Sony Group Corporation (6758) Earnings Call Transcript & Summary

Again, we have Tony Vinciquerra, Chairman and CEO, and of Sony Pictures Entertainment. And Tony, you're like -- I don't know, like the industry guru at this point. I would say...

Doesn't take a lot. By the way, it's nice to have Saratoga, my hometown Saratoga.

That's great. Okay. So you have the unique task of leading a major Hollywood film and TV production studio during a period of so much change. I think it's -- the last couple of years have really been a little...

And much more to come.

Well, hopefully, no more strikes or...

Strikes, no. But the business itself will be in a period of chaos, I think, for the next 18 to 24 months.

So, you tell I go, I mean, that's really the question. Can you give us like how thinking about things?

We just look at all the companies that have these albatross of cable networks around their next that they have to figure out what to do with the Disney, DirecTV, the experience right now is a great example of that. And you'll see a lot more of that. You're going to see mergers and bankruptcies and sales and all kinds of fun things happening over the next couple of years.

I mean, what's interesting so there's obviously a lot of challenges. Any opinions for what the solutions could be for some of these companies, and they just have to divest and get away from it.

Well, look, every business has a value at the right price. And some were along the way here. We'll see some kind of some kind of an adjustment. I wouldn't say solution because I'm not sure you can solve the problem of where the MVPD business is going. I think the next couple of big deals that happened maybe even including this DirecTV, Disney deal, although that's a very unique one, but I think the ones coming to come will really tell you where the business goes. I don't think -- I can't make a prediction as to where it's going to go, but it's going to be interesting.

You can see the negotiations are clearly changing where it's including direct-to-consumer. Streaming is part of the bundle, or rebundling. But you were really unique in not launching a general entertainment streaming platform. So what do you think staying away from that has enabled you to do? Have you -- what have you done differently than others that by not having a streaming platform.

Well, I think there are two things we did differently. One was when I first got to Sony, we had 110 cable networks around the world. We don't have that. And we got rid of those pretty quickly, except in three markets where cable network is still working. Spain, Latin America and India. And the game show network here in the U.S. works very well for us. But other than that, we don't have that issue. And that is the one that is most pressing, I think, right now for the business. The streaming business, look, eventually that is going to be a profitable business, but I think it will still take some time. We have -- we do have a stream -- we do have a streaming business, Quintero, which is really the only profitable one other than flex in the business right now. So we're pretty bullish on that side. And we'd love to do more genre-based targeted, passionate audience centered streaming services. And we're working on that right now. But it's going to take some time for the market to shake out. There's not going to be as many in a couple of years, and we all know that.

Right. So how many -- what do you think about how the market result like is it consolidate? Do some streamers go away? What do you think the market can support in terms of number of streamers?

It's a hard question to answer because in terms of general entertainment streamers very broad approach, I would say 3 or 4 probably. And you can pick who you think is going to be the winners there. But there will be very passionate audiences that gravitate towards genre-based streaming services as well, so you have some [indiscernible]. History does repeat itself, and it's really pretty much going the same way as the cable business did 25 years ago, 20, 25 years ago.

Coming out of the strikes, it looks like content spending is not going to recover back to pre-strike levels anytime soon...

Between television or...

Just -- yes, TV. Well, maybe film, we can get to film also. But in TV, you were -- I know you don't like this term anymore, but the arms dealer...

Strategic suppliers.

Strategic suppliers, right. You're a big beneficiary is the strategic supplier to the industry. Are you seeing a pullback for your content?

No. Well, through the strikes and through COVID and the strikes, obviously, we saw a pullback, but things are fine. I mean, we're not doing -- it's a totally different business today. It's not a high-margin business. It's a volume business where 5 or 7, 10 years ago, we would do 10 or 12 shows here, now we're doing 30 in the U.S. Shorter series 8 or 10 episodes, 12 episodes, maybe fewer seasons, 2 or 3 seasons as opposed to 5, 6, 7, 8. So it's not a volume business. The risk is much lower because you don't have -- you only produce a program once you an order, once you have an agreement, but the upside is not as great as it was. There's no friends or you're not going to see friends or [Indiscernible] folds or those kinds of results going the future.

Well, in terms of deal structure, do you think that we will get -- right now, it's a cost plus, by and large, driven by Netflix initially. But do you think the industry ever gets back to a back end?

