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

Okay. We're going to get started, everybody. Good afternoon. I'm Ben Swinburne, Morgan Stanley's U.S. media analyst. Quick disclosure. Please note that important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, all appear as a handout available in the registration area and on the Morgan Stanley public website. We're really happy to welcome back to the conference Gunnar Wiedenfels, who, I guess, now for the first time is appearing as the CFO of Warner Bros. Discovery, which is a company put together with the merger of Discovery and WarnerMedia earlier this year. Gunnar, thanks for being here.

Thank you for having us.

Good to see you. So I guess we're 8 months in to the merger. It's a pretty wild time in the state of media at the moment and the macro. Maybe just stepping back with the benefit of the 8 months that you've now got this combined company put together, how would you describe sort of the opportunity ahead?

Yes, you're right. I mean, there was no shortage of changes since we first started discussing this deal and where we are today. A lot has changed in the streaming ecosystem media overall. But net-net, I think it's going very well, and the opportunity is as great as it could be. And I'm really, really excited about the progress we're making. We've obviously made a lot of decisions very early on after we brought those 2 companies together. And it really comes down to the 3 core priorities that we're working towards. One is making sure that we continue creating this world-class content across all genres. We've got scripted, unscripted, news, sports, that we enable that storytelling to happen on one of the most complete global distribution platforms you can find regardless of geography, platform exploitation window. And maybe most importantly, and maybe the biggest difference after bringing these 2 companies together is that we're managing all that as one company, not individual business units, but an entire team, 40,000 people rolling in one direction for the benefit of the combined company. And we just took up our synergy target on the third quarter earnings call because we're making a lot of progress, more than 1,000 initiatives in flight. And it feels really good because the team is coming together, and there's a lot of excitement inside the company.

So when -- I guess it was, I guess, May of last year when you guys announced this transaction. I think at the time, at least my perspective was this is very much about direct-to-consumer and streaming and sort of the combined scale and winning in D2C. That whole business outlook has certainly shifted quite a bit since last year. Are you and David and the team looking at streaming with a different lens today than you were last May, when you think about the path ahead for Warner Discovery?

Ben, I would say more so the market has changed the lens because I would describe it in a little more nuanced way. Clearly, the D2C area for this combined company is going to be the most important growth driver going forward. But what's already differentiated the way we have looked at Warner Bros. Discovery when we announced the deal from everyone else is that we did not position the company as a D2C platform with a conveyor belt of mass content flowing in to drive that platform. But we have seen the opportunity of Warner Bros. Discovery as one integrated media platform being able to use all the revenue streams and cash registers across an entire ecosystem. And I think the market has come to that conclusion in the meantime as well. So very, very important strategic growth driver, very important source of synergies because we are going to combine 2 technology stacks into one. We are going to be able to much more efficiently and effectively market that D2C product and all of our products with the combined company footprint but not the end-all, be-all purpose of the company to exist.

So you're saying it's not you that's changed. It's us that's changed.

You have changed, yes.

I mean, there are so many different ways to monetize and distribute IP. And Warner has got content in lots of different places and lots of different -- from lots of different studios. Have you arrived yet at a sort of, here's the approach? Or is it going to be something that's sort of organically evolving over time?

Well, I think we have arrived at, here is the approach, but there's a lot of execution yet. One thing that I really prioritize is making use of all that information, all that data we have across the company that wasn't in place before. It was a very much business unit by business unit-driven landscape and decision-making approach. We're now bringing David's entire leadership together, and we're looking at all the information we're having. We're looking at areas where we don't have the data and we make informed assumptions. But we make, for example, windowing decisions in the best interest of Warner Bros. Discovery as a whole. And some of the movies that have launched since we combined the 2 companies are great examples where the ultimate estimates have come up over time because we were able to keep them in the theater a little longer and leverage that marketing buzz the theatrical opening generates through the entire value, and it's not rocket science, right? That's how it's been done successfully for a while. And the idea of collapsing all that into just one streaming window, in retrospect, is a failed experiment.

Yes. So when we think about the landscape, you've got someone like Sony all the way over on one end as the "arms dealer." You've got sort of Netflix as everything is streaming all the time. Warner Bros. Discovery sort of fall somewhere in the middle? Are you -- are there more than those 2 choices when you think about running the company over time?

