Warner Music Group Corp. (WMG) Earnings Call Transcript & Summary

Hello, everyone. I'm Ben Black. I co-lead the Internet research franchise here at Deutsche Bank. And this morning, we're really excited to welcome Warner Music to our MIT conference. And today, we have Eric Levin, the CFO. So Eric, thank you.

It's great to be here.

All right. So let's start at a very high level here. 2022, a bit of a challenging year. You had a DSP reset, currency, macro uncertainty as well then layer on a CEO transition from Steve to Robert. So with that sort of behind us at this point and you look forward to 2023 and 2024, what are some of the things that get you more excited about sort of the opportunity set for Warner?

Yes. So we're excited about a really broad range of things. I think it's really important to start with Robert Kyncl, our new CEO. So we have -- we believe and we feel a good strategy, a really good team and adding Robert and his perspective from Google YouTube, which he really advanced, understood the value of music as he built a series of music products, whether it's the ad supported product or a subscription product or a shorts product or content ID to be able to track and pay for music properly. So he really understands the music ecosystem, and he understands the importance of technology and driving it forward. So we're thrilled to have Robert on board, looking at what we're doing, bringing some of his Google YouTube colleagues on board to help bring their skill set, really be additive and take us to the next level. So we're excited about the new leadership and what it's bringing to the table. It's just early days, but there's a really huge opportunity there. And we're still in a business that has really strong growth potential. So whether we're looking at subscription, where developed markets continue to grow. Emerging markets have accelerated their growth. We're seeing pricing now from price increases, which we haven't seen for the prior decade, and that's a huge addition to the equation and we believe this should be a recurring cadence, not a onetime thing. Ad-supported has been disrupted, given the macro economy, but -- and we don't have tremendous visibility into this. But what we've seen before is when economies restabilize, that ad-supported streaming comes roaring back very quickly. And emerging streaming platforms, social platforms and other new ways to consume music are growing and growing very nicely. So we see a really broad array of growth. And I should always say our geographic expansion and commitment to artists and music continues to fuel that. So we see a really kind of exciting dynamic of growth in front of us.

So a lot, certainly a lot to unpack there. So let's perhaps start with recorded music. One thing that investors have been slightly concerned about, and [ perhaps ] this is slightly short-term warranted, but you had share losses recently. And you mentioned that was due to the software release slate. I guess a 2-part question here. I think you mentioned a strong back half release slate. What gives you the confidence that you will recapture lost share? And have you seen sort of similar share gyrations historically?

We've seen it just in the last 2 quarters. And the first thing that we say and have said for a long time is we're a challenging business to overread any one quarter, for exactly this reason. So what I'd like to start with is, there's an underpinning strategy that has been working for years and continues to work. The strategy starts with continuing to expand our reach around the world. Launching operations in more markets. We're in 70-plus markets around the world now, putting out more domestic local language music in each market. As streaming rolls out, more and more domestic music is becoming more and more popular. We continue to focus on expanding our reach with our distributors. We have now hundreds of distributors where a few years ago, we had tens of distributors, and it's growing all the time. So our reach continues to grow. We continue to focus on making our business more effective and efficient using technology. But yes, on top of that, release schedule matters and will always matter. We don't have the same product every quarter and every year, it changes. And sometimes it will connect, and drive share up. And other times, it will be slightly lighter. But over a longer period of time, we've been able to sustain a solid market share, consistent market share. If you just look at our -- and I'm talking in fiscal years, our fiscal Q4, we outgrew the market by almost any measure. And then one quarter later, we had a slightly lighter release schedule, we slightly underperformed. If you look at the quarters on average, we performed roughly with the market. So it will vary within quarters, but over an extended period of time, has gone to the norm and generally, we strive to outstrip the market. In the second half, again, in fiscal year, we have a really strong release schedule. Ed Sheeran is coming out with new music, Cardi B, Aya Nakamura, who is French, and a superstar in France, and I could keep the list going that could be 10, 12. Jack Harlow, 15 artists long, but the release schedule just happens to be skewed towards the second half, but we feel very good about the names and the music that's coming out.

Right. Looking forward to those hitting but -- so looking past the sort of the shorter durations, what's a good way to frame the longer-term growth profile of recorded music streaming? Sort of the P versus Q [ equation ]?

