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

Okay. Good afternoon. We're going to get started. A quick disclosure statement. Please note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures all appear as a handout available in the registration area and on the Morgan Stanley public website. I'm Ben Swinburne, Morgan Stanley's Media and Entertainment analyst, and I'm really happy to welcome JB Perrette, the CEO and President of Global Streaming and Games from Warner Bros. Discovery. And JB, thanks for coming out.

Great to have you. Great to be here.

Absolutely. So we're going to talk streaming and games because that's obviously your area of focus, and there's a lot to unpack there. But I wanted to start off with some maybe a couple of higher-level questions at the Warner Bros. Discovery kind of parent level. So it's almost a 2-year anniversary of the WarnerMedia, Discovery merger. And certainly, a lot has transpired at the industry and the company level since that deal was announced, let alone closed. How would you summarize what you and the broader team have been focused on the last couple of years? And how are you feeling about the outlook from here?

Look, when we closed the deal, we said we're really going to focus on 3 key things. And I think we've been hard at work trying to drive those 3 things. At the end of the day, also, this is a -- particularly on the scripted entertainment side, this is a long-cycle business, and so it doesn't -- the ship doesn't turn in 1 quarter or 2 quarters, it takes time. But the first and foremost was a reinvigoration of being truly the home of the best storytelling. And while on the different segments of our business, HBO and on the Max side, frankly, we've never been better. We've never had more content performing better than the last 12 to 24 months in the 50-year history of HBO, which is saying a lot. On the theatrical side, I think we've had a much tougher time, but ultimately, we've had -- we have 2 sets of leadership teams now. It's relatively newly in place over the last 12 to 18 months, looking to reinvigorate both the DC Studios side of the house with James Gunn and Peter, who are ultimately hard at work trying to relaunch the DC Studios and make that a much more compelling piece of it. And we think there's a ton of opportunity there. And then on the Warner Bros. Pictures side, Pam and Mike, similarly, are hard at work. And obviously, it's good to see the early fruits of some of that, even though this is not fully their slate yet. But certainly, The Dune opening this weekend was huge. Wonka at the end of the year was fantastic. And we've got a great lineup of additional content. So that reboot on the theatrical side is well underway, along with a number of new talent deals that the team has announced over the last several months. So we feel like reinvigorating the Warner's content story is there. On the TV production side, I think that one continues to be very consistent. We are a top producer and maker of content for a lot of the platforms in the business. So that is very rich. And we're, within the Studio segment, doubling down on games as an area where we think there's a lot more growth opportunity that we can tap into with the IP that we have and some of the capabilities on the Studio side, where we're uniquely positioned as both a publisher and a developer of games. And so content, doubling down on being the best storytellers in the world, is one operating more as one WBD team, which sounds maybe like a sort of soft. But the reality is this is a company that historically has operated in a very siloed fashion. And so that doesn't make for best decision-making, adding much more analytical rigor to the decision-making process and taking it out of kind of the emotional whose turf. And David and Gunnar and the whole team have done an incredible job of driving down a culture of what's in the best interest of the WBD company and the shareholder as the new kind of mantra for the entire team and organization. And you see that in things like marketing and cross-promotion. Historically, in the Warner world, teams didn't go after supporting, bringing all the assets we have across our Turner portfolio, our linear networks portfolio to support theatrical launches or game launches or Max launches. And now all of a sudden, everyone is rallying around that to drive that. And then the third is obviously on monetization. And we are -- on the distribution and monetization of content, we are driving as fast as we can. We'll talk more about streaming, obviously, is a big part of that growth, but we're also making more disciplined and smarter trade-off decisions around windowing of content and exploitation of content and not putting all our eggs in one basket, like was the previous mantra of putting everything only on streaming. We continue to believe in the theatrical window. We continue to believe in, obviously, Max and the importance of Max as a streaming platform for the future, but also in our Networks business. In our Networks, while that business is certainly under secular pressure, it's still a very, very healthy business that we think there's still a long runway for.

That's a great overview, JB. So anything you'd want to add as we think about 2024? You obviously spent the last couple of years taking a lot of cost out of the business, knocking down silos. Anything in this year that you particularly focused on in terms of priorities?