I think there are. If you think about the priorities that I described, sort of creating the best storytelling in the world and exploiting that across all platforms and managing it in an integrated one company way, why would we not be opportunistic about certain monetization streams? David has talked a lot about FAST as an area that we want to add to the mix here. We got a deep library of content. We know we need to make sure that there's as little in the way between new consumers and our content. And we're not going to tell you whether you have to come through our own app or whether you want to come through an Amazon Prime video channel, whether you want to use something on linear. We're going to be open to all those forms of distribution. And again, I think, like no one else, we're in a position to look at all the learnings that we're getting across that entire ecosystem and using all that to drive decisions in a way that ultimately allows us to get the best return for every dollar of content spend and then get that flywheel effect because once we have a -- that distribution ecosystem in place and the proper capabilities to utilize it, then we should be deploying as much as possible into great storytelling and take that around the world.

Great. Maybe one last on a high-level question then we'll dive into the segments a bit. You and I have talked about the biggest probably near-term opportunity for the stock is around deleveraging, and I know that's a huge focus for you. Tell the room and the audience online a little bit about your expectations around path to deleveraging, the speed. And also, a little bit why this year, there's been less free cash flow so far in the first couple of quarters than maybe we were expecting.

Okay. That's a number of questions in one, but I'll take them apart. So first of all, I want to make sure -- I don't lose any sleep over our leverage. We've got long-dated debt, 14.5 years average maturity, very little maturities coming up over the next 2 to 3 years. We're going to generate a multiple of that in free cash flow even in sort of slightly more stressed scenarios. And most importantly, it's very, very attractively priced debt. So by all means, I think we're going to be ending up buying back a lot of that long-dated debt that sends for the dollar. So it's a great opportunity, and we put it in place with the purpose. We put it in place with a structure that I'm very, very confident is not going to become problematic. That said, we are absolutely very, very focused on it because it does come up in every conversation. It's -- on the face of it, it's a large number, 5x leverage, and we're working towards bringing that down to the upper end of our target range of -- we have a target leverage range of 2.5 to 3x. We're going to get there over the next 24 months. By the end of 2022, we're going to be in that range. And to the point -- in 2024, we're going to be in that range. And to your point of free cash flow generation, there's no doubt right now for sort of quarter cash flow as an example is a little depressed by deal-related expenses, restructuring expenses going through. And also keep in mind that we just guided to an incremental sequential $2 billion of synergy capture in 2023 versus 2022. We've done the work. We've got these initiatives lined up. And a lot of that is obviously going to drive free cash flow into next year. And then there's a number of below-the-line items. There are working capital opportunities or CapEx opportunities. And most importantly, right now, the company is operating with a pretty significant gap between content cash spend and amortization that's going to normalize beginning next year.

Okay. That's great. Let's talk a little bit more about the direct-to-consumer segment, which, Gunnar, you mentioned is really the key organic growth driver. So you've got HBO Max and sort of all the versions of HBO around the world. We've got discovery+, which you guys have had in the market now for several years. Where does -- I know JB is hard at work at sort of what the new service is going to look like. But what can you tell us about the assets you have and what you can offer the consumer once you ultimately get a combined product out to market next year?

There are 2 things that really excite me about what we're going to bring to the market. Number one is the user experience. There's no doubt that we will create a much, much better user experience with a new clean technology stack and the new go-to-market approach. That's one. And number two is the integrated content portfolio between what the great scripted content that HBO does, all the Warner Bros. output and then the unscripted discovery+ content portfolio. And I do think that there's an enormous opportunity. We'll have to deliver against that, but the ability to attract subscribers with the -- with a tent-pole HBO content and then make sure that we retain them after the end of the season is a huge priority. And our discovery+ content lends itself to that like nothing else. We know for a fact we have very low churn on discovery+. We have very high levels of daily engagement across our content, and that's always been the core thesis for the quality of that combined portfolio. I, frankly, think there's no better content offering in the world than the combined HBO Max and discovery+ content portfolio.

