Great to have Steve Tomsic back, CFO of Fox. Welcome. Thanks for having us. Great to see you in person! Exactly. After our last one which was virtual. Been novel. So let's just start with the kind of a strategy question. The industry's gone through so much change since New Fox emerged in 2019. I mean, we've gone through COVID, we've had significant declines in the pay-TV universe in those, the last three or four years. the industry's pivoting to direct-to-consumer or streaming. There's been, or maybe should be consolidation, more consolidation. Obviously a bigger focus on profitability and streaming, as opposed to just subs. So, I mean, I could go on and on, but given all of the changes that have happened since your new company was formed, how does that inform your strategy? Has it changed at all? No. And you, you add all of those secular changes to what's happening macro, and you add to that the geopolitical environment, and it's been a very tumultuous 4.5 years since we split, right? So our strategy, we think our strategy is uniquely advantaged, and it's the same strategy that we had when we separated the company. So the logic in separating the company was to SVOD needed scale, and SVOD is a different distribution mechanism, versus sort of the content that we have, which is more linear live. And so as part of the Disney transaction, we created a company with Disney, with the combination of 21st Century Fox assets that allowed Disney to compete on the SVOD stage in a really, really major way, and they've gone ahead and done that. The parallel with that was that it enabled Fox to focus in on the things that sort of were core to the linear bundle, but also core to sort of the cultural conversation in the country, whether it be live sports and live news. And so we're focused in on that core and have had amazing success in driving audience and in driving monetization. And so you look at it at the end of a 4.5-year period with all the things that are going on in the industry, as well as all the things that are going on macro, we delivered our best-ever year in terms of revenue last year and best-ever year in terms of EBITDA. So revenue up 7%, EBITDA up 8%. While we're focusing in on the core, we're building around our adjacencies, so building from where we have strength. So in sports, we've developed really, really significant investments in sports betting. We've created the USFL, which gives us sort of more legs to the stool in terms of a sports franchise. In news, you've seen the Fox News Channel go from being just a narrow linear channel to what we now call Fox News Media. So you have News and Business as linear channels. You've got a really significant sort of website, both from audience as well as monetization. You've got Nation, you've got Weather, you've got Audio, you've got Books. And then when we look at the other pieces to our business, we had an entertainment business that obviously had a challenging, competitive environment, given how much of a shift to SVOD that we've seen in entertainment. So we've pivoted what we've done with entertainment, making bets on the verticals that we think we can win in, so things like food or pop culture with Ramsay and TMZ, respectively. And then from a macro perspective, with respect to entertainment, we invested in Tubi, which gives us what we believe to be the digital sort of broadcast network of the future on a free, advertising-supported basis. And Tubi's absolutely flying at the moment and has become as big as the national entertainment network. So the strategy that we had when we first launched the company 4.5 years ago probably remains more valid than ever, given sort of the value of our concentrated assets, and the execution has been fantastic when we look at sort of all the key KPIs and how they then funnel into financial metrics. And you look at that, and then it's that sort of exposes itself in terms of the strength of the balance sheet that we have, right? It's a fortress of a balance sheet, which gives us lots of optionality with respect to capital allocation going forward. Right. So you, of all companies, are the most exposed to the, to the linear universe, and Charter took a very unusual public stance last week stating the video distribution model needs to change. so a couple of questions in there, like, do you agree with this, or what would your response be to that? like, what's the Fox view of how the system evolves over the next five years? So I think that was a really interesting dispute, and I won't comment specifically on the dispute 'cause I'm not involved in it. But I think pay TV, writ large, is in a state of transition. I think if you look. You go back to sort of what is being served up to the consumer, and I think right now it's suboptimal, both on the linear side as well as the digital side. And I can see a world where, like the Charter deal, in some respects, tries to converge linear sort of video assets that are best transmitted sort of on a linear basis, as well as bringing in the blend of digital with the addition of things like Disney+ and ESPN+ to their bundle. One of our bugbears in terms of being. In sort of, at the moment, exclusive to the linear bundle, is the fact that the linear bundle has expanded in terms of channels, and the price points continuing to expand, which makes it difficult for the consumer to sort of continue to afford that. On the other side, on the digital side, you've got this proliferation and fragmentation of D2C services, which are equally unfriendly to consumers, right? And particularly when you aggregate the prices of those. And so I think where we want to get to is some sort of combination of using linear, where linear is most relevant, particularly for sports and news. With respect to us, we are two of the top five networks in the country, and so, we would expect our assets - and it goes back to our focus strategy of our assets being carried on multiple platforms. It's just from a Fox perspective, getting a product that is much more friendly to the consumer, both in terms of price and what's in the offering, is super important, because we've got the confidence that our content is going to be carried in any mass market consumer proposition. So what we want to get right is the consumer proposition, and whether that's a linear only or a combination between digital-linear and digital delivered sort of assets is we're sort of ambivalent. We're not defined by sort of linear carriage. We know that our content will find a home wherever that sort of distribution footprint