Ladies and gentlemen, thank you for standing by. Welcome to the Warner Bros. Discovery, Inc. First Quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Additionally, please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mr. Andrew Slabin, Executive Vice President, Global Investor Strategy. Sir, you may begin. Good morning and welcome to Warner Bros. Discovery's Q1 earnings call. With me today is David Zaslav, our President and Chief Executive Officer, and Gunnar Wiedenfels, our Chief Financial Officer. 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. 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-K for the year ended December 31, 2021 and our subsequent filings made with the U.S. Securities and Exchange Commission. You should have received a copy of our Q1 results. If not, please feel free to visit our website at ir.wbd.com. With that, let me turn the call over to David. Good morning, and thank you all for joining us. Two weeks ago, we closed our transformational merger and began our next chapter as Warner Bros. Discovery. As we begin the exciting work of bringing together the rich legacies of these two great companies, our mission is simple: To be the world's best storytellers with world-class products for consumers. It's been fantastic to finally have the teams working together, and I've loved having the opportunity to get time with the new leaders across WarnerMedia, as well as thousands of employees across key locations in the U.S. I couldn't be more impressed by the strong sense of motivation and excitement and opportunity to unleash the potential of the combined talent pool of this new great company. These last few months in our industry have been an important reminder that while technology will continue to empower consumers of video entertainment, the recipe for long-term success is still made up of a few key ingredients. Number one, world-class IP content that is loved all over the globe. Two, distribution of that content on every platform and device where consumers want to engage, whether it's theatrical or linear or streaming. Three, a balanced monetization model that optimizes the value of what we create and drives diversified revenue streams. Four, finally, durable and sustainable free cash flow generation. Warner Bros. Discovery emerges as a far more balanced and competitive company and uniquely positioned to deliver on these four critical ingredients. We have no religion about any one platform or window worse than other, and we intend to approach each and every decision through a lens of enhancing asset value against a set of financial returns. Our goal is to maximize long-term shareholder value and asset value, not just subs. We will not overspend to drive subscriber growth. Our focus is to invest in content and platforms that extend the life and return of our global IP and position us to drive greater returns out of each dollar of content spent than our peers, and to ultimately drive free cash flow. We will refine our capital allocation and content windowing decisions accordingly. We can maximize the distribution of our global IP in a number of ways, guided by simplicity and choice for consumers. In streaming, we have a massive opportunity to reach the widest possible addressable market by offering a range of tiers, all with the most compelling and complete portfolio of content. A premium and attractively priced ad-free direct-to-consumer product, a lower priced ad light tier, something we have had tremendous success with and is our highest ARPU product. In some very price-sensitive markets outside the United States, we can even offer an advertiser-only product. We have the ability to ring any number of cash registers, theatrical, gaming, premium home video, pay TV, and free-to-air broadcast, plus streaming. Now with 100 million collective subscribers, it is a growing and important complement to these existing and traditional avenues of monetization and represents true optionality that over time will drive our strategic decision-making. Given the depth of our content, decades of film and scripted and unscripted television series, many of the most iconic brands and franchises, including half of the MGM library, supported by a continuous pipeline of new production together with the world's news leader, CNN, and a large international offering of live sports. We have enormous flexibility in terms of how we monetize these assets. We benefit from a deep history of world-class content production, Warner Bros. Films, Warner Bros. Television, and HBO, true global leaders that are producing at scale, true content makers like Warner Bros. Discovery, with an ability to produce and control the content IP versus those that just write checks, are positioned best to win. As you've heard me say, we are not trying to win the direct-to-consumer spending war. To begin with, we firmly believe that two content companies coming together have unique advantages, including the largest film and television library from Warner, the largest domestic and international lifestyle library from Discovery, and significant global live sports and news. This strong foundational offering will allow us to invest and scale smartly and will uniquely position us in our drive to become a fully scaled global streaming leader. We come into this transformational moment with great creative momentum. Just to give you a glimpse, starting with the global success of The Batman at Warner Bros. Studios. At Warner Bros. Television, Ted Lasso and breakout hit series Abbott Elementary on ABC, which was just renewed for a second season. Of course, Chuck Lorre's unique and compelling content. To HBO Max, which is on such a roll, fresh off record viewing for HBO series Euphoria, Winning Time, The Gilded Age, and Barry. The hit Max originals And Just Like That, Peacemaker, and The Flight Attendant. In Europe, the Beijing Olympic Games on Discovery, Chip and Jo in the launch of Magnolia Network, and 90 Day is a real strong performer on Sunday nights, just to name a few. One of the company's unique assets is the linear network group. In 2021, taken together, we enjoyed the number one share in total television, total day in all key demos and P2+. We have the greatest brands, HGTV, Food Network, HBO, Discovery, CNN, NBA, March Madness, NHL, Magnolia, The Oprah Winfrey Network. Our balanced verticals and content genres across scripted, lifestyle, sports, and news provide us with significant opportunities to not only cross-promote for the benefit of the portfolio, but also to offer compelling reach in targeting campaigns for our advertising partners. I'll speak to this a little more in a moment, but this isn't just a domestic phenomenon. In LATAM, for example, we are now the number one or two pay TV programmer in every market, and we bolstered our position as the second-largest broadcaster in Europe. Again, we are excited about the strength of our sports portfolio and the optionality it gives the new company. We enjoyed our exciting March Madness and Final Four NBA regular season and what looks to be a strong playoffs at Turner and capping off our