Q1 2025 Warner Bros Discovery Inc Earnings Call

Finally, peace be advised that today's conference call is being recorded. I would now like to hand a conference over to Mr. Andrew Slabin, executive vice president Global Investor and strategy to begin. Let's begin.

John Hodulik, John Hodulik, John Hodulik, John Hodulik

Speaker Change: Good morning, and thank you for joining us for Warner Bros Discovery's Q1 earnings call. Joining me today is David Zaslav, President and Chief Executive Officer, Gunnar Wiedenfels, Chief Financial Officer, and J.B. Perret, CEO and President Global Streaming and Games.

Speaker Change: Today's presentation will include forward-looking statements that we may pursue into the safe harbor provisions of the private security litigation reform act of 1995.

Speaker Change: The forward-looking statements may include comments regarding the company's future business plans, prospects, and financial performance, and involved risks and uncertainties that could cause actual results to differ materially from our expectations.

Speaker Change: For additional information on factors that could affect these expectations, please see the company's filings with the U.S. Securities and Exchange Commission, including but not limited to the company's most recent annual report. And it reports on Form 10Q and Form 8K.

Speaker Change: I will turn the call over to David for some brief remarks after which we will take your questions.

Good morning everyone!

Speaker Change: Two years ago, we said, if not how much, it's how good.

And today, that focus on quality is really paying off.

Speaker Change: Our commitment to high-quality storytelling powered by the most exceptional creative talent in front of and behind the camera continues to be the engine that powers Warner Bros Discovery.

Speaker Change: That engine has never been stronger, more differentiated, and more important, both here in the US and around the world.

Speaker Change: Whether it's the white lotus, the pit, the last of us, a Minecraft movie, sinners, or the Eastern Gate series, internationally.

When you look at what's shaping culture today,

Speaker Change: So much is coming from our studios and reaching audiences on our platforms.

These stories aren't just watched, but sabred. [inaudible]

Speaker Change: People immerse themselves in them, share them, and return to them [inaudible]

Speaker Change: They spark conversation, drive connection, and fuel fandom, and that cultural influence and strength is showing up in our bottom line.

Speaker Change: On streaming, as you saw in our letter, we delivered another exceptionally strong quarter.

Speaker Change: Over the last 12 months, we have gained more than 22 million subscribers

Speaker Change: And in the first quarter, we gained over five million subscribers and delivered $339 million in EBITDA.

Speaker Change: We are firmly on track to deliver at least 1.3 billion of EBITDA in 2025.

Up 85% versus 2024.

Speaker Change: And to surpass our 150 million subscriber goal by the end of next year.

What's fueling that success?

Speaker Change: It's multiple growth levers that provide years of opportunity still ahead.

Speaker Change: Starting with the best stories from HBO, which is delivering the deepest, most consistent storytelling pipeline in its history.

Speaker Change: It's local language content and local sports that both there are relevance in every region in the world.

That combination makes us really unique.

Speaker Change: The impact of our stories is then amplified by our increasingly global footprint that still has almost half the world to go.

Speaker Change: And it's brought to life by a product that has gotten better at enhancing personalization and engagement.

But still is the strong roadmap of improvements ahead.

Speaker Change: On Studios, we are also encouraged by the progress in getting back to our 3 billion in EBITDA goal and growing.

Speaker Change: That's coming from the strength of Warner Bros Television, the world's leading independent TV studio, which broadens our cultural and commercial impact on the platforms outside of the BD ecosystem, which stand out shows.

Speaker Change: It's also coming from Warner Bros. motion pictures where our strategy of a mix of IP-based blockbusters

and compelling new originals is gaining traction and delivering results.

Speaker Change: as demonstrated by the recent big success of a Minecraft movie and centers.

Speaker Change: And Final Destination, which is launching next week, is trending very strong.

Looking ahead, [inaudible]

Speaker Change: We are excited about the strong slate across all of our studios.

Starting with DC Studios launching Superman in July .

Speaker Change: We're wrapping on Supergirl and our deep into production on Lanterns.

