Q3 2025 Paramount Skydance Corp Earnings Call

23 2025 earnings conference call.

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At this time, I would now like to turn the call over to Kevin Creighton Paramount EVP of investor relations. You may now begin your conference call.

Good afternoon and thank you for taking the time to join us for the Paramount, third quarter, 2025 earnings call. I'm Kevin Creighton EVP of corporate finance and investor relations joining me today is our chairman and chief executive officer, David Allison our president, Jeff shell our interim, Chief Financial Officer, Andy Warren and our chief strategy and Operating Officer Andy Gordon. As a reminder, we will be making forward-looking statements today that involve risks and uncertainties, our remarks will also include non-gaap Financial measures and reconciliations of these measures can be found in our earnings letter or in our trending schedules, which contains supplemental information. These can be found on our investor relations website. I'll now turn it over to David for a few brief remarks before we take analyst questions.

Good afternoon before we get to Q&A, I'd like to take a moment. Since this is our first earnings call to share some thoughts on what we've accomplished so far and where we're heading.

We launched a new Paramount just 96 days ago. And as we approached the 100 day, Mark, we're encouraged by the meaningful progress. We've made in a relatively short time. We moved quickly laid a strong foundation for what's ahead. And there's a real sense of energy and purpose across the company.

Our goal in bringing these 2 companies together with simple to honor Paramount's incredible Legacy of Storytelling while taking the necessary steps to transform it for the future. The combination, unites an extraordinary and diverse collection of entertainment assets spanning film television animation, interactive games news and sports supported by a rich library of celebrated and award-winning content.

This powerful portfolio gives us the tools to achieve scale in.

Succeed in today's fiercely competitive media landscape.

We intend to build on the strong Foundation.

Investing the necessary resources and talent to ensure our company is not only well positioned to compete but to lead in the industry.

Our vision is to transform Paramount into the global home of world-class storytelling, powered by 1 of entertainment's most storage Studios, the leading broadcast network and is scaled Global streaming platform that delivers much watch programming to audiences everywhere.

Achieving this Vision requires reimagining, how we operate driving greater efficiency, unlocking, new opportunities for creativity and positioning the company for sustainable long-term growth.

With this in mind, on day 1, we identified our Northstar priorities, the areas where we see the greatest opportunity to drive meaningful progress.

They are first investing in our growth businesses, anchored by our creative engines and exceptional storytelling.

Second.

Scaling or direct to Consumer business globally?

And third driving Efficiency Enterprise wide with a focus on long-term free cash flow generation.

Over the past 3 months, as part of a thorough review of our assets and organization. We've taken early but significant steps towards advancing. These priorities by making key leadership hires pursuing high impact Partnerships expanding our world-class roster of creative Talent.

Reigniting performance across our Studios.

Maximizing the value of our highly profitable CVS portfolio and driving efficiencies across the organization. All while staying true to our mission as a creative company.

Storytelling is and always will be the heart and soul of everything we do.

Every effort serves a single purpose to bring the best stories to the broadest possible audience.

Thanks to our actions to date. We are now well positioned to align Resources with strategic priorities and invest boldly in areas with the greatest long-term potential.

Just prior to this call. We issued a letter to shareholders outlining our third and fourth quarter results and expectations which we encourage you to review.

The letter details are 2026 guidance, including total revenue of 30 billion driven by strong growth, indeed to see revenue and Global profitability, as well as adjusted. And even up of 3.5 billion, additionally, we have increased our run rate efficiency Target from 2 billion to at least 3 billion.

In the near term, this includes adjustments to our film slate.

Our plan is to grow the electrical output targeting at least 15 movies per year over the next few years beginning in 2026.

While this rebuilding will take time, we are confident that our creative Direction and business strategy will deliver the quality films that will enable us to engage and expand audiences worldwide.

More broadly over the next year, we plan to make incremental programming investments in excess of 1.5 billion across both theatrical and direct to Consumer platforms. These Investments are designed to expand our Pipeline and premium films, television, sports news and gaming content for Global audiences.