Well, I think the cost narrative has obviously been very important because we obviously did bring -- take on a lot of debt to make the combination happen, and we had to deliver on this. But I think the cost narrative has sort of been taken over as sort of that's purely what we've been doing. And the reality is that is a false narrative. What we've been doing is ultimately restructuring the business in a way that it needed to be done. Some of the examples of the siloed approach by the nature of two companies coming together with one level of synergies that we drove. Within each of the companies and certainly within the Warner House, there was a much more siloed approach to this that needed to be broken down. And where you had duplication or triplication of activities, we're coming together and doing it smarter. So we spent a lot of the first 2 years just preparing ourselves to make smarter, more efficient and, frankly, more effective decision-making with better analytical and quantitative rigor. I think that's a lot of what's happened. And yes, as we've done that, the question is, okay, how do we get some more growth in the system? And the reality is certainly speaking to streaming as a key part of that growth. We laid out a plan in the August of '22 on our first earnings call as a combined company, a complete quarter as a combined company for the second quarter of '22, and we said on that call we're launching this sort of multiyear journey to drive Max and become one of the top streamers in the world, but it would take a couple of years. And at the time, if you remember, and obviously, in '22, we lost almost $2 billion in streaming. And we said we are moving from a world of subs at all costs, which is kind of the narrative that existed in the old media landscape, to a one of profitable growth as our key North Star. We delivered a $2 billion turnaround in '23. So the profitable part was core and the first part of getting it right. We had to launch and design a new tech product with the launch of Max, which took us some time, which we did in the U.S. last May. We finally started globalizing the product a week ago when we launched in Latin America successfully, and we're launching in Europe. But the growth piece of it -- so the profitable growth piece of it, the growth piece of it is now right in front of us. And as we think of the other key component we laid out that August, which was trying to get to $1 billion of EBITDA from the $2 billion loss in '22 to $1 billion of EBITDA in '25, we're confident that we're on a -- we're actually ahead of the plan on the profitability and that the growth is going to come here over the next year or 2 years as we launch in more markets with a better product with, frankly, the best content lineup we've ever had, and launching new SKUs and new product experiences like an ad-supported SKU in more markets internationally. So our penetration will continue to grow. So we're at the precipice, we think, of that delivering on that growth promise. And we think you people are going to start seeing the building blocks of that pan out over the next few quarters.

Great. I want to get into all of those comments on the streaming side in a minute. David, I think, consistently on the earnings calls talk about -- talks about putting the company on a path to sustainable overall free cash flow growth. And I just want to ask you, is that what we should all be expecting or at least what success looks like at the end of the day for this company as we look out over the next couple of years? Because obviously, the stock is not reflecting a lot of that, I'd argue.

Look, I think you've seen our discipline on the cash flow and the importance we put on that metric for 2 reasons. One is, obviously, we've done, I think, an incredible job in the first 18 months paying down the debt that we did take on to the other transaction, now under $40 billion of debt, under 4x levered. So yes, that continues to be, certainly, an important priority for us, is continuing to delever. And I think Gunnar and David have said that is, from a capital allocation standpoint, continues to be our #1 priority. But secondarily, we also understand that more cash we can generate, the more optionality we have to sort of figure out whether there's other things organically we need to invest in and continue to figure out ways to grow the business. And we think there's -- for all the efficiencies that we've driven, we continue to see more benefits to drive materially healthier both cash and cash conversion that Gunnar has talked about. And so both of those metrics, we continue to think, will be very healthy as we go into '24 and beyond.

Okay. So probably nothing matters more to your stock than success in streaming. So let's talk about streaming, which is part of your team and your leadership. What's the opportunity for Warner Bros. Discovery in the stream business? And I ask that, because I look at the scale you have already, you have almost 100 million subscribers. It's a $10 billion business. And yet, I think the market is still concerned that there's not a lot of profit potential there. So how do you -- how would you tell us how you think about sizing up the opportunity for you?