We'd love to do that. We've tried to -- we have proposed structures where we'd get the show back after 4 or 5 years as opposed to the much longer terms that are currently in place. But we haven't seen any progress on that to date. Maybe we will. I don't know, but it's a very different business. It is just a very different business. But to answer to your earlier question, do we see any negativity to it. Our main customers are Amazon, Netflix and Apple. And they have not come back, or they may be flattened their spend, but they haven't cut back. The people have cut back are the ones that are not as buoyant at this point.

Right. I can't have a conversation without talking about AI. So how do you think AI will play a role in future video production?

Well, it already is, to a degree, we -- virtual stages are things that are starting to develop. We have a company called Pixomondo, which builds and installs virtual stages around the world. We have a very, very big elaborate one on a lot in Culver City. So that's one level. Then we have Torchlight, which is a product that we develop through AI, which allows a director to see what a scene will look like visually before actually shooting it. So that they can speed up the process. And I said at this conference last year that I think what AI will do is help to facilitate the process of filmmaking, make it faster. The cost of film, I said the same thing last year and a lot of the strikers didn't appreciate what I said, but it will make film making more efficient. And that's necessary because it just costs too much money to make a film today.

And maybe you can just elaborate though on like what kind of expenses can come down? What could the magnitude be of expense reduction.

That's still unknown. I think as I mentioned with Torchlight, it will allow a director to much more quickly see and feel what a scene will look like. So they don't have to go through dozens of rehearsals or ways to frame a scene. So that's one thing. But there will be many others. We just don't know yet. It's way too early in the process to really understand. We have a film that we're distributing called here, which is all AI with Tom Hanks that's coming out this fall. That will be a real example of a film done in AI with AI in a way that realizes that the restrictions placed upon us by the union contract. So that will be a real bellwether I think, about how things will have a chance to develop.

So is there any way to think about that will be like what it would have cost without AI, or like...

I don't know. I don't know that you could have done it without AI actually.

Right. It would have been done. And then just in film in general, like you've been really consistent in terms of going into COVID, during COVID, and that the theatrical windows are really important.

Yep, we bought a film -- we bought a theater chain.

You just bought a theater chain, right? So maybe we could just talk a little bit about just the state of the film business right now and what happens with you said on TV that there's maybe from the bigger companies like a flattening of spend, not an increase. What do you think will happen in terms of output for films in general?

I think it's going to be pretty consistent with where it's been. It will be slightly less probably than pre-pandemic. I think you'll see fewer screens around the U.S. But the thing that people ignore and no one really talks about is that most of the film revenue now comes from outside the U.S. on box office. You come from outside the U.S. And that's still a growing marketplace. So that is a very positive thing. And it really comes down to, if you make a good film, people will go see it, evidenced by what's happened just in the last couple of months.

Right. So on the international markets, are there any particular markets that are showing incredible stronger?

Well, Saudi Arabia has grown dramatically because they just allowed films to come in. England has been great. Mexico has been really, really strong, several Latin American countries, there's pocket -- it depends on the film where it may or may not do well. But the international market is very strong.

And then just going back to that coming out of the strike, did it give you -- it kind of was like a forced pause. So did you reevaluate what kinds of movies you make with the number of films you said that cadence is probably back to normal?

Well, one of the things that we talked a lot about during the strikes was are there genre film, film genres that haven't been explored and one was RomCom, which we made a couple of and did really well with. People said you can't do this. Another was comedy. People said, comedy doesn't work. We did the Jennifer Lawrence film did pretty well. It ends with us as I'm not sure how you describe that. It was -- it's not a RomCom, obviously, it's not a comedy. It's a very serious subject matter of domestic violence, but it's going to do $330 million in box office. These are films that people said, can't be made anymore, but we went in and the proof is in the pudding that you can't make films. If you make a good film, people will go see them.

And then just on the opposite side of that, the last decade or so were like filled with action films and Super Hero films and it almost seems like there's fatigue of the genre or the question is, is it the genre or was it just the specific movies?

I think it's a specific movie. The Deadpool did pretty done well. That's a superhero film and did very, very nicely. I think that if you make a really good film that people are excited about and want to go see. They will make a way to do it. You saw animated films this summer do really well. [indiscernible] did really well Inside Out too did really, really well. To the detriment of our film, Harold and the [Indiscernible] because it sucked all the family money out of the marketplace, and we put ours out in much lower budget film that was targeted at a much younger audience, wasn't a lot of money left in the pockets for that film.

Right. And then you mentioned that you bought theater -- a small theater chain. Could you talk about the kind of the thought process behind that?