We've clearly demonstrated this commitment through a series of major creative Partnerships and long-term deals from South Park and the UFC to The Duffer Brothers, James, mangled. And our Landmark collaboration with Activision to bring Call of Duty to life on the big screen and much more.

Our top priority is our direct to Consumer business where we are focused on rapidly and efficiently scaling subscribers engagement revenue and profitability.

Since 2023 Paramount plus is achieved, the largest US subscription growth among all major streamers excluding bundles and we aim to aggressively build on that momentum. In Q3, we added 1.4 million new subscribers for a total of 79 million.

We are committed to scaling our subscriber base and our pursuing a more balanced year, round programming strategy, to drive higher engagement.

As we know, this is the single greatest factor in subscriber growth in loyalty over the past 12 months Paramount plus is ranked, as 1 of the top 3, most sought-after sources preferred content among major streaming services.

We believe we can do even better and we are fully committed to doing what it takes to become consumers. Top Choice for great storytelling.

Finally, our goal is to accelerate Innovation by making technology, a core competency of our company.

Competitors, from Silicon Valley, have quickly expanded into media and broader forms of entertainment. And if we want to remain competitive long term, we must strengthen our technology and do what it takes position ourselves. As the industry's most technologically capable Media Company.

Again, I want to stress that technology at Paramount is not and never will be a replacement for human creativity, rather. It serves as a powerful multiplier enhancing performance, elevating the consumer experience, and equipping, our creative teams with the tools that will enable them to tell even better stories more efficiently and effectively.

We're excited about several Innovation initiatives already underway and we'll be sharing more details soon.

While we're still in the early stages. As I mentioned, this is the only day 96.

We're energized by the progress. We've made in the clear path ahead.

And we look forward to answering your questions.

Thank you, if you would like to ask a question please press star. Followed by 1 on your telephone keypad, if you would like to remove your question, please press star followed by 2.

1 to ask your question, please. Ensure your phone is immediately. We ask you, please let yourself to 1 question.

The first question goes to Robert Fishman of moit Nathanson Robert, please go ahead.

Thank you. Good afternoon everyone. Um can you talk more about your confidence for Paramount plus to gain global scale? And what role does growing? Your overall content spend play in to better competing with the other large S5 Platforms in the future and then just on a related note when when you think about this global scale, how do you balance growing? The overall subscriber base while reducing investments in select International markets that you called out, thank you.

Yeah, absolutely. Uh, by the way it's David. Thank you so much for the question.

First we just highlight we had a really good quarter as it relates to our DC business, um 75 million total Subs uh Paramount plus Revenue growth with up 24% and we're up 17% for the segment.

So, I think we've made really good progress in that Arena.

To achieve scale. I think we really need to accomplish 2, main priorities.

1 is, we need to increase our investments obviously in content. Uh, as you guys know, high quality storytelling Sports entertainment, all increased engagement which Drive subscribers. Um, we've been doing that across our business,

That, you know, we've made the investment in the UFC and Zuppa. Boxing incremental obviously storytelling Investments as well. In addition to bringing over talents, like The Duffer Brothers, uh, all of which will be telling stories on across our ecosystem and on Paramount Plus

Converging the 3 streaming services that we have now onto 1 platform, uh, for clarity, the company currently operates.

3 separate streaming services.

On across multiple clouds and multiple stacks.

By unifying. Those all into 1 platform, we'll be able to significantly improve the the user experience. We'll be able to significantly improve how recommendation Discovery obviously work on platform. That will also improve our capabilities across the adtech will be able to deploy and we think by while improving the content and the tech that's available on platform that will lead towards incremental subscribers growth and engagement.

Do you have anything you want to add to that? Yeah, I'll just jump. Let me touch. Hi Robert, let me just touch really quickly on the international part of your question. So, interestingly, you know, the 2, big things that David just outlined content, invest investment and platform investment, both are Global Investments. So, let me give you an example. 1 of the biggest content Investments, we're making is scaling up our, uh, Studio output and Film Studio output. And there's nothing that drives the platforms, and most markets internationally, other than filmed entertainment and, and good movies, both animated and live action. So, that's a perfect example of where our content investment is going to be Global, not just domestic. And then obviously, the platform investment that we're making, uh, is a global investment. It's not Market by market and and 1 really important piece of that, is that Pluto which is a an asset we don't talk about that. Much is a, is a very critical asset in some International markets.

