Okay, thanks for joining us this afternoon. I'm John Hodulik, the telecom media analyst at UBS. And I'm joined here, this afternoon with Gerhard Zeiler, President of International at Warner Bros. Discovery. Thanks for being here, Gerhard. Oh, thank you for having me. We've got about 35 minutes for questions. If anyone has any questions, I can work them into the conversation by using the iPad and the app here. Gerhard, why don't we start with sort of just a little bit of background on your role and responsibilities? How is the international business at Warner Bros. structured and organized, and what are your responsibilities in the organization? Look, Warner Bros. Discovery is a global company, yeah? So, roughly 30% of the revenues are coming from outside the U.S. and Canada. Canada is part of the U.S. That's one of the—that's the only country where it is not an international, and the one thing which we really do very well is we're working as one company. We have no silos in our company. So each of the business segments has an international component and a meaningful component. There are a few business segments like the retail, consumer products, games, which are run centrally out of the U.S., from the U.S. But our guys on the ground are helping to sell, to execute the strategy, and to market a lot when it's necessary. The other business segments, especially when it comes to content sales, especially when it comes to networks and streaming, are really working very, very close together. We even have combined ops sites. We only have one team, one team who negotiates the distribution agreements, one team who does the advertising, one team who does the content for streaming and for the networks, one team. Mostly all of marketing is done by one team. That's more or less the organization and what we are doing on the international front. The one thing which is really good, we have boots on the ground in almost all the countries, and that helps us a lot. Got it. One thing you mentioned is the distribution agreements. Yeah. Warner Bros. signed a renewal with Comcast, which was announced yesterday. Is there anything you can tell us about that transaction? Oh, yes. First of all, you see me with a big smile. And if you would, today, see our whole executive leadership, from David to Gunnar to Bruce to everyone, they all will have a big smile. We are really happy. That's a big deal. With these deals. Especially for you as well, 'cause of the Sky. Absolutely. So, yes, I think Dave Watson said it yesterday. It's a win-win situation for both because we both achieved our operational and strategic goals, but it's also a deal or deals which nobody, not a lot of people really expected, and the deals have. There are three aspects. There's the U.S. aspect. Let's start with that. First of all, we got all our deals renewed. We didn't need to give any more carriage flexibility on the linear sides, beyond that what Comcast already has. When it comes to terms, how do I say that? Very carefully. We are very excited about that. Okay. It's consistent with the terms of the other big deal we did in the last couple of months. You know, the company I'm talking about. We just saw them, I think. It's on the TNT side where everybody forecasted that we would lose a lot of money. We didn't. We kept the TNT rate flat. And overall, the rates are going up. So, for all the portfolio per subscriber, we will get more year by year. So really excited about that. And it speaks for two things. It speaks first for our portfolio, our general portfolio. And it speaks also for our sports strategy, which a lot of people, as you know, criticized in the last half year. So that's the U.S. deal. The second aspect is Sky in the UK and Ireland. Look, Sky and Warner Bros. have a more than decade-long relationship, yeah? The Warner Bros. and HBO program on Sky always was great for Sky and for the customers of Sky. I know that. I'm a customer of Sky. Every single year, or almost every single year, I get a letter from the CEO, explaining why I have to pay GBP 1 more, yeah. Every single time, a huge part of the justification of the programs are our programs. We knew that Sky wanted that program to continue on Sky. On the other hand, we wanted to launch a Max. I think we both got it. On the one hand, Sky got the continuation of having all this great programming from HBO, the Warner Bros. films, the evergreens, where it's Friends, Big Bang Theory, all the libraries from Warner Bros. in their ecosystem. On the other hand, we can launch Max early 2026. Just a little bit of the background. There are in the U.K. roughly 27 million broadband homes, 20 million SVOD homes. The Sky ecosystem is roughly 10 million big. There is a huge amount of growth opportunity for us in going outside the Sky ecosystem. Now, we will be bundled, we will be hard bundled with this roughly, don't count every single subscriber, roughly 10 million subscribers subscribe with our ad-light product, so with Max with advertising. This also gives us a huge opportunity in advertising because it gives us advertising at scale from the first moment on. Got it. So the second. But even if I take out and leave them aside, the advertising opportunity what we have, the opportunity that we can grow with these other 17 million broadband homes, even the deal with Sky will grow in terms of revenues year by year going forward. So again, we are very happy about that deal too. Okay. From yesterday being at the conference, I didn't get a chance to read the press release. But so I guess we had always assumed that when