Warner Bros. Discovery - Earnings Call - Q4 2021

Transcript

Speaker 0

Ladies and gentlemen, thank you for standing by, and welcome to the Discovery Inc. Fourth Quarter twenty twenty one Earnings Conference Call. At this time, all lines are in a listen only mode. At the conclusion of the speakers' presentation, there will be a question and answer session. Also, please be advised that today's conference is being recorded.

I would now like to hand the conference over to Mr. Andrew Slavin, Executive Vice President, Global Investor Strategy. Sir, you may begin.

Speaker 1

Good morning and welcome to Discovery's Q4 earnings call. With me today is David Zaslav, our President and CEO Gunnar Videnfels, our CFO and JB Perez, President and CEO of Discovery Streaming and International. Before we start, I'd like to remind you that today's conference call will include forward looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward looking statements include comments regarding the company's future business plans, prospects and financial performance, as well as statements concerning the expected timing, completion and effects of the previously announced transaction between the company and AT and T relating to the WarnerMedia business. These statements are made based on management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from our expectations.

In providing projections and other forward looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our Form 10 ks for the year ended 12/31/2021 that we expect to file post this call and our subsequent filings made with the U. S. Securities and Exchange Commission. And with that, I'm pleased to turn the call over to David.

Speaker 2

Good morning, everyone, and thank you all for joining us today during this incredibly exciting time for our company. Our fourth quarter capped off a strong 2021 as we near the finish line of our transaction with AT and T to create the world's most dynamic media entertainment company, Warner Bros. Discovery. Upon close, Warner Bros. Discovery will stand on incredibly solid footing creatively and financially.

This is a real company, and we expect to deliver meaningful free cash flow over the near and long term. At Discovery standalone, we ended the year with $4,000,000,000 of cash and generated substantial free cash flow this year, over 2,400,000,000.0 even after absorbing over 1,000,000,000 of losses from our next generation investments. And our free cash flow will grow meaningfully from here. As a company, when we come together, we will stand on firm footing. And look to benefit from both a very balanced business model and from the cost synergy tailwinds we expect to result from our merger, supporting our expected reduction in gross leverage to three times or below within two years, starting from 4.5 times or lower net debt to EBITDA when we stand up the new company.

Our vision for Warner Bros. Discovery is simple. We believe the companies with the most appealing and most complete menu of IP and content stand to achieve success. And I believe Warner Bros. Discovery has the most attractive content in the business.

From Batman, Superman, Wonder Woman, Harry Potter, Game of Thrones, Euphoria, ninety Day Fiance, Hanna Barbera, Looney Tunes, for the Food Network, HGTV, Discovery, HBO, and great personalities like Martha, Chip and Joanna Gaines, Guy Fieri, the Property Brothers, and Oprah, plus CNN, the premier global news network with real resources and news gathering services all over the world. Sports with Eurosport, the Olympics, NBA, NCAA March Madness, Major League Baseball, and the National Hockey League, making us a global leader in sports alongside a wealth of local content all over the world, content that we've produced and garnered for the last twenty plus years. Taken together, we will have a broad menu of content to super serve every demo and every family member. Who would ever want to leave? When we bring all of our global content together, we will have one of the most compelling offerings in the marketplace and at a great value to customers.

This was the premise and the vision that John and I shared when we put this deal together nearly a year ago. Initially we planned to see how all these existing and complementary content pieces fit together, how well our package of content nourishes and enriches consumers, and what it does to churn and growth. From there, we can evaluate areas where we'll need to spend to fill in for our offering. Together, we already spend aggressively across all demos and genres and we'll have an even greater ability to do so as a merged company. And know we have the resources, we plan on being careful and judicious.

Our goal is to compete with the leading streaming services not to win the spending war. Whether breaking new franchises or reimagining and refreshing existing ones, we will have a truly scaled and diverse content engine. With IP ownership across a highly monetizable collection of IP. Perhaps most importantly, we are not solely dependent on one business model as we reach across multiple platforms and touch points, every leg of the stool from linear to direct to consumer to content production and monetization. As one of the leading content arms dealers in the industry, Warner Bros.

Television is formidable. And as a company, we will also be uniquely positioned to better serve advertisers and distributors globally. Said another way, we can monetize across any number of different cash registers. Consider that Warner Brothers Television has over 100 active series being sold to over 20 platforms and outlets. It's a content maker and content owner generating significant revenue, free cash flow, and most importantly, optionality.

There's not a lot of content makers out there, certainly not of the scale and of quality that Warner Bros. Television is in the marketplace today. And particularly at a time when the demand for quality television production has never been stronger. An important distinction when considering the asset mix of this company, a very real, very balanced and very complete company. We have a lot of muscle memory from the Scripps merger which enabled us to thoroughly reexamine how we conduct our business.

And we took that opportunity to better align our management, operations, and processes during a time of pronounced industry disruption and change. I believe that this same dynamic exists with the opportunity ahead for Warner Bros. Discovery. Turning briefly to the quarter, I'd like to call out a few highlights while Gunnar will take you through in more detail the puts and the takes. First, on the advertising side, underlying demand across our networks and channels has been resilient.

Overall 2021 global advertising revenue increased 10% over 2020 with growth from both domestic and the international segments. In fact, international segment advertising revenue increased 23% in 2021 excluding the Summer Olympic Games finishing the year on a strong note with growth across all regions. Here in The U. S, I'm pleased with our solid end to the year. Despite a marketplace that has endured some headwinds across COVID and supply chain issues helped in part by our outperformance against an industry wide strong twenty twenty one-twenty twenty two upfront.

At the same time, we've been very pleased with the results of our recently renegotiating distribution deals in The U. S. The team has done an excellent job continuing to demonstrate to affiliates that our portfolio is a great value and they've clearly seen that reflected in our numbers this year. Within direct to consumer, Discovery plus continues to perform very well. We end the year with 22,000,000 total subscribers passing peak investment loss levels supported by consistent and continued strong KPIs, advertiser interest and overall monetization efforts.

As previously discussed, we've thoughtfully and tactically managed our rollout and we'll continue to do so while sharpening our focus and gaining perspective for the next leg of our direct to consumer journey with WarnerMedia and HBO. Worth noting, we achieved a significant milestone this past quarter having replatformed our Discovery plus tech stack across Europe, bringing it onto a single platform consistent with The U. S. We achieved this important migration quite seamlessly enabling a more feature rich and personalized consumer experience. These efforts should ultimately drive better consumer engagement, higher retention and ultimately lower churn, further supporting the trend we've enjoyed over the last few quarters.