Look, I think a lot of it is -- it's not one thing. So we have -- and again, we're just about on the cusp of the 6 or 7, what I call, kind of growth vectors to drive that growth and the profitability that will come with it will largely come from a lot of more revenue potential that we see over the course of the next couple of years, but number one is the globalization. Today, Max is -- as of a week ago, it was in 1 market, which is the U.S. only. We launched in 39 markets last week across LatAm. But we are in less than 50% of the addressable markets that our bigger peers are in. So we have over half the world still to go. And that includes major markets like 4 out of the 5 big European markets, all of Asia. And so globalization is probably the biggest single vector. And remembering today that our business is, from a revenue perspective, 80% still U.S., 20% outside the U.S. If you look at the leaders in the space, that's completely inverted, right? They are 40%, 30% U.S. and 60% outside the U.S. So that international growth is going to be a big part of it. The second is just the content lineup. Unfortunately, we launched Max in the U.S. And in the 8 months following, for a variety of reasons, some that we knew about, some that are related to the strike, we went into the -- probably the lightest content slate we've ever had. We came out of the end of 2 output -- pay output deals for our film titles with Universal and FOX down to 1. We then signed a deal with A24 to come back to 2 that kicked off this quarter. So in the back half of last year, our pay-1 movies were significantly less volume. Our -- one of those slate, other than Barbie, which was obviously a huge hit but was lighter and not as strong as we had hoped, but we feel a lot better about it going into '24 and beyond. And then our original slate, partly because of the strike, we pushed out some titles that were supposed to be in the fourth quarter because we couldn't get the talent to help promote it. So they started more like True Detective in the first quarter. We had a much lighter slate in the second half of the year than we ever expected. And now when we look at the next 12, 18, 24 months, and we have all of our 4 biggest HBO tentpoles last -- House of the Dragon Season 2 coming in June. Next year, we'll have Last of Us Season 2; Euphoria Season 3; White Lotus Season 3, as well as the strategy that Casey Bloys, my sort of partner on the content side, implemented, where he started going after bigger Warner Bros. IP in terms of originals. So less of the Winning Times or the JULIAs and more of a Penguin series, which will come this fall on Max out of the DC Universe; a Dune series based on the, obviously, incredible success of the movies coming; It, the Stephen King series; The Conjuring. So we have a lot more, kind of what we call it, 4 quadrant appealing to everybody, big, known IP coming. So content is another vector. Product experience continues to get better. We've made a lot of improvements from where HBO Max was to where we are today. The App Store ratings of the product have gone up significantly. But we went from challenged to good, and we still have a ways to go to get to great. But we have a road map that continuously improves the product and the surfacing and the discovery [indiscernible], which will help us with engagement and should help us reduce churn. We're launching ad-lite, the ad-sponsored tier -- ad-supported tier. We just launched -- we were previously in only the U.S. We're now in 39 markets in LatAm as of last week. We're launching in a bunch of European markets as we go into the second and third quarter. And password sharing crackdown, which, obviously, Netflix has implemented extremely successfully. We're going to be doing that starting later this year and into '25, which is another growth opportunity for us. And so if you look across all those different vectors, we're not betting on just one thing. We have about 6 or 7 different things that we think will help drive both acquisition as well as continue to move on churn and churn reduction, which is obviously continues to be a priority for us, particularly in a highly penetrated market like the U.S.

Any way to size that password-sharing opportunity? Since you brought it up, I have to ask.

No. I mean, all I'd say at this stage of the game is, look, I'm conscious of not overselling it because you see Netflix' success, but Netflix was in market for 17 years. That means people are sharing passwords for 17 years. We've been in market for 4 if you count the HBO Max launch. And obviously, we're not quite at the same scale. But we think there's -- relative to the scale of our business, it's a meaningful opportunity.

Great. I often get asked about the long-term margin potential of all these streaming businesses but including yours. And I think yours is one of the most interesting to try to think through because we can look back not that far long ago to a HBO segment at this company that generated $2 billion of EBITDA, actually on less revenue than you generate today back in 2019. I know that a lot's changed since then, but when you think about the opportunity set for the business, are those relevant facts to think about as we try to assess the opportunity for you guys?

I mean, look, if you stuck to what that business would look like today, if we just stayed with it, let's just say...

It wouldn't be $2 billion?