Which are low rpu which could be a a way in for our DTC business. And often often a good business on its own right now, Pluto's on a separate Tech stack, you can't even upgrade somebody from Pluto to Karma plus. So I am very hopeful that once the platform investment is live, we will be able to use that product to you know start with Pluto and some International markets and over time you know use that to scale and markets which are which are uh not um not higher proof

Great. Thank you. The next question, goes to Steve and Carol of Wells Fargo Steven. Please go ahead.

Thanks so, uh, David if I have maybe an initial conclusion from the shareholder letter, it's it's that you want more more originals, more licensing, more sports news, wide releases tech and and I guess a lot more efficiency. Um is there any way you can help us? Think about how much investment you plan to put into Paramount's, guidance over the next several years? I'm guessing it's well in excess of that 3 billion and there's a lot of Revenue as well. But just in terms of the size of the company, you know, any way to put this into sort of a big number, uh, and then just on the studio side with the turnaround you're looking to do and and the additional wide releases. What did you learn from your experience at Sky dance especially creatively uh that you all think you can now apply since the studio at least financially has kind of underperformed historically. Thank you.

Yeah, no, look, I really appreciate the question. Um, again everything for us is really going back to driving our, our Northstar, uh principles that we outline the letter. Uh we're going to continue to obviously invest in our growth businesses anchored by our creative engines and Superior storytelling. And scaling, our DDC business is absolutely 1 of our North Stars. So to to your point, we're going to continue to do both of those 2 things and what and the company, we acquired, we think has an incredible Foundation, uh, but we do think that there's obviously more to be done there. Uh, we talked about in the letter, the additional 1.5 billion of content Investments that were going to make. And our goal is to be a global scale, uh, you know, streaming service. So from that standpoint, we are going to obviously, invest accordingly. But please know everything for us as as owner and operators of the company.

The way we think about this is really how do we drive long-term value creation? And, and as we're currently the largest shareholders and we'll continue to be the largest shareholders in the company. Uh, we really are looking at this in terms of how do we increase and drive value long term for for all of our shareholders?

and then I would say, 1 of the things that we've obviously, you know, learned on the creative side, uh, at Sky dance is a lot of our core pillar, uh, core principles

Was always quality is the best business plan when it comes to storytelling and a dedication to Aiming High and you just don't stop working until you get there. Uh, that enabled us to, you know, theatrically to deliver films like top gun Maverick. And you know, we've always had an incred, you know, when we were just the Standalone company, at Sky dance had an incredible partnership with Paramount, but we've consistently obviously delivered hits.

Direct consumer, but also, for reference on the film side. As you said, the, the studio was making 8 movies a year, uh, roughly. Uh, when we acquired the business, and we're getting to 15 movies a year, minimum starting next year, and we will be and and that will obviously lead towards increased scale and profitability uh, across all those segments of the business. So uh David, I'll just add Steve, I think it's important to also understand that every investment we make. We're looking at how it drives value for the entire company and has a proper return on on investment to. We definitely want to get to investment grade so that we do want to get the lever and 3. The the goal is to have high cash flow conversion as we get through the initial investment cycle. So all those things should be factored into how we think about Investments.

Great. Thank you. The next question. Goes to David karnowsky of JP Morgan David. Please, go ahead.

Hey great. Thank you. Um, with the TV media segment, just be great to get your updated view on your portfolio of networks. Um, how are you thinking about advertising and cord? Cutting Trends? I'm here and within your 2026 forecast and then within that context investing into or optimizing, these Brands, thanks.