Speaker Change: All part of our ten-year plan to reignite the DC brand globally and drive one-on-term franchise value.

Speaker Change: What we have now is a powerful combination of a differentiated, profitable, and growing global streaming service with a world-class studio business.

Speaker Change: Both being supplemented by the meaningful continued cash generation from our global linear networks.

Warner Bros Discovery's Global Reach [inaudible]

Growth.

and the demand for our quality content offerings.

Speaker Change: gives us real confidence in our ability to create long-term sustainable growth.

and Shareholder Value. With that, we welcome your questions.

Speaker Change: Thank you, and ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press a star followed by the number one on your telephone keypad. To withdraw your question, please press a star followed by the number two.

Value that you got today, and how you can get there in terms of the EBITDA and cashflow trajectory.

Stephen Cahal: And then on extra members, do you have a sense of how big that extra opportunity could be for Max in the US? Is it a few million? Is it a significantly bigger? And how do you lean into all the tent poles you have upcoming in order to help capture those as I imagine that drives you towards or even creates some upside to the 1.3 billion in EBITDA. Thank you.

Stephen Cahal: Steve, this is Gunnar Good Morning. Obviously, I don't want to speculate on capital structures for hypothetical parts of the company. We are very happy that we were able to get through this reorganization as quickly as we did the internal reorganization that we announced in December . As we laid out, we believe that we are now properly structured to take advantage of whatever opportunities may arise. David has pointed out how this industry

Stephen Cahal: is facing generational change and we believe there is now a more transparency for you guys. You'll see that we also issued trending schedules, several quarters back.

Stephen Cahal: A lot of good work here to create transparency and secure optionality, and that's it. I don't think there's any value in speculating about potential capital structures at this point.

Stephen Cahal: So, restructuring with these two subsidiaries, it's how we run the company [inaudible]

and it also gives real visibility.

to you and all of our shareholders.

Stephen Cahal: to see what we're seeing, to be able to see that we're the biggest maker of content, and we have the largest...

production operation globally.

Stephen Cahal: and we have a streaming service that is really growing and by putting this structure in place, you're able to see that and you also see that on our traditional business side we were global, it's free to air, it's sports, it's global news.

Stephen Cahal: It's differentiated table brands, all of which can nourish and enhance our existing streaming business but it shows you kind of how we look at the business.

Stephen Cahal: It also gives us full optionality. Having done that work now, not only can we see this and can you see it, but we can move quickly if we decide to change and make a determination on restructuring.

Stephen Cahal: And then Steven, on the extra member, a couple things to sort of size the opportunity and think about the timing. Remember, right now we've launched only in the US. It's only available on our retail subscriber base, which obviously is a subset of our total sub base.

Stephen Cahal: Password Sharing, Anishis that we have is very soft messaging that will start getting you know firmer and more visible to subscribers.

over the month of the coming.

Stephen Cahal: So, in 25, I think you're going to see some benefits from it. I think it's going to increase and really be a more, you know, 12 to 18 months initiative as it rolls out sort of more subscriber cohorts here in the US.

Stephen Cahal: Globalizes later in the year into 26 and is the messaging on the password sharing gets more assertive over the course of the, more than the back half of the year and really into 26.

Thank you.

Speaker Change: And your next question comes from the line of Peter Zepino with Wilk Research, please go ahead.

Speaker Change: Hi, good morning. Thanks. I wanted to ask you about your sports strategy on Macs. Understanding that that strategy leverages relationships and licenses that you have to the linear segment, do you see opportunities to license new IPs going forward? Thanks.

Speaker Change: The strategy really differs as we look at the global reach of math. There's a number of markets.

Speaker Change: where it's part of Max, there's number of markets where it's an add-on. Having the sports outside the US has been really helpful to us together with the compelling local content and HBO. It's been an offering that's...

Speaker Change: Really differentiates us and we're seeing some meaningful demand at J.B. You want to talk more specifically about the U.S.? Yeah, Peter, I'd say we've taken a very disciplined but experimenting with different models to see how in this migration from certainly sports.