works. Right. but you still are very committed to that Linear bundles, and you've gotten favorable rates because you've been you're not diluting your content. Across so many platforms, but others are. And so doesn't that, like, concern you, that it just disrupts the entire system, that you could be negatively impacted because of what others are doing, not necessarily what you're doing? I don't think what others are doing from sort of disruptive behavior is anything new. I think when we look at the choices we've made with respect to distribution, we start with, well, how does the consumer want to receive our content? And right here, right now, the most efficient, effective way for a consumer to receive sports and news is still in the bundle. The best way that we monetize our content remains in the bundle. That may change over time, and we'll adapt to that. But we still think that a bundled offering to the consumer, where sport and news will become the bedrock of that, is the best way to get to the consumer. so the interesting thing about the Charter Disney resolution is, like, some people think it really may stem losses because so much is- Perhaps. Contained. so like, I guess that's the question. Like, what's your view? Does it stem the losses, or does the current trajectory of pay-TV declines continue? Like, how? Do you have a house view? How do your negotiations. Like, how do your conversations change in the next round? So our negotiations probably don't change because we don't have sort of a bet each way on our content, right? At the moment, we are sort of dedicated partners with linear distributors at the moment. The fact that our content is so coveted by those distributors, as well as the end consumer, means that as others have bets each way, it's incumbent on us to get a higher share of wallet from those distributors in order to justify the fact that we remain in that bundle. But I've no doubt that there'll be sort of more modernized bundles. Our hope is that, if Charter says that it achieved all of its commercial objectives in the Disney transaction, our hope is that that is reflected in the way they go to market, the way they price their video offering, and ultimately in the sub trajectory that we see from them, as well as the entire industry. I don't think we're holding out for it. Our expectation is that subs continue to decline. But we would hope that this starts to sort of stem that tide of decline. and on the sports side, there's been a lot of talk about sports going directly to consumer, and ESPN+ is bundled in this resolution. so and Warner Bros. has said that they'll introduce sports into Max very soon. So what is the Fox point of view on the sports bundle, given your strong portfolio? So the delivery of sports and the, and the exploitation of sports rights in America is different to other markets, right? So you don't have, No one has a monopoly on any one sport, and no one certainly has a monopoly across all of sports. And so if somebody goes it alone from a sports perspective, the sports fan is going to feel unsatisfied by that offering in and of itself. There are other models internationally. So my home country in Australia has a model called Kayo, which is the conglomeration of a lot of different sports providers or sports networks that fold under the umbrella of an overall sports-delivered service. But the way that sport is, the way that service is delivered and the pricing of that service is complementary to the sort of the core bundle. And so I'm more skeptical of any individual provider going D2C with sports, and that being an enormous subscriber opportunity or revenue opportunity, because if you're a sports fan, you want more than just Monday Night Football, right? You want Thursday, Sunday, Sunday night. So and if you're a sports fan, you probably want more than just the NFL. And in order to be able to capture all of that, you're having to aggregate across a number of different providers, which when you start to add up the price points, 'cause sports is expensive. It's by its very nature, it's expensive. And so when you add up the cost of being able to capture that at a retail level. You're actually got better value in being able to consume that through the bundle, and probably even better value as that bundle sort of continues to evolve to being a much more contemporary kind of service. And so I can see a world where the ESPNs of this world do go D2C, but I'm not sure how impactful that will be for us or the entire industry. If there is the emergence of some sort of sports bundle that is across different network providers, then the first port of call is gonna be Fox, right? In the sense in terms of people wanting to aggregate our content with their service, just given how strong our sports offering is. Right. So let's go into your current trends, starting with the distribution. We already talked about pay TV sub declines, which have accelerated. We'll see what happens post this agreement. What offsets do you have to cushion the blow of lower of declining subs? So we're seeing declining subs since the emergence of Fox, and that's continued to be the case. What we've endeavored to do and been successful in doing is being able to get higher share of wallet from the distributors, which we see in terms of affiliate rate pricing, which has more than offset the subscriber declines, and we would expect that to be able to continue to drive industry-leading pricing across our networks. Our networks are only getting stronger and more impactful from a consumer perspective, and so I think that's the main offset for us. Now, we'll see how the bundle develops and whether that ameliorates the rate of loss in terms of subs, but we would continue to expect to see overall affiliate revenue growth. You should we've got through a third of our affiliate renewals last year. We've got another third this year that we're well on the way of doing already in the course of this fiscal year. We do that without sort of one of our distribution partners calling for an analyst call to talk about the acrimony. So we're naturally aligned with our distribution partners, and so we get things done. We do it quietly, and you see it come through in the P&L. And so we're pretty proud of the achievements. You'll see us continue to grow affiliate revenue. I think in terms of this fiscal year we're in, you should expect to see that in the second half of our fiscal year, the year ending June 2024, and you should expect it to continue to be biased towards our TV segment. So turning to advertising, are