Uh, absolutely take that great. Um, hi David. So,

1 of the original things. Um, that we we as a group were kind of um, United on is that people talk about linear as 1 homicides and when you start to look at it that way and you look at the disconnect between broadcast and cable, it's pretty Stark and growing more Stark. And that's why CBS was 1 of the, the Cornerstone assets that we were excited about when we when we acquired Paramount and that those Trends are continuing since we've owned the company and we expect them to continue in the future. Um on the broadcast side, obviously it's declining it's it's a linear asset. Like any other linear asset but the declines are very modest um compared to the cable side.

And those don't even take into account. The fact that it's the content on the broadcast side is increasingly a huge driver on DTC. Uh both in terms of subs and engagement, not just the sports, which is becoming barbell. You know, if you look at where leagues are going, they want reach and they want dollars. The dollar is increasingly come from streaming and the reach still comes from broadcast and we have the perfect company for that barbell with with the biggest reach vehicle and CBS, which is the most watched broadcast network for the last 17 years and will be. So again, this year is off to a great start, by the way, and this season, and then the streaming, uh product, which is our Northstar to grow and scale globally. So, you know, increasingly um, uh, we will put in

Investments into the CVS side of the coin and we see those Trends continuing on the flip side, cable is continuing to decline and and in each quarter is accelerating decline, not just for us, but for everybody around the media business. And, um, it's, it's increasingly clear that streaming first and foremost is a replacement for the, for the multi-channel cable environment. We're fortunate with yes, we have cable channels, but we don't have, uh, they're not as as large proportionately for us, as for others. So we're really focused on um, really focused on taking those Brands and seeing what we can do as far as driving value long term, both in terms of overall, and in terms of for our, our streaming product as it scales, we're not going to spend off cable assets, um, this this company has a history of spinning assets, and it hasn't gone very well for us and we think for others. So 1 of the big rationale for sin is that when companies are Standalone, they can focus on driving the value.

Of the brands that they have in a more specific way, we are going to do that, but we're going to do that within our company. So our shareholders, get the value of that. We think we have some pretty good brands, on the cable side. Um, you know, obviously Nickelodeon is a, uh, is a core kids and family pillar for us, and that's going to be a very important. Um, uh, you know, segment for our company, not just in terms of streaming, but in terms of Licensing and consumer products where we just brought in a new leader for that business. But if you look at music, which is important category,

The traditional leader. There, you know, comedy or Comedy Central is a great brand and then bet which has a, um, a great position with that audience. So our goal is to look at those Brands. See if we can transform those businesses in a digital way to drive value long term and make them increasing uh pieces of our overall scaled Global streaming strategy, which is our core business. So that's our our plan.

All right. Thank you, operator. Next question, please.

The next question, goes to you just cut ref of Bank of America Securities. Please go ahead.

Thank you. Um,

million entertainment companies is the focus on entertainment and Tech, um, just wondering, David, could you give us your vision of how

How Tech is the same, you know, interrelate and how you drive growth like we could you give us concrete or specific examples of color on on how you think about that? And then just 1 thing in the release. When you um, talked about your partnership with ipg and publicist

Uh, for digital sales. What did they bring to the company? Like, what tools will they bring to help Drive Revenue growth?

Yeah, that's a great question. I'll take the first part of it and then I'll pass it off to. You have to jump into the second part of it. So

Again, what I would say is, you know, as we've stated our goal is to become the most technologically capable Media company. And there's several areas where that's going to directly impact our business. And I'll just talk about a couple of initiatives that are, that are underway currently. Uh, when we acquired the company, as I said, previously, we kind of. You know, we're we're operating in 3, streaming services, currently Paramount plus Pluto and and bet plus. Um, those are 3 completely independent Tech Stacks, they operate across 2, different clouds and there's no connectivity obviously uh between the between those businesses currently uh convergence is currently underway to basically unites them into 1 which would be done around the the middle of next year. Um then from there we have a roadmap to obviously

Significantly improve the overall product, uh, for for, for, for Paramount plus. And, and again, when you improve products, you get benefits like you increase engagement, you get, you know, your your recommendation engine obviously, improves dramatically your ad sale, monetization will improve as you improve the adtech. So there's several areas where, obviously that this is going to impact the direct to Consumer business. I'd say another bucket is we're currently in the middle of an oracle Fusion integration, uh, the company. When we acquired, it did not have an Enterprise solution, uh, we're currently in process of deploying that across the business. Uh, that will lead to significant operational efficiency, uh, across the entire company. Uh, it will also give better Real Time information to managers, to be able to think of it. Uh, kind of like, if you're a pilot do you know? I am uh, instrumentation is important. The better visibility you have, in terms of how the company is doing on a day-to-day basis that improves your decision making.