It wouldn't look anything like that. So there's no question this is the right pivot. And by the way, I mean, there was an article written yesterday saying it was $2 billion, and we were in 54 million households. Just to be clear, HBO, by itself, was never anywhere close to that. I think they peaked around mid-30s. And so it is -- we have surely the ambition to get back to that. And when we think in 12 months, we went from, you're right, an extreme of having dropped almost $5 billion between that profitability profile and where we were in '22, $5 billion, which is crazy. We feel like the fact that we, in 12 months, have cut that in half is fantastic. And as I said, ahead of where we thought we would be when we made the predictions of what we -- our targets were back in the summer of '22. And over time, we remain very bullish. I think Gunnar has said, we believe that the segment profitability over the medium term can be in the sort of 20%. And so if you imagine, we're a $10 billion today. If you imagine, it will be higher than that over the next couple of years. You can see a path, this leads to the $2 billion and north of that over time. Longer term, look, I continue to be very bullish on -- as the industry continues to rationalize, fewer players, a more rational content spending, more rational pricing and fewer players doing, what I'd call, irrational deals, both on the retail and the wholesale side, that the profile of this business can be extremely healthy and, over time, even north of the 20% range.

You still see subscriber growth potential domestically? Obviously, internationally with the new markets. But in the U.S., do you still think you can grow subscribers?

Yes. I mean the thing to remember about the U.S., which some people looked at again, have looked at externally and said, oh, they used to be -- we hit a reported peak of about 55 million subs in the U.S. And we reported for the fourth quarter, we were at 52 million, and people say, "Oh, well, they've lost subscribers." Well, just again, to be very clear, back in this August '22, we said we're going to put these products together. There's 4 million subs that are overlapping between the 2 products.

Discovery -- now we're talking Discovery?

discovery+ and HBO Max at the time. Majority of those in the U.S. We're going to lose probably a majority of those subscribers that are overlapping. And number two, which is less of an issue today than it was a year ago and will be less of an issue, but it's still an issue is, obviously, the legacy HBO business still has a legacy wholesale, linear wholesale business, which has been similar to the pay-TV ecosystem, losing subscribers. Luckily, that's been abating, but that is a bit of a headwind that we face. And so we think our penetration of 52 million subs still puts us in the very top tier of services out there. We're not surprised that we lost some subscribers in the U.S. because of the reasons we just described and that we outlined 18 months ago. And we ultimately feel that, yes, there is potentially some opportunities for further penetration growth. It won't be overnight, and it won't be -- we're not going to add 10 million subs in a heartbeat. But we are looking at different opportunities, particularly our ad-supported SKU, we think, is underpenetrated in the market. So we're going to lean in there. We've been leaning in there with partnerships like the Verizon bundle that's pushing Max plus Netflix together, which is an ad-supported offering. We're in conversations with others about trying to do a similar type of offering, pushing the ad-supported SKUs. So we think there's more opportunity, particularly in that lower-priced SKU to drive penetration. And ultimately, as the mix continues to change of wholesale to retail, there's an ARPU benefit, an arbitrage that is happening as we may lose some further wholesale subs. But we are gaining and making up some of that mix on the retail side at higher ARPUs with higher and more control of those subscribers and pricing of those subscribers over time.

Makes sense. What role does Sports play on Max? That's been a product that you've layered in pretty nicely over the last couple of quarters.

Well, I heard Lachlan gave out the whole business plan.

Let's not go to the JV yet. I'm talking about on Max.

On Max, look, we launched Sports on Max -- our Sports on Max back in the fall. And what we found is a couple of things. A is, every month, obviously, it's a new proposition and new -- not only to the Max subscribers but somewhat new in the sports streaming. I mean, obviously, other -- some of the other players do, do it, but it was new certainly to ourselves. And we've built the awareness -- and the awareness for Sports on Max is growing month to month to month, but it's still relatively low. We still have sort of around 20% of the base that's aware. And so we still have a lot of headroom on building awareness for Sports on Max, number one. Number two is, not surprising, which kind of gave birth to our thinking around this venture is it's great to have our Sports on Max, and it's super-serving a fan base that is every month spending also more time with sports. But if you're a real sports fan, you want more. And the U.S. landscape is really unlike any other country in the world. Everywhere else in the world, generally, it's not as fragmented and not as splintered as it is here in the U.S. And so it is one where aggregation is super powerful and can provide meaningfully, I think, more opportunity for us and the partners, as we think about it, and that really gave birth to our sports venture conversation. But we found it to be, so far, very successful building awareness and growing month-to-month, and we're about to launch, arguably, our biggest content in that sector with March Madness coming to Max later in this month. And obviously, the NBA Playoffs coming later in the spring. And so our lineup gets stronger as we get through the next few months. And then, over time, as we finalize the venture and the structure of the venture, we'll figure out what exactly we do with our sports offering on Max in relation to the sports offering on the venture.