This replatforming also enables the rolling out of an ad lite tier to Discovery plus in select international regions, something as you know that was not contemplated when we launched at the 2020 and which we expect will figure meaningfully in our eventual merged offering. The opportunity here is large and we look to best practices from The U. S. We expect to launch The UK in March with additional countries in Europe having been identified to follow thereafter. As part of our global content strategy, we do believe premium entertainment, news and sports offers an attractive service in many markets.

And we are excited about the innovative deal with BT in The UK where as we announced a few weeks ago, we are in final exclusive negotiations to create a rich, extensive portfolio of sports content in that very important UK market. We will combine our Eurosport UK portfolio with BT Sport bringing together key matches from the Premier League and all of the UEFA Champions League, Premiership Rugby, Olympic Games, Cycling Grand Tours and grand slam tennis. This will create a more compelling and simplified sport offering in The UK and Ireland while also advancing our broader strategy of bringing sport and entertainment to more consumers with Discovery plus Staying with sports for a moment and fresh off the Winter Games from Beijing. Despite the many challenges and obstacles, we were very pleased with the event marked by healthy growth in subscriber additions, streaming minutes and total viewers across our combined portfolio. Though perhaps most importantly and building upon the momentum from the Summer Games in Japan, it reinforced the value of delivering a much richer product experience that combines entertainment and sports in Europe with strong appeal for the whole household.

This enabled us to bring new and different viewers to the Olympics as well as to introduce more sports viewers to our entertainment content which greatly improves retention and lifetime value. And lastly, one closing thought before I turn it over to Gur. Depending on how soon we can complete the closing of our merger, this earnings could be our last as a standalone discovery. For me personally, it has been the honor of a lifetime to run this very special company over the last fifteen years. Alongside such an extraordinary group of leaders, employees, and board members.

Folks that I've gotten to work with and learn from like John Malone, the Newhouse and Myron family, and the guy that started this all out of a garage with a crazy idea that discovery could change the world, my great friend, John Hendrix. Having accomplished so much and to have had such a blast along the way, I often remark this job is such a blessing of a lifetime. And we're all so lucky to be in this business and to get to do what we do. And I could not be prouder of what we've achieved together but recognize that our most exciting days and biggest tests are ahead of us. And we absolutely can't wait to share the next leg of this journey with all of you.

To close, I truly want to thank those of you that have joined us quarter in and quarter out during this first very formative chapter of Discovery's corporate journey. We believe the next chapter will be even more rewarding and fulfilling. With that, I'd like to turn it over to Gunnar.

Speaker 3

Thank you, David. I'd like to start by echoing David's comments. This was indeed an exceptional year for Discovery and one in which I believe we made significant strides across our financial, operational and strategic priorities. Speaking to our financial accomplishments, I am proud of our continued focus on transformation and efficiency during continued disruption in our industry. Notwithstanding over $1,000,000,000 of losses from our investment initiatives in 2021, we finished the year with over $2,400,000,000 of free cash flow, a 64% conversion of AOIBDA.

The true testament to both the resiliency of our core networks as well as overall balance of our global portfolio of assets. Moreover, we ended the year with $4,000,000,000 of cash on our balance sheet and net leverage of three point zero times, both of which have continued to improve thus far in 2022. And based on our current momentum, I remain very confident with our projected net leverage at closing of 4.5 times or better and reiterate that our long term target leverage range for Warner Bros. Discovery remains 2.5 to three times, which we intend to achieve within twenty four months from close and possibly sooner. Now turning to the quarter, let me briefly provide some color on Q4 results for which from a high level underlying trends are more or less consistent with those of the last few quarters.

In The US, Q4 advertising was up 5% year over year, largely driven by strong pricing in linear and further supported by continued traction in the AdLight tier of Discovery plus As I mentioned on our last call and not surprisingly, we have seen hints of softness in the scatter market due to supply chain disruptions and some category softness around COVID. Visibility remains limited as supply chain issues persist and we currently see low to mid single digit growth in Q1. US distribution revenues increased 17% helped by Discovery plus and higher linear affiliate rates more than offsetting declines in linear pay TV subscriber numbers of around 4% for our fully distributed portfolio. Turning to international, which I will discuss on a constant currency basis. Starting with advertising, momentum is quite a bit stronger than here in The US, increasing a healthy 12% in the fourth quarter, benefiting from robust performance in all regions.

We continue to enjoy pricing upside resulting from healthy demand across EMEA, particularly in The UK, Poland and The Netherlands, while Latin America continues to recover nicely also helped by share gains in key markets like Mexico and overall healthy demand. We are at the very early stages of rolling out an international ad lite tier for Discovery plus first in The UK and Ireland in March with additional markets in EMEA to follow enabled by the international re platforming which David previously alluded to. We are enthusiastic about the incremental consumer focused feature enhancements, which we expect will drive better engagement, resulting in continued churn reduction and monetization upside. Distribution revenue increased 5% during Q4 as ongoing affiliate fee pressures in certain EMEA markets have been more than offset by the growth in Discovery plus subscribers with strength in key markets like The UK, The Nordics, Poland and Brazil. On the expense side, total Q4 operating expenses increased 9%.

Cost of revenues decreased 4%, helped in part by a more normalized sports schedule in Europe, partially offset by continued investment in content for Discovery plus SG and A increased 29% due to overall marketing spend to support Discovery plus subscriber growth and new market launches. Lastly, operating expenses in our core linear business decreased in the low single digit range for the year in line with our guidance. To that end, I'm very proud of the efforts across the company to support continued efficiency and overall cost management. Pay OIBDA for the quarter was up 15% to over $1,100,000,000 and was down only 8% for the year to $3,800,000,000 which taken in the context of an incremental $600,000,000 investment in NextGen initiatives and a roughly $200,000,000 loss for the Olympics, I am extremely proud of our result. I do want to take a minute to call out both the criticality and the resiliency of our core linear networks business.

We continue to invest and support these important brands and franchises while at the same time look to drive operational efficiency across the globe as we maximize their contribution to free cash flow and to fund our continued investments in direct to consumer. Now turning to some housekeeping items and a couple of items to consider for the quarter as you update your models. First, U. S. Other revenue was up $74,000,000 during the quarter due to a non recurring non cash item, which flowed 100% to AOIBDA and which was a positive $08 per share impact.