you went direct in the Sky markets, you would lose that relationship. But you've reaffirmed that relationship. You're getting paid more from Sky, and you have the opportunity to go after those other 17 million homes. Exactly. Yeah. So we have, we have a balance. Of course, our retail subscriber has a, a higher output than what we get from Sky. But the opportunities what we have with advertising, the opportunity what we have in terms of both outside, plus that our revenues, which we also get from Sky, are growing year by year, is a huge win for us, and it's also a win for them because we both achieved our strategic goals. Right. Right. Makes sense. Okay. You know, stepping back, you know, maybe we can start with a sort of a bigger picture question about the state of the media industry sort of outside the U.S. I mean, I certainly take a very U.S.-centric view on sort of all things linear and streaming. But could you talk a little bit about where we are in terms of the transition? And I'm sure you can't. It's very hard to use a broad brush in terms of international markets. But where we are in terms of the transition from linear to streaming, how much sort of video consumption you're seeing in these markets, and just how what we're seeing in the U.S. is unfolding elsewhere? Look, headline is it's a similar trend in terms of linear is declining, streaming is growing. But there are three big buts. Number one, HBO always has been, with the exception of very few markets, never as big as in the U.S. So, to phrase my boss, David, who said it was never the mothership outside the U.S. as in the U.S. Does sound like David. Only a few markets ever had more than 50% of PTV penetration. Therefore, that's not a surprise that the decline is not as steep in the U.S., but it comes from a lower plateau, from a lower floor. Right. Second, huge difference. Free-to-air, that's what you call broadcast here. Free-to-air is still in the most international markets, the dominant and still the dominant viewing platform. I'll give you a few numbers. Italy, from 100 minutes on video, 79 are watched on free-to-air. Japan, 77%. Germany, 73%. Poland, 55%. Brazil, so that we go also to Latin America, 55%. Even the U.K., where you believe this is probably one of the bigger. Yeah. Streaming and PTV markets, 46%, yeah? So free-to-air is still very, very strong. I don't know what that number is for the U.S. It's gotta be dramatic. 28% was the last what I heard, yeah? But, and the numbers I told you are 2023 numbers, so this can change. And of course, it goes down also. And streaming is growing everywhere, yeah? I think there's only one in my knowledge, one market where streaming is already bigger in terms of viewing minutes than free to air. That's Mexico. It's 49% to 41% on free to air. U.K., it's 46%, yeah? So you see that. It's not as in the U.S. Number one is clearly it's already streaming. Number two, PTV. Number three, broadcast. It's the way, it's another way. And the third really big difference, there is no international. Every single region, every single market is different, especially from viewing habits, but also how the landscape is. And therefore, when you talk about international, you have to talk about markets. Right. So if you go a little bit deeper, for example, Latin America is probably the closest region to the U.S. PTV is already quite weak. So in an average, roughly a quarter of the people have PTV and subscribe to PTV. But in some markets like Brazil, it's even way below, yeah? Some markets, it's higher. But streaming is already very strong also in Latin America. PTV was always quite low there. So good thing for us, we are not in free-to-air in Latin America. We are in PTV, have the strongest PTV portfolio. But we also strong already in streaming, I would say, together with Disney, Warner Bros., [the two other Warner from Netflix] in a more or less kind of number two position. Latin is the only region where our streaming revenues are already higher than our network revenues. The network revenues are quite high. That's Latin America. Europe is different than I told you about. Still free-to-air in every single market and the main platform, the dominant platform. We are contrary to Latin America. We have a strong free-to-air business, not only our PTV channels, also strong free-to-air business, especially in Poland, especially in the Nordics markets, in Italy, but also in Germany and the U.K.. That helps us a lot to drive a huge amount of advertising revenues. As you know, we are not yet in every single market with our streaming product. Right. We'll get to that. So that will come, and we probably will talk about it. Asia is the smallest region for us, and therefore also in terms of networks in PTV. We are focusing on streaming in the future there. In 2025. Great. That's a great way to sort of set the landscape. So given the trends in each of these regions, each of these markets, and the pace of change you're seeing, what are the key priorities for the Warner Bros. in these markets in 2025? Maybe in 2025 and maybe if you could look out a little bit, maybe over the next sort of three to five years. So probably I would name four, but the number one, two, and three is really rolling out Max globally and growing Max where we already have it. JB Perrette, our global head of streaming said that, I think, in one of the conferences, a couple of weeks ago, if you look, and if you even take out China, Russia, and let's for the moment also take out India, the addressable term of addressable households is roughly 650 million