Okay. David mentioned on the earnings call that you're having constructive conversations with the NBA. I'm just curious if there's a plan to have the NBA distributed more broadly on Max or play a bigger role on Max long term?

Look, I defer. I don't have really much more to add than what David said. It's obviously been a -- probably the longest-standing partnership in sports and any sports in the U.S., and arguably in many other countries. So we have a great relationship with them, and those conversations continue to be very constructive. So -- but I think what we do with our Sports on Max is sort of somewhat separate from what happens to the rights and the renewal conversations. So it's related, but they're still -- they're not directly related.

Okay. Got it. Let's go back to your 6 to 7. I'm impressed you can remember 6 to 7 vectors. That's better than I can do. You mentioned global. So let's talk about international. I thought it's interesting that you guys are launching Max in many markets this year. A lot of your competitors are either sort of status quo or actually pulling back from international. So can you talk about Latin America, which you just launched, your plans in Europe? Why does it make sense for Warner Bros. to push Max globally when, for a lot of companies, it's been hard to scale internationally?

Yes. So, a, I think we definitely will continue to keep a rational disciplined approach to it. We did say -- I don't want to sound like a broken record, but in August of '22, we said we will launch in markets where we believe, over the course of 3 to 5 years from launch, that we can actually be a top 3 streaming service and profitable. And if we don't have high conviction we can get there, we'll license, and we'll continue to license. So 2 extremes that I'd say we look at, a market like India, where we've extended a long-term partnership in that market with Reliance and with now the combined bigger company soon. And in that market -- we love the India. We love the dynamics of that market, but we couldn't, as we looked at it, find a way to think that we could actually -- given the amount of money that's being spent on local content, particularly, that we couldn't reliably launch in a way that we think we could meet those criteria. And so we've continued to extend multiyear license deals and just take the economics out of the market and put that to use elsewhere. If you think about other markets, like 2 big Anglo markets, U.K. and Australia, our content travels extremely well. We know how well our content does on both existing legacy platforms, and it drives a significant amount of the viewership. So the demand is there. And there's unquestionably an easy access because, ultimately, we don't have a huge amount of local originals we have to invest in. There's not a lot of other costs. And so those are markets where we are very confident. We have high confidence we can actually meet the criteria of being successful in a relatively short period of time as we launch. The other vector, by the way, that I didn't mention in those 6 to 7 is partnerships. And we have long-standing partnerships with 2 players in those markets, and this is true about a lot of other markets in the world. And we are working actively with them and with others in markets to try and figure out ways to see whether we can't expand our existing footprint. But we invent the relationship to help us launch our product but do it through a partnership with an existing player or, in some cases, a new player who will help such that the economics of that transition from licensing to streaming doesn't make it a cliff, where you ultimately have great high-margin economics from licensing, dropping off to building literally from 0, a direct-to-consumer business. But ultimately, now with a partner who can help you get immediate scale and backstop you with real economics on the revenue side, make it such that transition is a very smooth transition to getting you more scale in subs, which is part of the reason to your question about why we feel we have to launch, because this is a scale business. And at the end of the day, in markets where we think we can deliver good, healthy, meaningful scaled growth and profitably, we'd be crazy not to do it. And in some of those markets, we feel like we're leaving money on the table.

Yes. Makes sense. I believe the Latin American launch was a relaunch, right? Max was launched in Latin America by, I think, the prior owner.

HBO Max launch.

HBO Max, yes. What did you do differently, just other than drop the HBO and now it's Max? But the go to market, do you do things differently? And what should we expect?