Yes. It seems like -- I know you guys don't report churn, but it seems like HBO Max churn is relatively elevated, which I find a little surprising just how, given it's probably got, I mean, my opinion is the best content. You look at the Emmy's. It's not just me. How do you get churn down in HBO Max? Is it as simple as bringing Discovery in there? Or are there other opportunities to drive down churn?

I agree with you on the assessment of the content quality. It's amazing. I think there's 2 things. One, there's good churn and bad churn, right? What I would qualify as good churn is the fact that HBO always bring in massive amounts of new subscribers. And naturally, you won't be able to retain every one of them, right? So in a way, in an ironic way, it's a measure of the quality. So that's there. We're still working hard on making sure that we have something to offer to those of yours, there's a lot to be said about content discovery, about guiding the user journey through the product. And a lot of that is going to be part of the new platform. We've made some improvements for the HBO Max interface and have put some measures in place with guiding a better subscriber journey. But that's a very big factor. And the reality is the platform right now is just not operating at its best possible performance. There are many people like you, if you look at App Store ratings, that are excited about the content. There's a lot of 5 stars for people who are focused on content, and there's unfortunately some lower ratings for people that are focused on the app experience. We'll fix that 5, 6 months from now. Hopefully, we're going to be in a very, very different world and then we have both ingredients, the outstanding content and outstanding technological user experience as well.

So on your earnings call, you -- I guess it was a couple of weeks ago, Gunnar, you guys moved forward or brought forward the relaunch or the launch of the super service as we like to call it to earlier next year. And it seems like you guys also have a lot of confidence in the financial output of direct-to-consumer really inflecting. So talk a little bit about the drivers there, both on the revenue side and the cost side because it's a business that, as you and I have discussed, HBO made $2.5 billion of profits not that long ago in 2015. Now it's losing billions but take us on the sort of path here over the next couple of years.

Yes. Maybe starting with the financial facts here. If you look at our pro forma financials, our entire D2C segment lost roughly $2 billion last year in 2021 pro forma, and consensus for this year is in a similar range. And by the way, I do want to point out because David was misquoted as saying HBO lost $3 billion. He was referring to the swing from a $2.5 billion profitable business over a short period of time into a loss maker. That's fine because we're making investments. We've always been clear that we view 2022 as the year of peak losses for direct-to-consumer. And the path from here is both, the revenue and the cost improvement path. And I'll start with the cost side because it's so straightforward. We've always been clear that, that $6 billion non-content D2C spend is one area of enormous synergy potential, and we're seeing that in our more detailed synergy work. It's going to take a little while because right now, everybody is fully focused on creating that new product, but certainly running 1 clean new technology stack is going to be much more efficient than running 2, let alone one that is sort of duct taped together from a number of legacy systems. So big, big driver. Marketing efficiency, we're already seeing that flow through. It's actually fascinating what we can do. We have one of the greatest media footprints in the world. And we're starting to make a dedicated effort to use that to promote our own products. House of the Dragon was a great example. I don't know if any of you guys saw that but flying the dragon through the Yankee Stadium. There's a lot of stuff we can do, and that's really helping effectiveness and efficiency of our marketing. And then on the revenue side, again, the most important driver is getting that churn number down. And we feel good about the content proposition and the improved user experience from the product relaunch. And frankly, we haven't gone all in right now from the perspective of driving that -- those sign-ups. But so there is definitely going to be a positive inflection from a subscriber perspective following the new product launch, but there's also a lot of opportunity from an ARPU perspective. The market has changed a lot, and HBO Max relative to other competitive products in the marketplace is now actually relatively moderately priced, despite the fact that there's no doubt that it's the greatest content offering in the space. So there's opportunity, specifically internationally. One interesting data point is that the effective ARPU between HBO Max and discovery is really not that different internationally, which is a function of that sort of push to maximize subscribers. But I think there's a lot of value opportunity there, trading off price and volume a little better. And then I do want to point out advertising, an enormous opportunity. We continue to see our ad monetization in the D2C space to trend up. And I think there's more that can be done for HBO Max and specifically a lot more for a combined product. This is an area where we're really still in the first innings. We're monetizing very well. We're getting CPMs that are a multiple of the linear world. But with scale, there should be an incremental exponential benefit in digital marketing. It's been one of the big growth areas in the ad sales space for us this year and last year and the year before. And I think it's going to get incrementally important.