homes. We are in 350. So we have a little bit more than 50%. That's a huge growth engine what we have. But that's not the only one. Especially the partnerships we have with distributors and where we bundle mostly with our headlight product gives us a huge opportunity about advertising. I mean, I refer back to the Sky deal. 10 million immediately, from the first day on, have the opportunity to watch all the Max products with advertising. That's a huge growth engine. Password sharing is a huge growth engine. The way that we more personalize our product is a huge growth engine. So that's what we want to do. It's very clear, and that's not only for 2025, to grow our Max revenues, to grow our Max profitability outside the U.S., to grow the scale of Max is clearly the number one priority, probably for the whole company, yeah? But especially for us, in the international market. The second priority is that we really want to defend these advertising revenues which are coming out of the free-to-air markets, Poland, Italy, U.K., Germany, and the Nordic markets, because that is a differentiation we have to other regions. And in order to do so, we need to defend also the strength of the product there, get our viewing rate at the same level, and also need to invest where it's necessary in a financially viable way. Third priority is really to run our PTV channels and power PTV networks as efficient as possible. And like in the U.S., we are also very, very profitable in all the international markets with our PTV networks. And last but not least, I would name this is not only 2025, we already started, but also 2026, 2027, to really grow and expand our local productions. We started with that. We already have a lot of success with that. But going forward, especially for Max for our streaming product, it's really important that we invest more in that. Right. So let's dig into the. There are another number of sort of aspects here, but maybe let's talk about the expansion of Max and the streaming business internationally. First, yeah, it's definitely a huge priority. That, I mean, that's obviously the. You've got the billion-dollar EBITDA growth target out there that you're gonna exceed, and a lot of that growth comes from international markets. So you've got a lot on your plate, Gerhard. So can you talk a little bit about just the traction you're seeing thus far from a subscriber standpoint and what, and what you've learned in terms of these new markets this far into the process? Look, well, let's start with Latin America. HBO has a long tradition in Latin America, yeah? It was not even owned by Time Warner more than 50% until, I think, 2019. Only 2019, 2020, when AT&T took over, the company bought the rest of the shares which were not owned by Time Warner. But HBO has a huge plan for acquisition. And that's the reason why we are more or less in every single market with our streaming product. We relaunched it as Max in February this year. As I said before, we are roughly together with Disney, if you look at the two metrics of subscribers and revenues, roughly number two. And our streaming revenues are already bigger than our network revenues. And we are very happy with our profitability, already this year there, yeah? So that's it. And the good news about Latin America Max is also that it's probably the broadest portfolio what we offer. It's not only, for example, on the feature film side. It's not only the Warner Bros. feature films. We have the NBCU feature films with the exception of Brazil. We have the Sony feature films. We have a lot of series from these two. And we have a strong kids portfolio, with Cartoon Network, with Discovery Kids. And we have local sports, which we use for linear and for streaming. And it's very, very helpful in terms of acquisition drivers, but also in terms of engagement, yeah? Whenever there is a Champions League game, and we have the Champions League in Brazil, and we have 50% of the Champions League games in Mexico. We have the EPL, the English Premier League in a certain package. We have in Brazil a local São Paulo league, which goes together with the Brazilian league. We have in Argentina, together with former Fox, now Disney, 50% of the Argentinian first league. We have all the matches of the Chilean first league. So sports is really big in Latin America. And one thing I can tell you, don't ever underestimate the passion and also the fandom of soccer in Latin America, especially in this market. So that helps us a lot. So that's strong. That is in Latin America. In Europe, as you know, we are not yet in every single market. We relaunched from HBO Max to Max in the Nordics, in all the Nordic countries, Sweden, Norway, Denmark, and Finland, in February, as well as in Spain and in Portugal, and in all the Central Eastern Europe markets in May. We relaunched in June in Poland to Max from HBO Max to Max and the Netherlands. And we launched in two new markets, in Belgium and in France, this year. And all in all, we significantly increased our subscribers in the last nine months. So from end of last year to the end of Q3. That's what I'm allowed to say, Q4 I'm not allowed to say. So, that's really a huge subscriber. And it's also a profitable, already profitable, streaming organization, a streaming unit. And in Asia, we are small. We just started. We started in Japan. This year, right? We started in Japan. In Q3 and Q4, as you know, it has been announced all in seven Southeast Asian markets: Hong Kong, Singapore, Thailand, Indonesia, Philippines, and Taiwan. I'm 100% sure I forgot one of them, yeah? Which is always the case when I talk about them. That's our rollout. But as I said before, it's a huge way to go forward. Next year, we definitely will launch in Australia. That's one of our big markets. We already announced that we will launch in Turkey. In 2026, the three big European markets: U.K., Germany, and Italy. What will that bring you to in terms of? I think earlier you said that right now you're just 30-350 out of the 700 million. 