So we're we're in the process of deploying that. Uh, we also, you know, our artificial intelligence obviously is going to have a significant impact across every business and, uh, and we do plan to utilize that here. Um,

We feel that, you know, Frontier technology working with more traditional machine learning is going to really impact how things like search reckon Discovery work on platform. Um, there will be increased efficiencies, uh, across the business while by deploying those tools. And we also believe it will have an impact on content creation, but I want to be really clear that when it comes to content creation. We really view, uh, AI as a tool for artists, to be able to iterate, more quickly, to be able to tell better stories. Um, and, you know, and and and, and basically, um, create create even further accessibility, um, really across the entire content creation pipeline. So from that standpoint, we think technology is going to impact all aspects of our business. And um, and and we want to be a leader in that space. And with that, I will, I'll turn it over to Jeff to talk about the, uh, the second part of your question. Thanks David. So, um, Jessica

when we signed our deal before we own the company, 1 of the things we found is due diligence, is that the company hasn't done the traditional media reviews in a long time of their buying relationships would be

So we work with prior management to, to do a review and the initial objective of the review is more traditional, which was we the cost by which we were buying marketing were much in excess of? Like, I had seen a my previous employers and and we've seen in the market. So the initial objective was, you know, try to use this review to load the costs of buying marketing for our various marketing

Buying side. We're going to get significant savings and and the cost of buying, um, marketing across the company and envision. Some, a lot of more benefits of going with the 2 large buyers. But the, the real opportunity here is more to other areas. The first is just these agencies, these following companies are not just buyers of advertisers, but represent all of our sales clients. And as part of the deal, we got significant, uh, Revenue commitments. Over 3 years with both Google assistant and ipg, um, and you can imagine part of the, the, the, the, the Nuance of this was what's incremental? We just want to get advertising buys that were just replacing current advertising. So, we, we expect to see most of this advertising in the digital area, where we need it, the most, um, and uh, that that you should see that in our numbers over the next couple of years. But more broadly, we're now Partners on a broad basis with the 2 biggest agencies as the world transitions from linear to digital, and we see lots of opportunities as

As we do, the things that David talked about is building our platform and building our adtech and our capabilities to work with the 2 biggest and most forward-looking uh Partners we have. And and as part of that, we brought in a new head of our advertising business Jasmine who most notably he came from Roku. But before that was the head of digital, for Google Assistant, who is 1 of our 2, new big Partners. So this is, this is a, you know, obviously a a big micro thing that we did but on a macro basis, we see a lot of opportunities.

In the coming years to grow our business in this way.

All right. Thank you, operator. Next question, please.

The next question, goes to bed at swinburne of Morgan. Stanley been, please go ahead.

Thank you, good, good afternoon. Um, David, I'm I'm guessing you probably can't talk about all the wbd speculation out there in the Press, but I was wondering if you could talk a little bit about Paramount Sky, dances, broader m&a philosophy. And and just how you think about industry, consolidation has something that could benefit the company or benefit overall returns in the industry. Obviously, we've sort of seen kind of rolling m&a through the sector for a number of years, and I noticed you guys, uh, divested some assets. So, it would be interesting to hear how you think about just the portfolio, broadly going forward. And then just 1 kind of clarification, question from the letter.

You guys talked about getting to investment grade metrics by 2027. I was just curious, if you could talk about what that actually entails in terms of Leverage level that you're aiming for to help us. Think about um, your balance sheet goals. Thanks.

And thank you for the question.