I want to come back to the ad supported here in a second. But just back to ARPU, Gunnar. It's interesting, right? A lot of your -- a lot of services came to market deeply discounted to drive subscribers. If we're hopefully sitting here together a year from now, a lot of them will have raised prices almost back to the HBO level. What do you guys -- what would lead you to raise prices? I mean, you've got a lot of work to do on the product side. You also have all the discovery+ subscribers as well. But it does seem like financially, ARPU growth is pretty important to making the math work. So what are the variables, what are the milestones for you guys in terms of evaluating the time to take price on that service?

Yes. Look, I think more important even than ARPU is lifetime value growth, and that's where churn kicks in. But there's no doubt. I have conviction that there is pricing upside. I went through some of the reasons earlier. And we haven't made final decisions yet, partly given how goal poles are moving in the industry right now, we'll go as close as possible to the actual product launch. But again, from a content perspective, this is the top product in the market.

Yes. So let's talk a little more about advertising. You guys have been in the market now with an ad-supported tier. Prior management team launched that. I think David made a comment on the last earnings call that maybe there have been fewer of the HBO Max customers taking that service than he guessed is expected. There's a lot of focus on this part of streaming right now. What do you need to do to really succeed in ad-supported streaming, both from a consumer adoption point of view and also an advertiser point of view?

Well, generally speaking, you could argue we should almost be indifferent whether people want to go for a premium price ad-free subscription or for a slightly discounted ad-lite subscription that allows us to make up the delta. Right now, it's actually a little more than the delta that we're making up in advertising. Again, to the point made earlier, I think getting the scale up, I think the mix between ad-free and ad-lite is going to be different in a combined Discovery and HBO product. Obviously, HBO is still very much this very premium top end of the market positioning and there's a lot of people who just want that in an ad-free way. But again, the core conviction here is, we have great content. We have great content of different qualities or different recency. And we'll make it available with an approach to cater to the different willingness to pay for certain segments. So there's going to be a premium priced, ad-free, discounted ad-lite. And then as we've been saying, we're also looking at a FAST kind of model to make sure that we have something for everyone. We have a huge library. And there should always be a default monetization for someone who isn't going to be willing to pay, but it's going to be willing to pay us with his attention and the ability to advertise them out.

So last question, direct to consumer. So you guys have a 150 million subscriber goal or target for 2025. I know the priority is the P&L, which I know you're about to say.

Correct.

But that is a public number. I just wanted to hear from you, how you think about the international opportunity in streaming and HBO Max in particular, because in the U.S., it's a big business already. It's a well-established brand, but the global situation is a little bit more nuanced than imagined around the world.

Yes. Look, I mean, first of all, again, the guidance we've given is for a D2C breakeven in the U.S. in 2024 and $1 billion in profit globally in 2025. And then we have given the additional sets of information that we estimate that, that's going to be in the ballpark of 130 million subscribers to get that -- to get there. You're 100% right. From a subscription growth perspective, the U.S. is going to play a lesser role than the international markets. And that's a combination of relaunching the product in a number of markets where we are already active with 2 separate products and launching in new markets. And some of the new markets are really going to be a little back-end loaded. We got a lot of opportunity by optimizing the markets that we're already in. And that's going to be the path here, a combination of subscription growth and pricing.

Thank you for correcting my 150 million to 130 million. I appreciate that. Let me ask you about the Studio business. So Warner Bros. is one of the -- a short list of very highly scaled studios, both in film and TV. Between the pandemic and the shift to streaming, there's been a lot of sort of evolution of those business models. But sitting here today, how do you guys maximize the value of Warner Bros. inside of Warner Discovery?