we at the point yet where brands are starting to return to the market, since the recession we've all been waiting for, may never happen? It's like the most called for recession that just, just is not appearing. so is it paralyzing the market because everyone's waiting for it? Like, what what do you, what do you think, and what are you seeing? We're different. I missed what Gunnar said about the advertising environment. So looking at our book, actually, not much has changed since our earnings call in August, right? So the bid for sports remains remarkably strong, right? There's no notion of recession from an advertising perspective in sports. So we saw that in terms of the cash sellout on Women's World Cup. We've seen that extend into MLB, we've seen that extend into college football, and we're seeing it in NFL. So sports bid remains exceptionally strong. Entertainment, we took a lot of risk off the table in terms of upfronts and being able to commit volume there. The scatter feels like it's just finding its way. I think from a scatter perspective, entertainment's linear entertainment for us is a relatively small part of our book. So what we're seeing there is people I think advertisers are still waiting to see where schedules finish up with respect to the strikes, and sort of will place their money once there's more certainty around that. News, there's a mix of factors going on. So from news, we've got the headwind of we're comping against higher ratings this time last year than we have this time this year. And we're comping against. We talked about this for at least the last two and perhaps three quarters. Direct response pricing has stabilized on a sequential quarter basis, but on a comparison versus prior year, is still down, which is what we've seen over the last couple of quarters. So you should expect that to be a headwind for us from a news perspective. National news has been pretty solid, and with the revamp of our prime time lineup, we've seen a lot more advertisers sort of lean into prime time news for us, which is really encouraging. And then the, sort of from a local perspective, we're obviously comping against a very significant midterm political collect last year. The base market is up. It's being driven by things like auto, but then there are some categories where there's natural headwinds, so whether that be retail, betting, which is where the money's moved from local to national. And then the final, not the final piece, but one of our most exciting pieces of the advertising puzzle for us is Tubi, which continues to grow like a weed for us. And I'm sure you want to get into that over the course of the discussion, Jessica. So let's start with Tubi, on Tubi- Then go to news. But on tubi like, it, it has done incredibly well, surprisingly. it's just really been very strong. Surprising for you. Well, I mean it was a relatively small player when you- Yes when you bought it, and it's, it's kind of and you've surpassed everybody else. Maybe that's- Mm-hmm A better way to say it. So, what role did Tubi play in the upfront discussions? And can you talk about how you see it evolving? Like, how important an asset can this be. Because you talked about it being your digital broadcast network. Mm-hmm. No, Tubi was like, for anybody who saw our Upfront, Tubi, Tubi was front and center in terms of the presentation at our Upfront, and it was also front and center in terms of our discussions with the agency. So we saw more money placed with Tubi than we've seen in prior years. But Tubi, Tubi is an important asset in our portfolio and is gonna continue to grow to be an even more important asset in our portfolio. So if you look at where we're at with Tubi, the fiscal year that we just closed, engagement was up more than 50%, and revenue growth was, I think, 33% for the year. And we're seeing, just in the quarter that we're almost at the end of now, we're seeing numbers on both of those metrics in similar kinds of zip codes. So we're really, really excited about the growth. People often ask whether Tubi is incremental to our book or are we just kind of reallocating dollars across other parts of the portfolio? It is absolutely incremental. In fact, when we compare national entertainment network advertising versus Tubi, Tubi's already surpassed that business, and so it is, it, it is a juggernaut. It is. When you look at the now, Nielsen does a ranking every month, and it, it's now level with HBO Max in terms of engagement. It's only gonna get bigger and stronger. Our monetization is running behind in terms of versus viewership, and so when you look at what the hard levers are to pull in terms of growing that asset, the hardest thing to do is get viewers and get them watching. The monetization will come, and the monetization is running behind because our fill rates are running lower than where we want them to be, and our CPMs are lower than where we want them to be. But of those three metrics that drive revenue, I'd prefer to have TVT flying and have our ad sales force catch up in terms of fill rate and CPM as opposed to the other. And so, we're very excited about the market opportunity for Tubi. The founder moved on. Farhad moved on, and we have Anjali Sud, who's literally a couple of weeks old in the company, and so she's gonna bring a fresh perspective, fresh ideas, to be able to take that asset to the next level. But sitting here now, we're excited about what that asset can do, and we'll continue to invest in it over the course of the next couple of years. Just one more question. Tubi. Sure. Just maybe follow up on what you just said. Sure. But I guess from an advertising perspective, what can you offer advertisers now that you couldn't before, besides more engagement? And how do you see that evolving over time? It's obviously a key asset that's going to grow. No, I think there's still room for us to better. We've kept. One of the mantras when we acquired Tubi was, "Let's keep the Tubi in Tubi," and so Tubi is run as its own kind of end-to-end business. We'd like to see more integration from a Tubi ad sales perspective with our sort of national ad sales force, in order to sort of bring an even more unified view of Tubi with sort of key advertisers, and we're well on the way to that. But with respect to advert, like, Tubi speaks to a different consumer than sort of traditional Fox, right? So Tubi is more an adjunct to people who are not in the bundle versus in the bundle, so you're immediately getting a different consumer there. Tubi speaks to a younger demographic