Yes. Yes. Well, we're really pleased that we can have a P versus Q conversation and not just purely a Q conversation. That in itself is a meaningful step forward. But just focusing on price for a second. One set of price increases isn't where this should end. It should be a start of something that is recurring. We've been talking about this publicly and privately for years. Streaming has existed for 15 years, and this is really the first set of price increases across a broad array of distributors. These are Amazon, Apple. And so what we encourage is the industry to start thinking of this as something that should become normal, that they should develop the infrastructure like the video industry has, to be able to be able to connect with customers, explain the value and the continued value add, and price increases then become a normal expected part of the industry. It happens across media and beyond, and music shouldn't, in any way, be different than that. And so we're thrilled it's getting started, but this should be a recurring sequence. On the Q, on the quantity side, all you have to do is look at streaming penetration globally to smartphones. It's in the low to mid-teens. And so if you think about the potential for streaming, which we've seen research that shows upwards of 60% penetration as being where the consumer interest is in paying. So even in developed markets that are generally in the 30%, there's enormous upside in emerging markets, which have accelerating growth, and many of them are still single-digit. They're just getting started on their growth curve. And then you think about emerging, streaming, social, fitness, gaming, Web 3, those areas are just a couple of years old with new use cases and are just -- the future is wide open for growth. And then we can look at ad-supported, which had traditionally grown with subscription, roughly in line, has been disrupted for the past 3 or 4 quarters and is actually in decline. What we have seen with ad support in the past is, it is very sensitive to macroeconomic factors. When there's macroeconomic disruption or slowdown, it gets hit really quickly. But when the economy comes back, it also rebounds very quickly. So that can go from being a slowing factor to an accelerating factor in a matter of a quarter or 2. We can't predict what quarter because we're the wholesaler, not the retailer, but we've seen in the past it come back very, very quickly. So we see a series of growth vectors across both price and quantity.

Yes. Yes, a lot there, to be fair. So you mentioned pricing. I'd be curious to hear what's the optimal scenario for Warner with respect to pricing? Is it a price hike every year in developed markets or sort of price action in emerging markets? And is there anything else you're looking for from your distributors in your negotiations?

Those are -- right, a good question and kind of 2 parts that are kind of interrelated. So I'll start because Robert, our new CEO, ran a distributor, right, at YouTube. And he comes with a lot of experience and perspective, and specifically in focusing on how to build the value of YouTube and music collaboratively. And so YouTube historically had their ad platform, but they launched a subscription platform, the shorts platform, content ID. And what Robert really focuses on is having holistic relationships with our distributors that are driving value creation both for our distributors and for the music industry. If we're aligned with our distributors in maximizing the value, then the opportunity to develop the cadence of how that is becomes much more -- I don't know if the word is flexible, but strategically aligned and easier to get to. As far as price increases, we've always said that we think every distributor, we love that there's distributors competing, and we love that they have different product pricing strategies to reach their customers, and marketing approaches and bundling approaches. So some distributors could say they want to raise rates every year. Others could say they want to do a higher rate increase every 2 years. They're all reasonable strategies. We are open to our distributors having different strategies, so long as they are focusing on growing the business and the business for their music partners in a very smart, strategic way.

All right. And then I guess sort of the other side of the coin here is, what is the pushback you get from your DSP partners when you are in negotiations, particularly around pricing?

So the first thing I'd say is 98%, some very, very high percent of our interaction with our distributors are super collaborative and super positive. Obviously, when there are negotiations, every negotiation has a push-pull. Like, it is just the nature of a negotiation. So again, I think part of why Robert's focus is about a holistic relationship, that if we're aligned in growing the industry together and growing the music ecosystem together, that there will be a way to figure out some of those smaller tactical items because the bigger picture is so much more important. When it comes to pricing, again, we're a wholesaler, so we have the tools of a wholesaler. it is our job to maximize -- I shouldn't touch the microphone -- It's our job to maximize the value we create for our artists. So we're very focused on making sure that music is distributed properly across the right products, marketed effectively and priced effectively across those. So there's always a push pull, but it is our job to be supporting the value of music consistently.

Right. Not to harp on pricing, but there's one more question I have, and...

Three in a row, not to harp on you.

And it's one I get a lot from investors, and it's really about your willingness to potentially -- you're looking at the bigger picture here, potentially cede a little bit on the incremental economics near term to lock in a more holistic longer-term relationship, which is characterized by multiple pricing.

