Q3 2021 ViacomCBS Inc Earnings Call

Good day, everyone and welcome to the Viacom C. B S Conference call today's call is being recorded at this time I'd like to turn the call over to executive Vice President of Investor Relations, Mr. Anthony D come Monday.

Please go ahead Sir.

Good morning, everyone. Thank you for taking the time to join US for our third quarter 2021 earnings call joining.

Joining us for today's discussion or Bob back as our President and C E O and the Beach Opera R. C F O.

Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website.

We want to remind you that certain statements made on this call are forward looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC Some of today's financial remarks will focus on adjusted results.

Conciliations of these non-GAAP financial measures can be found in our earnings release or in our trending schedule, which contain supplemental information and in each case can be found in the Investor Relations section of our website now I will turn the call over to Bob.

Good morning, and thank you for joining us.

On today's call I'll cover two key topics.

First I'll briefly discuss Viacom C B S as third quarter results.

Then I'll talk about streaming.

We're executing against the global strategy that leads into our distinct competitive advantages and where our strong momentum shows how we are uniquely positioned for success.

Let me start with the company's third quarter results were we achieved another quarter of strong performance as total company revenue grew 13% year over year, reflecting grow of course, all revenue streams.

In affiliate revenue grew as we continued to benefit from the expanded distribution of Viacom C. B S. As we're now and brands we.

We also struck a series of distribution renewables, including with charter Cox and just last month all peace.

And despite a tough comparison against political advertising in the prior year quarter. We grew advertising revenue in Q3 benefiting from an improved marketplace.

Turning to streaming we had another fantastic quarter of growth.

Strength and momentum of both Paramount plus and Pluto T V are clearly evident and demonstrate the power of the strategy, we laid out at our Investor event earlier this year.

Overall quarterly global screaming revenue surpassed $1 billion for the first time.

Driven by robust growth in both subscription and advertising, including the addition of 4.3 million global screaming subscribers.

These strong streaming results reinforce our conviction that our strategy is working and that we're well positioned to capture the significant opportunity and the global streaming ecosystem.

To that end I want to remind you of three key enablers driving the Viacom Cvs strategy, all of which are seeing an action.

First an incredible breadth and depth of compelling content, which is critical to attracting and retaining consumers globally.

Second robust distribution and marketing, which ensures we can build the broadest reach an awareness.

And third a strong and flexible financial engine to enable straining investment drive Roy and maximize shareholder value.

First content bye.

Viacom C. B S is uniquely positioned with a vast library and production capabilities across genres demos and geographies include.

Including World Class Studios aligned with broadly recognized brands would.

Which enables us to produce a diversity of compelling and engaging content on a global scale.

Content, that's already fueling Paramount pluses growth.

When we introduce Paramount plus nine months ago. We told you it would be a differentiated product with broad appeal composed of a full range of content, including news sports movies Kids and family unscripted and original dramas.

Our consumer data tells us the diversity of content on Paramount plus it's a huge attraction.

And it has served as a key tool for customer acquisition as well as for driving customer satisfaction, thus improving churn.

As evidenced just look at the third quarter.

Starting with kids and family content, which was the top genre on Paramount plus for both acquisition and engagement in the quarter.

In fact over half of our subscribers streams kids and family content from our globally loved Nickelodeon brand.

What's even more impressive is that content consumption was balanced across new original and library, both film and television, including enduring franchises like Spongebob and poor patrol and young adult content such as the new Icarly.

Movies are also proving to be a key attraction to the service.

And as we continue to experiment with different Lee strategies, we're seeing success across all of them.

This quarter, a quiet place part two and Paul patrol the movie where the top two titles for acquisition and engagement on Paramount plus.

And the results were impressive both in theatrical and on Paramount plus.

Following the global success with Paul Patrol the movie, we're thrilled to announce a sequel, which will debut in 2023.

In addition, a new PA patrol spin off series for Nick and Paramount Pluses in development.

This is Viacom Cvs franchise management ratcheting up to the next level.

Next week, we have another family film day, and date theatrical and Paramount plus premier with Clifford the Big Red Dog, which is tracking very well.

And finally as we told you we're also creating films exclusively for Paramount plus.

Just this past weekend the latest paranormal activity next of Kin debuted and we like had this model is working too.

So clearly movies are a hit for Paramount plus.

And they'll continue to be because paramount plots is only one of a handful of streaming services in the world that can draw from an established and legendary movie studio like Paramount Pictures to provide it with a steady supply of world class films.

And then there's life sports.

This quarter, we welcome back the highly anticipated return of the NFL in soccer, including your wafer and the fans came back in droves.

