Versant Media Group, Inc. ($VSNT)

Okay. We'll get started. Happy to have at the conference for the first time from Versant Media Group, Mark Lazarus, CEO. Mark, thanks for being here.

Thank you, David.

All right. Great.

So you separated from Comcast and NBC Universal in early January. Maybe you can walk us through your impressions as a stand-alone company to date? What's been the response from your operating partners? Any early learnings from interacting with the investor community?

So we spent a year separating out. And during that year, we were kind of doing 3 things simultaneously. We were doing the actual separation, which was complex and cumbersome, and I think maybe most of us didn't quite understand how complex and cumbersome, but we were able to manage that. And then we were operating the individual businesses and then trying to plan for growth for the future. We've now got the separation behind us. We've been our own company now for almost 5 months. And I think the reaction is from our partners, whether they're distribution partner, advertising partners sports leagues, anybody that we're in business with has been an appreciation for the renewed focus that we're able to have on our business and on those partnerships. We're now not part of a bigger company that has competing constituencies, and we're able to really focus on our individual business and invest in those businesses. And I think that's been appreciated by our partners. In terms of dealing with the investor community, I think we feel gratified that our story is starting to resonate that people are starting to understand that we have a focus on these 4 vertical businesses that we have scale in those businesses. We have iconic strong brands with which to build off of, and we're gratified by the reaction we're getting.

Okay. Maybe we can go with that, right? The 4 verticals. We'll cover each of these a little bit more in depth. But at a high level, can you just speak to what those are and kind of how you frame the TAM around them?

Yes. So the 4 verticals are business news, personal finance, retail investing around CNBC. We think of that TAM as -- there's 100 million people who are involved in the investing comment world. They want to be part of everything. They want to understand what's going on in the markets, and they're interested in what we do in terms of financial news. So we feel that in that business we have the ability to not only do what we do on television with CNBC, but to enhance what we've already started with CNBC Pro and CNBC Plus and reimagine a direct-to-consumer business focused on the retail investor, building out differentiated tools, building out a product set that will allow unique interaction between our consumers and the markets and their own portfolios, not being a broker-dealer, but providing the tools for them to make informed decisions. With that, we bought a company called Stock Story, which is an AI recommendation -- stock picking recommendation engine that we will incorporate into our toolkit. And I think we'll continue to look for opportunities like that. The second vertical is news and political opinion around MS NOW. MS NOW is the #2 rated cable network regardless of genre. It is big. It has an incredible amount of engagement. The average engagement for our consumers as they watch 9 hours a week. That is also second largest engagement of any cable network. Fox News has a little bit more than us. We have 9 hours a week of individual engagement. The next closest is only about half of that. So big audience, people interested in political news and opinion and an opportunity for us to reach a highly engaged audience. With that, we're going to invest in a D2C product. There had never been investment in digital video for MS NOW inside the old NBC News Group. NBC News made a decision to invest its digital resources into other things, NBC News Now and other products. And really, there was no digital video footprint for MS NOW at all, which in today's environment is not a good thing. So we're investing and we'll launch later this year in MS NOW direct-to-consumer business centered around the news and opinion that our audience is interested in, but not just replicating what we have on TV. It will be a much broader palette of content speaking to the audience, the pro-democracy audience, as we call it. The third one is golf, quick and simple. It's golf. 15 years ago, we had -- all of our revenue in our golf business was Golf Channel. Over time, we built out other businesses to the point where now half of our revenue in our golf business is tied to pay TV half is tied to other revenue streams. GolfNow, which is our tee time business. We booked 40 million tee time last year. It's a significantly scaled business with a large profitable a large profit and a very strong margin. We have GolfPass, which is a direct-to-consumer business, where we're partners with Rory McIlroy. And then we have an underlying software services business that ties tee time businesses, not just ours, but also and 2 golf courses and it also helps them manage all of their business lines with whether it's yield management or just overall management of their food and beverage in general. So that's our golf business, and that's sort of a model home for everything that we want to do. We want all of our businesses to trend towards 50% pay TV, 50% nonpay TV. Overall, as a company, we're a little over -- we're a little over 20% nonpay TV, but we have to -- the goal is to transition further towards that 50-50. And then the final is our -- final vertical is our sports and genre entertainment centered around USA Network, which is a combination of entertainment and sports. We have the Premier League. We have NASCAR. We have WNBA. We still have a deal with NBC to air the Olympics. We have League One women's Volleyball, and then we have WWE Wrestling, which we'll call sports since it's live...

