Warner Bros. Discovery, Inc. (WBD) Earnings Call Transcript & Summary

Good afternoon. I'm Doug Mitchelson, Credit Suisse's media and cable satellite and wireless analyst. Very pleased to have with us Jon Steinlauf, Chief U.S. Advertising Sales Officer of the newly formed Warner Bros. Discovery for our lunch keynote, a 0-calorie lunch this year, unfortunately. This will be a fireside chat format. My questions will likely run the full time. As I always say, feel free to email me if you like to ask me ask a question on your behalf. I'll try to work it in as I can. Jon, congratulations on the appointment. Chief U.S. Ad Sales for the new company. I don't think anyone was surprised and welcome to our conference. Thank you so much for coming.

Thank you, Doug. My pleasure to be here. Appreciate the kind words.

Yes, of course. I think for a lot of folks out there, Jon, you well know in the industry, perhaps little bit of your background and just an intro to investors who haven't had a chance to spend time with you yet.

Sure. I've worked for most of the top cable network groups over my career, I started on the sales side in the mid-80s at ESPN -- early days for ESPN and I sold and managed in New York for them then. Moved on to Turner Broadcasting from my first Turner broadcasting was '92 to 2000, managed the sales team on the entertainment side. In 2000, I made a move to cowork for Scripps Networks and ran the HGTV sales team for a while. And then in 2003, was promoted to run the entire TV ad sales operation for Scripps Networks, which included with HGTV, Food Network and others. And then in 2018, joined Discovery through the acquisition of Scripps and was named Chief U.S. Advertising Sales Officer for Discovery with Scripps and did that from 2018 to 2022. And then in April of 2022 at the close of the Warner Bros. Discovery merger, I was named Chief U.S. Advertising Sales Officer for the new company. So the irony is that Turner, Scripps, Discovery, my last three jobs is now my one job.

That's not one job.

That's 30 years of my career now rolled up into one job, dream company.

I got to be nice coming back and seeing a lot of your friends on the Turner side. And usually Turner was always an innovator, even back in the '90s. The focus on ad sales, which I'm sure you're part of. I think the -- it kind of leads you right into the merger, right? So what's the potential for the portfolio now that you've got your 3 jobs all rolled up. You only paid for one job at this point.

Yes, it's a formidable portfolio is a very complete portfolio. And I think the areas of the business that are new for the Discovery side of the equation that are really significant are sports, news and streaming, HBO Max is a big part of our plans. The AVOD side of HBO Max is only 1 year old. It just finished the first year as an AVOD service, but I think if I look at the across the portfolio that is new to the new company from the Discovery side, I would say sports is standing out the most in the short term. Over time, I think the HBO and CNN businesses will start to really scale up. But I think right now, in this market, what the advertisers really covet is sports. In fact, in the month of -- in the second quarter to date on women 25 to 54, half -- 30 of the top 50 shows in all of television on women, 25 to 54 are sports. And half of them are ours. So we're seeing -- actually seeing in this upfront, some activity where female advertisers are starting to look at sports because the sizes of the ratings and the ability to reach female viewership in sports is so important that they're taking a look at that. So as a portfolio, we think of it as sports, entertainment, lifestyle, news and streaming and kids business, which is somewhat challenged, but the kids business is also part of it. And we've developed a strategy that we call Premier where we've taken the best content off of every one of these channels that we now own. And we formed a stand-alone package of the biggest hits and the highest ratings and we're selling that as an option in the highest end of the marketplace, which is the prime-time broadcast entertainment market.

So how conversations with advertisers has gone so far post-merger? And I'm sure you are having some conversations within pre-merger, but there was lot of things you didn't know until the merger actually closed and now you can sell the whole portfolio. So my guess is the conversations have been evolving, what are they -- how are they going?