Look across it and you'll find that one third of all active domestic Paramount plus subscribers watch sports.

And importantly, we're engaging with our sports fans after the game too.

Building up the contents later those genre that we know sports fans love from our long history with broadcast and cable.

This is critical to maximizing our our ally on sports.

And are Paramount plus content lineup is only getting stronger.

The fourth quarter, we'll see our biggest scripted original lineup yet.

First start from Yellowstone creator and Hitmaker Taylor Sheridan is mayor of Kingstown, starring Jeremy Renner neck.

Next is the Yellowstone prequel 18, 83, starring Tim Mcgraw and Faith Hill.

Watch both of these shows behind the most popular show on cable television Yellowstone introducing them to a weekly audience of over 7 million viewers to drive awareness in anticipation among a loyal fanbase before they move exclusively to Paramount plus.

These are amazing series and will no doubt be fan favorites when released.

And on November 25th.

<unk> stand Kenny and Cartman will make their highly anticipated debut on Paramount plus as we exclusively premier the first of our South Park made for streaming movies titled South Park Post Covid.

And the second exclusive South Park made for streaming movie will stream in December.

Moving from content to the second key enabler of our streaming success, which is leveraging Viacom cbs's robust distribution marketing capabilities to build the broadest reach an awareness.

We are benefiting from a broadcast table and social reach driving consumers to Paramount plus.

With his but both an efficient and effective way to promote our new and existing series movies and events and streaming.

Of course that includes running spots and leveraging the social followings of our franchises and talent.

But it's much more than that.

I already mentioned, what we're doing with Taylor shows we just moved C. L team exclusively to Paramount plus after four episodes ran on CBS, we moved evil earlier in the year and we're doing similar things outside the U S as well.

In terms of streaming distribution, you'll see us continue to scale, both new and traditional platforms.

For example, we just announced a broad distribution agreement with T mobile to bring Paramount plus essential to the carriers large customer base across the U S.

Suffice to say, we're thrilled to have T mobile welcome more fans to Paramount pluses diverse and compelling content slate.

What's dreaming is not just about the U S.

I really see our international footprint as a key accelerant for the company to unlock the very significant opportunity and streaming outside the United States.

Here, we are rapidly making great strides.

Last week, we launched Pluto T V in Italy, continuing its international expansion.

This week, we announced an agreement to acquire a majority stake in Fox Telecom area, and Ah Studios, telling Mexico.

Which when combined with our existing assets, including Chili These young until the Fe.

Solidifies Viacom C. B S. As one of the largest Spanish language content creators in the world.

On our last call in August we announced a strategic partnership with Sky to launch Paramount plus and key Western European countries next year, including the UK, Germany, and Italy, putting us on track to achieve 45 markets by the end of 2022.

We have since announced Sky Showtime a joint venture with Comcast, which will include premium and original content from both companies launched.

Launching in 2022 Sky Showtime will reach an additional 20 European territories, covering 90 million homes.

The third enabler that positions us to win and streaming is our strong and flexible financial engine.

Here there are a number of elements to highlight.

It starts with the streaming financial model based on multiple revenue streams, which enables us to monetize content, both through advertising and subscription.

Multi revenue stream businesses have attractive characteristics when it comes to size and diversification.

Multiple revenue streams made the cable network business extremely attractive.

They will do the same for streaming and.

And the total addressable market for streaming is even larger.

Let me put our streaming add business in context for Ya.

As the leading free AD supported streaming T V service on the market Pluto T V is winning in both scale and engagement.

And it will be a 1 billion dollar revenue business this year.

Add to that global expansion and significant upside from our AD supported version of Paramount plus and you have a long runway of screaming advertising growth ahead.

And then their subscription.

This is already a huge market and while it's still early inning Ross R. Viacom Cvs business as well ahead of our long term growth plan and we like what we see ahead.

Our financial strength and flexibility is also reinforced by our ability to leverage our streaming content investment across geographies and platform.

Global is obviously important for content R y and.

And we are a global company, both as a content maker and as a network and streaming operator.

Lastly, the combination of the strong cash flow of our legacy business or aggressive approach to non-core asset dispositions and our capital raised earlier in the year has allowed us to build a substantial incremental capital base to invest in streaming.

As we said we would we began deploying that capital in the third quarter to accelerate our streaming growth.

These investments have attractive returns and result in more original series and movies for streaming.

As I mentioned earlier, we have a great content pipeline for Q4 and anticipate we will have a positive effect on our subscriber growth, which will be larger than in Q3.

This will also be the case for Pluto meus in queue for.