I think the most important point is building a capability to make individual decisions flexibly. I think one of the big, big benefits of what happened during the pandemic is that there is more flexibility today, that there is no stiff framework of, this is exactly how every film has to flow through the ecosystem, that we can speak with the distributors. And that we can give and take a little, offer a little more time, talk about shares, et cetera. And I think we -- again, as I said before, like no one else has the opportunity to look at the financial data coming back from all of these windows to make great decisions. That's something that we're just starting. But as David has been very clear before, we're committed to a theatrical window. We want to do more films, arguably, on the Warner Bros. TV side. We've got a larger slate next year. And we also want to take a better position regarding the leadership and quality position in that space. And got a phenomenal team in place. Was super happy when I spoke with David, and he told me about James Gunn and Peter Safran. That's going to be a real invigorating addition to the leadership team for the D2C -- sorry, for the DC franchise. So I think we've got the ingredients in place. And it's going to take a little while because these things don't happen overnight, but I think we're in a great position. The TV studio is on fire. Channing has close to 100 series working right now. And the market composition shifts a little bit, it changes, but we see a ton of demand for what Channing and her team are working on. We've got the greatest storytellers signed up. And you already mentioned HBO and the DME performance. So I feel very good about our position here. And we're going to make sure that, again, the studio has its place as one of the -- of these synergies in somewhat hedged parts of the component of the total portfolio.

This is a business at Warner Bros. TV that's typically made most of its money selling to third parties. And there was always this conversation around Time Warner and WarnerMedia about Warner Bros. TV selling to HBO. Obviously, HBO is pretty good at making content themselves. Is the ambition or the hope that the best content coming out of Warner Bros. ends up on HBO or HBO Max globally? Or is that maybe too simplistic of a way to think about it?

No, I don't think it's simplistic. I mean, in an ideal world, yes, we would love for Casey and the team to get their hands on the greatest hits that anyone comes up with. The reality is, it's a little bit of a random element in there. And again, we're super happy about the success of Ted Lasso and Apple. It's great to have a buyer who is super happy and goes from season to season. It speaks to the creative capability of the Warner Bros. TV team. And Casey has been able to find very, very compelling content, both from within and from the outside.

Yes. If you look back at the historical business at Warner Bros. TV, it was a very broadcast network driven. I got to think now the streamers must really drive most of the -- or the majority of that sort of first window of production. Any concerns that you guys have about Apple, Amazon, Netflix becoming so vertically integrated that they all of a sudden become -- it becomes more of a buyer's market than a seller's market? Or is it just too hard to corner the market on content?

So look, I think you're right about the mix if -- there's no question about it. And again, I think what you're describing is a question that's been asked over and over again over decades. Well, what if someone comes in, it just has tons of money and takes away all the company and the reality is, it does take a lot more than money. Money doesn't score goals. And again, the market position that we have with Warner Bros. TV is a very, very strong one with great talent and relationships. David, just on our earnings call, went through a long list of just the most important names that we had just very recently renewed on the creative side, and that's something that's very difficult to replicate.

Sure. Yes. Okay. And then on theatrical, what is the right sort of size of slate for you guys? That's moved around a lot over the years. David sounds quite excited about getting back into a substantial level of scale in the theatrical business. What are you guys thinking about in terms of theatrical?

It's a little early to come up with a specific number. What I can say is, we want to do more. There's no question about that. And again, to some extent, this is going to be driven by what's available in terms of creative output. But to David's point, we believe there's an opportunity in the theatrical window. Again, sort of at the risk of repeating ourselves here, this idea of direct to streaming for sort of normal size or large budget films, not a great approach. But I think there's a lot of room in the theatrical space. There is demand for more volume at the right quality, and we want to take part in that. And again, if anything, the releases since some closing our transaction with Elvis, Don't Worry Darling, Black Adam, if anything, that gives me more confidence in the value, in this new sort of post-COVID ecosystem with flexibility. And again, we just launched Don't Worry Darling on the HBO Max platform, and we're seeing a great pickup. And there's undoubtedly an impact of the promotional effect of the theatrical opening through the downstream part of the value chain, not surprisingly.

Yes. Yes. Great. And lastly, I just wanted to come back to your comment about DC, the DC Universe. David was talking a couple of days ago about just looking at the trajectory Marvel has been on over the past decade and sort of what you can do with DC Comics, Batman, Superman. There's been a little bit of news on the Superman front, bringing back some talent from the last one was what? 10, 13 years ago, something like that. When will we all get a sense of what the plans are around sort of this -- I don't know if it's a DC relaunch, but however you would describe it?