Second, we recognized a $0.13 per share non cash loss from the $15,000,000,000 of notional interest rate hedges that we implemented in the third quarter to mitigate interest rate risk for future debt issuances to finance the cash portion of the WarnerMedia transaction. As I mentioned on the last earnings call, we are required to report the changes in fair market value on our income statement as the derivatives do not qualify as hedges for accounting purposes, which could result in some additional variability to our net income until the WarnerMedia transaction closes. Third, Group nine signed an agreement to merge with VOXX in December 2021. As a result of the transaction, which closed earlier this week and the estimated value of our ownership in the new company, we recognized cash impairment charge. Finally, the impact of PPA amortization during the fourth quarter was $0.51 per share.

This is higher than in prior quarters as we reassess the useful lives and amortization method for all the purchase customer relationship intangible. While the useful lives of these intangible assets did not change, we decided to take a more conservative position and accelerate amortization to better align with expected cash flow. As a result of this, our Q4 D and A expense increased by nearly $200,000,000 Adjusted for all of the above, EPS would have been $0.73 per diluted share. Our full year effective book tax rate was 16%. Our cash tax rate was 25% for the year, excluding PPA amortization.

For 2022, we expect our tax rate to be in the mid-twenty percent range. While our cash tax rate is expected to be in the low to mid-twenty percent range excluding PPA for Discovery standalone. And based on our planned rates, we expect FX to have a roughly 90,000,000 to $100,000,000 negative year over year impact on revenues and a negative 5,000,000 to $10,000,000 impact on AOIBDA in 2022 inclusive of the existing hedges. A quick update on where we currently stand in the transaction process. We have already satisfied most of the conditions to close, unconditional clearance from the European Commission, the expiration of the HSR waiting period, clearance from all other key international markets and a favorable private letter ruling from the IRS for AT and T.

We also filed our final merger proxy earlier this month and have scheduled our stockholder meeting for March 11. Following the vote and assuming the deal is approved by our shareholders, this puts us on a clear track to close in early Q2. That will be a wonderful achievement that reflects our best case estimates from a year ago. I am encouraged by the continuing operating and financial momentum at Discovery during what has undoubtedly been a hectic year. And we could not be more excited to get going on integrating the two companies as well as delivering the promises we have made to you, including $3,000,000,000 plus of cost synergies and driving significant free cash flow to deleverage the company down to our target leverage range within twenty four months.

Having recently conducted some high level meetings across our respective companies, I think it's fair to say that both the Discovery and Warner teams are eager to begin collaborating in earnest to build one of the most dynamic media entertainment companies in the world. Now with that, I'd like to turn the call over to the operator and David, JB and I will be happy to take your questions.

Speaker 0

Your first question comes from the line of Robert Fishman with MoffettNathanson. Your line is open. You may now ask your question.

Speaker 4

Hi, good morning. Given the new geopolitical risks from Russia, can you just remind us what percent of Discovery's revenue come from Europe and Asia or what it would be on a pro form a basis for Warner Bros. Discovery? And whether you've seen any early pullback on advertising in the region, obviously, understanding that the Olympics just wrapped up there? Then I have a separate one for Gunnar on the amort policy.

Speaker 2

Okay. Go ahead, Gunnar

Speaker 5

or JV. Think

Speaker 3

Yes. Look, I could take it, Michael. It's an immaterial proportion of our financials. It's about 1% of profits that we're generating in the affected region here.

Speaker 2

But JB, if you could just comment

Speaker 5

I more would say in the exact in the Ukrainian market itself, obviously, it's even it's absolutely de minimis is the short answer. In Russia, specifically, you may have remembered a couple of years ago when the regulatory regime changed in the country and we were obligated to restructure our agreements to actually be represented by a local player. We did that and to become into compliance with the local regulations. So we already have a deal structure in place that is partnered with a local Russian entity. And so for the time being, based on obviously, this is a very dynamic situation based on everything that we've been able to study up until literally real time this morning, We don't see any impact, but we're going to continue to track it and see.

And as Gunnar said, even if you include the Russian market, it's still a very immaterial in respect to the total discovery company. As it relates to the larger European footprint, obviously, for markets that are important to us like Poland, like some of the Eastern European markets, which are the most likely to be affected, Again, for the time being, we haven't seen any impact. We're pacing very nicely for the first quarter. But that is a situation that is going to continue to evolve, and we'll continue to track it.

Speaker 4

Okay. And then for Gunnar, just following up on the change in amortization policy. Can you discuss if you're also reexamining the changing viewing behavior habits and how that might impact any of your content amortization included in EBITDA?

Speaker 3

No, Michael. This is really mean, this is, it was in a review of our accounting, methodology here. Remember, this is, purchase price allocation that we took on with the acquisition of Scripps. And, you know, obviously, we review these, on a regular basis. We've obviously also spent a lot of time thinking about purchase price allocation for, you know, the upcoming WarnerMedia deal.

And, you know, as such, this is noncash. It's it's it's what we pay for scripts, and I just generally like to take as conservative as possible a position here. You know, there is no benefit from having these intangibles on the balance sheet. So what's gonna happen is you you saw a $200,000,000 impact in the fourth quarter, But, again, we're not changing the amortization period. We're just front loading, the the the rate of amortization.

So this is gonna just increase the amortization of these positions for the for the next, you know, two, three years and then decrease the the amortization in the in the outer years.

Speaker 2

Just one point, coming off of Gunnar's point about Scripps. I just wanted to mention that if you look at our company today and how we came together with Warner, none of that would have been possible in my view without the business that Kenlow built. And when I say Kenlow built, I mean, as a real entrepreneur, came up with the idea for for those channels, at a time when broadcasters were dominant and everyone thought a home channel, didn't make a lot of sense. But home and food and the personalities and understanding brand and building a building a great culture and and a fantastic business. And when we came together, that really gave us tremendous strength and diversity in in nonfiction.

It also gave us more confidence to go to the market with d plus and a much broader menu and bouquet. And that transaction and the opportunity to work with Ken over these many years for all of us has just enriched the company and positioned us to be able to do the Warner deal and positions us, I think, to be more successful because that content has worked really well around the world. So Thanks, Robert. Next question. Great.

Speaker 3

Thank you. Actually, hold on. Michael, should have, I I didn't properly answer your your Robert, I didn't properly answer your your question, because you were also focused on content amortization. That's something we also obviously confirm on a on a quarterly basis, and there was no changes to these policies, you know, last year. So, again, you've got the linear world, the potential further exploitation of content in the digital world.

Those are sort of, you know, balancing each other out right now. So we haven't made any changes there and didn't, see any need for that.