It's really 3 things that are the most material. Yes, the brand changes, one, the content proposition. So in that market, the legacy Discovery content, all of our nonfiction content, other than in Brazil, had never been on a streaming service. So unlike the U.S., where, obviously, discovery+ was in the market and HBO Max were, in every market in LatAm outside of Brazil, Discovery's streaming content -- Discovery's content had never been in streaming at all. So the proposition got way broader and way bigger. Remembering that in that market, things like Kids, which is obviously an important element. It's probably our strongest region for kids, where, between Cartoon, Cartoonito and Discovery Kids, both of which were leading pay-TV services. We now have a leading kids proposition across those 2 as well as all the lifestyle, factual, reality show, content that comes with it. So the content proposition got much broader. And then the third thing we've done is reinvigorate the partnership's conversations. And so what you'll see over the next several months is a lot more bundles with all ranges of existing customers, new mobile and broadband partnerships, as well as new distribution partnerships with the likes of nontraditional distributors in those markets. I think those are the 3 main drivers. Remembering that the wholesale partnerships in a region like LatAm, where credit card penetration and billing is a major challenge, are -- it's super helpful to have those partnerships. Last thing, just to give you a real example of something that makes us really optimistic, which touch more about the product enhancements, which I'd say is probably the fourth thing. I haven't gotten to 6, but at least I got 4 there. The product enhancement on Max is materially better. And one specific example is, again, because billing and payments is an issue in Latin America and other markets in the world, where people are more price-sensitive, we obviously are trying to get churn down as we go. And part of the benefits of having an annual subscription is ultimately the benefits you get of lifetime value increasing as you keep those subs on longer. But it's a problem in LatAm when you ask people to pay $80 in one go or $100 in one go for an annual subscription. And so we previously had no installment payment capability. As we've launched Max now, we moved to installment billing. And sure enough, we've seen a material -- just in the last 7 days since we launched, a material improvement in the percentage of people taking annual subscriptions, thanks to the installment payment plan. That's just one example of a product enhancement that's been really beneficial.

Great. I want to make sure we get to games. So last question on streaming, which is on advertising. So that business, I think, grew 50%, I believe, year-on-year last quarter. What are you guys doing from a -- just a tech, impression, sell-out, all the sort of nuts and bolts to make the ad business grow in that business? And how do you size sort of the opportunity for advertising?

It's -- you think you're going to think I only have numbers in my head, but that's all -- we have 3 or 4 different levers there that we're going after, which is, number one, penetration. Obviously, we need more scale. We think we're subscale here. Part of that is the rollout internationally of more -- in more markets. So the scale piece of it. The second is partnerships. We're driving partnerships to try and help us scale. So that's the Verizon example. And again, in a market like the U.S., where we think, in particular, that's probably our best opportunity for growth. We're in conversations with a number of other partners like that to try and drive it. The third is just fill rate and inventory levels. We are very light in terms of our ad load. We just generally do 3 to 4 minutes of ads. We just started inserting. When we came into this business in '22, there were no ads at all on HBO content, at all. We just started implementing ads in the HBO content starting in the February of '23, so a little less than -- a little more than a year ago. And so we think that opportunity from 3 to 4 minutes, when you look at some of our peers here in the U.S. who are doing more like mid- to high single-digit number of ads, we're going to keep balanced because we don't want to obviously hurt the user experience, but we think there's opportunity there. And then lastly, on the ad format side, we've made lots of improvements from where we were, but we still have a lot of ad format enhancements, which ultimately will give us more things that we can go to marketers with shoppable ads, other elements of the ad format side of the house that we can improve, which should give us more opportunities for growth as well.

Great. Okay. So you are on global streaming in games. Saved 5 minutes for games, so I feel bad for the games group. But you're the only media company that has a scaled game publishing business. You don't disclose it within your Studio segment, but it's there, and it's significant. Can you talk a little bit about how you guys leverage that business in terms of growing the company? And if you're able to give us any sense of scale for that business, would be helpful.