I think advertisers like the fact that they can do more across our portfolio that we can connect more dots. So for example, CNN, NBA and TLC would link up really well in the African-American marketplace. CNN has one of the highest percentages of African-American viewing of anything in television, the percent of total viewers. The NBA also has a high percentage of African-American viewers. TLC's biggest hit series franchise, 90 Day Fiancé as well. So finding those links to be able to market across this portfolio in ways that the company could have done independently is something that we look at. The combinations of CNN Sunday Night Lifestyle with two of the great lifestyle networks, Food and HGTV, have those kinds of combinations to build more scale on a theme around female lifestyle is something that we're now starting to put together, ways to look at connecting different platforms, television to streaming as well, much bigger now with both HBO Max and discovery+.

Yes. I think about how you can drive value for marketers. You mentioned Premier earlier. And I think it's generally all know, but you may want to describe what that is? And is the adoption continue to improve? And how much value are you delivering there?

We look at it as the best of company all-in-one package and it's positioned against broadcast network prime-time, but it has a healthy dose of sports in it too. So what the package really looks like right now is it's, say, the top 30 or 40 shows from the company. And we layer in the top sports franchises as a single entity. So going into this merger, if you look back at 2021, there was about $400 million invested in Discovery Premier pre-merger, and it was invested by about 200 different brands. And we're building on top of that in the new version of Premier. We're building more and more clients that are being interested in looking at it as a way to get great engagement, live viewing, higher ratings and a competitive package to everything else that's out there, but at a discount.

I'm not sure if you're prepared with this at your fingertips, but you know what kind of reach U.S. also reach delivering with Premier products.

We know that in any given flight, we're going to wind up with greater reach than each individual broadcast network can get. We know we're going to get a larger audience share. And it's anywhere from usually 20% to 30% increase in terms of the impressions that we can generate against the amount of money being invested. The efficiency of it typically is generating about 20% or 30% of our impressions in reach.

Yes. I was going to ask you kind of next, what part of the portfolio are most undervalued today, and you've kind of touched on it a little bit, but it almost kind of continues the Premier conversation, right? Because one of the dynamics is you're trying to get more and more advertisers into Premier, but you're trying to drive this on that. So I guess the broad question is, what portion of your portfolio are most undervalued and I guess that includes what kind of upside do you see in Premier placing?

I think as a salesperson looking across this new portfolio I see a lot of opportunities, I see a lot of value. It's not just at the top end of the portfolio, there are networks like Motor Trend and Magnolia and Science and Animal Planet, that are great brands, very targeted, very passionate fanbases. The thread that I see across this portfolio is passion and really Premier verticals that have great engagement and for advertisers brands and passion and engagement stand out above all else. So while you may have modest ratings at something like Magnolia or something like Science, the people who are watching it are really passionate and their engagement with the advertising as much as theirs with content.

Is there a reason for broadcast prime-time CPMs to be premium to your division?

Legacy, that's just how this business is been built over the years. I'll take that to a different direction, your question. Cable started in the 80s, I was around when cable started. I remember kind of element of those of us who spent their careers in cable, there's always been this pricing gap. You hear us talking about it a lot. And while Premier is may be one of the most effective ways to try to capture the value that is inside that gap because this company has, we, Warner Bros. Discovery have more hits and successful cable series and more original cable series than anybody. The gap existed because a lot of these advertisers started buying cable in the early days, when the supply was really high. Back in those days there were new cable networks launching virtually every month. So we just avails and supply and supply and supply and growth everywhere you turn. So advertisers looked to that and said, "You need our money, we are going to establish low CPM bases and we are going to ride those CPM bases for as long as we can." Well that's continued through the 40-year history of cable network business and the gap continues to exist. However, in the streaming world, to me it was broadcast by itself for about 30 years, then we have cable and broadcast together and this is really the beginning of the AVOD world of streaming. And the launches of Peacock and HBO Max launched in 2020 with ad inventory. Hulu has been out there, discovery+ launched in '21. Rebrand of CBS All Access into Paramount+ 21. Now we're going to see Disney+, take advertising. We're probably going to see Netflix advertising. But as this business of streaming AVOD starts to build in these next few years. What we're seeing is that the CPM gap between streaming service to streaming service is not necessarily reflective of is it cable content or is a broadcast content? Now it's really -- if you're out there with a streaming service, take Peacock, for example, it's really a combination of universal product and NDC product for many of its different networks, be it broadcast or cable. So this distinction of an all-broadcast network versus an all-cable network and the pricing gap that existed is really not a factor when it comes to streaming because our streaming services, one is coming off of HBO, One is coming off of Discovery, they're being positioned at the same level of CPM as something coming off of broadcast.