And as a reminder, we're also deploying this capital to drive our international expansion.

Finally, I'm excited to tell you we will hold an investor event early next year to provide an update on our streaming business, including showcasing are content to come and providing more transparency around our plans and progress.

With that I'll hand, it over to intervene to share additional financial and operational highlights.

Thank you Bob and good morning, everyone.

Our third quarter results were highlighted by continued growth and streaming where we had a another solid quarter of subscriber additions.

Driving revenue grew 62% year over year with solid growth in both the subscription and advertising components of our streaming business.

Two three also benefited from growth in traditional advertising affiliate revenue and content licensing.

Let me start by providing some additional granularity on our streaming results beginning with our subscription business and then moving to our AD supported services.

We added 4.3 billion global streaming subscribers in the quarter, reaching nearly 47 million at quarter end.

Paramount plus continues to drive the significant majority of new subscribers with a mix of both domestic and international customers. We.

We also saw continued improvement in Paramount plus engagement.

The average monthly share of domestic pay subscribers active on the service also known as our monthly active right.

Grew in the quarter, both sequentially and year over year at.

At the same time average monthly hours per active domestic subscriber also improved quarter over quarter and year over year.

And in terms of monetization global streaming subscription <unk> increased 8% year over year.

A combination of strong subscriber growth and increased engagement led to streaming subscription revenue growth of 79% to 548 million.

We're going to our AD supported streaming businesses.

T V ended Q3, with 54.4 billion global and they use and revenue grew 99% year over year.

Pluto success continues to be driven by growth and users engagement and sell through which translated to 860 per cent increase in Pluto T V domestic <unk> in the court.

While Pluto accounts for the majority of our screaming advertising revenue growth. We also saw strong growth at Paramount plus or domestic advertising revenue more than doubled in the quarter.

All in streaming advertising revenue grew 48% year over year to $531 million.

Advertising revenue, which excludes screaming grew 1% in Q3 to 1.9 billion.

As strong demand was somewhat offset by ratings pressure political spend that benefited the prior year quarter as well as the sale of seen it.

Aiken together the impact of political and the sale of seen that resulted in nearly 500 basis points, it's headwind to advertising growth in Q3.

Look into queue for advertising revenue will benefit from the start of new fall programming and improved upfront pricing with the new broadcast season.

While supply chain issues do somewhat limited visibility, we expect to see year over year advertising growth in queue for.

Affiliate revenue, which also exclude screaming.

Through 2% year over year to 2.1 billion as incremental distribution contractual rate increases in growth in reverse comp more than offset the decline in pay television subscribers.

We expect these drivers to continue into Q4, resulting in another quarter of low single digit affiliate revenue growth.

Licensing and other revenue, which includes fees from the licensing of internally produced television and film programming for third party platforms as well as fees generated from home entertainment consumer products and live events.

Increased 18% to 1.5 billion.

232021 reflects a higher volume of licensing deliveries in the year ago period, which was impacted by COVID-19 production shutdowns.

Total company revenue grew 13% year over year to $6 6 billion.

Adjusted OIBDA sell three per cent to 1 billion as we continue to ramp up programming and production spin coming out of Covid and increase our investment in streaming.

It just it diluted EPS with 76 cents.

Adjusted free cash flow was a use of $187 million in the quarter, reflecting a ramp and programming spend including our investment and screaming.

Adjusted free cashflow in queue for should reflect a continuation of this trend.

And turning to the balance sheet, we finished the quarter with 4.8 billion of cash on hand, and total debt of $17.7 billion.

This translates to a 2.5 times net leverage ratio as of September 30th.

We continue to have significant financial flexibility, which will increase further with proceeds from asset sales, including Blackrock, which closed in October.

Looking ahead, we expect total pay subscriber additions in queue for to be higher than Q3, driven.

Driven by the content, we have coming to Paramount plus and.

Including the Premier of some of our biggest new or original as Bob just described.

We're excited about the launch of our T mobile partnership, which will have a modest benefit in queue for what should be a more significant contributor in 2022.

We also expect queue for Pluto television and May you additions to be greater than Q3, which in combination with Paramount plus growth.

Will result in continued strong total screaming revenue growth rates into for it.

In fact, we expect streaming revenue to surpass a 5 billion dollar annual run rate in the quarter.

This places US ahead of the trajectory implied by the long term streaming subscriber in revenue goals. We provided earlier this year.

We're encouraged by this momentum and are continuing to execute against our previously described growth and investment plans.

As we said before this translates to streaming content expense more than doubling for the full year 2021 versus 2020.

And given the cadence of content hitting Paramount plus.