Speaker Change: in the US from wholesale to maybe a more hybrid or wholesale plus streaming works versus internationally where generally our European sports business is.

Speaker Change: Historically, we've been more like our TMT sports asset in the UK, an al-Akhart sports business, unlike here in the US.

And so we have various levels of experiments where they're...

Speaker Change: The subscribers are paying definitively extra for that sports content. Here we obviously have it in Justin.

Andrew Zaslav, Andrew Slabin, Gunnar Wiedenfels

Speaker Change: We balance that with the cost of these rights and we are evaluating them to see what makes sense because it is hard still to find a business model in streaming alone.

Speaker Change: that makes these premium sports rights profitable and successful in driving those two metrics, and so we're going to continue to experiment in a smart way. We do think there's clearly opportunities to leverage powerful sports rights.

Speaker Change: as we do with Champions League in Brazil and Mexico, as we do with our sports right here, but it's not a one single model. We're going to continue to experiment and see how we evolve the model to make it successful and profitable at the same time. In the end, sports is the rental business.

You know, for us...

Speaker Change: Superman, Batman DC, Harry Potter, Lord of the Rings, those are the equivalents of the NFL to us.

Speaker Change: We own those assets, Game of Thrones, as we build storytelling content that people love everywhere in the world with characters that they love everywhere in the world, and then we could build out that world [inaudible]

Speaker Change: Like we're doing with Harry Potter with ten consecutive years, you know, in the aggregate, that is where the future of Warner Bros Discovery is at the best storytelling company in the world.

Speaker Change: with the most extraordinary library and from the Wizard of Oz to DC and Harry Potter and for us to harvest that because one of the advantages that we have is that it's...

Speaker Change: there's an opportunity to really begin to harvest it. In many cases, we haven't been doing that. And so, that's where I think we'll be spending more of our money and being less dependent on sport, which is a rental business.

Thank you.

Speaker Change: And your next question comes from the line of Bryan Kraft with Deutsche Bank, please go ahead.

Ryan Kraft: Hi, good morning. David, you talked about the strength of Max's distinctive programming as the source of competitive advantage. I wanted to ask

Ryan Kraft: You know, first, how is HBO able to turn out so many standout hits like this to do it so consistently? What's the secret sauce there from your perspective? Second, for David or J.V., can you talk about how Max is resonating with different demographic groups, domestically, particularly younger consumers? [inaudible]

Ryan Kraft: And then lastly, I was wondering if you can give us a sense of how time spent on Max and the U.S. compares to time spent in other markets on Max, particularly in Europe and Latin America. Thank you.

Thanks very much. Well, first. Good.

We have one of the the best creative executives

Speaker Change: Their ability to tell stories partner with great creatives, but they also have a model of quality.

When people see that HBO brand...

They know that that represents...

All of that talent, and people have... [inaudible]

for 50 years been coming to HBO for quality.

Speaker Change: Content. And you know, this is the strongest HBO has ever been. The idea of it's not how much, it's how good, it's something we identify that

Speaker Change: We're not going to flood the zone. We want to be telling the best stories and we want to also be taking advantage of all the great quality content over the years like Game of Thrones and come out with House of the Dragon. We got Euphoria coming up and a real innovation from that team with the pit. [inaudible]

which was a medical procedural.

Speaker Change: John Wells and Noah Wiley, together with Casey and Sarah and Channing, who runs our Warner Brothers television group. We've really brought the best creatives back to Warner and to that together with the great talent we have. Plus,

HBO is a different model for story-telling [inaudible]

Speaker Change: You know, that we do it very similar to what when I was at NBC with Musk's CTV.

Speaker Change: Whether it's Sunday night or Thursday night or Monday night, it becomes a cultural happening. People on Thursday night waiting for a week to see the pit. And that's part of a philosophy of this company of great storytelling.