Speaker 4

Got it. Thank you.

Speaker 0

And your next question comes from the line of Doug Mitchelson with Credit Suisse. Your line is open.

Speaker 1

So much. David and Gurira, would you just talk about your confidence level in the $14,000,000,000 EBITDA and $8,000,000,000 free cash flow guidance for 2023? And if that confidence has evolved at all and why? And then I guess the follow-up to that is, should we look at that level of guidance, 14,000,000,000 and $8,000,000,000 as suggesting you don't see a need to ramp content spending rapidly, which a lot of folks are worried about, that looks like a guidance that would suggest you're just going to continue along the path that HBO already had planned for their content spending ramp. So any correlation between that guidance and your intentions regarding content spending would be helpful.

Thank you.

Speaker 3

Sure. Sure. Let me start here. Number one, yes, full confidence in the guidance that we gave when we announced this deal. Again, as you know, we're in an approval process here.

So we have done some more work, are eager to know, get into the detailed planning of these, synergies after after closing. But, again, everything we've learned, so far has, if anything, given me, more confidence on our ability to generate these numbers. When it comes to content, investments, we we received that question a lot over the, the the past couple of weeks, understandably, given what's been going on in the ecosystem. A couple of things here. Number one, we have in our numbers baked in a very significant increase in, in content spending, and we have put zero synergies against that.

Number two is we are currently spending at a peak level, or at least the highest level that we have seen in the history of this company. We spent, more than $4,000,000,000 for content in in 2021 at Discovery alone. And, obviously, also on the WarnerMedia side, you know, they've they've seen, increases in spend. So we are definitely, spending enough, from my perspective. The the the key question is gonna be, you know, how much is going to be enough going forward?

We have plenty of room in in our business case. And I will also say, as David said in his opening remarks here, this is for us, it's not about winning the spending war. You know, money doesn't score goals as, as the European soccer analogy would be. We will have a greatly, complementary portfolio of, of content, focus areas between Discovery plus and HBO Max. As a matter of fact, you know, we're we're we're gonna be covering all four quadrants, like like no one else, and that could actually drive to content efficiency that we haven't been able to get as two, stand alone companies.

At Discovery Plus, we have invested in in in content in areas that's slightly outside of our lane in order to broaden, the appeal. And and certainly, everybody has noticed the, the efforts on the HBO Max side to get more female, etcetera, with investments that might not be sort of in, you perfectly in the wheelhouse. So I actually have hope that we might, be getting away with a little less, a a content spend, but we certainly have taken a conservative approach and put in a very significant room for increases. I don't know. David or JB, you want

Speaker 2

me to So, look. I think we start with the premise that the idea for this transaction was we have a library as big as Netflix with content that people love in The US, local content around the world, in the entertainment and non fiction space and in sport. And that when we bring that together with the with HBO and and and the TV the best TV library in the world in my view and and motion picture library, that the first question is how well does that do? We have a very low churn product in The US. Our churn is getting better in Europe as we've made it broader.

And when we put these two together, you know, I I think it's the broadest, most compelling offering of of content, available. And it appeals to from people very from the kids that are very young to, with Looney Tunes and Hanna Barbera and and Harry Potter to the DC content to to the the content that that, that older people and and every generation loves. And we see that there's also a different viewing pattern between what's going on at HBO Max and with Discovery Plus. A lot of our content is viewed throughout the day. So the first question is, how do we do when we come together?

What happens to churn? What happens to growth? As I said, we are a real company. What I mean by that is we're gonna be generating $8,000,000,000 or more in free cash flow. So we have plenty of money to spend.

That already assumes that we're gonna spend more money on content. But we're not gonna we're not gonna just spend just to figure to to to have more content on the platform. The key to these platforms, which is true of free to air channels and cable channels, is you spend enough that you could nourish an audience, that they wanna spend time with you, and that they feel that you're that that that you're the place that they wanna be and you're important. Low churn, high usage, usage by many people in the family. And we're gonna be very careful about looking at how we do.

And there's a good we believe there's a chance that we're gonna do quite well. And we also have very low cost content and that we're not gonna have to increase investment significantly, that our bouquet will be, differentiated and compelling. But we do have the resources if we see that spending more will get us, more growth and, lower churn and good economics on ARPU. But we'll be very careful because we're we have a real company that's generating real value.

Speaker 5

Thank you.

Speaker 0

And your next question comes from the line of Philip Cusick with JPMorgan. Your line is open.

Speaker 1

Hi guys, thank you. I wonder if you can talk about just remind us how

Speaker 3

you think these days, David,

Speaker 1

of cost savings and synergies in Warner. Compare the difficulty and size of the opportunity versus those in the Scripps deal. Anything changing there as you've gotten more into it?

Speaker 2

Bruno, why don't you we've been side by side on this for the last several months. And, the good news is that we've been digging in with Anne and with the team. And when we've been able to kind of confirm a lot of a lot of what we thought. But why don't you, as Yeah. As the general here, just take Philip through.

Speaker 3

Philip, the short answer here is we're fully aware of the fact that this is much larger, and it's going to be much more complicated and complex than, what we dealt with when we, brought Scripps and Discovery together. That said, you know, all the work that we have done, again, as I as I said, in in my earlier, response here, if anything, you know, I've gotten, more excited about the opportunity. We've had first very high level, meetings, with with the WarnerMedia side as well that that that are going very well. And remember, we have a couple of, you know, unique points here in the constellation. One is that a lot of the cost saving is actually going to come out of cost avoidance.

Right now, we're running two completely separate direct to consumer technology stacks of marketing operations, and we're spending, you know, roughly $6,000,000,000 for for technology and marketing between HBO Max and Discovery Plus. Clearly, you know, once we have successfully migrated those technology stacks into one, there is gonna be tremendous opportunity to to reduce costs. And, the second point here is that for both plans, we had anticipated very significant investment increases, which, you know, one of one of those ramps is gonna go away as well. That that could easily make up for, for half of the of the total cost synergy potential here. And then we have the the the the linear portfolios with with which, you know, I think we, on both sides, have a lot of experience, and and, you know, I've been encouraging people to go back and look at how, you know, the efficiency, change when we combine Scripps and Discovery.

There's just a lot of very straightforward opportunity, there. And then what I do wanna point out as well is, all the areas in which we have not, assumed any, cost synergies. Again, I've already mentioned content, but also the the entire studio operation, CNN, etcetera, etcetera. So, again, I think what we're gonna see is that we're probably gonna broaden the the the scope of potential initiatives, once we once we close the deal. But, you

Speaker 2

know, I feel very good about our ability to get at these numbers. The the other point is that we haven't assumed any revenue synergy. And the ability to come to market with in The US, the broad bouquet of content means that we can service advertisers and distributors much more effectively.