Q for streaming expense, including content and marketing to support the new programming.

Is expected to increase on the order of 350 million relative to streaming costs incurred in the third quarter of 2021.

As Bob said.

It's on C. B S as well positioned to be successful and screaming given the breadth and depth of content, we have on the service.

Bus distribution and marketing capabilities.

Are strong and flexible financial engine.

As we scale improving unit economics, and continue Tam expansion will make screaming accretive to Viacom Cvs earnings and cash flow over the long term.

And as we invest against the streaming growth opportunity, we will evolve the way, we manage and allocate resources in our business.

With this in mind, we plan to change our segment reporting beginning with our first quarter twenty-two results.

Which will help investors better understand Viacom C. B S. As the combination of three parts.

Very profitable traditional media business.

A world class film studio.

And a portfolio of high growth global direct to consumer streaming services.

Our direct to consumer segment will include Paramount plus <unk> T V. Showtime O T T and our other direct to consumer services.

We will combine our television entertainment and cable networks businesses into one T V media segment.

And we will continue to have a filmed entertainment center.

Importantly, these changes reflect the increasing strategic focus we will be devoting to our direct to consumer business.

Our new segment disclosure will provide additional information on the growth drivers and business performance of the services that comprise R. D to see segment.

And give shareholders, even greater visibility to our streaming progress.

We look forward to discussing the changes to our segment disclosure in further detail along with updates on a direct to consumer growth and investment plans at the Investor event, Bob noted in which we will post in the first quarter of 2022.

With that let's open the call for questions.

Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation time will indicate your line is in the question can you may press start to if you'd like to remove your question from the camp participants you think speaker equipment and may be necessary to pick up your handset.

Before pressing the starkey in the interest of time, we ask that you each keep to one question and one follow up thank you.

Our first question comes from the line I've Frat salmon with Goldman Sachs. Please proceed with your question.

Yeah. Thanks for taking my question is actually a three part question about the new T mobile deal, which looks pretty exciting you know T mobile they just reported earlier in the week. They had just under 27 million postpaid account I just want to confirm that that's sort of the addressable opportunity for you a T mobile and then I'm curious why you're expecting the impact could be more early Ah.

Next year, even though it's gonna start being offered in this quarter. The second part of the question is typically these are wholesale deals where all of these customers would be paid and and you're paid subscriber count that maybe at a lower are too and I'm. Just curious if that's the arrangement here and then the last one is a bigger one is now sort of your second big distribution deal.

Following what you've done with Sky in Europe, I was hoping you could maybe give us some insights and see what you think the opportunity estate continue add any more distribution partners, both domestically and in your international market. Thanks.

Yeah, sure, but let me start and actually start in reverse order. So look I I believe in the power of partnership it has been used effectively to create value great value for this company in the past and will on a going forward basis.

Today, we talked about two partnerships T mobile and Sky I think they are great examples of creating value and in all cases, when we think about partnership what we're looking for is an ability to drive scale. We're looking for low subscriber acquisition costs were looking for deals which will.

Drive <unk> subscriber stickiness, and we want a line with great brands and again those are examples of both so let's talk about T mobile a little bit since that was at the core of your question. We're thrilled with the deal we announced this morning, it's an efficient way for us to acquire Paramount plus subscribers. It's Ah.

Partnership with a great consumer brand and it will be additive to Paramount pluses momentum.

When I think about it I would highlight two things Big picture. The first one is that the most important thing for Paramount plus now.

Is exposing more consumers to the offering, particularly as we're ramping content. So this deal obviously does that and unlike most wireless promotions. This deal will be available to all timo users.

The second thing I'd highlight is that the fifth of Paramount plus and T mobile is excellent.

There are uncurl your position speaks really to value and innovation that aligns with Paramount plus and the essentials product that we're using is ideal as you know that product has content for the whole household.

And it has an attractive price point of 499, which will really maximize downstream promote conversion after the promotional period and.

And the broader distribution of Paramount plus essential fits well with driving our streaming add business.

So we think that all makes tremendous sense and again, we're very happy with this deal <unk>, maybe you comment a bit more on the economics sure Bob happy to do that Uhm, we're definitely looking forward to showcasing all the new content, we've got common to Paramount plus in 2022.

For all T mobile customers so to your question about scope.

Scope, yes, it <unk>.

We're excited to make this available to all the postpaid T mobile customers.

We do think that the deal should accelerate sub growth for Paramount plus but it will build over time some of the reason behind that is that the.

The really big broad awareness marketing campaign.

Mostly kick in in 2022.

