there's an argument that we should flip.

If the broadcasters are running mostly.

We run content and.

And we have original content, then why should they be in the sixties and we'd be in the twentys.

You know if the if the package the core of the packages sports news and us.

And we can provide consistent and reliable original content with high engagement.

Why shouldn't we be in the sixties and they drop events. So I think were really pushing this issue of.

And getting a lot of traction that.

It's a real win win and I think Johnston loft gets a lot of credit. We've we've been working on this for a couple of years and were really breaking through so and we see it in scatter we.

We see it in scatter a lot of strength, because we have a lot of original content and we have a lot of momentum.

Yep.

Michael the them on your free cash flow the cash flow and working capital question.

Two things working capital I think the direct to consumer business in an off itself is a little more beneficial because you get paid upfront.

Your consumers directly as opposed to the TV cash cycle, which as you well know.

Some very long.

Payment terms.

Terms with with with the traditional business partner, so thats a positive.

From a higher level for the for the free cash flow overall, obviously any startup business any growth business.

It has it has upfront investments as we're building scale to monetize the structure that we're putting in place upfront so but as you know we've been working on this for two years very pleased with the progress of the technology.

Platform. So that that's an area, where we have a bit of a headstart. We've also been hiring personnel, we've been producing content.

As you know the the big swing factor and the big variable factor for any future expansion is really subscriber acquisition cost and here, we will be willing to get behind anything thats really successful from a from a customer lifetime value perspective, and clearly you know there is.

A lot of variability in there and there is also a.

Little bit of the more successful you are the more growth potential and growth you're seeing the more you're spending against that but again, if you take a step back.

Very very confident in this company's ability to generate free cash flow and investing in our own organic growth is our number one priority so we'd be we'd be willing to get behind that right.

It doesn't sound like we wouldn't other companies pivots, the cash working really really consumed by the parent but it sounds like this is more manageable here given the investments you've made so far.

That plus again I mean, we've been saying is all along we're also just operating in a very efficient model with our global really global foot and the platform in place and very efficient content Jordan. It sounds so yes, we should be we should be better off than others.

And we think interestingly that this grand experiment that we're all.

Unfortunately going through here with the pandemic.

And operating remotely we've learned a lot.

And we've also learned on the content side, how we could produce content less how that content can be more engaging and more compelling how do we produce content.

Is there room to continue to do so how are you thinking about that and then separately. David you mentioned the sky direct to consumer offer which we believe is a rebrand the deep play as discovery plus in the UK and Ireland and you've added a subscription to tier what's the rationale for rebranding to service and how did you decide to.

And that's for 99 pound price point.

Okay. Thanks, so much Jessica there.

There has been a lot of restructuring and I think.

We're going to be able to get better pricing as I've said, we're getting more sure. If news calms down we get we may get a lot more and as these other companies decide you know what.

Let's kind of let's move away from this platform I think more and more people are going to what's really sticky.

And consumers should see where people are investing and so I think that we're going to get a real benefit from that having said that I think we can save a lot of money, but we're not going to do it in the area of content and because it's gonna pay off on both the great content that we can create we're learning a lot about what people want so badly.

They'll pay for it.

And how do we create.

Where do we put content will make those same decisions and we'll talk about that in December and we've been at that now for a very long time quietly.

But we think great content.

Is what our company is about and owning it globally that is what discovery is and that's what we are a global IP company.

And we're not a distribution company.

And so it is not a sidecar for us it's what we do for a living.

Uhm.

We will talk in December about what we're doing you can get a little bit of a hint of it in with Sky.

We think that a global platform.

Ultimately I think that getting we need to get our content in front of everyone everywhere in the world, but we'll we'll take you through what that balance is in and which piece of that we're going to go at hard we've thought about it a lot.

We've already been added a lot and we will give you the detail in the backup in early December.

Thank you.

Sports was off the platform. We had we were in the middle of a tough pandemic people were maybe saying you know what let me go by Netflix maybe that's good enough. It's hard to predict these things the good news for US is were out all platforms.

In and we probably have the best carriage in terms of skinny bundles. Our content has never been stronger our scale has never been higher.

And we've done very well in all of our renewals and getting everything carried in so physically what looks like it may be a stabilization.

Is very good for us.

On T mobile I think I've said enough.

In the end.

Our our stuff is carried on the broad platforms and then it is good for US. In addition to that someone wants to take the great content that we have and ER and offer it in a smaller bundle for less money thats. Good.

But not that way.

Understood. Thanks, so much.

Thank you.

Next question comes from Michael Morris from Guggenheim. Your line is open.