Yes. It's interesting right because you're selling each individual viewer in theory. And so demos also start to get up and a little bit -- that kind of leads to the next set of questions, and we will get to the marketplace and how it's doing right now, kind of later in the discussion. But I wanted to walk through, it's kind of nice to have you to really understand what's happening on anything surface in terms of how you're selling and the technology that underlies that and how sort of packaging is going to change over time. I guess I wanted to start with just sort of the basic question, like how you've been changing how you sell, I guess, you think about the last -- pick a time frame you want, but a multiyear time frame. And you look forward the next few years, how are you going to change -- continue to change how you sell?

One of the things that's coming into the market now is advanced advertising. And sometimes we hear in advanced advertising. We hear alternative currencies. We hear about addressable. We hear about programmatic. A lot of these technologies are coming into the market. And what it really all leads to is ROI for the ad buy. So if you're a client and you buy advertising, you want to know some way besides what was the 25 to 54 delivery reporting to Nielsen. Is there some other way to measure that 5? So say an advertiser wants to reach small business owners, and there are millions of small business orders in their country. And they come to us and they say, "We want to use your linear channels and your streaming services to reach to small business owners with as little waste as possible. And as you eliminate waste, CPM gets higher and higher and higher because they're getting a pure reach of the people they're hypertargeting. So in the case of discovery+ in HBO Max, AVOD, we know exactly how many small business owners are watching, and we can serve ads directly into those people's homes. So that would be a way to get a pure targeted audience that is highly desirable in streaming. If you move over to linear, with the 25 networks that we own in linear, we have a really high scale of the millions of small business owners. So you start looking at the unique fan bases of channels like HGTV, Food Network, Discovery Channel, TLC, [ Anios ], TNT, Adult Swire and CNN. So looking across this portfolio, and you're saying, look at all this reach. Well, you asked me earlier, Doug, about the reach of Premier, the reach of the company, which is even more relevant than the reach of Premier's, they're about 230 million people. in a given month that are interacting with our content, whether it be linear or nonlinear -- so the access we have to people across these unique fan bases that don't overlap so much. So the people don't necessarily watch 4 or 5 of the same channels. They may have their favorites. So we target the people who qualify for a specific audience segment and then we can scale up to those -- that number of people. So we call that in our business, we call that DDL or data-driven linear, where you look at the entire portfolio and you find the dayparts and shows that have the highest indices against a strategic target. And then you make a recommendation to a buyer that we -- our brand is called Discovery Engage. The WarnerMedia brand was called Audience Now. So we merged those technologies, and now we have the ability to really scale up to a very high percentage of a strategic target through a data-driven linear on the -- as an index by and through streaming as an addressable by.

Yes. It seems like there's different approaches to measurement this year among the different platforms. I was just curious; you have a specific measurement strategy that you would highlight and how is measurement evolving from your point of view? Because I think underlying the idea that, okay, adds are increasingly addressable, especially on streaming platforms, but you can also do some hard work on linear and try to help targeting underline that, there's got to be a measurement that everyone agrees on.