In between now and then we're gonna be doing some things to evolve and optimize the consumer sign up experience.

We liked the economics of these deals you asked about the impact on on <unk> as.

As is typically the case for these kinds of third party bundles, they do come with slightly lower our period than what we would see on a direct basis, but we really liked the ltvs of the subs that we can acquire through these types of deals those.

Those subs have lower turn and we get.

Full access to all the relevant user data, which helps us further maximize lifetime value.

And at the same time sack is very low so that ratio between lifetime value and acquisition cost is really compelling.

And given what we're seeing with our trial to pay conversion rates I think we can really make some hay out of giving T. Mobile customers 12 months to experience all the great content that we are producing for Paramount plus and then having them roll to to pay customers after that point in time.

Thanks, Brett operated we'll take our next question. Please.

Thank you. Our next question comes from the line as Michael Moore, So much cause in high partners. Please proceed with your question.

Thank you good morning, guys I'll ask a couple quickly first kind of following up on the T. Mobile question I would ask the same thing about the Sky partnership prepare.

For Paramount plus whether you know at this point you have any more insight into the timing of the western European launch there and how to think about sort of the the immediate impact of the partnership or what the the sort of steps are to to kind.

Kind of penetrate the addressable market there what the timing might be and then second [noise] if I could just ask maybe intervene.

A little bit more on the composition of the 47 million global screaming subs could you help us at all at this point with.

How many of those are paramount plots and maybe within Paramount plus the mix of of a premium versus essentials did you look at the new sort of reporting that you just announced is that something that maybe we work toward getting regular disclosure on going forward. Thank you.

Yeah sure Mike So let me start and then I'll I'll throw it to intervene on the Sky question, there's really two different kinds of partnerships with sky that that we've announced the first one you could think of as a bundle.

And that's with Sky in the UK in Germany, and Italy. It's.

It's a commercial deal where sky will distribute paramount plus to all their sky cinema subscribers.

And we look at that as a compelling way to accelerate penetration, but it's a commercial deal. So we preserve 100 per cent ownership of the business like maybe even talked about with Timo. We believe that has really attractive sack and churn characteristics and importantly in that deal we preserved are right.

To go direct in those markets as well to pursue additional opportunity because obviously I dunno direct is an important part of the streaming business. The second deal we announced with Sky is the Sky Showtime joint venture, that's really a deal with Comcast.

Obviously as well that's 50 50 JV on an equity basis, that's targeting 20 smaller most of the eastern European countries, which which is additive to the 45 markets. We've talked about for 22, historically, we see that and that will be a single App combo.

Dining Viacom Cvs and Comcast product and we look at that as a way to for us to participate in the smaller markets, while preserving investment capacity for the larger ones, which are more important strategically now in terms of timing of both of those the sky.

<unk> will launch in.

In the UK in the first half of 22.

And that'll be followed by Germany, Austria, and Italy also in 22 Sky Showtime, we've yet to announce dates on that but it will be in 22.

So that's the story Big picture Nadine.

Yeah, so to your questions about composition of screaming.

Screaming subscriber base.

First to actually I think the last part of your question.

We will be aiming to provide some incremental disclosure.

Related to the breakdown of streaming subs.

As part of the changes in reporting four Q1 and beyond.

So stay tuned for that in terms of where we stand today I can give you a little bit of color around.

Some of what we've seen in terms of sub additions I think I mentioned that.

A significant majority of additions in the quarter came from from Paramount plus I'd also note that Paramount plus domestic ads were hiring Q3 than they were in Q2.

So.

Even though.

That's the case, we do still have a nice contribution from from international.

And in terms of the split between premium and the essentials, we don't break that out specifically, but.

They're both important contributors to the subs that we added in the quarter.

Thanks, a lot operated let's take our next question.

[noise]. Thank you. Our next question comes from the line of Alexia quite Johnny J P. Morgan. Please proceed with your question.

I think yeah I it sounds like maybe if there's somebody that they can drivers to new subscribers based on your opening comments.

I'm wondering if that changes the way that you think about windowing are you're less inclined to stay with a 45 day window and my second question is just back to the the in basket and local language content. You've made <unk> acquisition, you know to bolster that content I'm, calling for it I think you see outside in the past many content.

The last person domestic currency kind of how should we think about it should be kind of even you know <unk>, which markets you see it's with a more competitive need to eat more spending.

Yeah sure Alexia on the film Windowing question, if you look at Paramount plus in the quarter. The third quarter, we actually deployed three different models we deployed.

Exclusive premiere, we just Floyd day and date, we deployed 45 day fast follow and actually we deployed the exclusive both and Ah Ah what was planned for theatrical release and and a true made for so we're experimenting with a with a bunch of different models on the Paramount plus side based on.