first season of the NHL and playoffs. Major League Baseball has just started to come together while having just completed a robust Olympic Games in Europe, as I noted. Lastly, CNN is once again setting the standard for groundbreaking and journalism-first news coverage. During critical moments, the world turns to CNN. At its core, CNN is the nation's premier news outlet and has the number one digital news service in the United States with 35 million unique monthly users. The heroic reporting out of the Ukraine reminds us all that CNN is the world's most impactful news platform, and for us, a true reputational asset. From a management perspective, we have brought together a strong leadership team in a streamlined structure to foster better command and control and strategic clarity and coordination across the entire company. We've just begun to hit the ground running with the teams and the broader organization. My focus is to foster a culture of collaboration and to embrace a singular focus around being the top home for the best and most diverse talent and creators to bring their stories to Warner Bros. Discovery. We will have our heads down across the company, and we'll have a more formalized and detailed outlook across our businesses to share in the coming months. Though in the course of initial planning, integration, and synergy capture, early action priority items for me will be the upfront. Like with Scripps, we are fortunate to have closed the transaction in time for this year's upfront marketplace. We expect our presentation on May 18th to be an important opportunity for the company to share the full suite of our combined network portfolio and in time for this year's upfront marketplace. We expect our presentation on May 18th to be an important opportunity for the company to share the full suite of our combined network portfolio, the top talent and personalities within the family, and the breadth of genres across series, specials, news, sports, streaming, and the best lifestyle content in the world. The combined strengths of both organizations' client relationships, advanced advertising, programmatic, sponsorships and direct-to-consumer, ad light streaming services all position the company with a unique hand. I have personally spent quite a bit of time with key advertisers and agencies, and I'm so impressed with the combined capability of our platforms and our ability to uniquely serve the needs of our clients, including integrating sports alongside our broad entertainment offerings. One offering, where before it was Discovery, Warner, and Sports, now as one, it's simpler and provides more value to advertisers. In many respects, we are building upon the momentum that Jon Steinlauf has built with Premier, bringing unduplicated broadcast equivalent reach and greater share to advertisers, helping us to secure a greater share of revenue. I remain very enthusiastic about the upside here and this multi-year opportunity. Direct-to-consumer. JB and his team are deeply involved in the early integration phase and go-to-market plans, having had very little interaction across the organizations during the pre-closing period. This will take some time, though key steps to identify and analyze technology proficiencies, subscriber concentration and overlap, content opportunities, marketing and pricing strategies are all underway. Content. Kathleen Finch on the network side, along with Casey, Channing, and Toby, are assessing the opportunity across the entire organization, and they are significant as drivers of both more efficient spend as well as revenue upside. Like direct to consumer, we'll have more to say in time, particularly on windowing as well as content sharing. Finally, synergies. We have been working hard for months and are now validating and executing against those 200+ work streams. The attack is strategic, operational, structural, and financial. We will clearly take swift and decisive action on certain items, as you saw last week with CNN+, while others will take time to formulate appropriate action plans. We've detailed a $3 billion+ cost synergy plan, and we're already on our way with coordinated efforts from our transformation office as to the waves over which this will unfold. Just 18 days in, we are as enthusiastic and excited as ever with the opportunity ahead to integrate and drive the new Warner Bros. Discovery. The leadership team is locking arms on our integration plans and long-term growth strategy, and we look forward to providing more detail on each of these in the coming months. I'll hand it over to Gunnar, after which he and I will answer some questions. Thank you, David, and good morning, everyone. What an exciting moment. It's great to finally be able to tackle the challenges and embrace the opportunities ahead as we begin the hard work to integrate WarnerMedia and Discovery. Please remember that today's call is predominantly meant to discuss Discovery's Q1 operating performance. Since as you know, our merger with WarnerMedia closed just after the end of Q1 on April 8. To the extent possible at this time, I will share some reflections on our early observations as well as WarnerMedia Q1 results that AT&T disclosed last week. Starting with a quick review of Q1 results for Discovery standalone. Discovery's first quarter U.S. advertising revenues were up 5% year-over-year. Our next-gen advertising products like Discovery+ and Discovery GO performed well, and we continued to see positive impact from last year's upfront, which helped to outpace delivery declines on the linear side. While the scatter market continues to be solid with pricing up over 30% versus upfront, visibility, not surprisingly, continues to remain limited given the current macro environment. For us, categories like auto, technology, and CPG are weaker versus last year, while travel, entertainment, and retail remain healthy. U.S. distribution revenues were up 11% year-over-year, largely driven by the growth of Discovery+ subscribers throughout 2021. Linear affiliate revenues were also up year-over-year as rate increases continued to outpace subscriber declines. Our fully distributed subscribers were down 4% as were total portfolio subscribers when correcting for the impact of the sale of our Great American Country network in early June last year. Turning to international, which I will discuss on a constant currency basis. Advertising grew 11% in the first quarter, in part helped by the Beijing Winter Olympic Games, as well as underlying momentum in certain key markets such as the U.K., Germany, and Latin America. That said, we did begin to see some limited impact from the conflict in Ukraine towards the end of the first quarter in markets such as Poland and Germany, as well as some macro headwinds similar to the U.S. While visibility remains limited in certain key European markets, at this moment, we expect Discovery standalone international advertising revenues to grow in a similar fashion with Q1, excluding the Olympics impact, which was a nice positive. At the moment, we're pacing up in those single digits. Distribution revenues