Speaker 1

Forgive me if I'm premature on this, but there's been a lot of headlines about CNN plus ramping up. Seems like there's a lot of business model overlap there with Discovery plus Anything you can add about that?

Speaker 2

We will in the next in the near term sit down and get a have a real business plan, discussion with the people at CNN and CNN plus We haven't had that yet. We haven't seen it. I've been watching a lot of CNN. It's a this is where you see the difference between a news service that has real has meaningful resources globally, news gathering resources, the biggest, and and largest group of, global journalists of any media company, maybe with the exception of the BBC. And here we are, waking up this morning with a war.

And, CNN is going to multiple correspondents and journalists risking their lives in Ukraine, in Poland, in Russia, on the ground. And there's no organization news organization in the world that looks like CNN, that can do what CNN does. And I think it becomes very clear as you go around the world and you look at other news channels that are where people are sitting behind desks and giving their opinion about what's going on. There's a news network that's on the ground with journalists in bulletproof vests and helmets that are doing what journalists do best, which is fight to tell the truth in dangerous places so that we, you know, we all can can, can be safe, and we can assess what's going on and what's dangerous in the world. So it's a proud moment for us to watch what's going on there.

But because of this deal has not closed yet, it's that CNN is being run by AT and T, and, we're in the beginning process of getting the details on what they're doing.

Speaker 6

And it's worth, Dave, I can

Speaker 5

just add one thing on the synergies, Philip. The other opportunity that is significant is the Warner International basic channels business is about 10 times the size of revenue of what Scripps was. And so I think also the opportunity on the channels integration on international will also be much more significant than it

Speaker 3

was in the Scripps business.

Speaker 1

Thank you again.

Speaker 0

And your next question comes from the line of Jessica Reeve Ehrlich with Bank of America. Your line is open. You may now ask your question.

Speaker 7

Thank you. Good morning, everyone. So we're on the cusp you're on the cusp of closing the deal and the hard part is obviously in front of you given the changes you need to implement. Where should we expect to see early results in revenue and costs and maybe specifically the upfronts in May and it seems like you'll close before then. The old Time Warner or Warner Brothers traditionally had silos between entertainment, news and sports.

Do you expect to go to market with all segments under one sales force? If yes, like what are the pros and cons of doing that? And my follow-up, I'll just ask now, you called out the Olympics performance, which is clearly very different than The US experience. Can you talk a little bit about the lessons learned from the first two Olympics and expectations for Paris in 'twenty four?

Speaker 2

Sure. Well first, we've been focusing really on cost. And after we close and we get into the business, we'll have a chance to think about revenue opportunities. But our number one priority has been focusing on cost and analyzing opportunities in synergy that reflect the $3,000,000,000 We can get more into the synergies, Gunnar, but I just wanted to speak to the Olympics and then pass it to to JB. We have focused very hard, throughout Europe with all sports in really driving local recognition of athletes.

Who are the local athletes? What's at stake for them? Where did they come from? Why do you care? And what we've learned over the years with our three sports channels and and with our direct to consumer business is it's not just the love of the sport.

It's the love of the athletes. And that, that when you see, eight skiers lined up, you wanna know you wanna know the backstory. And that has really worked for us across sport. And, JB and Andrew and the team spent months promoting local athletes with the objective that if you if you went down a main street in any country and you said who who are you looking forward to seeing in the Olympics, that we would the objective was that you'd be able to name between five and ten people. And I think that had a lot to do in terms of execution with what we saw, with viewership across Europe.

JV?

Speaker 5

Yes. Look, I think, Jessica, we've learned a couple of things. The focus, as David said, I'd say on the production side has been very much focused on content and storytelling on local heroes and athletes. I think also we've understood in this digital and social age that people want to see more authentic representations of the athletes' lives. And so we've also introduced things like family cams and showing particularly in this virtual world of the last two games where a lot of the families have not been able to be on-site, showing how their families and friends are rooting for them back home and bringing that and making it a more intimate authentic experience of the full representation of the support crew that supports these athletes.

And then lastly or the last two things I'd say, we've also continued to build out the best set of experts in terms of on air talent in the business by far. So people know to come to us because we have the best set of on air talent that oftentimes are medalists themselves, Olympians themselves. And then lastly, we've really continued to invest in innovative technology to bring the games and the stories to life in different and innovative ways that are not gimmicky, but ultimately really bringing the storytelling to life, augmented reality being one. We've done little simple things like our announcers being on camera and having feeds from our announcers who have obviously a lot of passion as they're watching their national games. And so we continue to innovate on the technology, which has helped bring the games to life in a different way.

And so we're incredibly proud of what our team has done, as David said, in a very difficult situation. And we're very pleased that both in terms of our linear ratings being comparable to what we saw four years ago in PyeongChang despite the put levels in that period being down double digit, that our experience was very different than others, obviously, in the last both this game and the Tokyo games for that matter.

Speaker 2

Gurus, Jessica was asking about a little more on cost synergy. I think you covered a lot of it, but any other thoughts?

Speaker 3

No. I mean, I think I think the the the one thing I would add, Jessica, to your point about the timing, look. We we we're we wanna hit the ground running. We have stood up, integration management offices, both on the WarnerMedia side and on the Discovery side. You know, we've got a, you know, full full teams in in flight working on setting up these work streams, etcetera.

But that said, we're still operating as two independent companies, right now. There's there's, you know, very limited, interaction, you know, regarding actual, savings measures. So with that said, you know, what what I would want you to expect is sort of an initial wave of savings after closing, which, you know, a lot of it is is gonna be straightforward, you know, early quick wins. And then, you know, we'll we'll get to work on detailing out the the the the longer term structure and setup, and that's the reason why we had focused our communication on 2023 because 2022 was always gonna be a little noisy. We're we're, you know, we're coming together, you know, a third into the year, etcetera.

So 2023 is is, for me, of the the year sort of for the full on, you know, synergy capture here.

Speaker 2

You know, our objective is get the deal closed, and implement these work streams on cost and then sit down and look at the opportunity to serve advertisers more effectively and efficiently, and we'll have the upfront. Hopefully, we'll be closed before the upfront. It looks like that'll probably be the case. And then we'll be able to start to put together an upfront strategy.