Speaker Change: with a shared experience, whether it's in the theater and then people can talk about it or people from the other on Sunday nights and watching the last of us. That's the core of what we are and it also as you saw with white lotus by having that experience over two months or over four months with the pit.

It also, it makes...

Speaker Change: Stars, people feel that they really get to know people in a way that's different than just watching 8 episodes in 8 hours on a Sunday afternoon. So if it comes part of the culture.

Speaker Change: And more and more, that's the future of maps is quality, quality, quality and that's why I think we're seeing a lot of the growth and that's why we think we have a great future.

Speaker Change: And then on the two questions around engagement in the US in terms of the younger demographic, we see a very strong and popular for a lot of the reasons that David just described. In terms of the topicality, the conversations that people don't want to be missed and the FOMO that people don't want to miss.

Speaker Change: We do well in that younger demographic. And obviously, as you think about our lineup...

Speaker Change: of series, particularly with things like Euphoria Coming Back, which is one of our youngest skewing, and biggest in youngest skewing series, and obviously building into...

Speaker Change: The truly four quadrant Harry Potter down the line. We have a number of series that is attractive to that demographic on the engagement across markets.

Speaker Change: Latham is our leader, I'd say, with the most complete offering, partly also because that market has...

Speaker Change: Multiple payout with deals, so our film offering is the most complete

Speaker Change: as well as obviously all the great output coming from HBO and the U.S. side and...

Speaker Change: We've been at originals for local originals probably one of the longest in that region of the world.

Speaker Change: Content Mixed There is largely a US-based Hollywood offering and so it's got real appeal but slightly less engagement with what you see in Europe and the US.

And Casey has a home field advantage.

Speaker Change: He can just walk down the road in the lot and go into Channing's office with her whole team.

Speaker Change: and whether it's Harry Potter or the pit, more and more, a lot of the content. We have really two of the best studios. We have the studio for HBO, and then we have the Warner Bros TV studio, and yes, we produce for Apple and Netflix, some of their best content, but that's our home field.

Thanks so much. Appreciate it.

David Karnovsky: Here next question comes from the line of David Karnovsky with JP Morgan, please go ahead.

David Karnovsky: All right, thank you. Maybe I'll ask on the macro the release noted no material impact over the last month, want to see if you can dig in a bit on it.

David Karnovsky: What you're seeing across advertising channels and hearing from your marketing partners and how that informs your view of the coming upfront. And then for Gunnar, corporate EBITDA was nicely improved over the last quarter and last year, maybe just walk through some of the items helping there and what should we think of as kind of run rate permanent savings. Thanks.

So yeah, let's be um...

David Karnovsky: and I've called out some of the factors impacting Q1 and Q2 and if you do like for like comparison everything we're seeing right now Q2 so far is tracking pretty much exactly in line with Q1 corrected for those items that I called out earlier. So I think that is good news at the same time. [inaudible]

David Karnovsky: We do obviously look at sort of external projections and we have a much more diversified portfolio now than we used to have. [inaudible]

David Karnovsky: But advertising obviously would be at risk to some extent. We have the upfront discussions that are

David Karnovsky: that are probably going to go a little slower, start a little slower this year at the same time, we see that being offset by pretty strong scatter at this point.

David Karnovsky: And nonetheless, we've managed through turbulent times as a leadership team.

David Karnovsky: and we would do the same, you know, should the outlook deteriorate in the second half, and you also saw we did.

David Karnovsky: for a potentially more turbulent environment here to make sure that we're ring fencing our financial performance.

David Karnovsky: The corporate cost step down that you saw in the first quarter was a mix. There were some smaller one-time items but generally speaking I wouldn't expect the corporate cost number to be down year over year for the full year. So nothing, no trend change there to call out at this point, David.

Thank you.

Speaker Change: And your next question comes from the line of Breach Greenfield with Leicester Dees. Go ahead.

Thanks for taking the question. Last quarter.

Speaker Change: Gunnar, I think you said that there would be a net savings from the NBA in 2026 of several hundred million dollars.