Sports entertainment.

Sports entertainment. So anyway, that's U.S.A. and then Fandango is a very strong direct-to-consumer business. We sold 70 million movie tickets last year. We also have a large home video business as part of that, buying and renting movies and TV series. Underlying business we bought a few years back called [ Vudu ] from Walmart, which has helped us power that engine. And then we will -- we're going to invest and create an AVOD service, a free with advertising, video service under the Fandango brand, which we believe, again, will move us outside of more pay TV because it will be an advertising-only business not tied to the bundle. Those are the 4 verticals, heavy emphasis on live news and sports, heavy emphasis on live, whether it's sports, news or even with products like E! where we do a lot of award shows and live from the red carpet. We have a heavy emphasis on live.

That was a great overview. Mark, in choosing a strategy of vertical integration, I think you could say you're effectively not pursuing horizontal growth in the cable network space. I assume some investors have asked you about potential cost or revenue synergies through M&A. Why is that not a path Versant is looking at actively?

Yes. I think -- the way I think about it is if everyone has been doing their jobs the way we've been doing our jobs at NBCU, I'm not sure how much cost out there's still left to do in most of these companies. Certainly, there's a management layer that you could take out and have synergies. But we've all been managing the decline of the linear business in a way that I would think is responsible. And I -- my expectation is that everyone else has been doing that, too. So the reality of how much how much cost out there could actually be in synergy, I think, is less than many people have speculated.

Maybe just staying on linear for a second. So pressures of Pay TV are well known. I'm curious, first, how you see the industry in the next 2 to 3 years, the prospects for some stabilization in the sub trend? And then just second, what are the tools in your control to help offset some of those trends within distribution or ad sales?

Yes. So I think we're -- there seems to be -- there is some stabilization, and we're happy about that. What we can control is our product. And what we've been doing, and if you think about -- you look at our portfolio, our product that's on linear is exclusive to the Pay TV ecosystem. None of our sports are streamed anywhere. It's all been held exclusively for the pay TV operator, and we make that point with them in partnership with them. Now one day may we start to think about doing something else. Yes, but we would do it in partnership with the pay TV world. We're not looking to run around them. So that's our focus. And when I talk about the direct-to-consumer businesses around CNBC and MS, they will be much broader and much higher price. They won't be discounted to what the pay TV providers give to us as part of our deal with them.

On ad sales, you're currently operating under a 2-year partnership with NBCUniversal. Consistent with that, we saw your networks featured in their upfront presentation this month. What can you say about the relationship to date? How does that inform your long-term view?

So the relationship is very good. I mean that -- when I was at NBC, I oversaw the ad sales business. So we have a pretty heavy focus, first of all, on who the people are and how they operate and very confident that they are treating us as if we had never left the company in terms of they are representative in the ad marketplace. And I think they did a very good job of integrating and working with our team and integrating us into their upfront presentation. Our content was featured prominently and I felt very good about that. In terms of the marketplace, we feel like, again, they are representing us. It's beneficial for both sides. They need the reach that we provide. And frankly, we're a little cheaper than some of the stuff that they have to sell, the kind of big shiny objects that they have. So we can help them bring in buys, so to speak. And so I think the combination works well. That being said, we have optionality. They have optionality towards the end of this year, we'll both make a decision whether we want to continue on as we are, continue on in a partial fashion or separate.

Let's pivot into your verticals. We'll start with MS NOW. So the political cycle is ramping up with the midterms, and how are you kind of thinking about the viewership trajectory at the network this year and into '27 and then kind of capitalizing on that through ad demand?