So so look. Um, first and foremost, you know, we're focused on what we're building at Paramount and and transforming the company and

Today, 96 days in we are more confident than ever in terms of our ability to achieve all of our Northstar principles that we've discussed in the letter and previously on this call. Um, and so, and, and, and I appreciate that. We can't comment on numbers and speculation. So first, I just want to say, thank you, honestly, for saying that. Um, uh, look what I would also say, as it relates to m&a, in terms of our mindset, I think it's important to know that there's no must-haves for us. Uh, we really look at this as buy versus Bills, and we absolutely have the ability to, to build to get to where we want to go. We believe, we can achieve our goals with our creative content engines. We believe we can achieve our streaming goals and that we can drive Enterprise efficiency, you know, for long, you know, and create value and long-term free cash flow Generation all through the building. Uh, standpoint as it relates to m&a. Everything for us is going to tie back to, to does it. Accelerate those 3 core principles and

The, for us, we're fortunate that we have the balance sheet, um, to be able to be opportunistic when we think that m&a will accelerate our goals. Um, but we're also long-term disciplined owner operators. So from that standpoint, we'll always approached things through the lens of how do we maximize value for shareholders and from an m&a standpoint it's always going to be how do we accelerate and improve our Northstar principles?

Um, so that. So that's on that standpoint actually. Jeff. Do you want to talk about the the vestures?

Investing in things that are non core to what's going to get us to Global streaming scale. So um I think we you will periodically see us the best smaller assets.

Yeah, and I would just add on The Leverage point. It's Andy been um, that that we're not sort of investment grade cross all the agencies today. So we want to get all 3. Uh, the main agencies to the rate of this investment grade. And as you know, there's a numerator and denominator to that equation relative to leverage ratios and we're going to focus on both.

Great operator. And our next question, please.

The next question. Goes to Rich. Greenfield of light, shed Partners Rich. Please go ahead.

Hi, thanks for taking the questions. Um, you know, I guess from a really high level David, it would be great to get your view on the USC strategy. You, it was obviously with the by far the biggest sort of statement you've made since acquiring Paramount. And you know, how do you think about earning a return? You obviously put up a much bigger price than what was being paid before and so between, you know, the subscriber base of Paramount Plus getting this included price increases, you you said 1's coming but you didn't specify how much like how do we think about how you drive or return and how you'll use the UFC assets across Paramount plus CBS? Um, and even maybe some of your cable networks, I'd be curious, just how you think about that and then, just for Andy, just a couple of housekeeping points,

1 you the projections you made, I realized this transactions have way longer to close than you would expected, but obviously the projections in the original filings were, you know, I think like 3.4 billion and 4.1 billion for 25 and 26. Those are now 3 and 3 and a half, it looks like just would love any color Beyond just took longer, but any color on, why those came down or major issues to think about? And then you also made a comment about content, right down instead of helped Q3 and will help to go forward. How significant dollarwise is there anything you can give us the qualifi quantify? Those comments would be really helpful as we think about modeling the next 12 months, thanks so much.

Yeah, rich. Thank you so much for the question. Uh, I'll obviously take the first part and then pass it off to Andy, um, 1. We could not be more excited about our partnership with TKO, Dana White and the UFC. And look, I'd also Loop into that, uh, zuffa boxing. Um, you know, it

Th those 2 deals obviously makes Paramount plus really the home for Combat Sports and uh, you know, obviously in the United States and we also have rights in Latin America and Australia.

And when you also look at the UFC, um, it is the largest sport that is not basically split off across multiple platforms. And so, it really is a unicorn Sports property and we think it's going to drive a tremendous amount of value in terms of both subscriber growth and engagement across.