Well, it's a growing business. It's doing well. A couple of reasons we wanted to have is, one -- the most important one is that we, as a film and television producer, don't have direct contact with our customers. Everything goes through a distributor, either through a cable network to satellite network, the streamer or a theater chain. This company, Alamo Drafthouse has 4.5 -- it's a very small company, but has 4.5 million people in its affinity program. So we now have a lot of people to talk to and find out what they're thinking about our various businesses. Plus the customer profile of Crunchyroll is very similar to the customer profile of Alamo Drafthouse. So we see that there's going to be some real potential there as well.

But you also said earlier that you think the number of screens will decrease. But obviously, you think [Indiscernible] screen?

Well, I think ours will increase actually because download is not in a big way in the major markets for film. We're not in New York, L.A., Chicago, San Francisco, which is 25% of the marketplace. We don't have a lot of screens in those markets, there in Texas and Midwest and places like that. So we think there is some expansion opportunity. But we're not going to grow it massively. We're just going to target it a little bit better.

Okay. Any thoughts of going outside the U.S.?

To own theater chains?

Yes.

No. None at the moment. We exclude that as a potential, but not at the moment, we're not thinking about it.

Right. So we kind of started off with how bad the Pay TV universe is and the problems for the studios. But with the decline or the contraction of the linear universe, you do sell to a lot of these companies in addition to Amazon and Apple. Have you seen an impact on the acquisition of Sony products.

Well, that business -- the linear business has been -- our linear business has been declining over years. We don't have much in the way of linear business today. We have some, but not a lot...

Content sales.

Content sales, yes. We haven't really seen a degradation there yet. We expect there will be some over time, but we think that the streamers will pick a lot of that up and they have been. The streamers have been picking up library product as well. We sold Apple even bought a pretty significant package of film just recently.

And how long are those deals typically for sell packages?

They're all over the board. It could -- some films have very narrow windows that you can sell some or 5 years, some are 7 years, but it depends. They're all over the board.

Right. And one possibility to all of the challenges in the industry is for there be consolidation. We mentioned consolidation of streamers. Maybe consolidation of some of the linear channels as maybe there's a roll-up vehicle coming for some of these channels. But just wondering, like, as the industry transitions transforms over the next few years. What role does Sony play in this?

Well, we're going to sit back and watch what comes available to us because we're in very stable, very comfortable position. And we think that there will be lots of businesses that pop out of these companies. As I said earlier, there's going to be a chaotic time here where a lot of things happened. Mergers, bankruptcies, sales, whatever is going to happen. We think that there will be some nice businesses that become available that are -- that we would be interested in taking on mainly in the IP area, and that's really where we'll be focused.

So you were briefly involved at least from a public standpoint and the bidding for Paramount Global, can you talk a little bit about the decision to ultimately walk away from that transaction?

Well, we didn't really get much traction with the process. We've thought -- our goal was to get IP. That was really where we wanted to be. We would have had to do a lot to get to that point in terms of taking the other parts of the company and finding new homes for them. So really, the scope of that became very, very big. And I understand that the company wasn't willing or anxious to get into a conversation with somebody who wanted to take the company apart. So I think that's really what kind of started to peter out from our perspective. We were only interested in a very narrow part of the company.

Turning to the advertising market, which isn't something like, I guess, you're really directly involved...

We have some. We will fortune jeopardy network, there's some pretty big products there.

So what do you think the impact of Amazon, it's such a big increase in supply overall. So what are you seeing as the impact of Amazon?

Well, that's a subject that not many people are talking about, which I think they should be talking about, and it's not only Amazon, but think about Walmart buying VIZIO. That hasn't closed it, I don't think. But I think the numbers are something like Walmart sells 50 -- close to 50% of the televisions in America today. I don't know if that's exactly right, but it's somewhere in that neighborhood. VIZIO is a big -- will be a big product that Walmart sales will be a big share of market there, I'm sure. And they'll create an advertising market as well. If you think about Amazon, who they will use their leverage and so will Walmart for consumer products to be advertising on their platform.

Absolutely.

And the amount of inventory, I think Amazon did a very -- followed a very smart path to get to where they are by saying, if you want no ads, you pay $3 more per month or whatever the number is. I think it's $3 per month. And most people I don't think did that. I think the vast majority still are getting ads now on Amazon. That's a massive amount of inventory to go into the marketplace. And for a couple of years, it's going to take a couple of years for the marketplace to absorb that. and it won't be a positive for linear cable line cable networks.