and a more diverse demographic. So when we present to advertisers, we're able to present a much broader spectrum of consumers, going from sport and news, which skews traditional, to sort of Tubi, which skews much more contemporary. And so we think that's a powerful combination to go to market with. All of the advertising is under Marianne, so it's- But Tubi is still very independent in terms of from an advertising sales perspective. Okay, so moving on to Fox News. Mm-hmm. You've had a very active fiscal 2023, and 2024 looks like another busy year, but more hopefully because of the presidential election. Hundred percent Than something else. So, can you give us an update on how ratings are trending since you've made some of the primetime lineup changes? and is it already resulting in more advertising opportunities? So listen, we're really Like, we obviously had lineup changes. And we have always had. We've seen lineup changes in the past at Fox News, and for whatever reason, like, we are resolute in our belief that the brand and the all-encompassing nature of the Fox News service is far more impactful than any individual on in the lineup. And so we've proven that time and time again, but people continue to be skeptical of it. We introduced the new lineup, I think it was July fourteenth, and so when we look at when the previous lineup was in place versus what's happened since July fourteen, our sort of overall ratings, P2+, are up by a third. Our ratings in the demo, so 25-54, are over 50% higher than where they were. We're still down versus last year, but we're building into primary season, and we're gonna build into election season, and so that's only gonna grow. And then if you look at it, Jesse Watters, who took on the 8 P.M. slot, is now number one in prime time. Hannity's numbers continue to grow. Gutfeld's continued to grow, and people probably overly focused on the prime-time lineup, but if you look at across the day part, we are super strong. So The Five is consistently the number one-rated news hour across all of news, or across all of cable news. And so when you look at the strength of the linear asset, engagement on the digital properties continues to grow. We feel really confident about Fox News's prospects, sort of the remainder of this fiscal year and absolutely into next fiscal year when the presidential election will be on for young and old. So. Old and old. Right. so let's just talk a little bit about fiscal 2024. We went through all the reasons why fiscal 2023 was such a banner year for you. I mean, it's incredible, between the affiliate renewals, the Super Bowl, political, World Cup, et cetera, et cetera. so you're lapping a lot of this. You also have step-ups in NFL and Big Ten. Could you kind of walk us through puts and takes for fiscal 2024, how we should be thinking about it? It's one of the challenges in following us, 'cause what makes us so powerful as a consumer service is these massive events that we're front and center of. And we've just come off a super cycle of massive events in terms of midterm elections, a Super Bowl, and a Men's World Cup. And so some of those are more impactful top line versus bottom line. But Super Bowl, we wrote, I think, around $600 million gross in revenue, which is obviously not going to repeat itself in fiscal 2024. A lot less of that drops to the bottom line, just given how expensive Super Bowl is from a rights amortization perspective. From a football-soccer perspective, I should say, you've got the FIFA Men's World Cup, which washes with the FIFA Women's World Cup. But then towards the end of our fiscal, we've got our inaugural broadcast of the UEFA finals, and so that will be a negative from an EBITDA perspective. Staying with sports, we've just renovated our college sports rights, and so you should expect us to be able to get a bit of margin back from that, particularly in our cable segment there. And then you've got the tailwind of this continued ramp in affiliate revenue, which, as I said earlier, we expect to see more in the TV segment and more to when, towards the end of this fiscal year. So they're sort of what I'd call—obviously, political's not going to be there in this coming or the fiscal year that we're in now, and that was like a $260 million tailwind from a revenue perspective at our local stations. But we do expect the base to be a little bit better at our local TV stations, which ameliorates some of that loss. And then the other piece is what we call our investment businesses. So assets like Tubi, Nation, Weather, Credible, where there the overall envelope that we invest in those businesses, we expect to come down somewhat in fiscal 2024 versus fiscal 2023. Albeit within that portfolio, we are sort of maintaining our investment in Tubi, and we'll see how Tubi develops over the course of this year. But we sort of retain the right with Tubi to continue to invest even more- Right if we see the upside in the revenue. There's a lot going on, as usual. There's a ton going on, which is the frustrating thing. Like, people sort of—you can have up years, down years because of the nature of just these massive cyclical events for us. But when you look at it, it just goes to the underlying heart of the business and just how strong we are. So you were very early in sports betting, as a company, and you've recently announced plans to close Fox Bet. Can you give us the rationale behind that decision and whether we should interpret that as a strategic shift in how you're thinking about sports betting? It's absolutely not a strategic shift away from sports betting. We still remain super excited about the sports betting opportunity in this country. I think what it is, is a rationalization/consolidation of our interest in sports betting right now. And so when you look, for the uninitiated, when you look at our sports betting investments or quasi investments, Fox Bet was the smallest piece of it. And it was a virtual joint venture with Flutter, where they had funded it, and we had an option to buy in. It became clear to us that Flutter was more aligned in pushing FanDuel, thought FanDuel had a better opportunity in the market and really pushed ahead with FanDuel, and Fox Bet was always going to struggle to find its place. And so we came to an arrangement where Fox Bet will be is in, in the course of winding down. When you look at what we're left with, we're left with, I guess, three things. One is we've got-- we continue to have an investment in Topco at Flutter, which is worth $800 million to us, which I think goes