What we think is best for a specific film obviously keeping in mind all the constituents involved in that the reality as we see them all work.

So it's not a question of of moving away from one or the other we're going to continue to optimize on a per film basis and.

We're definitely not moving off the 45 day fast follow if you look at a quiet place part too that was a film that use that model and it was very effective both in theatrical from a box office perspective, even with some of the COVID-19 issues as well as a big sub driver for Paramount plus.

And by the way, we got plenty of consumption of a quiet place part one.

As well, which really points to the value of having a a library to go co along with call. It new release product on Paramount cloth. So we'll continue that as I said in my marks the next film up this weekend is Clifford that'll be another day and date <unk>.

The article Paramount plus release, we think kids and families. In this continued COVID-19 time.

Those films are right for day and date again poor patrol worked very well and we're excited about Clifford move into the second part of your question, which is around quote unquote local content.

People think of Viacom C. B S as a massive English language content creator.

And we obviously are but for years, we've been creating content around the world to satisfy local consumers you.

You look at our company and you got hit original is coming out of Tele Fe things like 100 days to fall in love to catch a thief. These shows do like 40 plus shares in Latin America, certainly in Argentina.

We also do a lot of format work all around the world probably the best example of that but not the only example is our shores franchise, where we have many versions out there and actually when you look at that what you see is our scale is not just in English and I mentioned, it but but in addition to English were also one of the law.

Just Spanish language producers in the world and that's not something people people typically talk about when you think of streaming which is I'm sure at the core of your question.

That provides an opportunity for us to leverage our experienced in this X U S production as a real competitive advantage and that's supposed to serve specific markets and have that strong local relevance again through characters and storylines et cetera, but it also in the stream.

Space is to supply a larger aggregate global slate, where we also benefit from cost advantages, we're already using locally produced content to great effect in places like Latin America for streaming I mentioned shores Acapulco sure is a massive.

Hit on Paramount plus and really our next step is to exploit that content really the whole collection of content globally, where we integrate international productions quote unquote into our global slate that will start next month, where the two telophase shows I mentioned will be coming to Paramount plus.

That'll be the first of many and.

And likewise, we're gonna do some interesting things with formats, including cross border for Paramount plus so local content definitely core to our strategy, but it is about much more than the local market it's about feeding.

The global Paramount plus pipeline as well.

Thanks, Thanks, Alexa operator next question.

Thank you. Our next question comes from the line average Clinton's channels with latex partners. Please proceed with your question.

Hi, Thanks for taking the question.

Over the last several months one a medium moved away from Adam Amazon channels. So you've seen essentially the biggest players in streaming Disney Netflix Hulu Apple T V. All sort of focus on D C and.

Ah Ah direct retail relationship with the consumer versus sort of wholesaling through Amazon you know I think I'll look at Viacom C. B S. I think you're the largest now of the remaining players on Amazon channels are using Amazon channels, Bob I'd love sort of your sort of high level kind of view on the the puts and takes a.

Of being on Amazon versus going you know I'm being in sort of a wholesale relationship with the consumer versus fully directed you know should we think.

About as you started to focus more and more on streaming will you move away from Amazon and go fully direct or is this something you like and you think others are actually incorrect in not being on Amazon and it'd be great to see if there's any way to frame how big Amazon is or things like Amazon or are part of that 47 million that would be great to understand as well. Thanks.

Yeah sure Rich look it's a great question.

We continue to believe in broad and you <unk> ubiquitous distribution really is a path to scale.

And that includes wholesale relationships, including with the company. You mentioned now look there's obviously tradeoffs in terms of a wholesale versus a direct relationship those tradeoffs tend to be around requests for certain types of exclusivity data access margin.

So it's not a black and white question. The real question is do you have deals in place, which makes sense relative to those considerations and we get a lot of thought to that and by the way that means we passed on some deals.

And somebody will take longer to get done then certain people would like.

Because the deal has to be right.

But net net where we are in terms of balance, particularly as we're focused on scaling we continue to believe in the benefit of these wholesale relationships.

In terms really are providing access to the largest total addressable market, which we strongly believe offsets some of the other considerations again, assuming you have the appropriate deal structure. So we like the balance model of course, it's something we're going to continue to evaluate.

Over time, as we scale, but we see value to these distribution channels today.

Thanks Rich next question please.

Thank you. Our next question comes from the line of John Hardwick with you B S. Please proceed with your question.