650 million, yeah. It'll get you to 650. Yeah. 350 out of 650. These are the numbers JB said at the live, I think last week. Got it. Okay. And as you look into each one of these markets, you know, and how do you think of the structure of the launch in each market and potential partners and, you know, how does that differ with each market you launch into? Let's go back to what is our goal. We always said very clearly that our goal is to be a top three streamer in the first three to five years, hopefully earlier, in three KPIs: a top three streamer in terms of scale, a top three streamer in terms of engagement, and a top three streamer in terms of profitability. And that's the guideline. That's the balance we'll have to take when we launch in a market. So all the internal debates we have before we launch a market is, okay, how do we get the best balance of all these three KPIs? And usually, we have a dual strategy. On the one hand, we launch our standalone app, yeah? Our retail offer, our standalone retail offer, mostly not always, but mostly with an ad-free offer with an ad-light offer, so with ads, and then an ultimate offer. And also besides that, we are looking at all the distribution landscape and talk with the distributors, why it makes sense for them, but also for us, to have a wholesale bundle with them, mostly, with the ad-light product, because that gives us really immediate scale in terms of advertising opportunities, and it also gives us immediate impact of scale. So I'll give you one example within France. We launched with Canal+. That's the big distributor in France. A couple of months, we launched also with Amazon PVC, but we also have our standalone product now. In Spain, we have a hard bundle with some of the packages with Vodafone, as we have a hard bundle with Telefónica with a premium package, plus we have a strong cohort of retail offer. That's for us in the, let's say, regular market launch, the best direction to really have a balance of scale, engagement, and profitability, and then there are also markets. I'll give you one example, Japan, where our brand recognition, both for HBO and for Max, never was really there. HBO was never a big issue in Japan. So we had to decide how do we launch these markets? Do we go all in, which means you have to spend a huge amount of money into marketing, in order to get this brand recognition? You have to spend a huge amount of money into local content because otherwise you don't get that, or you do it more or less in two phases, and that's what we decided. We took the best streamer there, U-NEXT, made an exclusive deal for a couple of years in order really to bring the brand's recognition up, and then we can decide how we go forward with that. That will not. That's not the usual launch, but in some markets where we don't have the brand recognition, where our product is not so known, especially when it comes to Asia, that could make sense. Got it. So at this point, international RPU is collectively just about $4 per month. What's the opportunity and where can that figure go over time? And how do you get there? Is it a combination of sort of price increases? Does the ad-tier play a role? You know, what should we think of as sort of monetization? Look, let me say first, RPU is for sure a very important KPI, but it's not the only one. Our North Star is really customer lifetime value, and really what we get in terms of subscription-related revenues per subscriber includes advertising and distribution. That's really how we see the world going forward, and yes, RPU is important. When you look at the current RPU, you have to have in mind three things. Number one, we're in a lot of the markets which are not really known as high-priced markets. Latin America is not known that. Central Eastern Europe is not known that. Most of Asia is not known that. We are not in high-priced markets like Australia, like the U.K., like Italy, like Germany. So automatically, when we launch there, this will help us to grow also the RPU. Number two, we are pretty sure that our pricing power has not come to a ceiling yet. We tried it out last year in some of the Latin markets, in some of the European markets, and we didn't really see very negative reaction from our customers. We will look at that as everyone else does that too. Third, don't underestimate the value we have in terms of growth opportunities from advertising. We don't have yet even in the markets where we have launched Max. We don't have everywhere a product with advertising. We have it in Latin America. We have it in the Nordic countries. We have it in Poland, in Romania. We have it in France and Belgium, but we don't have it yet in Spain. We don't have it in Portugal. We don't have it in most of the Central Eastern European markets. We don't have it in Asia. So this will, we are just at the start of that, and we will get into that, yeah? That's also the reason why we are so happy with the Sky deal in the U.K.. Right. These are all growth factors also for RPU. Gotcha, so you know, you mentioned the company's looking to expand their local content production, sort