Right. So I guess I want to be careful. We've always, as a company, said we don't negotiate in public, we try not even to talk about specific distributors. However, what I can give is some kind of underpinning principles. One is our music has been central to the -- our DSPs growing enormous subscriber bases. They have done that without price increases for a decade. Nothing, and we firmly believe this, has done anything to decrease or impact the value of music. It is critical and central to their products. So we again [ grow ] firmly and aggressively support the value of music, and we see music as being an incredibly valuable component of what is driving the success of the industry, and we see pricing and price increases as something that should have been happening years ago and there already should have been -- and we're in catch-up mode, not ahead of the game. So we will continue to advocate strongly for the value of music, is I think the most I can say and hopefully, my point was made.

No, I'm clear. And recently, there has been sort of a discussion about potentially changing the distribution model. So consumption patterns have clearly changed over the last decade or so. But distribution and monetization models haven't evolved with them. So curious to -- are we at an inflection point? Is there something that's changing in the industry? Can...

So if you're talking about, which I think you are, kind of the wholesale formula or equation for how DSPs and labels and publishers share. We -- by the way, we firmly agree with that. When the music -- when streaming started 15-ish years ago, the product put in front of the consumer was very different than what's out there today. But the equation and the formula has remained largely unchanged. As that has changed, it is fair and appropriate to revisit and reevaluate the formula to see if it needs to be modernized as well. So we are -- we are supportive of that, we'll call it reevaluation process. It will take a minute. It's not something that one DSP and one music company can fix. It's got to be something that we believe has to go across DSPs and become something that becomes a new updated kind of formula or approach. So it's going to take a minute to get there. We have done some experimenting. We have a deal with SoundCloud that is user-centric as opposed to stream centric. We know that some of our competitors have started to experiment with other DSPs as well. And we think it's a very healthy dialogue within the industry, and we will see where it plays out. It will take a minute or 2 for it to play out.

Can you just double-click on the sound cloud agreement? You said it's user-centric rather than streaming-centric. How does that...

So I don't want to get -- we don't talk about individual deals too much, but I can talk about the concept of user-centric. So a user-centric -- let's just say, for example, like one of our legacy artists. We'll just take, like, Led Zeppelin. So let's say that there are a certain segment of the subscription base that listens to only Led Zeppelin. But who's going to likely listen to Led Zeppelin?. They'll probably be older, they'll probably be working. They may not have as much free time as a teenager. So as opposed to streaming 400 streams a week, they may stream 12 streams a week. But if it's 12 Led Zeppelin songs and they're paying the same $9.99 to someone else, why would those 12 songs be less valuable than the 400 song stream buying equivalent? So you would pay the entire wholesale to the label that's providing the Led Zeppelin music as opposed to being 12 out of a billion streams. And so it tries to say that each paying unit, each user should have their own wholesale equation. And if some listeners have a different volume that they listen to, but more intensity towards certain artists, those artists shouldn't be penalized. So it starts to experiment with different equations. Not the only way to do it, but it's one way that should be trialed, and I'm sure there are others, and we are open to those others. And by the way, Robert just started. So I don't think he has a conclusion what the best answer is, but we have talked to him and he is supportive of this experimentation and this debate.

Interesting, yes. And I only want to listen to 10 songs, and 99 is $9.99.

You're driving the -- 100% of the value of that subscription to that individual. But that band or artist would be theoretically undermonetized on the current equation. So this is really all about trying to create -- trying to ascribe value to where the value creation is in a better way. And I think that's going to be an open discussion and debate. It's already starting, it's already bubbling up just as you're asking, and we're doing deals and others are doing deals. We're very interested to see where this goes, and we want to be a part of -- we will be a part of that debate.

Awesome. All right. Let's shift gears to emerging platform streaming deals. And it's certainly seen as a big catalyst for you guys this year. Can you help us understand maybe the -- not necessarily pinpoint the timing exactly to the day, but how should we be thinking about sort of the cadence of new deals coming through the pipeline?

Yes. So what we can say is that we did a series of renewals in 2021. Our deals are generally 2 to 3 years in length. So over the next 2023, 2024 period, we should see a series of renewals again. I think the question that always comes up along with that is, what 4 movies new deals take.

That's my next question.