Speaker 7

Great. Thank you.

Speaker 0

Your next question comes from the line of Michael Morris with Guggenheim. Your line is open. You may now ask your question.

Speaker 1

Great. Thank you. Good morning, guys. Two questions for me. First, David, you spoke about Warner Bros.

TV. And historically, that's been a somewhat unique business its size, but also selling outside of of the company. You know, you referenced that being something you you sort of expect going forward. And in recent times, it feels like companies are trying to pull more content back in. And perhaps in situations where they've sold externally, been disappointed with that decision.

So maybe you could just talk about the balance there given the size of the business but also the interest in fueling your own platform. And my second question, maybe for Gunnar, is really on the long term margin structure for the business and thinking about the streaming industry more broadly. The guidance that you guys have given sort of implies a high 20s percent EBITDA margin, which is below the historical cable business, but definitely at the high end of the streaming business. So I guess the question is really, how do you see that converging over time? But also when you think of a sort of scaled streaming business globally, what does its margin structure look like over the long term?

Thanks, guys.

Speaker 2

Thanks, Michael. I've been for many, many years in deep envy of Warner Brothers TV, having spent eighteen years at NBC. Mhmm. Must see TV, and Jack Welch would often remind, the heads of entertainment, of this that it was really Warner Brothers TV, that all those shows were produced by Warner Brothers. And the business that Channing is running right now is generating significant revenue.

And in some ways, it's doing two things. It's probably the best and largest producer of quality content, TV content in the world. We're in that business. We have a business called All three. As many of you know, we're we're fifty fifty with, with Liberty Global with 35 production companies.

That business has gotten Jane Turton runs it a lot better because there are multiple bidders for for quality content. And when you look at Warner Bros. TV, it's a very, very compelling business in a market where there aren't many makers. And as you said, you know, even the smaller makers are are making just saying, let me just make for myself. You know, we I look at that business and I see tremendous optionality and something that's really rare to have a maker of the scale of Warner Brothers television with some of the greatest television producers in the world.

You know, Rob Reiner, Chuck Lorre, you know, the most prolific working at Warner Brothers gives us great optionality. We can produce more content for HBO and HBO Max. We can produce more content to generate more free cash flow and profit by taking advantage as an arms dealer of something that's very rare, the ability to provide great content to Apple or to the broadcasters or to other other providers. We'll get in there and figure it out. But in the end, you know, when when I say this is a balanced company, this

Speaker 6

is

Speaker 2

a big piece of it, that we have a big production entity here entity that makes a lot of money. And we have the ability to ramp that up to make more money in a in an environment where there's lots of need, or we have an ability to ramp that up and provide more for ourselves, which also provides some economic efficiency. And so it's a great asset. We're looking forward to learning more about it and leaning into it.

Speaker 3

And on on the margin side, Mike, so a couple of points here. If if we take a step back and look at the pure math and if we look at a long term horizon here and sort of, you know, the ten year projections that we that you saw in our in our s four, you know, I I think it's reasonable to assume sort of, you know, slightly declining margins on the linear side. And then we have all talked about, d two c, you know, reaching their the the peak investment point. Discovery plus, as as you know, has has peaked in in in 2021 from a investment loss perspective. HBO Max is guided to peak from that perspective in 2022, so there will be a very significant margin improvement in those businesses.

You know, David described the, you know, the the the the the macro tailwind for for the TV studio, so so that should be a positive as well. But if you take, you know, these underlying trends by business and then factor in that there's probably gonna be a mix change with d to c, obviously, growing significantly faster, then I think that gives you a feeling, you know, for, for, you know, how we got to to this, to this margin level and to those levels that you see in the, in in in the s four. We have, said when we launched Discovery Plus that we were confident to be able to get to a 20% margin at scale. That's where Netflix, is roughly today. And the, the the point that I want you to take away as well is I do think, and I have said many times from today's perspective, think we're gonna do better than, than that 20% number.

And, that is because we are very uniquely positioned. You know, we're we're making the the combined company is gonna be very uniquely positioned. We're making the content. We can decide flexibly where the greatest value is. We've got multiple bites at the apple when it comes to monetizing the investment on our platform.

And, again, we've talked about that so much. You know, we're virtually using every available revenue stream, you know, in a way where sometimes double or triple dipping, you know, monetizing content at our, US linear environment, TV everywhere, Discovery plus on the international side, basic pay. And then in in certain markets, we've been very successful launch of free to air on top. And almost every dollar that JB spends on content is is is used both on Discovery plus international and the linear platforms. That's a huge advantage.

Also, the fact that we're getting subscription, distribution, and advertising revenues. So I think we will, always have an advantage with that global footprint, when it comes to monetizing, the IP investment. And, again, as we also said several times, we're not gonna be, you know, in a race here, you know, to win the the spending war or to win a certain subscriber numbers. We're managing, our business for the long term shareholder value, and sort of nourishing, you know, all platforms at the same time.

Speaker 2

So look, I've always felt one of the great strengths of Discovery is

Speaker 3

that we were

Speaker 2

a free cash flow machine, And we were laser focused on that metric as being a real metric that represents the quality of a company. And when we look at $23,000,000,000 that gives us a lot of strength. But we're not going to just say, let's pour everything into the direct to consumer business. There is a level of investment that makes sense for that business. And that's how we're going to attack it.

We'll be looking to monetize our IP to grow firm the value of the overall company, to build shareholder value, and we have an ability to do that uniquely as a global company in ways that, most companies can't.

Speaker 1

Thank you.

Speaker 0

Your next question comes from the line of Brandon Nispel with KeyBanc Capital Markets. Your line is open. You may now ask your question.

Speaker 1

Awesome. Two separate questions, if I could, please. One, on the linear advertising side. Your trends in advertising are significantly different than the company that you're merging with. So I was hoping you could help us understand your plans to really turn it around the Turner portion.

And maybe it goes back to some of Jessica questions. But how should we think about Discovery's linear advertising growth, particularly in The U. S. For 2022? Then just separately on streaming, could you talk about churn for Discovery plus How do you measure it?

How do we think about monthly churn rates? And really, what should we be looking for, for churn on that service going forward, particularly as you sort of layer in HBO content?

Speaker 6

Well, we can start with

Speaker 5

the second one maybe, Brandon. So I think on the Discovery plus churn numbers, I think we obviously are not we don't talk about specific numbers, but I can tell you this, which is, as David has alluded to, I sort of separate The U. S. And international. The U.