Yes. I think we got to give Peter and James a little bit of time, and this goes back to what I said earlier. The lead times for some of those decisions are obviously -- or the impact of some of those decisions are obviously a little bit longer. But hopefully, they're going to put their brand on some of the films that are in the pipeline for next year. And I want to give them the time that they need to formulate a broader, more detailed strategy. They certainly have a great vision, and it's exciting to just hear them talk about the DC brand and individual characters and the connection between their own lives and DC. So that's certainly energizing. But stay tuned, I guess. They just started. Got to give them couple of months to hammer out a strategy.

Great. Okay. Well, let's shift to the basic networks business. We've got about 8 minutes left. And now we should talk about the business that generates most of the free cash flow for the company. So there's no mystery around the situation around linear networks in the United States. Obviously, a lot of macro and kind of secular pressures. But as a management team, how do you maximize the potential, say, on a 3- to 5-year view for that business? In particular, what is the strategy on sort of TNT and TBS, which are massive businesses today? David, obviously, is getting his hands an opportunity to sort of rethink those.

Yes. Look, I mean, forget about the current sort of macro backdrop for a second. But the -- there's no doubt. The linear networks are delivering the vast majority of our free cash flow. And I have no doubt that they will continue doing that for a very, very long time. It's clearly a business with secular challenges on the top line and some of the underlying drivers. But what gives me a lot of confidence is that the team that we have in place has done this before, has outperformed in a major way in a difficult secular environment. If you just go back and look at the data between 2018 and 2021, following the closing of the Scripps and Discovery combination, you'll see that around the globe in most of the key markets, we have again and again and again quarter-by-quarter, outperformed in terms of share gains in the viewership space and then the monetization of those share gains in the advertising space and similarly, on the affiliate and distribution side. And I think that was not a coincidence, but it's just so much easier and more effective to manage a combined portfolio program. The combined portfolio sell a combined portfolio. And it's coupled with the fact that specifically on the Discovery side, we're also coming out of a world in which we have under-monetized some of our assets. We've been able to raise prices in a major way again and again and again because we're still, at this point, despite having made significant steps, our premier advertising product get a lot more volume this year and the year before. And we've been able to raise prices, but we're still relatively under-monetized from the perspective of what we're bringing to the table. If you think about it this way, in the U.S., we're delivering 1/3 of cable viewership in many nights, a lot more than that across all of the key genres, news, sports, scripted, unscripted with very, very strong producer relationships in all of these genres. Internationally, it's a little more diversified depending on the market that you're looking at, but with strong positions in pay and in free-to-air in addition to our D2C footprint. So I feel very, very good about our ability to outperform in this market. And I have no doubt that we'll enjoy these cash flows very, very long time to come. And it's also reflected in the synergy work that we're just doing. There's a lot of opportunities, a lot of -- we have over 1,000 initiatives, and a lot of them are tied to optimizing the linear footprint. We've got a great team.

You mentioned sort of leveraging scale and audience to drive advertising. You also commented, bringing things back to more the short term on your earnings call about the current scatter market is pretty tough. And David made it sound like it was really tough, a couple of days ago. I just wanted to ask you since he commented on it a few days ago, could update us on sort of the state of the TV ad market?

Yes. Look, I mean, David was referring to the visibility. Week-to-week visibility right now in the U.S. scatter market is really weak. I want to be clear. Our view on the market hasn't changed since we reported earnings. If you take a step back here, we guided for the third quarter high single digits to low double-digit declines, and we came in on the bottom end of that. So there was a little bit of an intra-quarter deterioration. And we've seen that same level of market quality into the fourth quarter. Now there's a number of things that are coming together, starting with the U.S. for a second here. Sports, predominantly the NFL, certainly, in a weaker market has sort of probably attracted a disproportionate share in the third quarter. Political advertising is something that as well sort of benefit certain players with local ad out that's more than others. So there's a number of overlays there. But bottom line is, the market is a little -- is soft right now. And internationally, it's a little different, better on balance but with a wider range. We have markets like the U.K. that are very difficult right now. But markets like Poland, Italy, where we're actually doing quite well. And again, I just -- I don't want to take a position here. I do think it's cyclical, but one of the reasons why we gave a little more cautious outlook for 2023 is that I don't want to be sitting here telling you $12 billion is in the bank regardless of what the environment is. But I do feel that we've all seen this time and time again. We're doing what we can. We're taking a closer look at our cost structure. We're laser-focused on delivering our synergies. I talked about the $2 billion sequential delivery for next year. And hopefully, we'll see the same outcome as 2009, 2010 or at other tough, softer markets before where we're setting the company up with a sustainable cost footprint and get a lot of operational gearing when the market comes back. So it is what it is. I don't lose too much sleep over it.