unnoticed, in many, in many valuation models. We continue to have an 18.6% call option over FanDuel, and so you would have seen a significant recovery in asset prices around sports betting. Depending on where you see FanDuel in the sum of the parts valuations of, of Flutter, we think the strike price of that is somewhere close to being in the money. And when you look at the fact that we've got roughly 8 years to go before we have to make a decision around exercising the mathematical option value of that option is enormous for us, and so that's the second place we play. And the third place is we had obligations with respect to Fox Bet in terms of commitments around on-screen integrations and marketing and all the rest of it, and we're now a free agent for that. And we've seen a lot of inbounds come through in terms of people wanting to partner with us from a commercial perspective. We're already taking a ton of revenue from sports betting in a nationals perspective, but there will be opportunities that we'll have a look at in terms of deeper commercial partnerships with operators. So, the shuttering of Fox Bet is no indication whatsoever of the fact that we've sort of lost any interest in that space. With the recovery in the various sports betting assets in the public markets, does that change how you're thinking about the timeframe of exercising the option? Not, not really. Like, the fact that we've got such a long-dated option affords us the opportunity to wait and see how the market really plays out. And that's a market, and we look at that from multiple levels, right? It's like, is consumer adoption where we thought it would be? And all signs are that it completely is. And is FanDuel the right asset? And all indications are that it is. But there's no, there's nothing that would force us to exercise that option anytime soon. Okay. So moving on just to sports rights in general, like, they've been escalating across the board, and it's kind of leading some to be more selective about what they keep, what they let go, because it's just climbed so high. So as you think about your sports portfolio, how would you bucket the different rights under your umbrella, in particular with WWE? What are your considerations of retaining it versus just moving on to other rights? So I won't, I won't comment specifically on WWE, but let me give you some color on, on sports. So first, we think we're well spent in terms of overall portfolio, spend on, on sports rights. We have, over the course of the last four years, a touch longer, actually, we've been really, really focused on getting long-term extensions on what we call foundational rights. And none other more emblematic than, than the long-term extension we've got for NFL. But if you look at NFL, MLB, college, we have a bedrock of rights that take us to the, the latter part of this decade and into the, into the next decade, that we feel really good about. And that, that is a really, really significant platform that affords us, what I would say. We're always disciplined about all of our rights, and all of our rights have to pay their own way. But it allows us to be sort of, I guess, much more clinical in the way we look at renewing existing rights or looking at new rights that we wanna sort of acquire for the portfolio. And so we'll take a really, really, as I said, clinical look at the renewal of rights that we have on the slate at the moment, and determine the value they deliver to us, both from an advertising perspective, and the impact that they have in terms of incremental affiliate revenue, versus what the rights owner expects to receive in terms of rights cost. And we'll make that mathematical equation and be super disciplined about it. So it's been two years since the launch of USFL. Can you give us the key takeaways, the highlights of it, and is there anything you want to change? How would you judge the success of this so far? So USFL, like, it's a really interesting asset because we've got a fantastic sports franchise. We have in our schedule, I guess, a gap in spring, where from a broadcaster perspective, having the USFL come a little bit after NFL is really helpful from an end-to-end schedule. And we've seen USFL find its place from an audience perspective. We'd like the audience to be bigger, but it certainly sort of makes weight in terms of it compares well with regular season baseball, it compares well with MLS, those kind of assets. You've seen us. In the first season of NFL, we hubbed all our teams in Birmingham, in Alabama. In the most recent season, we've expanded that. We think there's a couple of things for this to be successful. One is we need to be much more local, and so you saw us expand from being in one hub to going to four hubs. So you'll see us continue to expand that hub model in order to generate true sort of local interest. We would hope that the audience continues to develop, and the proof will be in, Like, we're co-owners of the rights with NBC, and so we would expect real success to be determined by sort of what the revenue opportunity is. And I think key to that revenue will be audience, because that will inform what the broadcast deals will be on renewal- Mm-hmm. - which is super important. And then on the ground monetization, whether it be with sponsorships, gate receipts, so we'll look at that. It's still, it's nowhere near maturity, right? We're two years in, we're learning things, but we feel enthusiastic about what the opportunity is there, as long as we can continue to take it local and continue to grow the TV audience. We don't have a lot of time left, so I'm going to try to sneak two more in. Mm-hmm. You made a lot of strategic investments through the years, and a lot of strategic asset sales as well. Mm-hmm. How do you think about Fox's asset mix today, and how do you think about M&A and how that fits into your strategy? So, when I look, I don't know if your last question will be on capital allocation, so I'll, I'll answer capital allocation now. Okay. Well, yes, that was my last question. I can see I've got two different bits. So when we look at capital allocation in totality, right? You look at the history of Fox and the balance. We want to grow the business, right? We want to grow the business organically, and if there's a great inorganic opportunity, we'll take the opportunity. But when you look at what's happened over the course of the last 4 years, the bias has actually been to sending capital back to shareholders. So since the inception of Fox, we've sent back $6 billion of capital in the