increased 8% during the quarter, largely driven by continued growth of Discovery Plus, though note that we did not launch any new markets during the quarter as we previously outlined and in line with our strategic thinking coming into the closing of the merger. On the linear side, we continue to see healthy growth in LatAm, while pricing pressures in certain European markets remain a headwind. This also, in part, reflects hybrid affiliate deal structures which balance affiliate fees and B2C distribution. Furthermore, note that revenues from our Russia JV, which we announced we had exited, are recognized as distribution revenue. This resulted in a 100 basis point drag to distribution revenues during the quarter. I would also note that Discovery's exposure to Russia and Ukraine in total is less than 1% of revenues and 1%-2% of AOIBDA. Operating expenses were up 11% during the quarter, primarily due to the Olympics. Excluding the impact of the Olympics, OPEX declined by 2% year-over-year as lower marketing costs as compared to the elevated discovery+ launch spend last year were partially offset by higher content costs across our portfolio. Net net, we finished the quarter with $1.03 billion of AOIBDA, up 23% year-over-year, including a small negative impact from the Winter Olympics and roughly $170 million of investment losses. Net income for the quarter was $456 million, resulting in GAAP EPS of $0.69 per share. Now turning to some housekeeping items to consider for the quarter as you update your models. First, we recognized a $0.58 cents per share gain from the $15 billion notional interest rate hedges that we implemented last year. We unwound this hedge in mid-March in conjunction with the successful closing of our $30 billion debt offering. Second, the impact of PPA amortization during the first quarter was $0.49 per share. As I mentioned on our last earnings call, we decided to take a more conservative position and accelerate the amortization of purchased customer relationship intangibles. As a result of this, our Q1 D&A expense increased by $164 million year over year. Adjusted for the two items I noted, EPS would have been $0.60 per diluted share. Turning briefly to the WarnerMedia results that AT&T reported last week, which I'd note is based on how AT&T has historically reported the segment and which will not necessarily tie to carve-out financials or how we plan to segment the business going forward. We are working on Q1 carve-out financials for WarnerMedia, as well as updated pro forma financials for Warner Bros. Discovery, and we will have those disclosed before the end of the quarter. Sticking to the reported numbers for now, underlying performance at HBO Max during Q1 was healthy, with growth of 3 million net adds reflecting continued strength of the programming slate. In total, together with Discovery's 2 million net adds, the pro forma company added 5 million paid subscriptions during the quarter. Adding the two subscriber bases, we ended the quarter with just over 100 million global D2C subscribers. Though please note that we are still working through alignment of our subscriber definitions and the focus of our subscriber reporting going forward, after which we will have a more refined and detailed update when we report second quarter results. However, the operating results, as you have seen, were down in WarnerMedia's first quarter. The 33% decline versus prior year to $1.3 billion. Free cash flow was down even more, declining by $2.6 billion versus prior year, and more importantly, significantly negative in absolute terms. Again, this is for WarnerMedia in the AT&T segment structure and includes elements that are not part of Warner Bros. Discovery going forward. In my mind, there is both good and bad news in these results. Starting with the bad news, Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. Given that Q1 performance and previously unplanned projects in flight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. However, with a positive offset of a couple hundred million dollars on the Discovery side of the combined company. Opening leverage as a consequence of this, while still dependent on working capital adjustments that have yet to be finalized, is likely to be a notch higher, now estimated around 4.6x, give or take, and still well below the initially modeled 5x. Net net, being the first year of our integration, and as we've explained all along, 2022 will undoubtedly be a messy year with a lot of moving pieces and now a somewhat less favorable starting position in Q1. The good news, on the other hand, is that I also see more opportunity as I work through the numbers. There are certain investment initiatives underway in plain sight that I don't think have attractive enough return profiles. As such, with our new combined leadership team in place out of the gate, I feel very confident in our ability to rectify some of the drivers behind the business case deviations and some very quickly, with the CNN+ decision last week being exhibit A. While we're still early in our integration process and are still at the beginning stages of initiating our synergy as well as strategic and financial planning, we feel more confident than ever about achieving our $3 billion cost synergy target and believe there is a much greater opportunity off of the current baseline, and that target will ultimately prove conservative. To be clear, we remain fully committed and reiterate our financial targets for 2023, and I remain very confident that we are on track to achieve our target gross leverage of 2.5x-3x at the latest 24 months after closing. We are refining a more detailed bottoms-up combined budget and long-range plan, the key insights of which we look forward to sharing in the months ahead. Prior to that, I wanted to share some high-level priorities that we're digging into early on, as well as some initial financial and operational observations since close. Number one, content. I'm working very closely with our creative and financial leadership teams to examine the totality of our $23 billion+ of annual content spend to analyze the ROI of each dollar spent. The goal of this exercise is not to identify ways to reduce what we spend on content, but to harmonize processes and analytics so as to be more consistent and efficient in how we allocate our content spend across the entire global portfolio to optimize returns. Second, marketing. The combined company spends more than $5 billion each year on marketing, and that doesn't include the opportunity cost of cross-promoting assets across all of our platforms. We intend to drive for the highest level of financial discipline here to make sure that every dollar spent is purposeful and measured. This will prove to be an enormous opportunity for cost synergy capture across the globe and within each and every business line, given the significant overlap geographically and operationally. Lastly, working capital. Since I joined Discovery five years ago, a key focus area has been to improve working capital efficiency. This has been a critical part of the formula that has led