S, one of the greatest things we've experienced over the course of the last year is that compared to the best in class in the market that our numbers are not quite there yet, but looking very competitive with some of the best in market. And that's the reality is only twelve months out of the gate when our product and all the elements of our product both in terms of engagement and retention capabilities, I would say right now is still not at certainly even on par with some of the best in market yet. So we feel great about where we are one year out being in the same ZIP code as some of the best in market. And then internationally, we've had, I think, a much more we've been much more challenged, candidly, historically.

Speaker 6

And as David said, part of

Speaker 5

the issue was that our platform wasn't as sophisticated because it came from a legacy pre Discovery plus launch in The U. S. Front end that didn't have nearly the tools for personalization profiles, really basic things that we couldn't enable. And by completing that replatforming at the end of last year, we came out of 2021 with record lows on churn internationally, still higher than The U. S.

But the great news is the trend we saw towards the end of the year and into the first quarter is very promising.

Speaker 6

And a big part of

Speaker 5

that, we think, is going to continue to improve by just having the product features that have been available in The U. S. Now available to us outside The U. S. And as the proposition and as the product features continue to improve over the course of the next couple of months, we think there's opportunity for those numbers to come even lower.

So hopefully that gives you a little bit of a flavor.

Speaker 2

The only thing I'll add is that we went to market with over the years with this idea that we could build super fan niche businesses. And we tried to do that with cycling and we tried to do that with tennis. And we separated sport from the non fiction and entertainment offering. And one of the aside from the quality of the platform is that we learned, and this is good, every time we have a challenge the question is okay, what can we do differently that'll improve the experience for the consumer that a broader menu of content is more people in the home using it, longer length of view in the aggregate, lower churn. And so the experience over the last few years is as we put as we add to the offering, the broader the offering, the the the lower the churn and the more, satisfied, the consumers are.

And so that's something that leads us to, you know, to this to the conclusion that bringing this whole thing together is gonna be very compelling. And there's a number of markets in Europe where we're the leading broadcaster. So we have all the entertainment. We have the nonfiction. We have the sport.

In some markets, we also have news. And in in those markets, we're doing very, very well. And and our our churn numbers are looking, you know, very encouraging. And so that's one of the things that that has led us to be so optimistic or optimistic about the fact that the strategic attack of putting it all together, will provide a broad menu that will be provide growth, lower churn and better customer satisfaction. Go ahead.

Speaker 3

Okay. And, yeah. On on on the advertising point, mean, you know, obviously, you'll understand we we we can't talk about sort of, you know, specific plans here for the combined company. But I do wanna give you a couple of general points and then and then one deal specific, point. So number one, just generally speaking, there's no doubt that that ratings across the industry, are under pressure, so, you know, we have less inventory.

We've continued to grow for a number of reasons, and and I have every reason to believe that we're we're going to continue, to grow with the with with this lineup. Number one, and we don't have to go through the details again, but cable has always been under monetized in a major way. David has been talking about this, for years. We're we're finally seeing some real traction as people, sharpen their pencils. It's just a great deal to spend, you know, 30% less than on broadcast, on our networks, and and we can still double our CPM.

And we've, and and we've we've talked about that a lot. Targeting, you know, even in the linear, space, dynamic ad insertion at this point has, you know, past the point of just pilots and testing. There's there's an opportunity there. And then finally, as we look at digital with eyeballs sort of moving out of a linear ecosystem into a direct to consumer, ecosystem, we're getting, as we laid out in our presentation when we launched Discovery Plus, up to three x CPMs because we're covering more demos and and and and age groups and, get better targeting, etcetera, etcetera. So there's a lot of monetization, opportunity, left in that in that traditional, business.

The the deal specific point that I do wanna make is, you know, what we learned when we combined Discovery and Scripps is and if you go back and look at the number in virtually every market, globally, we were able to get much better rating out of the existing, content output because we were optimizing suddenly, we're able to optimize across a portfolio of networks. JV was able to launch new networks and reprogram certain networks internationally. You know, we did, very significant programming changes across the combined scripts and discovery, portfolio in The US. So we were able, if you look at the ratings trends, to outperform the industry on a global basis, for for several years, following that combination. And I think that's a general theme, which, you know, I would, I would hope to get some, you know, some traction out of, when we combine these two kind of fantastic portfolios as well.

So I really feel, very, very positively about, you know, the ad sales side, you know, with the caveat that obviously, you know, no one is, you know, expecting any viewership growth in this day and age.

Speaker 1

Thank you for taking the questions.

Speaker 0

Your next question comes from the line of Jason Bazinet with Citi. Your line is now open. You may ask your question.

Speaker 8

So you guys have such a great track record in international markets. I just have an international DTC question. If you ask the buy side a year ago how big the opportunity was, they would have said $800,000,000 or $1,000,000,000 households. And if you ask the buy side now, they'd give you a number that's like a third of that because some of the bigger players are seeing decelerating net adds. And I just I know you guys have sports and news and a wide array of content.

But what's your view of what that number is and what will it take to sort of deepen penetration outside The US? Thanks.

Speaker 2

Thanks Jason. Look I think that there's a certain number of people who pay $14 or $15 for television. And you're you know, you can model out country by country and there's different cultures and different willingness to pay for content in different markets what that aggregates to. But the way that we see it is we'll have an ad free product where we'll be competing in that space. But then we'll have an ad lite product that we're going be very successful with that is much less expensive.

And so what is the market for a product much less expensive that has limited commercials but is very broad and has a compelling menu of IP, and is available on every platform? So that you know, what is how does that broaden the market? And then if you actually we take a when we take a look inside of d plus and we haven't been able to look inside of HBO Max, and we don't know exactly what they're doing with their library, but, you know, they Warner has the largest TV and motion picture library. They have the m they have half of the MGM motion picture library. We have a huge library.

And so I really see, and we as a company see three funnels. Our objective is to reach everybody. There's certain percentage of, people that'll be willing to pay $15 for a premium service with no commercials. They'll be we'll have a lower priced product that'll attract a broader view of people with limited commercials. And we've seen a lot of success with ARPUs equal or greater to the to the higher fee.

And then finally, as we get more sophisticated, we'll see that there's a substantial portion of content that we own, movies, TV. This is true for Discovery right now that, that's not being used that much on the premium service. And so, you know, eventually, we should be using all that. Now we may be using that on channels. But ultimately, you know, you could see a a subscription only service, an AdLite service, and then a a free digital service so that that, everybody can go to.