form of buybacks and dividends. $4.6 billion of that was buybacks, including the most recent fiscal year we closed, where we did more than we've ever done, which is $2 billion of buybacks. We've done about $1.9 billion of gross M&A, but as you mentioned, we've sold about $500 million worth of assets. So a billion four in net investment. So when you look at capital allocation, the bias has been to returning capital to shareholders, but I think that's largely been because we haven't seen an opportunity attractive enough from an M&A perspective. None of the organic businesses we have in the portfolio are staffed for capital. If we see growth opportunities, it's like we do with Tubi, we'll lean in and take deficits on those in order to grow them into the businesses they can be. We just haven't seen a particularly attractive sort of inorganic opportunity to apply capital towards. But, our bias is to grow the business from what is an incredibly strong core with sports and news, and now with digital in terms of Tubi, and we're on the lookout for those opportunities, but we look at everything, but we have an incredibly high bar. Okay, so you answered the capital allocation question. Sorry. Maybe one last different one then. Mm-hmm. There's been a lot of speculation around linear assets and what could be for sale, especially Bob Iger spoke at Sun Valley and there's some other companies that maybe should be selling assets. Do you, do you view yourself as a consolidator or an eventual target? The short answer is probably not, right? Like, I don't like the notion of defining a business by its distribution mechanism. So when we say linear assets, I go back to the core of what the asset is. Is it, is it something that we can add value towards? So we've already made a clear bet in terms of where we see general entertainment programming with the transaction we did with Disney and the focus on sports and news. So if there's something in there that we can bolster our sports and news services, maybe, but it would have to be, never say never, but it'd have to be a ridiculously opportunistic deal for us to pursue that path. Great. Well, we are out of time, so thank you so much. Thank you, Jessica. Thank you. Thanks, everybody. It's a pleasure to welcome Jennifer Witz back, the CEO of SiriusXM. So welcome. Great to see you in person. Thank you, Jessica. you, Jessica. Always nice to be here. Thank you. So Jennifer, you remain focused on driving three pillars of growth for Sirius. First, continuing Sirius's strong in-vehicle presence, second, increasing usage and subscriptions outside of the vehicle, and finally, driving growth through your extensive advertising platform. What do you consider the biggest growth driver over the next, let's say, three to five years? I really believe we have opportunities in all three of these areas. So like you said, our in-car subscription business, our streaming business, both in and out of the car, supporting subscriptions in both areas and through our ad platform. And increasingly, once we build this new platform, I think we have more time to talk about that. That is going to enable us to allow each of these to reinforce one another in even more meaningful ways. So I believe there'll be growth across all three. just as an example, in terms of the platform we're building, we're going to be able to make it much easier for our in-car subscribers to carry their listening forward into streaming devices and vice versa, in a very seamless way. Ultimately, I think it's not gonna be about streaming subscribers or in-car subscribers, but really just about subscribers, because we're pretty indifferent as to how they listen or where they listen. But what we're building is gonna definitely improve our ability to drive growth in those areas. Then on the ad platform, similarly, what we're doing for SiriusXM will increase our digital MAUs, if you will, both in the car through 360L and over streaming devices. That will give us more data on what customers are doing and what they are listening to. P rovide us a lot more targeting capabilities, which will enhance our ad business as well. So on top of, I think, what the growth opportunities are in the core business segments, we also have a tailwind in free cash flow beyond that. So incrementally, in terms of improving working capital, improving cash taxes over time, and also as we've talked about our CapEx cycle, and we're in kind of the height of that with the build-out of these four satellites, and we'll be through that in a few years, and we'll have several years after that of zero satellite CapEx. So just great tailwinds on the free cash flow side, on top of the opportunities in the core business that will drive better free cash flow generation in the years to come, improve free cash flow conversion, and better yield. That's great. Let's just get this one out of the way, but, how would you like to see the structure between Liberty Sirius and Sirius handles? And can you give us any sense of, of timing on when you expect Liberty to deal with this issue? I would be surprised if you didn't ask. Mm-hmm. It's I think the first couple of transactions have been completed in terms of the Braves and Live Nation, and that would certainly seem to mean that Liberty can focus more on what might make sense for LSXM and Sirius. I've said this before, I think a simple structure makes more sense. I would think they agree. Certainly, just we've seen these dynamics in terms of the technical impacts on our stock that are driven by the sort of complicated corporate structure that we have. But I have no particular insights on the timing. we have a great relationship, I think, as with Liberty on the board, and just we have a very strong board overall and a very strong special committee who will be able to evaluate whatever comes forward. I'd just say, as I typically do, that we remain focused. The vast majority of our time as a management team is on- Right. How do we profitably grow the business? So I'm gonna quote you, because you've said that you've been able to. This is a quote: "Con you'll be able to attain continued improvement in subscriber performance and a positive back half of the year." What gives you the confidence that you'll achieve positive self-pay net adds in the second half of 2023? And can you give us any update on Q3 self-pay and trial starts? I mean, I'm not going to provide any specific guidance on the quarters, but I continue to believe that we will show progress on our self-pay net adds each quarter. Meaning that the Q3 will be