to our free cash flow conversion rate being among the top end of our peers. Similarly, I believe we have a tremendous opportunity to continue improving working capital efficiency at Warner Bros. Discovery, operationally and structurally, and this will be a key ingredient in achieving our free cash flow conversion rate targets. As I stated at the beginning of my remarks, I am invigorated by the opportunity ahead to build a unique and truly remarkable media company centered around unparalleled IP and a balanced monetization model to drive sustainable profit and free cash flow growth. We're only 18 days in and are still at the very early stages of integration and refining our long-term strategy, and we look forward to sharing more about our plans in the coming months. The new combined management team is completely aligned around our philosophy to manage Warner Bros. Discovery with the highest level of professionalism, with diligent analysis and decision-making, accountability, and overarching coordination of our balanced portfolio of assets in the best interest of the company, focused on free cash flow and firm value more than anything else. Now, with that, I'd like to turn the call over to the operator, and David and I will be happy to take your questions. Thank you. Ladies and gentlemen, as a reminder, to ask a question, you will need to press star one on your telephone keypad. To withdraw your question, press the pound key. In the interest of time, please limit yourself to one question and one follow-up. Your first question comes from the line of Vijay Jayant with Evercore ISI. Your line's open. Good morning. Just wanted to get some perspective. Obviously, you know, you made some decisive decision on the CNN+, you know, shutting down. Are there a lot more opportunities across the Warner Bros. businesses that can result in material saving of costs going forward, that you've sort of seen, that you know could help the long-term cash flow story? Second, just for Gunnar, in terms of working capital and free cash flow. Obviously, this year there's gonna be a lot of puts and takes with cost to achieve and fees and so forth, and also the adjustments that came through the transaction with Warner Bros. You know, I think you paid $2.5 billion less than the original deal price. Any sense of all the puts and takes can help us with what the free cash flow trends can be given where you're starting from? Thanks. Sure, Vijay. Let me start with the last one, because I wanna make clear we're still working through our opening balance sheet and there's you know working capital adjustment work that's still in flight and I'd prefer to discuss the details of those results when we have all that fully baked and audited in hopefully a few weeks here. I think the bigger picture here is as we've said you know 2022 is gonna be noisy and you've mentioned some of the factors that are gonna flow through. If I take a step back here and just look at, you know, call it the past 15 months for WarnerMedia, sort of as a carve-out group, you know, we're looking at more than $40 billion of revenue and really, you know, virtually no free cash flow. Right or wrong, management has made a decision to invest a lot of, you know, the incoming funds. Into a number of investment initiatives. As I'm looking under the hood here, again, CNN+ is just one example, and I don't wanna go through sort of a list of specific examples, but there's a lot of, you know, chunky investments that are lacking what I would view as a solid, you know, analytical, financial foundation, and meeting the ROI hurdles that I would like to see for major investments. This is an opportunity. We're gonna be able to, you know, continue the initiatives that make a lot of sense and reallocate some funds or drop some cash to the bottom line. It's an opportunity. We're in the process of working through that. As I said, 2022, you know, very much, looks a little messier than probably what I had hoped for. For 2023, you know, I'm more encouraged than ever, and I think it's gonna be very clean. Another area that, you know, you may have picked up from David, a minute ago is sort of this point of not being religious about any of these decisions. We'll make decisions on the basis of the data that's available, and clean financial analysis. I think there's a ton of opportunity. You know, an example of that is if we're not gonna be in a particular country for a period of years, then we should be monetizing our content. As we've taken a look at the subscription platform and looking at HBO Max, which Casey is doing such a great job with, we're looking at the data, and you could see that there's a huge amount of content when you look at the wealth of the TV library and the motion picture library that's not being used at all on the subscription platform. Basically, what content is being used and valued on the subscription platform? How do you enhance that and drive that together with our existing content to reduce churn and drive growth? What's not being used on that subscription platform, and how do you monetize that in a way that's meaningful? Everything should be monetized. We own more content, more compelling IP than any other media company in the world. We have a strategic focus on a global platform that reaches people either through subscription only or ad light. But ultimately, whether it's through our existing platforms or through AVOD, we should be monetizing all the great content that we have. All right. Thanks so much. Next question. Your next question comes from the line of Kutgun Maral with RBC Capital Markets. Your line's open. Good morning, and thanks for taking the question. I wanna talk about streaming. The market's enthusiasm for the streaming business model has tapered off somewhat following one of your larger peers starting to see a notable deceleration in growth and calling out a number of headwinds that they're seeing to their subscriber trends. It's interesting to me because on the flip side, your most transformational and exciting days are probably still in front of you under your new combined portfolio. I think for all of us, it would be very helpful if you could help frame the opportunity you see ahead with streaming once more and whether or not we should be thinking about HBO Max discovery+ services a little bit differently than some of your peers. If ultimately your views on your DTC subscriber or ARPU trajectories have meaningfully shifted given what we're seeing elsewhere in the ecosystem? Thanks. Thanks so much. Look, I think it's a big benefit that we're a fully diversified company. We're the largest maker of content, and whether it's Ted Lasso or we have over 100 series that we're producing. More than 50% of those are for third parties, and we're generating a lot of revenue by being a great producer and maker of content. In addition, we have our traditional business which we're outperforming, and we're generating a lot of free cash flow. Having said that, the idea of Discovery coming together with Warner, with all of this great IP and being able to reach across the globe, from my