Yes. So ratings have been up. Our ratings have been growing 20% against total day and prime time. So we feel very good. And one of the risks we had at MS was having to rebrand. And I am very pleased with the way that rebrand went. I think a combination of 3 things really helped us. One, I think we did a very good job by seeding with our audiences that we're going to have a new name, but we're not going to have a new approach. I think we spent -- had a marketing budget that allowed us to also make sure people knew that we were just changing our name and had the same mission. And then we were fortunate that there was a heavy news cycle, when we've made that change and the news cycle played right into us changing the name and people were going to watch regardless. And so I don't think we lost a step in the rebrand. The focus for MS has been to get more people to watch. I mean we have a center-left point of view. Some might say it's more less than that. I think it's up to interpretation. Our goal and what I said to Rebecca Cutler, who runs the business and to the teams that work there, whether it's behind the camera in front of the camera is the only job is to get more people to watch. It's not to satisfy somebody's point of view, get more people to watch. And if you do that, no matter what their political persuasion we're going to be able to monetize it. And so with these ratings that have been going up over the last 6 months, we've been able to monetize it and it's been a very good trajectory for us there.

You noted earlier, plans to launch a DTC platform for Ms NOW,around it was midyear, maybe you said at the Investor Day.

Yes, it will end up being a little bit towards the back end of the year, but -- yes...

Any updates on this? What do you think early success would look like for that platform?

Early successes will obviously be a combination of subscribers and engagement. If we can get people to sign up to want to watch us, and then get them to stay with us -- stay on the platform for a period of time. The biggest opportunity we have is there are a lot of people who are interested in the MS point of view, who are younger than are watching us on television and are getting that type of news from a lot of other places right now. If we can start to make inroads there, then we'll have success. And that's -- and that will be -- while our talent is one of our biggest assets, bringing in differentiated talent, younger talent who may have a similar point of view will help hopefully allow us to expand that audience.

Maybe staying on news with CNBC, you have a leading network brand in the financial space. How do you think about leveraging the core audience into a wider subscription product? And then what opportunity do you see to keep adding functionality to the Pro or all access tiers?

Yes. So first, let me take half a step back. With -- from 6 to 9 a.m. with Squawk Box and Morning Joe on MS, we reach the most influential people in business and politics every day. More people, more influential people than any other media company in that 3-hour window every single day. It's a really important daypart for us, and it's a really important calling card for us because we can get pretty much any business leader and any politician between those 2 networks or administrative official between those 2 networks. So we are part of setting the agenda of the day every single day. And I think that's a very important calling for us. Back then to your question because I didn't answer your question on CNBC, again, we have people from both political parties. We have administrative officials. We have, from time to time, the President. We can help set the business agenda for the day and what the intersection of politics and business are. That's important. We have kind of had a renewed focus on what the markets mean to you as an investor, not just the professional investor, but the retail investor. And that will be a big part of our push in the direct-to-consumer business. That's why Stock Story was an important acquisition. That's why the toolkit that we're going to create, the charting and the types of products will create will allow us to hopefully give individual and retail investors a reason to use our digital business as their home base.

I want to shift to sports. So prior to the spin, you rebranded your offerings is USA Sports. Maybe just speak first to the institutional knowledge and production capacity that sits here. And then you touched on this a little bit earlier, but we've seen competitors in the space like Fox or CW, it widen their distribution either through an owned or third-party streaming platform, you kind of touched on this a little bit. How do you see the digital opportunity for your property?

So on the knowledge base of sports, this is one, I can I've run -- personally have run 2 different sports divisions in my career and Turner Sports and I ran NBC Sports for the last 15 years. So the knowledge of the sports industry we have. I've also -- we've hired a gentleman named Matt Hong, who's running -- who's the President of our sports division. He for a long time was the Chief Operating Officer of Turner Sports, not during my era, but after my era. So again, someone with hands-on experience and the relationships across the industry. And then we've hired a gentleman named [ Jeff Bank ] as our executive producer. Again, at one point was the executive producer at Turner Sports back when I was there. someone who is known and trusted in the business. So our skill set and our knowledge base is there. There's no one in the sports industry worried about how we're going to handle their properties, full confidence in that. When we separated all of the rights that we have were assigned to us. So we actually have the direct relationships with the with the sports leagues and organizations. It's not through NBC. We actually separated the contracts. So we have our own direct relationships and work with them. I feel very comfortable, I like the asset base we have. I do think there's going to be more opportunity. I think as the NFL comes to market and in all likelihood, takes more money out of the marketplace for their product. Some of the competitors in the sports space will have to make choices on what to keep and what to not keep of their current roster, and I think we'll be in a good position to add to our roster at an appropriate price. I mean we're not a scaled entity that's going to be able to buy the NFL or the NBA. Good news is neither of those are available short term anyway, but there will be a lot of other properties that are. Since we've spun, we have extended our U.S. GA golf contract. We've extended our PGA of America really our rider cup contract. We've bought League One Women's Volleyball. And we've expanded our WNBA offering, including having the WNBA finals this year. So we have a good roster. At some point, streaming our content -- you mentioned Fox. Fox essentially took their content and just sell it as a -- they're not really -- they are streaming it, but they're selling it holistically, right? They're selling their networks on a streaming platform. And then CW did a deal with ESPN. So at some point, might we do that or do something on our own, yes. But as I said, we'll do it in conjunction with the MVPDs without disrupting the strength of our relationship with them, which is by having exclusive contract -- exclusive content with them.