Thank you guys. Good morning to two questions from me first I'm curious, how you're thinking about the implications of an increasing amount of pure content on these free AD supported over the top services do you think that the populating those is creating sort of a growing threat to maybe the existing economic model and in.

As you think about your products going forward I'm, just how do you think that the balance of having your own control the app environment versus selling a your branded content to third parties like Pluto where to be a broker channel with guys like that and then second maybe just a a little bit more specific on the investment in content going forward.

Quickly into the DTA DTC launch are you expecting a meaningful step up in your cash spend in the 2021 to support the product portfolio.

You talk about the value of the library and how that can support you maybe how.

Is there a way to quantify how much that library that deep library, you have can benefit you in terms of how much content, you're able to to serve consumers. Thanks.

Thanks, a lot Michael.

Marketplaces, getting driven with a huge amount of dollars and people are getting more and more used to paying and go into content and consuming in on all platforms. That's really good for us I think what's what's even better for us is that that'll all that stuff looks the same and it's very expensive to market.

You have to explain what the series is about who's in it why they should want to see it. They already have all this other stuff that looks a lot like it. So we will take you through it but we think that our library, we sell very little.

We've been holding our content for for for this moment for a long time and we're going to go very well with everyone. We're going to look very different than everyone and.

When people see our brands on our characters, they're going to know very well.

Thank you very much.

Thank you.

Next question comes from Canon Bank as far from Barclays. Your line is open.

Thank you this is David Joyce for closing.

Your advertising front you were ahead of expectations in the quarter.

Can you provide any context on what the digital strategies have done for you there.

From the discovery go apps or from your targeted advertising efforts and also wondering what that opportunity set is going forward is that opening up the advertiser base for you.

And then just one final thing on the Upfronts given the timing shift.

And the advertisers.

Really changing dramatically I think there will be a calendar upfront, but the upfront was quite healthy.

Alright, thank you.

Thank you.

Our next question comes from Stephen Chahal from Wells Fargo. Your line is open.

Thanks first I just wanted to follow up on <unk> question Uhm. It sounded like your sub decline improvements were more idiosyncratic then industry and we've certainly seen some M. B P. D. Recent reports looking a little better. So just wondering you know if everything is equal going ahead, we would have even further improvements.

And your universe sub declines just driven by by some of that M. B P. D improvement and then Relatedly, we definitely have questions about whether or not you've got unusual amount of pricing lift this year with these new renewals. So just wondering if you could comment on whether that's correct or whether they're kind of resent. We're seeing now is more like a decent run right for.

Domestic affiliate going forward Uhm and then just on the DTC side I know, there's a lot that's gonna come in December golf, Phoebe as a product that's already in the market. So I was wondering if you could give us an update on how 'bout T. V has performed so far this year I think you launched it in a couple of new markets. Thank you.

Okay, Let's see let me, let me start with the with the two affiliate questions again, I don't Wanna I don't want to speculate about some trends again, we're happy to see a slightly better number this quarter, certainly hope that that might.

Might be the case for awhile, but it's really not in our control of what is in our control is the end of the day.

Degree of character that we're getting and as David said now all the reason renewables we've been getting very good results here. So there were some some talk in the market about potentially getting tears appeared or losing herridge for networks, none of that has happened.

And again, we close to two more deals today in this water that we talked about today and if you look at the if you look at our reported numbers you see the the 2% growth you know 4%.

Declines on the on the on.

Putting it altogether and having a very unique offering and we'll talk to you about what we've learned about that and why we are where we have this aggressive strategy that we're taking global in December that we will talk to you about in December.

Got it thank you.

Thank you.

And we'll take our final question from Ben Swinburne from Morgan Stanley. Your line is open.

Thank you good morning.

David I guess just to wrap up on D to C and again I know you want to save.

Most of this for December but one of the things that has clearly been a appoint attention in the market with your distributors is launching a product that might compete with what they sell and I'm. Just wondering if that if we're sort of past that now I mean, if you look at obviously CBS all access has been in the market for lots of pretty direct competitor with CBS network AMC plus.

Launch recently do you think we're beyond that issue with your distributors and now there's much more alignment.

And ER and secondly, the script steel is has been so transformative for the company I'm sure you'd agree in a variety of ways and I know there aren't other scripts out there, but you generate so much cash flow have balance sheet capacity I'm. Just wondering if you think you'll be more active in M&A over the next couple of years as you build.

Scale, because it seems like you've got a lot of infrastructure you have a lot of library content and there aren't going to be 20 global DTC companies I'm sure you'd agree so if you're thinking about being more.

Aggressive on that front, thanks, a lot thanks Ben.

Well I certainly would agree on the scripts deal or Ken Lowe is brilliant.

Connect everyone have a wonderful day.

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