perspective, remains an even bigger opportunity. You take a look at what Netflix has done over the last several years and what Disney has done. They've plowed a path, and behaviorally, people have gotten acclimated to buying content. They've got acclimated to watching content on different devices, how to move content around. Here comes this new company with this lane. The middle lane is wide open for us to accelerate with the broadest and most compelling IP in the world, whether it's DC or Hanna-Barbera, Looney Tunes, and Harry Potter, Game of Thrones, HBO. We put this all together with what we have at Discovery. When I say we're gonna be disciplined, you know, people are spending hours a day with discovery+. We have content, a huge library, about as big as Netflix. You put that together with the shock and awe of HBO Max. The first question for us is that looks like a pretty combustible, compelling, broad offering. In Europe, it's sports, it's nonfiction, it's entertainment, it's HBO. To get here in the U.S., it's all of the content which many months we're the leader for women in the U.S. with what we have. Our product is very low churn. We start with, I think, a very differentiated, very broad, very compelling offering that has IP that people know and that's attractive to everybody in the home. Our data says that the more people that use it, the more often they use it, the higher the growth and the lower the churn. We're very enthusiastic about driving down that lane with our ad light and subscription service. We also, you know, in this moment of uncertainty. Feel very strongly that this diversified company is gonna give us the ability to have that conviction and to have that discipline because we're generating huge free cash flow. You know, I've been at Discovery now for 15 years, and for those of you that have followed us, we're focused. Discovery was a free cash flow machine. We were generating over $3 billion in free cash flow for a long time with investing in our new media, which we did successfully, and we learned a lot. We still were generating almost $2.5 billion of free cash flow. Now we look at Warner generating $40 billion of revenue and almost no free cash flow. With all the great IP that they have, we bring this discipline and this focus on what are we investing in? Are we investing in investments that are gonna generate real return? Is this gonna help our subscriber growth? Is this going to be helpful to us in our platforms? We think that there's a real opportunity for us. Yeah, look, maybe, Kutgun, just to add from a financial model perspective, all we've seen over the past 18 days is in support of the thesis that we had developed jointly, you know, through the course of this deal originally. No change there. If anything, maybe more enthusiasm around sort of the ability to control one of the most important metrics, which is churn, by the combination of these two phenomenal content portfolios and the great work that the teams are doing here. I mean, just to, you know, answer this broader question about the streaming business model, remember that as we've been saying all along, a lot of the synergy potential is really gonna come from, you know, cost avoidance and elimination of, you know, planned expenses for the streaming business. I do think I continue to see a very, you know, attractive return model here. That's great. Thank you both. I'm sorry, if I could just squeeze one more in. I realize it's still very early days, but now that the deal is closed, can you talk maybe a bit more about top-line synergies? When you think about the combined company scale and IP portfolio, it's fairly massive. It doesn't really take a lot of heroic estimates across potential upside to linear advertising, to affiliate fees, to DTC to come up with a fairly needle-moving total top line synergy number, maybe, I don't know, $1 billion or $2 billion. Any updated thoughts on the opportunity with the top line synergies and the path to get there? Thanks. Thanks so much. You know, in the models that we've shared with you, we don't have any revenue synergy in there. I think it's opportunistic that we closed in advance of the upfront. It's also opportunistic that together we have a scaled product, and we're in the market already with an ad light product. We're the ones that were out there very early saying ad light looks really compelling because it's a great consumer proposition. They, our users, the churn was very low. We were doing between two and four minutes of advertising and generating $5-$6 in incremental revenue. As it scaled, we started to make more. We said very early on, we're gonna switch to offer consumers what they want, a lower priced opportunity with a small number of advertising. In addition, we're in the business of selling advertising, which gives us a great advantage. As others, and I expect they will over the next couple of years, get into the streaming ad light business, many will not have the infrastructure of teams locally on the ground or the ability to package ad light business. Many will not have the infrastructure of teams locally on the ground or the ability to package all the channels or free-to-air channels and markets across Europe together with that type of inventory. Finally, we... The opportunity of putting these two companies together, and I've been meeting with the top agencies last week and this week with Bruce Campbell and with Jon Steinlauf. We're talking about this exciting opportunity of what we bring to the table now, a leader in live sports, news, entertainment, and lifestyle. Taken together, we're bigger than any of the broadcasters. If you lay out the four broadcasters or you say now who are the five leading players in prime time in America, by any measure in terms of reach, the ability to get demographics, the quality of the IP, the amount of live content, the amount of sports, we're in the top three. By some measures, we're number one. I think that ability to offer that bouquet because every advertiser wants something different, who wants more sport, more entertainment, more news. Sport for us, particularly, where all the sports are locked in for the next several years. Next year, for the first time, all of the playoffs and the Stanley Cup of hockey will be on TNT. You have the NBA Finals, TNT. You have baseball, TNT. You have March Madness, TNT. We love that. We've been driving that hard to create value for advertisers throughout all of Europe. We hit every demo, and in terms of scale and opportunity for advertisers, we're very strong. We have the NBA playoffs, not the finals. The net-net is the advertisers we've spoken to and agencies are very excited about having this new fifth player in prime time. You know, we would argue the number one, two, or three player in prime time. The same is true for us scaling outside the U.S. to provide more opportunity to advertisers. Great. Let's take the next question, please. Your next question comes from the line of Jessica Reif Ehrlich with Bank of America Securities. Your line's open. Thank you. I have two questions. Can you talk a little bit