Speaker Change: NBA ad revenue and the cost, all costs associated with it. I assume there's a net benefit in Q1 but just anyway it's sort of wonify and then you know as you sort of gave that Q2 cost guide and you said that costs would be up year over year.

Speaker Change: What would it look like? I assume it would obviously be down without the NBA but just anyway to sort of think about those two Q1, Q2 issues would be great.

Speaker Change: Yeah, so the short answer is yes, it would have been down significantly without the NBA but let's take a step back and peel back that onion a little bit. So it is true, as we said, we're very happy with how we transformed our sports rights portfolio in the context of the NBA discussions. [inaudible]

Speaker Change: We have a very strong portfolio now. We've been successful in renewing our affiliate deals which as you know that part of the major driver of monetization for these sports rides.

Speaker Change: We did also say that 2025 is going to be impacted by some overlap between sort of outgoing and incoming rights.

Speaker Change: And that is still a thing. If you want a quantification for that, I would say… [inaudible]

Speaker Change: You know, it's okay to model a roughly $300 million cost increase in 2025.

Speaker Change: Q2 is going to take a big part of that. There's going to be a little bit of a headwind in Q3 as well and then from Q4 on this should turn initially into a moderate tailwind and then to your point we're going to see very significant improvement in sports rise expenses with the NBA coming out in 2026. So a very material step down from the increases that we saw this year. And again, I think

Speaker Change: You're a more specific question on what Q2 would have looked like without the MBA. I want to stay away from quantifying that because there are so many different factors playing into it. But again, if you keep in mind that

Speaker Change: The NBA was a very profitable property for us, partly because of its value for affiliate discussions, we were able to renew these deals without the NBA so, you know, next year is going to be significantly better from the financial perspective, from that perspective.

Thank you.

Speaker Change: Andrew, our next question comes from the line of Jessica Veef-Earlick with Bank of America Security,

Jessica Rief-Erlich: Thank you. I guess two questions. First, on direct to consumer, you've entered into a number of distribution agreements, mostly wholesale agreements.

Speaker Change: Of course, at lower RPO, maybe you could discuss some of the drivers you have to increase RPO over time and you know coming into the year I...

Speaker Change: The streaming consolidation was widely expected. You talked about optionality. Do you believe there's still opportunity to scale further here? And then maybe just to follow up on the advertising comments. And then maybe just to follow up on the advertising comments.

Speaker Change: Yes, it's macro uncertainty, but you've got more tools like particularly an attack, so you're coming into the upfront like with a different strategy or approach.

Jessica, start on the article question.

Um...

Speaker Change: Look, we always evaluate these deals based on our approval, but really based on lifetime value, including obviously our approval in the deterrent dynamics. So, you're right that we have a number of distribution partnerships with wholesale partners where we may take a reduced. [inaudible]

Speaker Change: wholesale rate, but obviously have a term profile that's significantly higher and we evaluate that on an LTV basis that is accretive to the business.

Speaker Change: In terms of other levers for our group growth, there's several. One obviously is we talked about it, we talked about it on the previous call which in the near term as we said then, I think in our fourth quarter call. [inaudible]

Speaker Change: We'll create some downward pressure on our poo in the initial phase remembering that we were only in our ad supported skew was only available as of a little over a year ago in one market which is the US we've now rolled out in over 45 markets and we're seeing great traction. Thank you very much.

Speaker Change: and the advertising piece of the art crew calculation there.

Speaker Change: is growing and the good news is internationally we're seeing great demand on numbers in a variety of the biggest markets are up multiples of what they were even 12 months ago.

Speaker Change: But that's going to continue to grow and the art we were going to continue to expand over time and so they'll be growth.

Speaker Change: We think on a net R who basis from the advertising skew of overtime. Obviously this additional member, extra member skew will help and as the password sharing crackdown comes, we will also add more subscribers on top of that.

Speaker Change: And then, as we talked about on an earlier question about... [inaudible]

Sports and the upsell of sports.