better than the second, and the Q4 will be better than the third. And then I also believe that we'll be slightly positive in the second half, and there's still a fair amount of variability. Obviously, as we get through September, the trials are pretty much locked. So the Q4, I would say, the sort of biggest uncertainty is vehicle-related churn, and that's just a function of how strong is the market for auto sales, which ultimately is good for the setup going into next year and the growing of the funnel. but it has the near-term impact on, on churn, in the Q4. That's the thing that we can't really navigate. But again, continued progression throughout the year, I still feel very confident about that. And what do you see as the greatest risk to Sirius generating sustained subscriber growth on a long-term basis? Look, I think ultimately, we have to keep delivering value to our subscribers, right? We're a premium price product. We provide an exceptional bundle of content across many different genres, and our focus on how do we continue is how do we continue to drive value there. Future subscriber growth is going to be certainly tied to, like we talked about, the auto funnel and how does that build over time. But then on the other side of the business, and really supporting all parts of the subscription business is the launch of this new platform, which is really the next generation of SiriusXM and will enhance our capabilities to provide better value to subscribers because they will be able to find the great content we have in much easier ways, and hopefully we'll have a chance to talk more about that. You've raised your financial guidance a couple of times this year. What gives you that confidence? I mean it's really kind of turbulent times, but you seem pretty confident. What gives you the confidence that you will attain this financial guidance? We've held our revenue guidance in part because of the volatility in the ad market. I think going into the year, we felt pretty strongly that the second half would start to materialize in better year-over-year trends. There was a general feeling across the industry. Now we're seeing that probably materialize more in 2024. So for this year, I would expect ad revenue to largely be flat year over year. which really means that guidance is approximately $9 billion, but that sort of outcome on ad revenue probably really drives whether or not we're slightly below or we're at the $9 billion in total revenue. And then on EBITDA, we increased our guidance once, and I think that so we're at $2.75 billion. That has a lot to do with the cost transformation work that we've put in place, and we're just having better visibility into how that's materializing in the P&L, the various expense item, line items this year. And then on cash flow, we've increased it twice. We're now at $1.15 billion, and I spoke about this a little bit before, but improving working capital, obviously, EBITDA rolling through. But improving working capital and lower expected cash taxes helps give us a lot more confidence in the cash flow guidance we have. So let's talk about advertising a little bit, since you're not expecting it to really improve until next year. What's going on in the current ad market? Can you give us any color on, like, what you're seeing in terms of cancellations or categories? There haven't been that many cancellations, but I think advertisers are slow to book. So we have seen this trend, which is one of the things that creates a bit more uncertainty in terms of how the year is going to shape up, is that brands are coming in. They have budgets, they're willing to spend, but they're tending to wait until later to see what's materializing on the consumer front, especially. And so we see strong from a momentum on the travel and tourism side, on restaurants, QSR, and on CPG. And then there's traditionally, but just over the last year, we've seen kind of some downward pressure from financial services, healthcare. Of course, political year-over-year is down with no election. We'd expect that to pick up next year. Then a bit of uncertainty, obviously, around entertainment spend, just with the strikes that are in place, and then what could happen on the auto side. But, but I really like our position here. We've grown our programmatic tools. We can take a lot of close-in buys, and we've got a great set of assets across the board with the different platforms we have. So, I mean, everyone says, but churn, it comes up all the time on your calls, but it's just incredible how you've managed churn and how low it is. Q2 was roughly 1.5%. What has been the most significant driver of your, like, really incredible churn results over the last few quarters? It really comes back to value, right? And we think we have a really unique value proposition with the set of content that we have, and we keep reinforcing that with new content, whether it's new channels, new formats, new talent or hosts on the platform. and we do continue to see it's a slow march, but we do continue to see improvements in our in-car subscribers streaming outside of the car. We definitely see better retention as a result of that. So that's reinforced improved churn. and the dynamics are really we have not seen a lot of concerns. We don't have a lot of concerns around involuntary and entry rates there. We watch that really closely in terms of a sign of the consumer health. Voluntary, we talked about in terms of value, and then vehicle-related is sort of the big unknown in terms of how that shapes up with the growing auto funnel. Right. What are you hearing from your OEM partners or on auto production and car sales moving forward? There's the risk of a strike, I guess, tonight. Yes, tonight. Can you talk about how you think that will impact you and I- It's hard to say how it's going to materialize. It sounds like it's going to be all three domestics, but probably targeted to specific plants, and maybe it rolls out to something bigger. They certainly seem to be closing the gap a bit on the negotiations. We've been through this before, obviously, with GM. It won't have a material impact on our business unless it's really prolonged. but we could see lower SAC this year, possibly lower promotional revenue, but next year is really when we'd see the impact, if anything, onto self-pay net adds. But in general absent a strike, I think there's been progress on the automotive side. You know, clearly, this year, the estimates for SAR without a strike are in the low 15s, and last year it was 13.8. So it has been