Alright, Thanks, guys two things first of all on the the DDC content Uhm Devine. Thanks for the color of their ramping it sounds like over $2 billion and 21 is the 5 billion in 24 still that's still the target any color on sort of how that lamps.

In 22, and how much of that is incremental to to the to the whole company and then secondly, uhm. The licensing revenues look strong again this quarter and I know you guys benefits from from easier comps, but uhm no Bob you're talking about the business continues to be a multi revenue stream business. Just just your view on for the future of that of that licensing busy.

This you have and how that fits into the broader ddc's strategy. Thanks.

Yeah sure John I'll I'll jump in there first on the content spend.

The.

The the 5 billion as you said is our.

Sort of where we're tracking on a long term basis.

I think I would remind you that you know that.

That is not entirely incremental two total.

Total company content spend and so while we are expecting to see material increases in streaming content expense I mentioned, the doubling from 2020th of 2021, and then growing further to over 5 billion by by 2024.

Not all of that is is entirely incremental because.

As the linear business continues to evolve there will be remixing between linear and screaming I think you've heard me say before that.

Yeah, there's a lot of content that does double duty for us on both.

Linear and screaming platforms.

And.

At the end of the day, we are very focused on the R y of those content investments.

We continue to see content investment as the single greatest way to continue to grow customer ltvs, both through increased engagement and lower churn.

And we're already seeing evidence of that in our results since the launch of Paramount plus so it makes total sense for us to continue to invest behind it.

And then I think the second question about that like to take the licensing side, we've always been in the licensing business for a long time as a reminder, content licensing revenue for Viacom Cvs has a bunch of different components in it.

Mean mentioned his remarks and includes home entertainment includes television syndication and includes consumer products and of course. It includes licensing of content more broadly when you look at it. So I'd say two things one is we're in the licensing business, but two is that businesses is.

For sure evolving so when you look at the Q3 results and yes, there was a whole bunch of growth. There. The growth was heavily COVID-19 related we had many deliveries that were delayed due to production shutdowns. So there's definitely some catch up in Q3 and then the other thing that's going on.

On is if you looked at the prior year quarter.

Particularly internationally, particularly in the AD supported network space you had many people that had hunkered many buyers that had hunkered down and we're preserving cash given the uncertainty of the revenue situation as the AD market has rebounded those companies have moved to refresh their concept.

Lineups, so that they can satisfy their consumers with new product versus kind of running the sprockets off what they had at the time and that's certainly a driver of the growth.

Third thing is there are a bunch of original theories deliveries in there.

What you need to <unk>, what you need to understand about that is those are fulfillment of deals.

That were really pre dating the launch a paramount plus so that might be a third season of a show we're doing for someone it might be a first season of a show we're doing for someone that took two plus years to create so while our strategy has shifted to become much more focused.

On owned and operated streaming with our franchises et cetera. There is a tale to the call at legacy deals we've done and you do see that showing up in the third quarter.

Thanks, John Operator next question please.

Thinking our next question comes from the line of Jessica Sperlik with Bank of America Securities. Please proceed with your questions.

Thanks Ah content question could you talk about your evolving strategy for Paramount.

In context of the whole company growth, how about film and direct to consumer and then I guess too short follow up uhm.

<unk> D. <unk> <unk>, what can you give us color on on your aunt light <unk>. So what's the <unk> with advertising person subscription online and then do you talk to a little bit about as it sounds but didn't Simon and Schuster given the government's response, where do you go from here.

Yeah, So a bunch of stuff in there Jessica let me start.

On content and Paramount, presumably Paramount pictures.

We obviously made a management change there I'm very excited to have Brian in the chair.

Jim Obviously got us to a better place financially and really stabilize the studio, but as we look at the next chapter we need to lean more into franchises, we need to lean more into a multifaceted model including of course streaming.

And I think Brian as both the content creator and a collaborator is ideally suited to that and.

Is already moving quickly to prove that value.

In terms of the evolution of the slate Brian.

Brian is working on that I think the the good news is we have a very well stock slate as we enter 2022 for sure Great Pictures in the can which hopefully the theatrical market will continue to improve it has been improving particularly at the at the younger and and <unk>.

<unk> will provide tremendous benefit theatrically.

Theatrically and we remain committed to theatrical but also in downstream windows, including the.

Fast follow strategy, we're using for Paramount plus pay one you did see us announce a pop patrols sequel, which speaks to franchises, but I'm very excited about where are Paramount pictures is gonna go it clearly is.

Is an important part of the company as a content engine.

And it's clearly in early days, but clearly benefiting paramount plus as well.

Let me take the last part of your question to which is the Simon and Schuster, One and then I'll I'll throw it to Nadine.