We've had Nielsen since the beginning. They've been the primary currency determinants in my career, there really hasn't -- they really haven't been challenged nationally in linear television. They've been challenged more in digital and streaming. But what's coming next is there are 3 players that are in the market right now that are getting a lot of testing, iSpot, comScore and VideoAmp. We're working with all 3. Most of our competitors are working with all 3. And for a Wall Street audience say why should I care that Nielsen is being challenged or there may be alternative currencies? And what's going to happen in the next year is we're going to go from a 40,000 sample that Nielsen runs to a 40 million sample that Nielsen will have and the other 3 companies are building to. So when we do the 23-24 upfront, instead of looking at a 40,000 Nielsen sample, we're going to be looking at 1,000x the number of households that are going to be in the sample. And how that changes the dynamics and the market shares and the CPMs and the things that you care about is still to be determined. But one thing that we look at is accuracy. Nielsen had some problems during the pandemic being able to manage their sample understandably, there were some underreporting that they admitted. There was -- so there was some revenue that is under debate -- whose revenue -- who deserves that revenue. But I applaud the efforts that are being made in this industry to get to increase the sample size to get a more accurate read and that could open the door for the best engaged advertising, the networks that have the most engagement to their content and their advertising, will win more share because there'll be more clear understanding of the quality of the impressions through these new research companies. They're looking at how do we distinguish ourselves from Nielsen and Nielsen is trying to do this as well, by trying to figure out attribution. So when ad runs, what happens. Does anybody take action? Does somebody who see an ad tonight and the NHL finals around ABC tonight. Somebody seen it in that game and actually search for a product in the first 5 minutes after they see that ad. Somebody go into quick-service restaurant the next day. So this is what we the industry is working towards is the ability for new research to come in that can really make a difference in determining the ROI of an ad campaign. And we have -- going back to what I said earlier, we have the most engaged audiences that are passionate about these channels that the most engaged networks are going to win because the audiences are going to be valued at a higher rate.

Yes, it's anything in our measurement when you have an article in Wall Street Journal and a study done by one of the ad agencies saying, we're just trying to figure out the television is on or not for some of the streaming services and streaming platforms.

We're working with Group M. We're part of the coalition working with Group M to try to address that issue. And that issue had mostly to do with continuous play channels, we're sold in on-demand apps.

Right. And I'm just curious when you think about maximize the values of these impressions, particularly digital, is it -- we're talking about measurement standards is there other tools that you need to build or that you're tapping into? Is there a scale that has to be brought to this? Or -- I'm thinking about kind of the steps and the time frame before we reach a little bit more of a Nirvana where advertisers kind of look across all the platforms and feel like they can manufacture appropriate reach and frequency across their target and maybe bring a lot more dollars to this and a lot more focus to this.

Yes. I mean going back to what we just talked about with alternative currencies and new research and some competition coming to the world of measurement of linear/streaming measurement, we can look to the future and say, cross-platform reach becomes more of a factor in how advertisers are paying us. So incremental reach, cost per incremental reach point, what that means is you have people buying a lot of linear that are now taking a step into streaming and they want to know, can I reach different people. So if you're an insurance company and you have a large ad buy in linear, and you don't have any people you're reaching and you know how much frequency you're getting, say, over a campaign for a month. There's another part of the country that you're really interested in, which is the households that don't have cable. So cross-platform measurement means that we're going to get a better idea of how many different viewers or households are being reached by a campaign over the course of a flight and how much frequency can you control. So that's -- a possible shift would be I am willing to pay a premium to be able to reach people that I'm not currently reaching, and I may have to go to streaming services to do that.

[indiscernible] focus by investors on shift to programmatic buying as there's more and more stream inventory. When you think about the different sort of sources of ad volume that you tap into high time versus programmatic, do you see the changes in terms of how you package and sell your inventory time? And does that impact your ad revenue or cost structure sort of one way or the other?

Doug, we go into this upfront market that we're in right now. And I look at proposals every day that we're sending to holding companies. There are 39 individual platforms. I go back 10 years, you might have seen a plan going to a holding company that had 4 networks and a couple of dayparts per network, and that was it. Now we're selling 39 individual platforms, each with its own value price point investment. So this is a portfolio approach to the upfront. So what's happened now is the emergence of the nonlinear option, whether it's social, whether it's VOD, whether it's authenticated apps, whether it's streaming service, AVOD, any of those options now fall into. Like in our case, we have Bleacher Report, we have cnn.com. We have HBO Max, we have discovery+. We have the WarnerMedia app, authenticated apps, we have the Discovery legacy dedicated apps. So all of these fall into a proposal that says, here are your schedules or proposals for 24 or 25 linear channels which is still the core of the business. And then here's your proposal for 14 or 15 digital options, a whole menu of digital options. And as a company now that has just gotten all this data, we didn't see any of the data really until April 11, the merger closed April 8, we came to work here on Monday morning, a very different company without having seen any other data from each other. So now we get to look at each other's data and decide how do we service these holding companies knowing now that what they did on both portfolios last year is now being merged. And where do we feel they need to invest more, where do they feel they need to invest less? What are the opportunities to grow range. So I think the biggest change that I've seen in the last couple of upfronts is that we have these distinct marketplaces. So there is a streaming/digital marketplace that almost every one of the companies that owns linear networks is engaging in. And then there's delay in marketplace. The negotiations are really -- here's what's happening in linear, here's what's happening in streaming. If I'm willing to do something in streaming, if I -- content companies willing to do something in streaming, what's the impact going to be on their linear. So it's -- there's a lot of horse trading within these portfolios, both internally and to the outside world. And that's -- a lot of that is all new because most of these streaming options and digital options have come into their own in the last couple of years.