Maybe just following up on rights availability, your comments around the NFL. Do you see opportunities to kind of proactively go to some of your peers on sublicensing opportunities?

Yes. I think they -- many of them will be looking for some of that especially in the college space when there's so much content.

Okay. Let's move to our Platform segment. GolfNow has seen solid growth in recent years, though global penetration remains low. Can you speak to the opportunity to expand first in more regions? And then within the core markets, what room do you have to add more courses or upsell on services?

So we have about 9,000 courses, 6,000 domestically, another couple of thousand internationally. We've just really started expanding in the U.K., France, Germany, Austria, South Africa and Australia. We bought a company in Belfast that's helped us do that expansion globally. This is another area where this was in need of investment. When you go all the way back to the beginning of the spin, these businesses kick off a couple of billion dollars of EBITDA and all that money was being harvested and used to fund other NBCUniversal projects. We -- and I was part of it, we made big decisions on where the best use of our capital was. And at that point, we were building out Peacock. We are building new theme parks. And now that capital all stays within our business. One of the things around golf now we're going to do is just expanding the sales force. It's a feet on the street business in terms of getting golf courses or multicourse operators, and that's a real opportunity. So we're in the process of hiring a whole bunch of salespeople, many of them in the international markets to expand our opportunities there. And that's -- we grew in the first quarter in our platforms business to high single digits, 9%. And I think that, that should continue.

With Fandango. Obviously, if you go to the movies, you're probably familiar with that brand and platform. You've announced plans to leverage the business into AVOD. I think along with some broadcast digital nets, you've picked up. So why are you bullish on the AVOD offering? And how should investors view the upcoming service relative to some of the established offers they have today?

Yes. So first, just one other business we acquired as part of Fandango. This goes to the movie ticketing business. It's called INDY Cinema. We've rebranded it has been Fandango1. And it is, again, a software services business that ties movie ticketing to theater chains and individual theaters. It's a real expansion opportunity for us and a new line of business for us in Fandango. And we're very bullish in the early results we've had this business for our quarter are very strong. So we will be able to expand how Fandango operates into another revenue stream. In terms of the AVOD service, we own a lot of content. We have access to a lot of content because we buy content for our linear services for Oxygen, USA, SiFi. We -- and then we have strong relationships through Fandango and through our linear services with all the studios where we can do revenue share deals on acquiring movies and series that will allow us to have an offering. So 2 reasons why I think we can -- why we like this business. One, we -- there is a market. What's growing right now in linear television or in video is free. People are getting subscription fatigue. And we have an ability through our offerings both in free TV networks and other acquisition we made and through this pending AVOD service, we have a real opportunity to create an ad-only business. Yes, there are already people embedded Tubi, Pluto, in particular, and have had a lot of success, and they've grown very quickly. We think we can be another important offering. We think the brand of Fandango is strong. We think we have -- already have a very large installed base because of that Vudu product and our home video business. We already have a large installed base across all of the MVPDs and connected TV devices. So we feel that we're not starting from scratch and trying to get it in front of people. We will -- we've never marketed Fandango really before, so we'll be able to do that. And we're very -- because of the data we have, from movie ticketing and the home video business. We know what kind of stuff they're buying and going to see. And we know that the genre of content that there is we'll be able to serve them the content that they want to see. We'll be able to use that data and information and use that for ad serving as well. So we're bullish that we will have a product that can grow very quickly.

And I would assume rotten tomatoes...

Rotten tomatoes will play into that, too.

And just circling back to your -- I'm curious on the INDY Cinema comment. I guess the most immediate addressable market is sort of that essentially almost half the theater operation, which is not associated with the kind of big 3. And then is there an international opportunity somewhere...