Speaker Change: We will be leveraging the upsells to sports in the markets where we have that particularly in Europe which will also add more our food benefits. So not to mention obviously that as we see engagement as we continue to focus on engagement and the product improvements.

Speaker Change: That we're making, again, particularly on the ad light skew that we have, that engagement will translate to more time spent which will translate to obviously more monetization.

Speaker Change: Those are a couple of the levers that we feel comfortable with David. Yeah, well look across the board the the streaming inventory on Max.

David Karnovsky: We're seeing just real demand and tremendous amount of value and coupled with the growth that we're seeing, you know, for instance, one of the really positive

David Karnovsky: The development that we see now, and it's for more than, I think it's for three quarters, is that in Europe

David Karnovsky: We're not growing when you take the decline of the traditional business and then you see the growth of our streaming business and our ad light product together. We're seeing meaningful growth across Europe and in fact when you look at all of international. [inaudible]

David Karnovsky: What the decline in the traditional business is being outrun!

David Karnovsky: by the increase in our subscriber and ad revenue so that we're in that positive there, which is a really meaningful turn for us.

And the fact that it's substantial in Europe .

is a powerful son. [inaudible]

David Karnovsky: In the US, we need, it's not there yet, it's not clear that we'll be able to get there. On the upfront, we'll be emphasizing the streaming inventory on Max which is really coveted and with what we have coming up.

David Karnovsky: on Max. There's a lot of demand specifically for specific titles and to be associated with the quality of content and the fact that it's watched in large groups.

David Karnovsky: which is, you know, with their sports and then there's HBO. And then we have our films coming and the ability to affiliate with those films on Ad Light.

Robert Fishman, Richard Muffet-Nathanson, Lisa Hatt [inaudible]

Good morning, two for you guys if I can.

David Karnovsky: As you shift it away from the more is better streaming strategy, how does the focus on higher quality content change the way you think about the right level of content spending at streaming and the overall company? And should we expect content spend to come down or is it just the reallocation of those dollars to the bigger bet?

Speaker Change: Now, it also be great to hear your updated thoughts on licensing, your library, and producing originals for third-party streaming services. You mentioned in the investor letter that the Scooby Doo show for Netflix as one example. How do you balance what should be exclusive to Mac?

David Karnovsky: And how is that evolved over the past couple years? Thank you.

Unapple

that title to create a compelling series. [inaudible]

David Karnovsky: with Jill and Hall and sell that to Apple. It's a very good business for us, shrinking, bad monkey.

David Karnovsky: Abbott Elementary, which we sell to Disney. We're a high-quality provider. It's one of the reasons why some of the best and the brightest people want to come to us.

David Karnovsky: because they're not a captive and they can produce content for anyone. A lot of the content, more and more of the content is coming to us.

David Karnovsky: But it's a very substantial business that Channing is running, and it's important for us.

David Karnovsky: to be able to sell our content to third parties. As we look at our titles, there were some where there were many that are really just full Warner Bros.

David Karnovsky: When you look at the major characters that James Gunn and Peter Safran are developing with their 10-year plan around DC

David Karnovsky: That is to build asset value for us globally. Everywhere in the world, Wonder Woman, Batman, Superman, Supergirl. So we look at those as big asset builders of big differentiators. Same thing with Harry Potter.

David Karnovsky: You know, and that's why we've leaned in so hard with JK, and we'll be doing ten years of that. You know, today we're good, we're announcing the date of our Lord of the Rings movie.

David Karnovsky: So there's some premium global IP that's recognizable Game of Thrones. Those belong to us and they'll only belong to us forever.

David Karnovsky: because we're building big assets and a global differentiated strategy around that.

David Karnovsky: So it's those global tent poles, together with quality originals, that's what makes our motion picture slate, it's what makes

David Karnovsky: our streaming business so strong, but then we have so much IP at this company, Hannibal Barra, Looney Toons, and there's just a lot of titles.

David Karnovsky: and that can get very broad acceptance in the marketplace and then we can follow it with a Scooby-Doo movie and that would be a real win-win for us.