If you go back 2, 3 years ago and a force advertisers who take streaming inventory and now they are coming in and almost looking for first we have an ad buyer this morning and they're talking about, you can go both ways. You can start with reach on streaming then try to add linear to top it off, and you can do linear and go back to streaming. I'm sure you're one of your path to the team here is more and more stream inventory as fast as you can. I'm curious -- you talked about packaging linear streaming a bit. You're also selling sports and news for the first time integrated with your entertainment product, and I think you mentioned upfront a little bit how important sports has been. How is that process going to given the internal reason to sell sports separately?

Well Turner Sports is a spectacular portfolio. Post-season NCAA men's basketball post-season NHL, including the Stanley Hub finals in June of 23, which, by the way, will be the first time that 1 of the big 4 major professional sports is going to carry his entire final on a cable channel, never happened before. Post-season Major League Baseball, post-season NBA, so we have now been able to put the sports portfolio together with the rest of the portfolio and work with advertisers on trying to find sponsorships that are in -- maybe in sports and then see how far across the company, they may be able to go. But to maintain the importance of sports and the relationships we have there to build upon those, not to try to shift money away from sports but actually build upon the success that Turner Sports has had in the ad-sales business by opening up some of these advertisers to the rest of the portfolio. So when you asked earlier about how do we sell? Some of the data we're looking at is, who's high share Warner low share Discovery? Go to those clients, we really haven't had a lot of time to do this. This is just get ready for the upfront, get into the market, start negotiating. We have to understand in a methodical way, exactly what it is that we're committing to. But if you -- once we get past this upfront, and we start talking about now we're back into the selling cycle, what can you do with high share Warner, low-share Discovery and vice versa. How can you take sports advertisers and expose them to the rest of the portfolio of news advertisers, lifestyle advertisers. So there's a wide range of advertisers that are very focused on individual components of our portfolio, but now we can spread out and show more opportunity and grow the relationship from a marketing standpoint.

Yes, care to quantify kind of the number of advertisers and the number that you can put across and execution on that. Why don't we get to the current marketplace. I think a lot of folks are waiting on that part of the discussion. So maybe we should get to that. How is the upfront going so far? And just as a backdrop, yesterday, we had three of major media companies indicate high-single-digit price increases, I think your ad by our panel sort of agreed with that pricing and there's been plenty of press out there saying that Discovery is looking at its position and it feels like it's undervalued in the marketplace and is wholly off for a more aggressive price. So you are welcome to dispute or update any of that? Or any comments on the upfront in the process relative to peers would be welcome.