about, I guess, there's no secret that there were tons of inefficiencies at the old WarnerMedia. How are you approaching the incentive structure under your management team versus prior owners? That's question one. I know you talked a little bit about advertising, but can you talk a little bit about the approach? It's scale yet, which you've talked about, but you also have a broader array of assets. From what I recall from the time, the old Time Warner days, news and sports were never sold with entertainment. This seems like the first time all of these assets will go under one sales team. Also you'll have more, like, more platforms to sell. I guess, are you selling... It sounds like you're selling the advertising for DTC within all of this at the upfront. You know, can you just talk about that and your approach? It obviously will show up in Q4 of this year, but any opportunity even before that in scatter. Thanks. Thanks, Jessica. You're right. I mean, it was our number one thing is how do we service clients with simplicity, one stop? We've restructured, and in these advertising facing meetings, we've already gone out to agencies and advertisers. It is simpler because it's before it was sports, it was Warner Entertainment, and it was Discovery. Now it's all in one. As you said, we also have all of this digital inventory, which is in great demand, whether it's Bleacher or whether it's cnn.com, which is the largest dot com, the largest site for news in America, together with the ad light product on discovery+, together with the ad light product with HBO Max, and all of our other digital assets. It's one place to get the broadest demographics and all the different types of content that an advertiser can want. Steinlauf and Bruce can sit down with an advertiser and address really whatever need they have, but sit down at the table as having the largest reach or close in the marketplace and the broadest scale of diverse content. I think it puts us in a very good place to service advertisers. Gunnar? Yeah. On your first question, Jessica, we're obviously, you know, in the early innings here, but one thing that I can clearly say is that we're going to set incentives that are reflecting the balanced nature of the portfolio, as opposed to, for example, sort of incentivizing everyone across the company just for a subscriber goal. We gotta reflect the best interest of the entire corporation in incentives and make sure that people actually have an ability to impact what they're getting paid for. One theme that I think is gonna cut across here is that we'll work hard on coordinating across the different business units to make sure that assumptions you know tie into each other as opposed to sort of you know our focus on individual business units. This is gonna evolve over the course of the next 12 months, but that's sort of the high level philosophy here. Gunnar, can I just ask a quick follow-up? When you said that there was a shortfall on the part of WarnerMedia of $500 million, where does that come from? Jessica, as I told you, everything I'm saying here is on the basis of what AT&T disclosed publicly and then some internal management reporting. I do not have sort of a fully audited set of WarnerMedia financials. I don't wanna go into any kind of detail here, but you know, just take that you know, aggregate operating profit number, and that's essentially $500 million lower, what I'm seeing today for the full year, than you know, what we put in our management case that was disclosed in the S-4. Just one follow-up that I think is gonna be interesting for next year in terms of sports. It'll be the first year that all the playoffs for a major U.S. sport are on cable, be it whether the hockey will be on ESPN and will be on TNT. That's all the playoffs will be on us and ESPN. Thank you. All right. Your next question comes from the Next question. Your next question comes from the line of Bryan Kraft with Deutsche Bank. Your line's open. Hi. Good morning. I had two, if you don't mind. So first, just wanna ask you about the timing for the relaunch of your direct-to-consumer strategy and products. Is that something that could happen by the end of the year? In the meantime, how are you managing that business? Are you gonna continue to invest in marketing and growing HBO Max, or will you be taking your foot off the gas marketing there? Separately, just wanna ask you how you're thinking about the challenges and the opportunities presented by account sharing. Do you see the kind of opportunity that Netflix sees in tightening that up and trying to monetize it? You know, is that something that you need to focus on in the next couple of years? Is that something that is, you know, maybe more of a longer term focus for you? Thank you. Yeah, Brian, thank you. Look, when it comes to the timing for the relaunch, again, I don't wanna make any new commitments here. The team is working hard right now, you know, as one combined team to hammer out the exact cadence here. We will, you know, come back to you all once we have a fully baked firm plan here. What I can say about the interim period here is we're not changing our mindset. The priority for the team is to sort of rally behind that integrated product, and at the same time, we'll continue to be very thoughtful about our spend. We will not launch any new markets for the time being. We will not sort of chase aggressively behind subscriber growth as long as we are working on this, you know, priority one, which is getting these products together. That said, you know, all I've seen so far, you know, makes me very enthusiastic about the opportunity of the combined product. Got a great cadence of content coming to the market here. House of the Dragon for third quarter, I think is gonna be exciting global phenomenon. Feel very good about it, but we'll continually be very thoughtful as we have been, you know, going into this into closing this merger here. I mean, it's mission central that we think both of these products together, the bouquet of content that we provide, the wealth of content, the diversity of content, the content that's known around the globe, the sooner we believe that that's gonna be a combustible product that we could really drive around the world. The sooner we can get it launched, but we wanna get it right. It's critical because we could have a record-breaking number of people watching Euphoria, but we wanna make sure that when they finish Euphoria, if we have the goods, if we have all this great content on, that we have an ability to recommend to people, "You just finished Euphoria. Here's the other eight shows that you would love, whether it's Chip and Jo, whether it's Oprah, whether it's 90 Day Fiancé, or whether it's Minx or another great HBO Max series. We have some work to do on the platform itself, that will be significant. We also think that one of the big opportunities here is gonna be churn reduction. There's meaningful churn on HBO Max, much higher than the churn that we have seen. The ability for us to come together is part of one of the theses here that managing churn, and we've