David Karnovsky: that will take that piece of IP and grow it to a point where it's even more valuable for us. So it's all about harvesting our IP, but recognizing that the most important IP that differentiates us from everybody in the industry will be used to build that said value.

the the the the the the

David Karnovsky: You know, if you compare our studio numbers today with you know a couple of years ago you'll see that we have continually

Uh uh uh uh uh uh uh uh uh uh

David Karnovsky: Increased the share of one of brothers' output that we're using internally.

and you see that in our company eliminations. [inaudible]

David Karnovsky: And it's just an important point to make that every dollar of inter-company profit that we take out in inter-company eliminations is really, to David's point, building asset value, that is future streaming profit in waiting and we have built that internal asset in a pretty significant way.

We laid down that pipe two years ago.

David Karnovsky: So what you're seeing now is you're seeing the fruits of that strategy and us doubling down on it because consumers are looking at the quality content and saying that's really what they want. And we did get rid of a lot. That was a shift from when we took over and bought this company. [inaudible]

David Karnovsky: and we got rid of a lot of content and with a lot of noise around it, but it was part of that overall strategy of...

David Karnovsky: Volume, particularly on the library side, purely and some, obviously, less unscripted and towards more pay-one movies, global scripted originals and select local originals and key mortars.

Great. Thanks, guys.

Speaker Change: And your next question comes from the mind of Rick Prentice, with Raymond James, Keith Gohead

Rick Prentice: Thanks for taking the questions. I'm going to follow up on the streaming side obviously. Thank you.

Rick Prentice: Furley on track, as you mentioned, as you think about what's in the term.

Rick Prentice: One of the bigger drivers is you would rank them, subscriber growth, ARPU growth, cost cutting. Well, what should drive that business up into the rise we go forward? And then on the studio side, you mentioned several times your goal to get back to 3 billion and talk about your slate of IP you've got. Help us understand the pacing to kind of get to that number and stay at that number. [inaudible]

Rick Prentice: I mean on the streaming I'd say the good news for us, not a single or even a small set of levers there's you know several big levers so number one is obviously globalization

Speaker Change: As David said repeatedly, we still got almost half the world to go in terms of rollouts and new markets.

Speaker Change: Number two is in those markets penetration growth in the markets where we already are on sort of same-store sales basis is penetration growth as part of that is driven by things like the introduction of the lower price add light skew in more markets to sort of go after more price sensitive consumers and that's you know we're only

Speaker Change: 12 months into that, and I should say, on the globalization…

Speaker Change: First globalization point, remembering that obviously in the beginning and part of next year we have three of the biggest markets in Europe and three of the biggest markets in the world.

Speaker Change: coming online with Germany, the UK, and Italy, and so that'll be a big bolster. So globalization, penetration growth,

Speaker Change: Arpoot growth in the same points to respond to Jessica's question earlier and better at sales monetization in particular.

Speaker Change: The Password Sharing Crackdown Initiative that, again, will take 12 to 18 months to get full of full steam, but we'll create another boost of both subscriber and our group growth through the extra member add-on, and then, you know...

Speaker Change: Look, content is obviously the fuel of this entire thing. Content is the stories are the product.

Speaker Change: and the content slate we have and the Casey and the team have curated over the next...

Speaker Change: 1824 months is stronger than anything we've ever had and more consistent.

Speaker Change: and so that will be another avenue growth and lastly, you know, product enhancements. David mentioned to it in his opening remarks, but, you know, we went from not good to good, but we still have a chalk or block road map.

Speaker Change: that were effectuating every day where the product is getting better and better to go from good to great. And so that will help engagement, that will help time spent, that will help monetization. So we got five or six different levers that...

Speaker Change: We'll help create some, we'll tailor one for us here over the next couple years. The final one is kind of a strategic attack that we've been on for a long time which is bundling better together and putting together a bundle that's not just a bundle for price

Speaker Change: 20 apps, and they're sitting down with their Google and try to figure out where to go.