Well, we're not going to talk about the market. We're not -- we never talk about the market while we're in the market. So this is nothing new. There'll be a point in time where we can provide some guidance as to how things are going and how we did. But this is not the time for that. We're active. We're negotiating. We're talking to everybody. We're closing deals. We're being patient. We have a different paradigm this year. The way we've chosen to go to market with Premier is not the way advertisers normally buy mixes. This is a mix that consists of sports, entertainment, lifestyle, news, some syndications, some Jennifer Hudson show and syndication, a new show [indiscernible], you saw her. So this is a process that has -- that requires more complexity than they've seen in the past. However, they really like what we're doing because we've created a one-stop shop for the best of Warner Bros. Discovery and all of these great brands. I can't emphasize enough how great these brands really are. And sometimes in a big company, as the company gets bigger and bigger and bigger, sometimes you lose sight of the fact that what's really valuable. These gems of networks like HGTV, like Food Network, like Discovery Channel like Animal Planet, like Adult Swim, like CNN, like Turner Sports. These channels have incredible staying power. They're incredibly important to advertisers. There's a lot of emotion about these channels. And when you start pulling everything together and a big company, you can't overlook the fact that there are long-standing relationships that are valuable. Not every relationship between advertiser and channel has the emotion and the passion that these advertisers have for these channels because a lot of these channels are clean verticals, the names of the channels are the names of the categories. And they're very clear, clean verticals that advertisers have been a part of for a long time. So we have -- we're looking at it as a blend of the best of the company that we're going in and saying, this market is different than last year. And next year will probably be different than last year. And I've seen all this -- every kind of market you can ever say but the conditions right now are a little more volatile than normal. We don't have the crosscurrents that we're facing on a day-to-day basis in every single upfront year. But we've had -- we've been through 2 COVID upfronts, we went through 2021. We did two upfronts from home. At least now we're back, and we're working. But I would just say that the mix that we're as selling is going to be a long-term strategy for our company. And we're not just depending upon getting everybody to buy into what we're doing here day 1, month 1, month 2, but we're going to be at this, and we're having a lot of success getting people to think of this company as 1 of 5 -- 1 of 5 players at the big table. That was the goal in this upfront was to think of this -- that this company would be thought of as a player at the table with 4 others that are competing for the most coveted advertising.

The stories given the mad scramble to sit together and execute on it. But it's good to have a patient boss. So that's nice, too. I think the...

On the other hand, the value -- when you buy another company or you merge with another company, and they're in the same industry as you're in, your knowledge base gets much better because now we understand when you compete, you don't really know exactly what's going on, but when you're now an owner of more and more and more of the networks, you're able to really understand how it's positioned and how to take what's been done in the past and try to improve upon...

So let's start out with the challenges of the business, linear ratings here the last couple of years, a lot of ratings declines. You talked about some of the Nielsen measurement issues, but they're expanding their sample and tuning things up, and we're still getting some ratings declines. So losing, call it, 4%, 5% on subs and viewing-per-subscriber dropping. How does that -- does that challenge ad sales? Or do you make that up on price because you're delivering value? How does that work?

Well, we've taken this approach that we have the digital streaming platforms to pick up some of the shortfall at different ad loads. One of the questions in the business right now is you're running a 4-to-5-minute ad load business at discovery+ and HBO Max. How is that performing for the advertiser? Does the advertiser feel like the 4-to-5-minute format is much more impactful than what the clock looks like in linear television. And those clocks are higher, those ad clocks are higher when you get into linear. So when you go to streaming, you're going to get -- as I said earlier, you're going to get new viewers, you're going to get lighter ad loads, you're going to get younger viewers. You're going to get the underlying power of the brands and the content that exists within the HBO and Discovery libraries and all the other libraries we have access to, but the ability to target through programmatic is a point not to be overlooked. And that the programmatic business to discovery+ is contributing about 50% to 50% of its revenue. in the first 1.5 years. And that programmatic business is at a different price point. So what we direct CPMs that are coming from agencies into discovery+ and HBO Max are at a premium to what linear has been. And I mentioned here that the cable bias that existed in the 40-year history of the linear table against broadcast network. That linear bias doesn't -- that cable bias doesn't exist in our streaming services. So we're starting from a higher point. But the advertisers are valuing the lower ad load, the younger viewers, the more engaged viewers that exist on the streaming side.

Makes sense. The second quarter...