There you go. And traditionally, these deals have been fixed price, for 2 reasons. One, when platforms start at early days, we generally want to help them get up and running relatively quickly and not have prolonged negotiations. And 2 is, they generally don't have the systems or infrastructure to track and report variable deals. Variable deals require pretty significant systems when you want to track both -- and again, this is multimedia. This is often video with audio or graphics with audio or game with audio. Sometimes videos have 2, 3, 4 songs within them, sometimes a song could have 7 writers. So if it has 4 songs and 7 writers, you now have [ 28 ] And so you need pretty tailored, well thought-through systems. We encourage these emerging streaming platforms to develop these systems. Some of them have. YouTube shorts who said they have this capability, our deal with Meta, not the full deal, but the user-generated part, has this. So some of the more scaled platforms are starting to develop variable capability. We're encouraging the other. Remember, we literally have hundreds of distributors, some large, some small in this emerging category. If they don't have the systems, I don't think we're going to have much of a choice but to do another round of fixed deals. If they have developed the systems, it gives us the capability to negotiate a variable deal, which is our preference. But I think we are -- we expect it will take several cycles to get to something fully variable. And as this new cycle, we will try to make progress, but it requires the counterparty to have developed the infrastructure to support variable.

And from the counterparty's perspective, is there a preference for fixed versus variable? Or is it -- are you generally aligned in...

It's hard for me to speak for them. What I can say is that if a platform is in significant growth mode, their equation has to include where they want to deploy resources. Do they want to deploy resources to enhance their consumer-facing product to win in what I'm sure for them is also a competitive world, where they have to keep enhancing their product? Or do they want to look inwards to develop the infrastructure to work with their trading partners? Be the ideal way. I suspect that our distributors would be as aligned and we are to have deals that payout is tied to actual market performance and ideally revenue. I think everyone gets fully aligned that way. But we do understand in some cases that platforms are focused on competing and growing, and we want them to compete and grow. And some cases, especially earlier-stage companies, may not have the resources that a Google, YouTube or a Meta does. But we still have to find ways to get across that line. We're just appreciative that it might take more than one cycle.

Right, okay. TikTok is a name that we've all heard of, and it comes up in a lot of my conversations. One of the things that I want to focus on is reso, or let's call it pickup music. It appears to me at least that they have global aspirations for music distribution. And so how do you think the launch of reso, with music across all 3 major labels, is going to impact the adoption of paid music services more broadly?

So I'll take a step back and talk about -- just to reiterate what I said before about Robert's philosophy. So again, as someone that built up ADSP and took an ad-supported service and launched a subscription service, not totally dissimilar to what we're seeing here, he always comes back to a holistic view. Is this a partner whose focus is on growing their business and the music business collaboratively together? And if it is, then the rollout of their products is accretive to the industry and therefore in our best interest as well as theirs, and creates the right environment for a good, aligned negotiation. If there are things that cause a divergence there, and I'm not saying what is or isn't the case in TikTok and reso, but I'm saying philosophically, then any discussion or negotiation would have to happen in that context. In the context of, are we really fully aligned with this really? Because it's not our job to help our partners grow their business unless they're also growing the music business. If someone has a strategy that is somehow destructive of the value of the music industry, we have to be really cautious about that and negotiate with that context in mind. So it is our job to learn [ which of ] our counterparts' strategies, how they're going to incorporate and grow their business and music, hopefully alike. And then within that, figure out the right way for us to negotiate and contribute music and what the right compensation is. So it really has to take form within that broader approach.

Right. And I guess one -- the follow-on that I have is, and it's one I get from folks [ at buzz ] there's a concern that when Tiktok comes into the market as a traditional DSP partner of yours, that they'll undercut pricing, and that could disrupt this really strong story that you're talking about in terms of tremendous sort of pricing upside potential across the industry.

So again, hard to talk about one individual distributor, but again, going back to kind of our underpinnings and philosophy. One is, I'll start with, we are very pro competition. We like to put distributors into the market that are going to increase competition. Competition creates a focus and sharpens each of our distributors' focus on growing their business, signing up more subscribers, adding value to their product. All of that is really positive and sharpens the industry and helps it grow overall. But we also have to be careful about -- we don't control retail pricing for our distributors. We control wholesale pricing. So we are very thoughtful about making sure that we are -- for our business, we don't speak for our competitors, setting up our wholesale pricing so that there is a stable consistent ecosystem for our partners to compete, not necessarily for one to have an advantage over the other. We have said that our major DSPs' or major partners' deals are within a very narrow band of each other. And so that is a way to reinforce that we are certainly trying to create a level playing field from what we can do at a wholesale level.