And it, you know, it might be, vanilla labeled, but putting in a lot of the content so that there's a load of people that will never pay for television. But they can go to and and view this content, and that'll be advertiser supported. And so in the long range, I think there are a number of players that are very tied to this idea of subscription only. But as a company, we probably have the most content, the most diverse content, the most content in language around the world. And our ambition is that, let's work really hard to drive the aggregate product in in subscription and add light.

And then let's take a look at who we're not getting and what content we have that could serve them in advertiser only. Eventually, I think there will be a digital broadcast global broadcast network. It'll have very different content than the subscription or AdLite, but there'll be people that do not wanna pay, and they'll wanna watch content. And who has more content than Warner Brothers Discovery? And so figuring out how to do that will be one of the strategic initiatives that we have in place.

Speaker 5

David And said, look, that strategy is not just a theory. That's the same strategy that led us in Europe to get into free to air over the last ten years, where Pay TV was penetrated up to in certain markets only 20%, 30%. And so 60%, 70% of the market was never going to be interested in paying for television. With David's vision at the time that the group went out and started launching free to air and we ended up developing a whole new audience segment at 20%, in some cases, percent margin businesses in the free air. That model may eventually migrate to kind of what we call free to view as it moves to to digital.

But we think that's another alternative way, but we wanna go after every customer segment with slightly different product offerings in each one. And we'll have

Speaker 3

the content depth and breadth to be able to do it when you look at the combined company.

Speaker 2

You know, that broadcast model, we called it broadcast, but we didn't have we didn't have news. We didn't have sports. And in in many cases, for a couple of years, we didn't have any original content. We just used library content. And, you know, for instance, you know, in Italy, we had the number one channel for broadcast channel for women, which within six months of launching it, and our cost was, de minimis.

Speaker 3

Jason, if I could add just add one point from the perspective of just, you know, achieving long term sustainable growth. You know, remember that while the international markets have lower ARPUs, and and you're probably gonna see some of that impact over time as as international subs, sort of increase in the mix here for us, it's, it's a multiple, relative to what we're getting, you know, in the linear world on a on a per sub basis, and we're also able to address a much, much broader, part of a much larger share of the of the total population. Some of the markets in the traditional pay ecosystem were limited to, you know, fifteen, twenty, 25% of the market. So that's why you're seeing us continuing to grow through this trans through this transition.

Speaker 8

Super helpful answer. Thank you.

Speaker 0

And your last question comes from the line of Kakun Mehra with RBC Capital. Your line is open. You may now ask your question.

Speaker 1

Good morning, and, thanks for taking the questions. David, you said in your prepared remarks that your goal is to compete against leading streaming services and not to win the spending war. You as you know, a lot of the leading streaming services are ramping their spend levels more and more. And and on your end, I think Gunnar, you've even hinted at the fact that there may even be some content spend efficiencies than you previously expected. So I I don't mean to belabor the point, but it's just top of mind for so many investors.

So I'd love to get your perspectives on what gives you confidence that the DTC spend levels embedded in your targets remain appropriate in what seems like an increasingly competitive streaming landscape. And I guess at the core, I'm just trying to better understand how much of an internal priority there is to hit the 14,000,000,000 in EBITDA and drive significant free cash flow versus maybe some flexibility for incremental streaming investments to better position the company company to become a longer term leader in the space? Thanks.

Speaker 2

Thanks. When when you take a look at at at the premise of this deal, the reason that we have a feeling, but we don't really know in the end exactly what we're gonna need to do. And that's why I think having the free cash flow and the optionality and the ability to monetize across platforms is important. Having said that, we are we wanna compete against Disney and Netflix. But we're not we're a very different company than the two of them.

Those are two great companies. You know, Disney has a group has has a group of people around world that absolutely love their product. And there's they're doing very well. Netflix has a very broad appeal product. And, and and Ted and Reid are doing a a wonderful job building out that brand.

They're they have built the road of getting people comfortable buying content and consuming it on all devices. We will have a very compelling offering. So someone could have Netflix, and they'll go there to what. But we have very identifiable IP, which, and much broader. It'll be much we're much broader than than Disney, and we're much we have much more identifiable IP.

And if you look at what Casey is doing with HBO, so, you know, he he has, he has Euphoria right now. He just had Succession. He has the, the the period drama Gilded Age. Gilded Age, going right now. Would would we do would HBO be doing a lot better if it had three more really successful scripted series at this moment?

You know, it's not clear that that they, you know, that they would be why you know, it's sort of the example of if you took, Food Network and you said that we do six hundred hours on Food Network and we make and we nourish an audience and they're happy and they like it and they feel like that's their place. And we make $400,000,000 as an example. If we decided to do another four hundred hours of content, then maybe the audience would be a little bit happier, But now we'd make no money. And so when when you put, Euphoria on and then that audience could then watch ninety day fiance and they could watch Fixer Upper, that there's a real balance of content here that we can go to. And there's a lot of nourishment in our in in our library together with a lot of shock and awe in the Warner library.

And the shock and awe together with the nourishment and the and and the great personalities, we think is a is, you know, a really compelling, menu, and it's a, it's a great recipe that we think we can we can lean into. We're gonna spend more on content, But you're not gonna see us come in and go, alright. We're spending $5,000,000,000 more. Because the first thing we're gonna see is we have so much rich content and so much nourishment as well as, you know, some some so much content that that's compatible or reaches different audiences that they don't reach, that the excitement is gonna be when we come together, let's take this car out for a ride. Let's see how this does.

We're gonna continue to spend. But don't expect us to to to come out and go, you know, a couple billion dollars more and off we go. No. We're gonna be measured. We're gonna be smart, and we're gonna be careful.

But we have we're we're gonna invest in in the streaming platform, but that's not that's not our only game. Our game is to create a business that generates sustainable growth, that's global in nature, that generates a lot of free cash flow. And we're quite confident in the numbers that we've given you. If if something changes in the next year and a half that where we think there's a substantial amount of opportunity for long term growth and long term economics, we'll come back to you with it. But we're quite comfortable.

Gunnar?

Speaker 3

No. I I think you said it all, David. And and to you to the point about priorities, our priority is on making the right decisions and leaving no opportunity untouched, but we will make those decisions, as David said, in the interest of sort of long term, you know, value for the for the firm here and, you know, long term sustainable growth. So, you know, that that's all I can say, but we will definitely, you know, touch every opportunity.

Speaker 1

That's perfect. Thank you both.

Speaker 0

Thank you. And that concludes Discovery Inc. Fourth quarter twenty twenty one earnings conference call. You may now disconnect.