Right. Yes. No, there's a vast amount of inventory. At the same time, you have Netflix and Disney+ and other streamers scaling up on their [indiscernible] platforms, but you have a good traction in linear. So you're seeing like in your -- is it having an impact on the overall like in your shows?

We haven't -- look, the upfront this year, it's not over yet. It's now September, right, as September 4 today, right? And the upfronts are not done. So that tells you something.

Right. Okay. Is there anything -- any good news here?

Look, I think there is good news. There's a lot of good news actually. Once we get through all the process that has to happen over the next period of time, whatever it is, 18 months, 2 years. The demand for entertainment is not going down. It's increasing. You look at product that people really want, sports product and NFL in particular, it's still doing great. And once the business becomes more stable and settles down, there will be a nice business. It will be a great business. And we're really looking forward to that time when all while the stuff gets rung out of the business that has to get rung out of the business. So I think there's a lot of future here once we get through the process.

Right. Demand for content hasn't -- if anything, it seems like it's going up...

It's gone up for sure.

[indiscernible]

It's going to become more stratified and people will be in different groupings and look for different things and have a passion for different kinds of product. But it's going to be a great business.

Right. But the business models are changing. And I guess -- when you talk about IP, we've seen incredible success last year with Barbie and with the original IP, Barbie and Super Mario, I'm just wondering at Sony, you're sitting on incredible IP between PlayStation, maybe even Sony Music, are there any interesting internal opportunities to take advantage of?

Well, I think those are the interesting internal opportunities. We've started down a path a few years ago of taking PlayStation IP into TV and film have been pretty darn successful at it. I think we've had 5 or 6 really nice projects come out of. We have another 5 or 6 in development right now and getting ready to go into television. We have the Spiderman universal characters, which we'll continue to develop. We have the Ghostbuster world, which is going to continue to expand. We've got a lot of stuff that's very exciting. Jumanji is coming in and then we have Spider-Man himself, which we have the Spider-Verse animated side in the live action side. So we're pretty bullish about the future.

And then is there anything in Sony, like Sony Music that you can develop?

Well, it's quite -- actually quite a bit. We have a lot of projects going our unscripted business with Sony Music doing documentaries on music, music icon and things of that sort. So there's a lot happening on both sides.

Right. And then would you say you're like interested in IP. That was the reason for looking at Paramount and that you'll see what comes on the market. How do you think about the scale of the business?

Well, scale will be even more important going forward because the companies that do survive and do prosper going forward will be the big ones. I think, that if you look at history and see how businesses go through these kinds of transitions. History does repeat itself. And if you look at history and you see how things work, you can predict where things generally will end up. And the big companies will be the ones that survive unless they make some massive mistake or miscalculation. So scale will be important. And people say we're under scale at Sony Pictures. But we have PlayStation music, all the electronics background of Sony. I don't think -- we're not under scale if you look at the company in total.

So I mean, you've had like an incredible successful career, long track record in television from I think a very much...

[Indiscernible]

I think I made you [Indiscernible], so even before Fox. I guess, like as you know, every piece of the industry, but Sony isn't operating in all of those parts. There are certain things that you don't have, like I may be wrong on this, but theme parks, I don't think.

Well, we -- interesting to bring that up. We actually have been experimenting with theme parks the last few years quietly. We've licensed a lot of our IP to theme parks around the world, not in the U.S., but in Thailand, in Italy and actually, Russia, which is the longer effect. But in Spain, to learn something about that business. And so to understand that business. And we've come down -- come a long way in understanding about the business. With -- when we bought Alamo, we created a separate business called Sony Pictures experiences, which will be where we put our location-based entertainment businesses, and we're looking at a lot of different paths there right now actually.

So maybe you could talk about the -- because coming out of COVID, it feels like the experiential part of the business is really just taken off. Like what is your view? Like how do you see that?

Well, we're -- like I said, we're right at the precipice of creating strategy. We just recently created a task for some more pictures, PlayStation and Music to start to evaluate the opportunities out there, and there's a lot. There are a lot of opportunities out there. If you look at a lot of the theme park businesses and experiential businesses, many of them are owned by private equity firms. So those businesses will come to market at some point, and we're looking at a lot of them.

But are there things like that are most interesting, like would you see the most upside of things like Harry Potter experience or something or theme park or something completely different?