And then just to your point about the rating, because I didn't answer the question yet talk about the ratings. The linear ratings, while they may be down and pick a channel, we have channels that are up. We have channels that are down. TLC is up right now. TNT just finished as the #1 cable network in April and May and will probably be for the entire second quarter in all of television, TNT being #1. TLC being up, others not being up. It's a mixed bag when you look at audiences. But 1 thing that's consistent is when you compare 18 to 49 to 18-plus. While the channel might be down, say, 15% year-on-year on 18 to 49, and some of that is sport cutting and some of that is the aging out of the demographic. When you go to 18-plus, what you're finding is typically a 5-point decline. So the difference between an 18 and 49 and 18-plus is pretty stark. And it gives us the ability to say to an advertiser, buy Linear for really what it's good at, which is that broader demo, 18-plus. If you keep buying linear on 18 to 49, the supply is going to be continually constrained. So while linear television takes its knocks for not delivering the same audiences year-over-year, that's not entirely true because sports is breaking that. But if you look across the portfolio and you go 18-plus, you're seeing pretty good year-on-year audience retention. And then when you go over to the streaming side, you pick up a lot of what you lose. So if an episode of Deadliest Catch it runs on Tuesday nights on Discovery Channel, the advertiser now can say that same episodes available on Discovery Channel linear on Tuesday night. It's available on Discovery GO, the authenticated app. It's available on discovery+, the subscription DTC service. It's available to VOD. If you want to get it from your MVPD that way. It's available through your DVR. People still have DVRs. They still record shows and they still watch them back inside the 3-day C3 window. So it's a way -- I call it total TV. So it's not just looking at linear but by itself on 18 and 40 and say, oh my god, what's happening to linear. It's really, linear is more of a broader view. And then it's all the other components to catch that same episode or binge years worth of Deadliest Catch of the greatest shows we've ever done.

Now I hate to shift the conversation from all of that interesting stuff to something that's mundane. It's the second quarter in the current ad market to wrap up our conversation. But I do think people are curious if you're seeing inflation or higher interest rates for the macro environment, higher gas prices influence advertising. Just for reference, we've had a lot of commentary at this conference about how supply chain has been impacting things, but not inflation. I'm curious if you're seeing any kind of early signs of softness that you would point to macro. And just how is 1 other discovery doing second quarter, obviously, you did have some good sports as you highlighted with TNT's ratings.

Well, I'm not going to give any guidance for second quarter. But sports has been very successful. Some of the other channels, as I said earlier, are doing well. We are in the third quarter of 4 quarters of very high upfront rates of change. If you look back on '21, '22, you know what happened with rates of change. So that inventory will be in place through third quarter of '22 before we flip to the next upfront cycle. So in terms of the categories, the supply chain has loosened up for some categories. So we're seeing in areas -- in some of the CPG categories, we're seeing the supply chain loosening up. And Target, the retailer reported that their factories are overstocked now with product. So while there are other issues coming in, the supply chain has been the overarching problem in TV ad sales in the last 12 months has been supply chain. And it's still both the lockdown -- temporary lockdowns back and forth depending on the state. But I would say right now, if I were to characterize the categories, I would say that automotive and tech have been hit the hardest because of the chip shortages. And that's right now, as we speak right now, second quarter or as we look into more in the second quarter, upfront being more of a futures market, upfront, the advertisers are thinking about April 1 of '23 as the midpoint of the new cycle? And what's the country going to look like? What is the consumer going to look like in April 1 of '23. Anybody's guess, that's an intern right now looking for I think, 9 or 10 months away from that, who knows? But in the category picture right now, I would say, automotive and tech was affected by the chip shortage and the categories that are really starting -- that are performing better right now would be travel, entertainment, meaning movie studios is some of the 3 openings and how well the movie studio category is doing right now they're coming back to the theaters, at least more people are. And then retail has had -- we've done well in retail in the last couple of scattered quarters. So on the good side, I would say travel entertainment and retail. On the challenge side, I would say automotive and tech -- and I would put CPG and it took mixed bag depending upon how well they're getting their product into the stores.

And to be really interesting when you think about this time next year, that will 6x be as long as you had your upfront together. So that will be fun. Look, I really appreciate the conversation. It's fun gate the weeds on this advertising stuff, a lot of change taking place. And exciting to see what you're going to do there on warner Bros. Discovery.

So thanks so much for your time. Thank you for yours. I appreciate it.