Yes. I mean we -- look, we think it's a meaningful differentiator for us. We see the world, and whether it be VR devices, the Vision Pro, the virtual world, look, who knows exactly how it evolves. But certainly, those types of platforms are only going to increase in scale and adoption. And having 11 owned studios, where we're not obviously just a publisher of games, but we're actually a developer of games, we think it's a differentiated asset for us. Today, the majority of our business revolves around 4 main forms of IP and games, which are all billion-dollar-plus businesses themselves, which is Mortal Kombat, Game of Thrones, Harry Potter, with obviously our success of Hogwarts Legacy last year as the best-selling game in the world last year and the DC world. And DC, obviously, has subsegments underneath there, but Batman being one of the biggest. So those are our 4 that make up the majority of our business. The challenge we've had is our business, historically, there has been very AAA console-based. And so as you know, that's a great business. When you have a hit like Harry Potter, it makes the year look amazing. And then when you don't have a release or, unfortunately, we also have disappointments as we just released Suicide Squad this quarter, which was not as strong, it just makes it very volatile. We think the opportunity for us, which is, again, this is a multiyear because it's games. It's certainly a bit of a long-cycle business, too. But the opportunity is to take those 4 franchises and be able to develop a much more holistic approach, particularly around expanding into the mobile and multi-platform free-to-play space, which could give us a much better and more consistent set of revenue. And you'll see us launching later this year, some mobile free-to-play games, which we hope will start building that. And then secondarily, live services. So rather than just launching kind of one-and-done console game, how do we develop a game around, for example, Hogwarts Legacy or Harry Potter that is a live service, where people can continue to live and work and build and play in that world on an ongoing basis. And so we think we've got the franchises. We've got some of the greatest studio capabilities. And we have a road map and a strategic investment plan to try and build out that business, and we think there is meaningful growth over the course of the next couple of years.

Is there evidence in your mind or strong evidence that, that sort of franchise piece of this really reinforces the key IP that you have? In other words, having a Harry Potter game and having Harry Potter films and owning your own studio that all that together makes the business more valuable?

We do. We do because it's ultimately about trying to keep franchises, and we literally just hired someone to come in and help us. Sort of overall, WBD helped us think about franchise management in a new, bigger, more consistent way. But absolutely, it's not just the expanding the longevity in the life cycle, so that you're not going from a movie release of a Batman title 1 year and then sort of it goes dormant for 3 or 4 years. If we can execute on this strategy, it also allows that franchise to live on day-to-day, week-to-week on a much more consistent basis. So you're nurturing that fan base. And by the way, what you can do with that fan base then both in terms of experiential, TV, movies, et cetera, you can monetize in new and different ways. But ultimately, we're also bringing those franchises to younger generations. As you see, obviously, the demographic of the gamer population generally skewing younger than some of the other media forms. It helps bring on a whole new generation at the same time. So both of those have enormous value to us.

Got it. All right. Last 2 questions as we wrap up here. You have a $1 billion target for OIBDA at D2C next year, '25. Maybe you can talk a little bit about your confidence in delivering that and also your confidence in the streaming and gaming business driving overall growth for the company over the longer term.

Yes. Look, we never expected to hit profitability this fast. So I'd say, generally, on the trajectory, we feel very good about it. And for all the reasons we talked about earlier in terms of where we see revenue opportunity, it's not a sort of squint and you will see it. It's like a -- it's coming, and we have it. And so I think we feel very good about that on the profitability side and the $1 billion. What was the other one?

Was just going to ask you about just longer-term growth and the Games and Streaming business driving EBITDA and free cash flow for the [ overall ] company.

Well, I think, I guess, on the streaming side, I'd say this as well is, there's a lot of punditry, particularly in the last 10 days out there trying to look at the state of the industry and interpret it as though it's the bottom of the ninth inning. We fundamentally disagree. We look at this as we're in the top or the second. And certainly, on the WBD side, for all the reasons we just talked through, we have a number of different vectors that are not theories, but our practice and that we're executing on that will help us deliver that growth. And so we're very optimistic about what can happen. And the longer-term potentials of the margins in that business, we think, are exciting. And games -- look, games is still more in its earlier stage of the development cycle, and it does take a few more years. So that one is less of a -- you'll see all the building blocks in '24, '25, '26, like you will on streaming. But we think we're doing the right things now to lay the foundation for more of a '25, '26, '27 kind of time frame of more growth from the game side.

Right. Well, it's a good thing equity analysts aren't pundits. Otherwise, I think you'd be accusing me of some punditry. Thank you, JB.

Thanks, Ben.

Thanks, everybody.

Thanks, everybody.