of efforts. What's the correct mix of U.S. content versus local language content? Is it different in each market, and how should we think of that for local language content investment as we look out over the next few years? Look, you need both. You need, on the one hand, the huge important global content, whether it's the feature films, the Warner Bros., or HBO. And I only can name what we have in this next year as we, I mean, this year it was House of the Dragon season two. It was Penguin. It was Dune. We'll have White Lotus beginning of next year. We'll have The Last of Us. We have Peacemaker. We have a new franchise from IT: Welcome to Derry. We have a new franchise from, from Game of Thrones, Seven Kingdoms. We'll have Euphoria again in 2026. We have another season of House of the Dragon. And then we have Harry Potter. I think everybody of the distributors, that's one of the reasons why I haven't met one single distributor, who I spoke to in the last years who didn't want Max, yeah? So that's, that's the one thing. It's really the, the global content which you need. But you also need the local content because, and we have already the first examples of that. We have, these are huge acquisition drivers. For example, House of the Dragon season two was this year the biggest acquisition drivers in every single Max market, except Poland. There was number two. There was the fourth season of The Convict, which was the biggest acquisition drivers on scripted series. So that's, that's one thing. A lot of number two, number three position when it comes. We have, for example, in Latin America, we had these last three months, we had two premieres. One was City of God in Brazil, which, according to the huge film everybody knows, hugely successful, and now even more successful, Like Water for Chocolate, a series, a six-episode series. Every single Sunday when the new episode is out, it's the number one top viewed program in Latin America, although it's a Mexican series. It's also successful. So you need that, yeah? You need that going forward. You need that in terms of scripted series. You need that in terms of documentaries. We had a huge win with some of the true crime documentaries, the Sancho Case in Spain, the murder of Daniella Perez in Brazil. There are a lot of that. And also let's not forget local sports, yeah? Got it. A couple of topics I want to address in the last couple of minutes here. First, on the Q3 earnings call, the 2025 EBITDA guidance was increased to now meaningfully exceed $1 billion. How should we think about the international contribution to segment EBITDA in 2025 and beyond? Look, I will not comment on the word meaningful, yeah? You have to ask David and Gunnar and maybe JB about that. But what I can say for the international market, Latin America, we are very happy with our profitability. Europe is already profitable, and we see a significant opportunity to grow profitability next year in the international markets. That's all what I can say. So I'm not concerned that we will deliver what our guys, what JB and his team and my team together are looking at. You expect continued growth from there, right? I mean, you're growing in Latin and. Yeah, it's not only one. I mean, if we only would grow one year, you know, Gunnar, he would not allow that, yeah? Absolutely. So, two more. One, since Linear is a big part of the international business, I have to. I need one question here on the Linear side. What are the trends you're seeing across both distribution and advertising, on the Linear side? Look, advertising is interesting because, especially because of our free-to-air markets. End of Q3, the international advertising revenues were higher than the international advertising revenues in the first three quarters of 2023. And that comes because, as I said before, free-to-air is really strong in Europe, and that compensated that. Second, distribution revenues, that's our second biggest revenue driver. There's no secret. I mean, I said that before. Linear is declining, and this, of course, has an impact on the distribution revenues. But if you look at only the combined Linear and wholesale, Linear and wholesale distribution revenues of Linear and streaming together, we are growing. So that is, from our point, the proof point that we are going in the right direction. Got it. So wrapping it up here, can you give us a sense for what you're most optimistic about over the next 12 months and what you see are the key risks to your business, both on the Linear and I would say more importantly, the streaming side over the next 12 months? Look, I couldn't be more excited about the growth for Max, yeah? The deals we just announced, but also launching in Australia next year, launching in the U.K., in Italy, and Germany in 2026, launching in Turkey next year, all of that. I'm really, really excited about that. So that's number one. What are the risks? I mean, yes, we have to execute well. I mean, every single company in an industry which goes from one business model to the other, we can't afford to make too many execution mistakes. That's clear. But the risk is probably structural. So if the decline of Linear is deeper and faster than we thought, yes, that's probably the biggest risk. But there's also a balance with that because then we can even go more and put some streaming opportunities there, and we'll get some revenues additionally on the streaming side. But that's probably the biggest risk what I see, yeah? Got it. Sounds good. Gerhard, thanks for being here. Super interesting. Thank you. Thank you.