Well, one of the things we've seen through the experimentation that I described earlier around the world is, if you put a successful IP on an unbranded ride, you see a pretty good uplift, 10% -- pick a number, 10%, 12%, 15% or something of that sort. So you see a pretty good uplift. So with the IP we own -- and I mean, Disney has done this forever. Universal has done this forever. If you take a theme park, an unnamed theme park with no branding and put IP on the rides and new experiences, you probably will see a bit of an uplift in the business. So that's a concept that we're using as the core of how we evaluate where we go.

Okay. And then another area, which is much smaller, is theater Broadway plays by sand, whatever. But is that something that you guys have...

Well, we have been in that business quietly. We are one of the owners of MJ, the play that was in New York. We've had a couple of others. We're not going to get aggressive in that business. It's a very, very difficult business. As you probably know, that [Indiscernible], yes. So if you miss, you miss big if you hit, you do pretty well, but it's a risky business. But we will play in it here and there. As I said, MJ was a big win for us on Broadway. Now it's starting to tour around the world.

Right. And then I don't know if there's anything else in terms of like genres, but -- so maybe we could just talk about kind of rest of the world. One of the places where Sony has done really well in India. But you've had some pretty big changes there recently.

A lot of changes in India there. We had a -- as you know, we were working on a merger with Z. It was 2 years of hell going through that. And when a company is in that purgatory world of being in the midst of a merger or an acquisition, things that don't necessarily go well. On top of that, the advertising market in India has softened pretty considerably, and the cricket world has just gotten crazy there. The cost of cricket has gotten so out of control, those are going to be very significant money users for the companies that own the cricket rights. So we're -- but on the other hand, India is the fastest-growing country in the world, probably it's the biggest population in the world. The middle class is expanding. The economy is expanding. We're there. We have a pretty good business. We -- our CEO wanted to retire 2 years ago, but we forced him to stay through the whole process, and now he's retired. We hired the Head of Programming from Star to come be our CEO. So we're still bullish on India, but we're recalibrating right now.

Right. But that whole market is in transition. I mean, Disney selling out or taking a minority stake into a much bigger today.

It's a difficult market because it's a big market, but it's still -- the economy is still evolving. Right.

And the infrastructure is still...

Still evolving as well.

Right. And then I guess more generally, where do you see opportunity to produce content or invest outside of the U.S.

Well, in terms of where we will -- you've seen the production world changed pretty dramatically over the past year or so, 1.5 years where much of the production that may have happened in the U.S. is now moving to Eastern Europe to Australia to other countries around the world. because it just costs less to do to produce there. And I think you're going to see that continue over the next couple of years. So those are important parts. But we also have another business, our international production business where we used to have 8 or 9 markets where we were producing local films, and now we're only doing in 2 or 3. Spain being the primary one we're very, very successful and also in Japan, where we've been very successful. So we're going to expand in those areas as well where we produce local language films for those specific markets. Much -- obviously, much lower budgets and much less expectation in terms of box office and revenue, but it can be a very successful business as well. So you'll see a lot of that happening.

All right. And then are there any like because you don't talk about Japan, I mean, you're obviously much huge presence here. But are there any pieces missing in the parent company territory that?

Well, interestingly enough, Crunchyroll is not in Japan, and we want to find a way to be in Japan with Crunchyroll because that's where all the product comes from. And Aniplex, which is a part of Sony is a massive producer of anime product and is such an important part of what we do with Crunchyroll because they know the business, they know the animator -- the anime creator business well. And they guide us as to how to navigate that world, which is very complicated. I don't you've ever gotten deep into where the product comes from, but it's a very, very unique ecosystem.

Right. And I guess, like finally, just going back to the Film division, you've had incredible stable management, like Tom's done an amazing job. The industry has had its ups and downs, but you guys have seen really stable. Can you just talk about kind of outlook for the next few years, what you're planning to do, what your content with a number of films cadence that...

I think we will have a very similar number of films, larger film, medium to large films that we produce 12 to 15 will distribute many pictures through Sony Pictures Classics, we'll produce some lower budget films through some of our other labels and will represent other companies like Apple or Legendary and other things. So we have over 30 films that will release a year. So then I think that will remain pretty consistent. I think the entire company is very stable right now in a world that's not very stable. So we are pretty comfortable where we are and we know that as you described earlier, there will be pieces of businesses that become available that we'll look at and try to add some my [indiscernible] to our arsenal. We're actually looking forward to next couple of years from that regard -- in that regard.