On Simon and Schuster really I, just want to reiterate the statements that we and Penguin random House made earlier in the week, we do believe the transaction would be beneficial for consumers booksellers and authors.

We think the Doj's claims are without merit I'm not going to get into any legal arguments here, but I will say as we've disclosed under our sale agreement.

Penguin Random house has agreed to take all necessary steps to obtain the required regulatory approval, including defending through defending any litigation and so they and we will vigorously defend this lawsuit.

<unk>.

Yeah. So to the question on <unk> is between the essential in premium tears for Paramount plus.

A couple of important points number one.

<unk> between those tears are really not as different as you might think because of the advertising contribution in the essential tier.

I think you've heard his comments about the fact that we see a lot of momentum.

In the digital advertising component.

It was one of the things, we really like about that plan.

And in fact in Q3, the Delta between art through on the essential tier and the premium tier continued to narrow.

And second major point is that you know ultimately we're focused on making sure that.

Our customers are in.

Whichever tier it's gonna make them the most sticky meeting with less focused on the <unk> because in the long run.

Bigger determinant of lifetime value is actually the expected life of the customer. So it's all about getting them in the tier where where they're going to stick around the longest.

Great. Thanks, Jessica Operator next question.

Thank you and next question comes from the line Offend Swinburne with Morgan Stanley. Please proceed with your question.

Good morning, Uhm, Bobby talked a lot about different content.

Verticals for streaming I wanted to ask about sports.

How does the NFL and sort of your sports lineup performing are you looking to add sports rights and are there international.

Strategies around adding sports [laughter] to your screaming portfolio over time.

And then I'll just ask my follow up now to Nadine on the new segments.

Next year I realize it's a ways out but.

I'm assuming that includes EBITDA. So so we're gonna be getting a direct to consumer segment EBITDA number and enter your point earlier about content traveling I guess, you'll be using some sort of allocation between segments on programming that lives in both places just was wondering if you could give us some more color there.

Just seeing an interesting addition to the sort of disclosures. Thank you [noise].

Yeah sure. So look I think the best way to think about the sports question is to talk about how Paramount plus consumption has evolved since the transformation.

So we obviously transformed it from Cvs all access nine months ago.

And in doing so made to really big moves, which is adding kids and family content and films really at scale and that has dramatically changed the composition of subscriber acquisitions as well as engagement.

Those categories were essentially zero.

In the Cvs, all access days and now they're very material and they stand alongside.

Really Cvs, both entertainment and sports So as you talk about sports. There's no question. It continues to be a really important category for us in my remarks, I mentioned the power of the NFL.

<unk> by the way through college football in there too they have continued to perform for us in fact, both the NFL and UEFA set in how streaming records when they returned for parents plus.

So super happy with that again part of verses being focused on deepening that collection of sports.

What we're focusing on is getting really and Roy from that sports and taking advantage of what I'd call a conjoined analysis uhm, what else to sports consumers watch and by the way the answer to that question tends to be believe it or not reality adult animation and of course scripted shows so we're working on.

Uhm insuring customer satisfaction of those sports fans in roughly a third of people on Paramount plus of watch sports to go and make sure we're extending that lifetime value. So that's our principal focus today certainly in the U F X you ask we don't really have a significant.

Sports component, we have some trials underway like in Australia, with Australia Australian football, but we don't really start with a cornerstone of right. So so we're evaluating where to go with that.

You mean.

Yeah I've been to your question on what to expect in terms of the.

The new segment reporting.

Let me share a couple of thoughts.

We're obviously, making those changes because we are.

Really evolving the way that we're managing the business and we're increasingly thinking about it as the.

The three parts that we outlined that traditional media business that combines broadcast and cable networks, which is sort of a lower growth, but very healthy margin business. The movie studio, which is you know.

Core source of content for both our theatrical and screaming platforms, and then that Ddc's segment.

As the portfolio of a bunch of high growth businesses, where we're still.

An investment mode, but very bullish about the future growth potential.

So yes, we will.

Have those as fully independent segments, meaning.

The presentation will allow you to see the.

The earnings power of our traditional businesses independent from.

The investment in contribution from from streaming and I think that'll reveal a couple of important things number one it will give you a holistic view of the direct to consumer business all the way through the P&L to your question.

And I think it will also demonstrate that earnings in our core business are relatively stable and materially higher than our consolidated OIBDA.

So I think it'll be it'll be helpful to investors to look at the business and that way.

And get a much more accurate picture of how the different parts are evolving.

Thanks bed operator next question.

Thinking our next question comes from the line I've.