Paramount Paramount plus, as well as, uh, CBS where there will be some aspect of the UFC that also lives on, uh, on CBS, um, in addition to that, uh, you know, I think, when you think about the UFC and the opportunity there, you know, there's a 100 million fans in the us alone. Uh, it's grown 25% since 2019, to date, and it's been doing all of that behind a double pay wall and it's in its previous home. And so, from from that standpoint, we think when you eliminate the double pay wall, it's going to become much more accessible. And we think that growth rate will increase um, additionally to that. We think we're offering, uh, you know, to our subscribers at Paramount plus really significant value in the fact that, you know, for approximately 1 pay-per-view. Um, you basically can access all of the UFC across Paramount plus and so you know from from from that standpoint, we think it's a great value for consumers.

And really going back to kind of our North stars of scaling or direct to Consumer business. Uh, we need to obviously invest into more content. I mean Rich you you know that you talk about this all the time, you know?

Perspective with that, Andy. I'll let you. I mean, I think you've kind of said it, which is, you know, when we put the investor deck out there is what we expected at the time of the announcement. And as, as David just mentioned, we had some really significant opportunities that came to us right around. Closing South Park, USC, and all the different Talent Fields. We've done between August 7th. And today you combine that, with our increased goal, um, and understanding. And now actually, um, confidence in our, um, expense efficiencies going forward. And we think we made the right decision based on what we, where we were, um, in in, in in last year versus today, uh, either 4.1 billion that was put out versus our 3.5 billion of guidance. So, we think, you know, given those Investments, we're making the right choice for the long term. And I would just say, I look on the efficiencies, we're going to start 26 with 1.4 billion of those accomplished and run rate by the end of 26th. We'll have accomplished most of the 3 billion plus that we've outlined in.

Our letter. So we feel very good about our ability to um, get our projection next year.

And then look on the uh on the right content. Write Downs. I think as you may know and transactions like this there is a review of all the content and all the libraries and we made the appropriate economic and accounting adjustments to make sure they're consistent with our strategy and learning with the company going forward.

Can I have 1 thing on your face? Yeah go back Rich if you don't mind on UFC um if you are going to go design a sport for us, you obviously it's perfect in so many ways. It just kind of punctuated with David 7. We started looking at this this that this app that Paramount we had a real desert of sports that ended at the end of the Masters. And, you know, started um again in the NFL and we saw lots of churn over the summer as as people turned off the service and then turned it back on for for NFL and this is a year round sport, which is very unusual for major sports. And then the second thing I I want to add is, you know, sports are not homogeneous. They're increasingly, you know, bifurcated, uh, from sports that are are, are kind of regular and sports that are events.

Um, you know, you kind of look at, you know, the recent NBA deals. There's a lot of regular season and then there's a lot of postseason and I think everybody who bought those rights would would say that postseason NBA is different than regular season NBA. Um, and for, with the UFC, there is no regular season in postseason. Every 1 of these numbered events that David talked about coming out from Beyond the pay wall is an event and the ability to have events throughout the year is exactly where we think it's worth is going. And then I, I will add 1 thing and we talked about CBS under George Chiefs, um, incredible leadership, we have huge volume of engagement on DCC and CBS. These tend to be older female, I think you do a bit of a female, all of our procedurals and the shows that are awesome on uh, on

CBS Matlock and globalism. You can go down the list. So having a a sports property like this, that was available in the year round, the event space and drives. Young male is like perfect. So, this was a bit of a unicorn for us and where we were trying to go.

All right. Thank you, operator. Next question, please.

Question. Go to John hudek of UBS John please go ahead.

Great. Thank you.

Uh 2 if I could. Um, first David, how should we think of the long term possibility of the the of the DDC business and um what are the major levers to get? There it sounds like from the letter. You think arpu is is is 1 of them where where you guys can make substantial Headway in the near term and then getting back to the comments on the, on the investment. Um, is this a situation where you guys are investing? So heavily on the front end that that free cash flow, may turn negative in the near term before the the platform scales up or how should we think of free cash flow Trends over the next couple of years?

Yeah, but I'm going to I I turn it over to uh Danny to to take that question. And then I'll fill in after that. Sure. Yeah. So the um, John is Andy the, the pre- cash flow is 1 of the biggest opportunities that we have we see going forward uh for 206. We are uh we know there's going to be about 800 million dollars of uh transactional and transformation costs. Sound reported basis, it will be negative but on an adjusted basis, taking out those kind of 1-time items, it will still be positive.