Speaker Change: What we did with Disney that bundle here in the U S of Hulu Disney plus and Max is very compelling and when you see these bundles and we're starting to roll them out around the world.

Speaker Change: As people will look as who is a global player that we can attach to get more scale and to try and to try and find real growth in in those bundles.

Speaker Change: Is by definition less lower marketing.

Speaker Change: Much lower churn so when you see churn numbers.

Speaker Change: It was like we see with Disney and we're starting to see in some of the bundles, we're doing around the world.

Speaker Change: Encouraging you don't need to re market to get to some of the same subscribers that are coming in and out one and two you've got two or three players marketing to our product and that product is more satisfying because you can go across without having to come in and come out will come in and come out and so this is an evolution ultimately there's going to be.

Speaker Change: This is going to be five or six players that may be a few regional players that can do marginally well and they may be overly dependent on rental sports, but there'll be a few global players probably five or six.

Speaker Change: That will it will be a better consumer experience and some of those five or six may even come together in a bundle to make that experience even more compelling and.

Speaker Change: If you bet on solving for a consumer problem.

Speaker Change: And providing quality content, great storytelling, and a better consumer experience.

Speaker Change: Better consumer experience always provides huge value creation and so that's our focus but the bundle I think is a big part of it bundles.

Speaker Change: And then Rick maybe maybe on the on the $3 billion.

Rick Prentice: The target that we put out for the studio.

Speaker Change: <unk>.

Speaker Change: Again, a reminder, that's not a that's not guidance for this year, even though we did say that we're expecting to make a very significant step towards that number this year, but two levels to answer that question one sort of on the on the on the level of the individual business units there is opportunity everywhere and in the studio landscape Channing and her team have been incredibly success.

Speaker Change: Well with television production and there may be more opportunity as she manages the transition of the business model from a very broadcast heavy.

Speaker Change: Output.

Speaker Change: At years ago to a more streaming focused model now, there's there's margin and ROI upside there.

Speaker Change: In the film space, we're starting to see the portfolio strategy come through David has mentioned there is a number of times the combination of harvesting our own library.

Speaker Change: And IP combined with with the right level of.

Speaker Change: Original films, the right mix of bigger swings and.

Speaker Change: Smaller budget commercially safer films et cetera, we're looking at a blowout second quarter here showing some of the fruits of that but again I don't want to get too focused on that but I do believe we're going to see more.

Speaker Change: Longer term basis, the games business remember last year was really impacted by.

Speaker Change: Some misses we had in that space.

Speaker Change: <unk> and JV has implemented a pretty significant restructuring of that business and that should be a growth driver over the longer term horizon here and then frankly.

Speaker Change: The biggest point underlying all of this is all the transformational change that we have implemented over the past three years. It starts with a much greater collaboration coordination the approach that we take the franchise management.

Speaker Change: The planning that goes into the.

Speaker Change: The rollout of every.

Speaker Change: New IP.

Speaker Change: And the way the entire company rallies behind each each new film.

Speaker Change: And each each series that we're that we're creating that is going to pay dividends for a very long time to come and we have also frankly revamped every step along the value chain from greenlight to the monetization the windowing of our content I have no doubt that all of this is going to.

Speaker Change: Provide lasting impact and again as I said before what we're not going to see is perfect.

Speaker Change: Consistency, it's a hit driven business, but I have no doubt that we're going to see much greater upside and success and much much less downside.

Speaker Change: The inevitable.

Speaker Change: Areas, where we're we're going to Miss at times last thing I'll say is we're also supporting this growth with investments I.

Speaker Change: I talked about content investments already were planning to moderately increase that.

Speaker Change: That number every year, but you also saw the Capex in Q1 slightly up a lot of that is going into the necessary investments in our studio footprint and so again I think.

Speaker Change: This is a great longer term.

Speaker Change: Our outlook longer term story for the studio.

Speaker Change: Very short term, we're going to have an absolutely amazing second quarter.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: At that time, we have for questions, ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.

Speaker Change: [noise].