seen this because we've been at it in Europe for eight years. As you begin to manage churn in a meaningful way, that provides, you know, a real meaningful growth. Maybe, Bryan, on the password sharing point, as you may have heard before, both from us and the HBO Max team, that there's a process in place, there's a dedicated team, you know, I would just say, that this is not a rampant problem here. In fact, I think it's a small number of cases where we see a high risk of that sharing activity happening. Great. Thank you. Our next question comes from the line of Rich Greenfield with LightShed Partners. Your line's open. Hi. Thanks for taking the question. You know, there's a quote, David, from former HBO CEO, Richard Plepler, that more is not better, but better is better. I'm... You know, I know you've sort of talked about you're not trying to win the sort of content production arms race. As you sort of think about the HBO Max strategy, does broadening HBO to HBO Max even make sense? Like, should HBO just stick to the HBO ethos of like, we all know what an HBO show is, like Succession. Should it be broader? You just mentioned things like 90 Day Fiancé, et cetera. Like, should Discovery and CNN content really be in there? Or is HBO such a great product as it is that expanding it to be more actually doesn't make sense? I'd love sort of just how do you think about that, and how do you evaluate, especially given what just happened with sort of Netflix and Disney both sort of realizing they have to do advertising and that, you know, some of their content may not be generating the type of sub growth that they had hoped for previously? Thanks, Rich. It actually makes perfect sense because what you need is a diversity of content for everybody in the home. You know, they may come in for Euphoria, but our research shows that people watch Euphoria, their favorite second show to watch is 90 Day Fiancé. Having a diversity of content, there's a reason why people are spending hours with discovery+ 'cause there's a. They watch discovery+ at different times of the day. You know, the same people that are watching Julia, you know, a great new series, or are watching Gilded Age, they're turning around and they're watching Big Bang Theory and they're watching Friends. That's why HBO Max has been able to continue to grow so aggressively. When you put all of this diversity of content together, there's content for kids, there's content for teens, it's basically everybody in the family. Why would you go anywhere else? We have all the movies, we have all the library content that you want, and I think better is better. That was the point I was trying to make, that if we have, if Casey and the HBO team, who I spent a bunch of time with this past week, extraordinarily talented team. They've been together, the leadership, for more than 15 years, all of them. They have a system. You know, it reminds me of the Disney, Alan Horn, Bob Iger, the way that they were able to really outperform the market, Kevin Feige, Kennedy, they were able to outperform the market with motion pictures for a period of years. You look at the way they focus on quality, whether it's Julia, Winning Time, Gilded Age, Euphoria, Flight Attendant, And Just Like That. Barry, they just launched. This is an ability to really own kind of the cultural importance and the idea that just doing more shows. You look at HBO right now, what it really needs is precisely what we have. That when they're finished with watching Winning Time, they can go and watch Friends or watch Big Bang or watch their favorite movie or go over and watch Oprah or watch some TLC shows just for fun. We believe, and we see this in Europe, where we tried to offer. We thought that the answer was just to offer niche high quality, that you get high-quality shock-and-awe content together with a lot of nutrition, in our case in Europe, together with sport, and you offer something that everybody in the family uses, and the churn goes way down. It's much harder to churn out of a product when your kids use it or your significant other uses it or your mom and dad are watching, but also if you find yourself watching it more often. I think it's precisely why we did this deal, and I think everything tells us that it's gonna make us stronger and more compelling because of the breadth of the quality menu of IP that we have. As you think about that, how does that impact the, you know, obviously, as the streaming product becomes more robust and you put more of your energy there, how should we be thinking about what happens, the trajectory of sort of Turner Discovery, the legacy cable network business? Like, how do you balance that, the decline of that business versus the growth of the other? Like, especially I know it's 18 days in, but how are you thinking about that sort of trade-off? Well, first of all, we've been growing our traditional business. We recognize that 4% of subscribers are down and viewership on the platform is down. When our competitors are taking content off of that platform constantly, it gives them an opening for us where we're doing a lot of original content. We're obviously all original on CNN. Sports is live and tuned in. We're doing original on Food, on Home, on Discovery. We see it outside the U.S. Long term, there's no question that the business is challenging. CPMs are increasing. Advertisers still are looking for. They're chasing and chasing for inventory because it's the most effective inventory in long form video. Look, remember broadcast for a period of 20 years was declining and CPMs were increasing. You know, I was at NBC in the mid-1990s when Welch was saying, "This can't continue. We can't have smaller and smaller audiences and make more and more money." I think he was right or maybe he'll be right eventually, but it's almost 30 years later, and the advertisers are still paying more than the hurdle rate of decline. We will be leaning in with efficiencies and effectiveness to our traditional business, which we think generates an awful lot of free cash flow. We'll be leaning in as a maker at Warner Bros. Television, where we're selling, we're an arms dealer, and we can sell content, and we're selling because we're the best producer of content, we're selling content and getting prices in bidding wars to get that content, and we'll continue to do that. right down that middle lane, we'll be building that important growth engine of starting with HBO Max and discovery+ and what we have across Europe. You know? Finally, I'll just say that traditional platform. You know, the other night during the playoffs, we reached more than 50% of the people that were watching television across our platforms. As Gunnar said, there's a lot of money being spent to try and reach an audience. We now have the same or in many cases, the largest reach on television in the U.S., and the ability to use our own inventory to promote to and from all of our products and the efficiency of doing that and the cost savings of doing that, I think is a big plus for us. I as the one thing I would add, Rich, is just from the financial