growing, and there have been sort of progress in terms of availability of inventories. Prices seem to be holding. There's a bit more on the incentive side coming out on new car, and then there's been growth on the used car side, which we really haven't seen as prices have dropped there. We've seen more used car sales, which helps with our funnel because we're, we're happy to have either. So it's going to be interesting, obviously, to see how it shapes up over the next few months. You know, obviously, we are very focused on we'd love a healthy auto funnel and would love to get up to the 16, 16.5, 17 million to give us a tailwind going into next year. So, you kind of touched on a few times the new digital launch later on this year. Can you give us a better sense of timing, what the product will look like, what you're thinking in terms of pricing, and obviously, how it would help subscriber growth? Because you said it, you're indifferent or you-- it sounds like you expect subscribers to be on, like, both in the car and out of the car. It really is. First I'd say we have a really strong foundation on which to grow and to build this platform. And it's really about how do we continue to enhance the value of our subscriptions. And we've got this tremendously valuable set of content that really speaks to every audio genre, music, news, talks, sports, entertainment, comedy. We have live, on-demand, we have exclusive, non-exclusive. And it has just been a challenge to. I think the biggest gap we've found is being able to get consumers into the content they love. Obviously, in the car, it's been very much about turn the dial or hear the on-air promotion or get the email and then go find the content. But now we're in the process of building the next generation SiriusXM platform, and that's going to give us a tremendous amount of capabilities to personalize these journeys across marketing and in the product. so in terms of the content marketing to bring consumers into the funnel, to sign up for trials or in terms of our direct marketing, email, push, all those other channels, or even just in the product itself, in the car or outside of the car, we'll have a lot more data-driven personalization capabilities. So we can get consumers and listeners directly into the content they love using all of these capabilities. So in later this year, we're planning for the first step in this launch, and it'll be a new streaming experience. I will say it's a bit of a march and not a sprint. So this is the first of many steps. We'll have more releases following that. New set of consumer apps later this year, new releases following that at least every quarter throughout next year and beyond. And then ultimately bringing these new capabilities in terms of better martech, commerce, and identity through to the in-car business as well. So it starts with new streaming subscribers and having the benefit of this new platform, new consumer apps, which will drive improved experience for our listeners, both existing streaming subscribers, whether they're subscribers or they're listening, in-car subscribers listening outside of the car, where we have millions of customers already doing that, or new subs that we're bringing into the funnel. Again, kind of continues through next year in updating our existing base of subscribers. In terms of pricing, I'd just say, as we've looked at the opportunity to grow among our core and growth segments, there is clear opportunity to provide different packages at different price points and just be more flexible. So the commerce platform we're building will allow us to do that, and we think that's going to be key to attracting more of the growth segments, which we've talked about as being younger, more diverse, clearly looking at SiriusXM as a complementary product to a, an on-demand music service that they already have. Because of the broad set of content that we have, and it was particularly all the live content and non-music, that we're a very attractive option for these growth segments, but we need a more flexible set of pricing and packages to appeal to them. Can you provide any color on what the commerce part of it will be? So we're going to use a new. I don't think we've talked about the vendor, but we're using Salesforce for martech. That's going to leverage the new commerce engine that we're building, and it's just gonna today it takes us an inordinately long time to just get a rate increase in market. So things like that will be much simpler, but it'll also allow us to test different pricing packages much more easily in market to get a better idea as to what the impact is on both growing the funnel and retaining subscribers, and also really just protecting from any downgrades in the base. So on the sub growth, like, how much of the runway do you think will come from digital versus in-vehicle as you go out? It's really going to be tough to delineate, I think, over time. But again, the platform's going to support both sides. So I would expect our in-car subscribers to increasingly stream. That brings more value to the subscription, improves retention. It also helps to the extent we can make it really easy as a new trialer gets into the car with their new experience embedded in the car to just the click of something on the screen to download the app. So the sooner we get people streaming and experiencing all of our content in other places, the better our conversion rates will be for in-car. And then we absolutely have a trajectory of growth ahead of us on the streaming-only side as well with the launch later this year and supporting that, throughout next year with new features and functionality. There's not—I would say there's not, like, one hero feature, but there's just all of this, these capabilities that we've built and in market to support, again, the sort of easier discovery, access, navigation, and control of the service which consumers are looking for. Can you walk us through the difference in economics from an in-vehicle sub versus a digital, or if they're the same? Like, how is each sub different? They're a little different, but overall, we have very strong margins on both sides. I guess the difference is our streaming product is priced a little lower, so the ARPU there is lower than on the in-car side. The in-car side obviously includes both the integrated experience of the car and streaming, so we price that at a premium. and margins, percentage margins on the streaming side are a little higher, given the licensing structure there. We don't have OEM revenue share.