Big international opportunity. Yes, we're in the process of a discussion with the largest South American and Latin American theater chains now, which they own hundreds of theaters. So that's -- the international is a big opportunity for both of our platforms businesses.

You mentioned before free TV networks. I think you've talked about scaling this to meaningful ad revenue. And obviously, the over-the-air market is clearly growing. Can you talk us through how you get there? What audience scale or kind of measurement infrastructure needs to be in place to get traction with national marketers on the [ OTA ] inventory?

Yes. We need to -- I mean we've got good distribution, but we're improving the distribution. We're buying or doing deals to get more VHF as opposed to UHF signals. We've got 4 networks now. Right now, it's small and it's all direct response advertising. Again, that's a good kind of low overhead business. We actually use a third-party seller who brings us the advertising. The business that we bought was founded by a group of people that had done this before and sold their business to Scripps. And those businesses still exist. We basically run the same play. And we are confident that the audience, the type of shows we have a Western channel, we have a True Crime channel, we have African-American channels. Those are the audiences that are looking for free over the air and that have -- are watching the antenna-based networks. And we're seeing strong viewership growth, and that's evidenced by the ad sales growth that we're seeing in the Direct Response business.

I guess stepping back, you've stated a target for platforms revenue to be 1/3 over, I think, the next several years. Can you walk us through how you see the path to getting there? And maybe also discuss a bit M&A, how that plays a part in it? I think investors have asked about just kind of your philosophy around deals.

So on the M&A side, there's 2 buckets for us. There's the ones that enhance our verticals that exist today. And I think the INDY Cinema does that with the Fandango business. The free TV networks does that in our entertainment business, and Stock Story does that with CNBC. There are opportunities -- other opportunities in each of those verticals and in golf and in the political opportunities, whether it's events or newsletters or podcasts. There are opportunities to do M&A responsible and M&A in those verticals. And then I think there -- our goal will be something more transformational, doesn't have to be big to be transformational, but something that continues to move -- help us move revenue outside of pay TV and into -- outside of pay TV and into other revenue streams. I think the most important thing I would say to investors is we really have 3 goals. We want to return capital to shareholders. We want to invest in our businesses, and we want to have a strong balance sheet. And I think we have all 3 of that right now. I think we're uniquely situated in our space with a strong balance sheet to be able to be selective and on M&A. And we also have the ability with the strong balance sheet to be able to return capital to shareholders, which we've already done with our dividend and by buying stock back.

Maybe on that point, you repurchased $100 million in Q1. You announced $100 million ASR at earnings. Anything else you can say just on your overall approach to buybacks?

No, other than we will continue to utilize all 3 of those tools to transform our business and to make sure we are responsible stewards of the capital that investors dressed us with.

Okay. I want to touch on margins and costs, especially in light of some of the pay TV trends that we were talking about earlier. How do you think about managing the expense base in particular programming?

Yes. So we were able to set up -- I'll get to programming. I mean, we were able to set up the company to be an efficient company, right? We we didn't -- we started with a leaner group and a leaner strategy than what we had come from, just we were able to have that luxury of getting started. We are also -- we had to lift and shift many of the systems and processes from NBCU just to get the spin done on time. I think what we're doing now is looking through every single process and every single application that we have. And I think we will be able to continue to be efficient. We're obviously using what are the new technologies and tools and what can they allow us to do to be more efficient. I forgot what the first part of the question was.

It was just about managing the expense base in programming?

So we -- so we're very judicious with our programming. We've got -- one of the things we are able to do because news is really such a variable cost, we can toggle up and down as revenue if there's revenue issues with the amount of how we spend into news because it's really a variable cost. There's no rights fees. There's anything. In terms of sports, those are a big part of our cost, and we'll be judicious and responsible with what we buy and only buy things that give us -- I look at any acquisition through 3 filters. One is, what does it mean to our audience, what does it mean to distributors and what does it mean to advertisers. If it's good for all 3 of those, then obviously, that makes sense to go do. If it's good for 2 of those, you probably still want to go do that kind of programming deal. If it only fits one of those. It's probably not the right thing for us.

Got it. With that, we're about out of time. Mark, thanks so much for being here.

Thank you, David. Appreciate it. Thank you.

Thank you.