Warner Bros. Discovery, Inc. — 2024 Q1

Thanks so much, Bryan. The bundle with Netflix is doing much better than expected with Verizon. And so I think it's another example where there's more strength together, and it's really driven by the need for a change in the consumer experience. We see it in all of our studies and then even on a practical basis talking to consumers. And so it's just much more efficient.

Yes. I mean, Bryan, just the only other thing I'd add, on pricing, as Dave said, we'll come out with more specific, but you should imagine it will be priced very attractively for the consumer. As a reference point, it's really working off of the Max stand-alone and the existing Disney+ and Hulu package bundle. So as a comparative basis, it will be priced very attractively for consumers.

Yes. And one of the advantages that we're seeing is by having 10 to 12 channels in every country and free-to-air and local content all over the world, we have relationships with all these distributors. And when you saw deals here in the U.S., this innovative deal that Bob and Chris did with Charter and Disney, those are deals outside the U.S. that you'll see replicated or already happening, and you'll see it as we launch, that allow for a real advantage for the fact that we're already in business. A real advantage that not only are we in business, but that consumers are watching our content. And we'll be transitioning a lot of those consumers to watching us through our Max product.

This is Kutgun Maral on for Vijay. If I could just follow up on the Disney bundle, maybe a high-level question. If we take a step back, the content companies entered distribution years ago with streaming. And now we're kind of going through this rebundling base of these services. Between the Disney bundle as well as the separate sports JV you announced a while back with Disney and Fox, you're clearly placing yourself in a key position in this industry transition.

Well, we've been saying for the last 2 years that the consumer experience is a real challenge. And ultimately, you've got to follow the consumer. Our philosophy is create the best consumer experience, and that ultimately, the consumer will go to the best content, the best storytelling in the world.

Yes. Just the only thing I'd add is, look, I think what happened in the 2010s is the industry went down a very dangerous financial path of trying to invest in every type of content in every genre to try and be something for everyone. And at the end of the day, we know where that led us to. We're now getting back to all being great at what we do and swim in the lanes that we were great at. Disney, obviously, is incomparable and world leader in kids and family. We are world leaders in premium dramas, scripted drama, comedy, nonfiction verticals. And we can get back to investing and prioritizing our lanes and our key content, they can do theirs.

It does feel like this is a moment in terms of what the next year or 2 years will bring. I said a while back that this is a generational disruption. I went through a generation -- a disruption not quite as big as this, but when my career started, when the cable business was getting started, that was a real disruption.

Maybe sort of following up on, David, on what you just said. The last 2 years, as you well know, you've gone through a restructuring while navigating through the massive industry changes. And as you look out over the next 2 years and you said there would be some -- the industry would restructure, but from a WBD point of view, what do you think the biggest surprises will be? How different will the company look?

Thanks, Jessica. Look, we've spent the last 2 years at the very essence has been -- the investment community uses the word synergy. The way we looked at it is we had an opportunity to restructure each business to start over. What does this business look like if we started today, to build a business that will be successful for the future. We did that at Warner Bros. Motion Picture. We did that at Disney. We did at DC. We did that with Max and HBO. We did it with our channels business, our production business on Warner Bros. Television.

the best content will win. And we have to continue to tell the best stories.

Yes. I mean, look, for the Upfront, I think it's a little early. We definitely hope to continue some of the momentum that we've seen last year. I would also say that we're operating in a much more constructive environment this year than we did last year. So hopefully, that will be supportive.

Yes. When you think about the D2C business in the U.S., we need to fix the consumer experience and I think these bundling structures that we've come up with in sports and with Disney will help to do that.

Well, it's certainly beginning to shine through, but I think there's a lot more opportunity. The thing to keep in mind here is we've got to differentiate between the traditional linear and D2C advertising.

Thanks, Kannan. On your first question, look, we think this proposition of Disney+, Hulu and Max is incredibly robust and compelling. You've got truly -- when we think about a lot of what's happened, as I said earlier, around people trying to figure out whether every individual company could invest sufficiently to deliver something great for everyone in the household, the reality is we've, I think, all learned somewhat painfully that the expense and frankly the excess of content from a consumer standpoint was way too much.

Yes. Look, I mean, in terms of replacing linear ad sales, again, one important point that I want to reiterate, and we've made this a couple of times before, I think it's too simplistic to just look at, okay, we're doing, whatever, $7 billion of linear advertising today and that's going to transition elsewhere because the viewership is transitioning elsewhere. I do believe that we're going to see a very, very long period of coexistence. And feedback we're getting from the marketplace and the success we're seeing in our ad sales go-to-market, I think, supports that. So those environments are going to coexist.

We're only doing a 30-second spot or a 60-second spot. And for those that are purchasing ad-lite, I don't -- I think there's an expectation that there would be more advertising than that. It wouldn't be approaching any kind of significant density, but you could easily go up to 2 or 3 minutes, double or triple what we're doing now.

And if you look at the combined company, as we said in our prepared remarks, I mean, the combined company advertising trend is still down, obviously, with what we're seeing in linear. But it's gone from down 10% to down 7% and that's really driven by some of that support we're seeing in the streaming world.

Thanks, Rich. On the marketing question for the bundle, look, both parties will continue to market clearly their offerings. And obviously, if you think about the majority of the market spend, it's really related to content marketing. So each of us will still have responsibility and we'll continue to market our content on our -- from our individual companies. And those will be attributed to the Max service or the Disney+ service or the Hulu service.

And look, we're always looking for good content. We structured a deal a while back for South Park, which has been a great product for us. When NASCAR came available for the summer, we bought some NASCAR. We have hockey, which we've done and -- which we added in the last few years, we're having a lot of success with. So any content company that we're -- we bought a movie output deal with A24.

Thanks. Look, churn is the -- you need to have a great product. You need to have great content. But the churn is just a killer in this business. And so we have been hyper-focused on it. And it's not one simple answer. But the churn is down dramatically and we measure it daily, weekly from when we launched this business. It's not in our target because our target is that it should be extremely low in the -- with a 2 handle. That would be -- that's when your business starts to be really healthy when you're below 3.

Yes. Well, I think, Steven, to David's point, the fact that up until we launched in LatAm, our ad-lite offering and SKU was only in the United States for HBO Max. It's a good example of where, as we look to partner with all sorts of distributors across the world, oftentimes you're right, there is pressure to do it at a price point that is more attractive and less costly to the partner.

This change of working with existing distributors is really meaningful. Because these distributors, cable operators, broadband players across Europe with the innovative deal that Chris did, what they're basically saying is that they want to take part. They want to be part of the content opportunity and the content economics in the new world.

And then, Steve, on the continuous improvement mindset, again, it's -- I think it's important to take a step back. The large part of this company and maybe the entire industry just was never very focused on financial discipline. We have dramatically changed that. We have a completely different mindset across the entire management team now. And that starts from the creatives who know that the creative stories need to be great, but we're also running a business. And we have so many different processes in place now and some of those pay dividends over time.

And one company really -- you really see it in the ability to market globally. You saw it with Barbie, Wonka, with dune: Two, with Godzilla. You saw it with House of the Dragon, The Last of Us. When we launch House of the Dragon again, every platform, every platform everywhere in the world will be promoting it. But it won't be just in spots, it will be all of our talent talking about what's coming up on Max.

one company and the ability to market globally like no one else.

And even in our growth business under JB and Casey, we're still focused on this. There's a difference between an investment and an expense. And there is -- it's not a coincidence that we're leading in terms of profitability while we're getting ready to significantly accelerate our growth over the next couple of years.