Okay. So you control wholesale, which is clearly a key input into where pricing ultimately shakes out. All right, let's move on to sort of the ad-supported side of the business. Totally understood, we have transitory macro challenges as it stands right now. But it appears that your growth rate or the level of the clients that you're seeing right now, may be slightly more severe than your peers'. So curious what's going on there? Could it be potentially slate related?

No. And I'm really glad you asked that question because it's a misconception. We are not underperforming our peers. We report differently and so our ad-supported number is -- or our ad-supported decline is going to look differently than our competitors' because it is just different basis. And let me explain. So -- and I can give a couple of comparables, so I'll start with UMG. So UMG reports ad supported and what we call emerging streaming combined. Ad supported is in decline. Emerging streaming is still growing nicely. When you aggregate them, the aggregate number grows. I think some people are comparing UMG's number, which combines those 2, to our ad supported. For our ad supported, we separate emerging streaming and ad supported. Our ad-supported is more YouTube and YouTube-like players. So our ad supported is in decline, and our emerging streaming is growing, and when you put it together and compare it to Universal's numbers, they're almost identical. Literally like, identical. So there's really no difference between us and our peers. When you look at Spotify's ad-supported, that's not all music, right? And they have areas such as podcasting that are newer, smaller, and are probably still showing growth, they're so early in their cycle. So it creates a noncomparable comparison. When you compare us to pure ad-supported players in the market like YouTube, YouTube is declining, their increase in the rate of decline this quarter roughly matched ours. We think that what's happening to our ad-supported is 100% consistent with what's happening in the market overall. It's just that our numbers and those that people compare us to are reported on a different basis.

Right, understood. And then looking past these macro challenges, again, sort of perhaps not a P&Q question, but how should we be thinking about the steady-state growth of ad supported?

So ad supported has been -- so in the normal environment, which we haven't seen for a while, ad support and subscription streaming grew very much in lockstep. They were growing at roughly the same rate on a consistent basis. Since COVID hit, there have been a series of almost like sawtooth up and downs. When COVID hit and it's just -- ad supported is just -- in our business, a leading indicator of economic disruption in a broader way. When COVID hit, ad supported came down really quickly. When the economy stabilized -- so in 2020 ad supported came down. 2021, when the economy started to stabilize, ad supported didn't just come back. It came roaring back, onto its original curve, just down and literally grew from I think 15% one quarter coming back. Now with the kind of new set of macroeconomic challenges, we're seeing an ad-supported downturn again. I don't have a crystal ball, but I suspect when the economy starts to stabilize, that ad-supported has the potential to come roaring back again. So ad supported longer term and subscription have been growing at roughly the same rate, but ad supported is so sensitive in macroeconomic factors that it just sawtooths up and down, unfortunately. But we're looking forward to it stabilizing. The good news is we see this as a pricing, not consumption thing, meaning that the ad rates are coming down because companies are paring back their marketing budgets as they are affected by this. And when they start to feel better about their business, will start to release ad dollars again, which will bring the rate back and consumption continues to be strong.

Great. Okay. So let's move over to the publishing side of the business. Chappell really a bright spot for you guys and often overlooked, to be quite fair, I'm not sure why. But what's the source of that sort of Rouse's durability in trends, I mean...

I think there's 2 things. One is on the recorded music side, we talk about release schedule. It's not really a release schedule on the publishing side. There certainly are songwriters and composers creating songs and putting them into other artists' releases all the time. But Warner/Chappell's songwriters put music across everyone's releases, not just Warner Music Group's releases. So their songwriters' releases are very, very hedged, which means that there's much more of a, much less kind of a reschedule equivalence to sensitivity. So we see more stability on that. Two is our leadership team that we brought into Chappell about 3 years ago, Guy Moot and Carianne Marshall, have done an extraordinary job of expanding the business, expanding its reach and monetization, expanding globally more, but also really focusing on building capabilities to drive monetization. Building a new sync set of tools and team to proactively be selling into commercials, TVs, films to maximize our music's reach into the market. They have a team they call Creative Services, whose job is to evaluate and mine opportunities in our catalog. So that our catalog is not something that is being monetize passively in the market, it's being monetized really proactively, whether it's kitsching it to be rerecorded, whether it is putting it into new products, whether it's creating documentaries around our artists and their catalogs, whether it's anniversaries where they should -- artists should be celebrated and revisited. They're creating opportunities that are driving monetization up. So it's a really proactive lean-in approach that has been supportive of what is a great array of both catalog and new songwriters and composers, plus it's focused on monetization and push and outreach on all of our music, been really effective in showing what we think are terrific results.