perspective. You know, we have a hand that I would not wanna trade with anyone else in the industry. The balanced portfolio has so many built-in financial hedges. Again, I happen to believe that the linear platform is gonna be around and will coexist with our other platforms for a very long time. You know, should it change, should that trend accelerate, you know, we're positioned with, you know, more than 100 million homes on the direct-to-consumer side. Should we see more price inflation on the content side, we'll be benefiting from that with, you know, one of the top TV studios in the world. There's a lot of, you know, flexibility and, you know, I think it's anyone's guess how some of these trends are developing, but I think we're as well positioned as anyone in this game. As the largest maker of content, we can change strategy. The world is changing. If it turns out that producing more content for ourselves because we're accelerating down that middle lane as a global direct-to-consumer business, that, we're not gonna have to go write a lot of checks to others to get the best content because we have the factory. Thank you very much, guys. Your last question comes from the line of Steven Cahall with Wells Fargo. Your line's open. Thank you. I just wanted to ask about a couple of WarnerMedia assets and sort of take your temperature on how you're thinking about what you can do with them. Maybe first is on the DC Universe. That seems like just an asset that's been under-managed by Warner, especially vis-a-vis what we've seen from some of the peers like Disney. Just wondering if you've had any time to get under the hood on DC and how you think about you might be able to use that with some of your global ambitions a little more successfully than the predecessor management team did. You know, with CNN, you've shut down CNN+. You know, we've seen this week that there are folks out there that'll pay a lot of money for news and news-type platforms. It doesn't seem like news is something that scales globally in the same way you talk about a lot of your other businesses and content. I'm just curious how core we should think about CNN within your long-term strategy? Thanks. Thanks, Stephen. Well, first let me start with news and CNN. I love the news business. We love the news business. CNN is the leader in news. They're the leader in global news. They're the best journalistic organization in the world, which they're showing. We've got a great new leader, Chris Licht, that's going in there. We're fully committed to it. We think that as you look at news around the world, it's never been more important. Here in the U.S. and around the world, there's mostly advocacy networks. The ability to provide journalistic great journalism and facts. Those two elements are the foundation of a civilized society. We need great journalism and great facts to make the right decisions. You know, advocacy networks that make a lot of money by generating and supporting an audience is a great business. CNN is in the business of journalism first, and that's what we're gonna fight for. It's also as importantly it's a really good business because we own it. When it comes to our entertainment business, whether it's DC or Harry Potter or Hanna-Barbera, that's IP that we own. When it comes to sports, we're very careful about sports. The TNT and Warner team was clever about getting long-term rights, which we're gonna get a lot of benefit from. Sports are rented and news is scalable. We are already in Europe, and the ability to take CNN around the world more aggressively and own that and the value of that, because when people get up every day, you know, there's lots of entertainment content they wanna see. But as human beings, we wake up, are we okay? And then what's going on in the world? Being able to own that with the greatest brand in news is really compelling. We're committed to it. We think it's a differentiator. We see already in Europe that when we put it together on our subscription platform, that people come to it often, it reduces churn, and it increases appeal. Finally, I think cnn.com is a new media asset. People are looking at news on their devices, and we're the leading place that they're going for news. We're pushing breaking news to people on their devices, on every device. That creates a real connection. When people see CNN, and they see that on their device, it's meaningful. Chris is gonna start his journey in the next week or two. I'm watching CNN. I think we all are. It's a treasure. What Ted Turner tried to create is something that is really meaningful, and we take that seriously. It's a solemn moment with the war in Ukraine, but ultimately, when there are war trials, the exhibit A, B, C and D will be the great work of the war correspondents that are risking their lives to get what's going on there on video, and in camera. It's probably what differentiates this war from almost any other. It's probably one of the reasons that's galvanized NATO and galvanized the world on what's going on because of the work that CNN has done. We're fully committed. On DC, I would just say we think that DC is an extraordinary opportunity. Batman, Superman, two of the biggest brands in the world, maybe one and two, maybe one and three. So I think there's over 100 characters. Let's just say that we're gonna focus very hard on building a long-term plan. Batman was just very successful. It was also very successful on the platform when it dropped this past week, which I think is just one piece of data, but it's a very good sign. I've been saying for a very long time, owning Warner Bros. Pictures together with a streaming service, together with a big factory maker of quality content in Warner Bros. Television, together with the largest traditional media business, global business, is a great recipe and a very balanced attack. There was a question about whether opening a big movie should we really collapse the entire motion picture business on streaming? I think I've been saying no, but I think now the data is starting to show no way. That when you open a movie in the theaters, it has a whole stream of monetization, but more importantly, it's marketed and it builds a brand. When it does go to the streaming service, there's a view that that has a higher quality, that benefits the streaming service. That's been my theory. I think Batman, the early data is that Batman did extremely well in generating viewership and in generating interest, even though it was in the movie theaters first. I think that's a great sign for the motion picture business. I think the motion picture business is still where you tell the most compelling global stories because you're with other people, and it's that big screen, and it's magic. It also gives us a chance to attract the greatest and most compelling talent because that's where you fight over it at the top of the ecosystem, and that's the motion picture business. We have Warner Bros., and we're excited about it. Thanks. Thank you. That concludes Warner Bros. Discovery, Inc.'s first quarter 2022 earnings conference call. You may now disconnect.