Okay. So punchline is it's -- things are relatively similar to what they were 2 or 3 weeks ago when you guys reported an advertising point of view. Okay. And then the last question I had on the network front is about sports. The NBA is the one, people are quite focused on. Imagine it's probably still a little early in terms of starting those negotiations. You got a couple of years left. David commented again that a new deal with the NBA, obviously, would only happen if it makes sense for Warner Discovery, but also that the deal will be different, that there will be maybe more digital extensions. Just talk a little bit high level about what Warner Discovery brings to a partner like the NBA that may allow a partnership to continue in a cord-cutting streaming world?

Yes. Well, let's maybe start a little more broadly here. Sports is a super important genre for Warner Bros. Discovery. And we have strong positions here in the U.S. and Latin America and Europe. So it's here to stay. I think we're also -- we're happy with the performance, specifically on the NBA. It's a great right. But what David was referring to is, I think, 2 things. One is, we'll always make -- whether it's sports or any other content investments, we'll always make decisions on the basis of the best available information and with the best interest of our shareholders in mind. That's how we're going to be approaching deals. We're not going to go after trophy assets or pay ridiculous prices just because we want to have something. So I think that's what he said. And specifically, here for the NBA, I think we're really bringing something to the table. We have Bleacher Report, House of Highlights inside the NBA. We're doing very well on TNT relative to ESPN on viewership. We've got a global footprint. We've got a digital partnership with the NBA. We could potentially do more, leveraging close to and hopefully soon more than 100 million subscribers in the D2C space. So there should be room for some creativity. And I guess the one thing that's clear is, paying price increases for sort of a pure-play linear deal at this stage in the ecosystem, I don't think would be in the best interest of our shareholders.

Sure. Okay. Got time for maybe one last one. I wanted to step back again sort of bigger picture and ask you about sort of the strategic outlook for the industry and Warner Discovery. I think every 2 or 3 years, you and I are here talking about another merger. You're getting quite good at this. What's your long-term view on sort of industry consolidation and sort of opportunities that, that does or does not present for a company like Warner?

Look, I think there's no doubt that sort of with this trend towards direct-to-consumer, there's been a little bit of fragmentation, which from a consumer perspective is just a little annoying. I think, secondly, with the changes that we've maybe seen over the past 12 months, I would assume that in some boardrooms, the discussions around sinking another $1 billion into a stand-alone D2C platform might go differently than they have 12 months ago. So I think there's a number of great arguments for consolidation. Again, I continue to think that regulatory angle is going to play a role. And what matters to me is, 2 things for Warner Bros. Discovery. Number one, we have what we need. The whole deal started with John Stankey and David Zaslav on the phone, debating direct-to-consumer and the future of media and agreeing that together, this will be one hell of a business. And I think that hasn't changed, and we have what it takes across all key genres across the entire global footprint. We don't need anyone else. Number two is, we're head down, delivering on a $3.5 billion, hopefully, more synergy program. Everybody is working overtime right now. It's a great energy. The team is coming together. People are seeing that we're making decisions for the purpose of one company that we're seeing some of the improvements, though, very much on the cost side right now. I mean, as I guided for Q4, you're going to see a very significant SG&A reduction of around probably more than 20%. And we're going to see more come through next year. People are seeing that we're creating something very different. And there's a lot of excitement around it, and we're looking forward to seeing the inflection on the D2C revenue growth and top line overall as well.

Great. All right. We're all out of time. Gunnar, thank you so much. Thanks, everybody.