And do you have -- you do have an output deal, right? Could you just remind us who...

Well, our output -- our film output deal is that we combine the Pay 1 and Payne pay 2 deals and have a deal with -- a 5-year deal with Netflix and Disney. It goes Netflix, Disney, Netflix, Disney, and that is in process right now. It's a good deal for us. I think a good deal for them as well.

And in the 30 years of films that you just mentioned per year, does that include your distribution deals?

Yes.

And who are your distribution partners?

Well, Apple, we distributed a couple of Apple films. We have Legendary and then we have a bunch of independent deals that we do on a one-off basis.

And the Legendary deal is relatively new.

It's a couple of years old.

Yes. Is it like based on number of films or just...

No. It's just when they -- a lot of their IP is already committed to Warner Bros. because they've been there for a while. And our deal is fulfillment going forward with them.

Right. And then maybe just the television business, I don't think people really appreciate how big you are in TV.

We have -- around the world, we produce about 300 series a year. It's a lot.

It's really big. And I don't think it's widely known.

No, it's not. And -- but it's -- as we discussed, it's not a business -- it's a volume business now, and you have to do massive amounts of volume to generate the kind of revenues and profits that you want to see out of the business. Between our international business, which we changed pretty dramatically as well several years ago, we had 20-plus studios. Now we have 5 or 6 that are all very successful, mostly in England. And that's been -- that's worked very, very well for us. And you can see the results of that at our -- at the LA screenings this year, I think we had 6 shows that we were selling from our studios in the U.K. So we're doing very well there. And domestically, obviously, doing pretty well in addition. So -- and then we have all the other things we do between our unscripted group, which does 50 or 60 shows your documentary series, scripted. So we got -- we have a lot of business out there. Don't ask me the names.

No, no. I actually was going to ask you, though, like what would be your few like could you name some of the global hits that you have. Is there anything like a global?

Well, The Boys is a massive global hit. The Crown is a massive global hit. We also have The Night Agent which is the #1 show on Netflix last year. So we have a lot of pretty good stuff out there. It's all about great people. We have terrific management in the company and terrific people working in the various parts of it.

And you have really stable management. There are secrets to your like success of...

Well, the secret is to treat people with respect and to help them develop. I get my -- except for lately, you don't see my name in the press very often because they take my satisfaction from seeing the people I work with, get better at what they do and develop and go on to do great things. And there's a lot of people around the business that I'm very proud to have worked with. And that's how I get my satisfaction rather than my picture in variety every week. So that's what works. And we have great morale our company represents the U.S. almost exactly in terms of percentages in terms of diversity and where we have people. And that's what works. If you have a lot of different opinions, a lot of people contributing the team has come together.

And then finally, you mentioned like you're looking -- you'll be ready for opportunities as they arise as coming out of the chaos of what's going on in the industry. So do you have access to Sony's balance sheet? Like is that -- you have access to capital that does not...

Yes, yes.

So it's not an issue for you.

Well, no, I wouldn't say, Sony has pretty deep pockets. And their balance sheet is impeccable. It's the gold standard. There's not a lot of debt. They have -- we know how much money we want to invest in the various projects and products that come about. And the company has earmarked amount of money to be invested in the entertainment businesses.

Are you fighting for capital against other divisions?

Yes, music, mainly, yes. I mean, do a lot of arm wrestling.

Okay. Okay. And then as you look out over the next year -- this is really the last question we're out of time. But as you look out over the next, like, 3 years, what's the area of -- the biggest area of growth for Sony, which is entertainment your division.

Crunchyroll.

Interesting. And is that because of distribution pricing.

Well, it's an enormously passionate, very large audience. It's a genre. It's very large and for genre audience. And it's just going to continue to grow. And we haven't accessed a lot of the world yet. We haven't really gone into Southeast Asia. We haven't gone into Eastern Europe in a big way yet. So we have a lot of the world still to develop.

How big is it in the U.S.

Well, we're about 15 million subscribers, most of that in the U.S. at this point.

And is the upside in pricing would you take advertising?

Well, we do have an advertising. We're not taking an advertising subscription business, but we have a free advertising business already. But look, we want our access to the rest of the world first. And pricing-wise, we just raised our prices a little bit actually on Crunchyroll. So we're looking forward to being in many more countries. And obviously, ARPU will be less in some of those places, but that's a great business. It's a great business.

Great. With that, thank you so much for being here.

Well, thank you for inviting me. This was great.