But I think most importantly, when we look at going forward it really comes down to our ability to do 2 things working capital has been a big negative to this company for many years. It's a real opportunity for us to both get better, payable and sales terms. But also 1 Thing. David spoke of was our ability to get better systems in place, visibility into accumulating uh receivables by customer. And by areas, it's going to be a big driver of this.

And we'll get significantly better over time 1, real benefit of having as you know a global portfolio of Ip is where your downfall that I that IP has big influences on your cash tax rate, and that's something else we're focused on.

If you want to answer you want to go back real quick and double click on DBC profitability. Yeah, no, no, absolutely look. I think if you go and it's obviously outlined, um, you know, the DDC segments, obviously will be, you know, it is profitable next year. It will be increasingly profitable uh, in 2026. And so from that standpoint, when we look at the growth rates across the business, uh, we believe that we can grow and scale our service, and we're doing that in a, in a, in a fashion, that is profitable.

All right. And uh, operator next question, please.

The final question, goes to cut gun. Morale of evercore hot gun. Please go ahead.

Great, thanks for saving me questions. Um, I just had a follow-up on the content Roi discussion, maybe away from the UFC specifically and speaking more broadly in the context of the plan to make incremental programming investments in 2026 in excess of 1.5 billion, what does the 1.5 billion look like across the various categories or verticals, whether it's between sports or Originals licensing, DCC theatrical. However way you're able to slice, it would be helpful along with what the total content spend budget. Looks like in 2025 versus 2026 and then how are you approaching the decision?

Decision making process and ROI analysis of these Investments. As you move forward and manage the balance between investing for global scale, while also anchoring around profitable growth. Thanks,

Yeah, no, absolutely great question. So, uh, so as we've talked about really revitalizing, our creative content engines is, uh, is is, is a key, a key driver in goal for us. So from that standpoint, like a couple of examples to talk through, we've talked about the UFC, we've talked about Zuppa boxing, um, you know, South Park is an exclusive for, for, you know, obviously for Paramount. Plus, in terms of the streaming rights, is another investment that we've obviously made, which is performed performed incredibly well, for us, both in cable, as well as on the DDC platform. Um, you know, having The Duffer Brothers join next year. Um, you know, is another area, we've obviously invested in the content, obviously, in the content space. Um, you know, we obviously announced the film with James mangled and timothee chalamet. So we really are investing really across the board, uh, in, you know, in our, in, in our growth businesses. Um,

I also think, you know, everything we do is through the lens of long-term value creation. So whether that's streaming, whether that's Sports, uh, what, you know, whether that's our film business. It really is, how do we grow and scale for to, to create long-term value for our shareholders? Um, you know, when you think about Paramount Pictures in particular, uh, that's definitely an area where there was, uh, some weakness when we obviously came into the

The studio. And so from that standpoint, we are uh, you know, diverting a a lot of resources from the combined uh, continent engines Paramount Pictures as well as sky dance, to make sure that we can get that studio to scale and get that studio to scale profitably. Uh, which we're incredibly, uh, confident in our ability to be able to do that, especially with the great leadership under, uh, you know, Dana Goldberg and Josh Greenstein. And so, um, that's really kind of how we look at it. Uh, Andy, anything you want to just say, also there's a unified, um, uh, review of our big content spending across all the verticals, and the segments, and corporate finance. And there's definitely buy in that we're all trying to do is grow the Top Line, grow value creation for the company, which means, share price appreciation and nothing's done in isolation. Um and we're very careful about that with regard to to our big content spend across film television

And see it and broadcasting cable.

All right. Uh, sounds good. David, do you have any closing remarks? Is that our last question. No, just 1. Just I I I want to just thank everybody for who took time to dial into the call today and just want to reiterate, there's tremendous energy and excitement around the company. And we're really excited for what we're going to get to build in the to build in the future. So just thank you.

Thank you. This now concludes today's call. Thank you all for joining and you may now disconnect your lines.