Yes. And it sounds like fairly durable going forward.

And that's the plan and the management team didn't just do what I would say one set of things and then relax. They continued to lean in to opportunities on a go-forward basis. So we're really excited about what's happening at Chappell.

Fantastic. And then I guess somewhat related to the -- interest rates are spiking [ and election ] in the process of [ going home ], I know it [ first hand ]. But has the calculus around sort of catalog acquisitions changed at all, have you seen that in the competitive landscape?

What I would say is our calculus hasn't changed, but the market has. So we have always been the same, and we have always looked at things and done deals with the same criteria. We always look for double-digit returns and double-digit IRRs. We always look for catalogs that aren't just passive buys, but ones where our operating teams can drive incremental value. When we see those 2 criteria, we get very interested, and we will pursue those. What had happened kind of in, we'll call it kind of the COVID era, were 2 things. One, initially artists couldn't tour, so they were potentially looking for new revenue streams. And interest rates got very, very low and so pure financial players were entering the market with very low cost of capital, bidding up the prices of catalogs, which enticed more catalogs to come into the market. As interest rates are high, to your point, and as touring is back, we're seeing a more normal rate of catalogs come into the market, much lower than it had been. But even before COVID, there were some catalogs that would be available periodically. We're seeing a much more normalized availability of catalogs. We continue to evaluate them with the same criteria that we always did. We will certainly do some catalog acquisitions, but we had done, we had found like the Bowie catalog and the Bruno Mars Catalog, which we've acquired in successive years were unique opportunities. Those don't come up every year, but we will continue to look to see what does come up. But it's been -- it's certainly been slower in the past 6 to 9 months than it had been for the preceding year.

All right. Fantastic. In the interest of time, let's move on to margins. It's obviously a big topic for [ you ]. And I think you guys talk about leveraging tech to become more efficient. So can you just dig a little bit deeper into that? What exactly are you referring to?

So let me -- and I think this is again, I can bring it back to Robert and what he did at Google YouTube where he invested in technology to roll out new products into the market, but also to develop content ID to be able to track music consumption, to be able to develop better deals and more trust with music companies. Robert, some of the things that Robert has done right away have brought in 2 of his colleagues from Google YouTube. He brought in Ariel Bardin as President of Technology, and he brought in Tim Matusch as Head of Strategy. So what they will be doing with the existing management team is looking at opportunities to be able to make our business more efficient and also drive growth. Now what those will be, we're talking about it, people that have joined us, in some cases 2 weeks ago. So it's going to take a moment, but we're already starting the process and the conversations and the evaluation. And I think we're all very excited about the kinds of tool. One of the capabilities we have that are now new and much more akin to what Big Tech has as opposed to a traditional music company. So there's a real -- I think it's real game-changing in that way, but where the specific opportunities are discovered and where the focus is, is going to take a moment.

And then related to margin, I think you mentioned 50 to 100 basis points of margin expansion. Was that a comment for 2023 specifically? Or is that sort of your longer-term outlook for an annual...

Yes. Thank you for asking that. It's a comment on 2023. And as we've talked about throughout our talk today, some of the areas, and we can point to ad-supported, that have become more sensitive, affect -- make our ability to forecast with precision margin growth, a little less predictable. So for instance, we've often said part of our formula for margin growth, our formula for margin growth, I might as well just say it, is our digital business, which are high margin growing, while our physical business, which is lower margin declining, is margin accretive. That plus cost and overhead control, including our financial transformation, creates an environment for strong margin growth. However, we've been in a period the last few years where some streams like ad supported are harder to predict whether they're growing or declining. For the past 3 quarters, ad supported has been declining, which pushes down short term, the rate of margin growth. When ad-supported comes back, has the potential to create a very favorable. So we still see margin growth, we still see solid margin growth in 2023 but because of the dynamics I'm specifically reporting at ad supported, we just wanted to taper expectations a bit. And when we see ad supported start to stabilize and hopefully rebound and grow, it may create an environment for very favorable margins. But we'll have to deal with that when we get there, when we see how the macro economic environment changes.

I mean, we could continue this conversation for a long time, but we're actually at time. So I want to keep you on schedule, Eric.

Well, this was great, Ben. I really appreciate the time. I appreciate the thoughtful questions. It's been fun. Let's do it again.

Absolutely. I'll welcome you back next time.

Absolutely. A pleasure.