Ladies and gentlemen, welcome to the Warner Bros. Discovery Second Quarter 2024 Earnings Conference Call. At this time, all participant lines 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 call over to Mr. Andrew Slabin, Executive Vice President, Global Investor Strategy. Sir, you may now begin. Good afternoon, and thank you for joining us for Warner Bros. Discovery's Q2 earnings call. Joining me today is David Zaslav, President and Chief Executive Officer, Gunnar Wiedenfels, Chief Financial Officer, and JB Perrette, CEO and President, Global Streaming and Games. Today's presentation will include forward-looking statements that we made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements may include comments regarding the company's future business plans, prospects, and financial performance, and involve risks and uncertainties that could cause actual results to differ materially from our expectations. For additional information on factors that could affect these expectations, please see the company's filings with the U.S. Securities and Exchange Commission, including, but not limited to, the company's most recent annual report on Form 10-K and its reports on Form 10-Q and Form 8-K. In addition, we will discuss non-GAAP financial measures on this call. Reconciliation of these non-GAAP financial measures to the closest GAAP financial measure can be found in our earnings release and in our trending schedules, which can be found in the investor relations section of our website. And with that, I'd like to turn the call over to David. Hello, everyone, and thank you for joining us. This has been a busy, productive quarter, albeit against the backdrop of what continues to be tough market conditions. 2+ years after launching our company, we are still in the midst of a long-term transition, marked by many notable progress points as well as some tough challenges. Our direct-to-consumer business is doing very, very well, and we see a tremendous amount of upside. At the same time, there are tough conditions in the legacy business. With that as a frame, let me walk you through some of the highlights. On the direct-to-consumer side, at the home of the Olympics in Europe, Max and Discovery+ are the only place to watch virtually every minute of the Olympic Games, and it's really worked for us. It's been a multi-platform experience spanning linear, digital, social, and streaming, with more than 141 million people engaged across our channels and platforms. We purposely timed the launch of Max in Europe to capitalize on the attention around the Olympics. It was a heavy lift, and it paid off. We broadcast the games on Max and Discovery+, on linear TV and online through our Eurosport channels to 47 markets in 20 different languages. A challenging endeavor by any measure, and yet the team at our broadcast center in the heart of Paris has made it look easy. More importantly, the response from consumers since the start of the games has exceeded our highest expectations, both in terms of subscriber growth and viewership. The success of the Olympics and our whole offering reflects an incredible amount of work over the last two years, fighting to make our content available outside the U.S. And now we are finally there, in Latin America and in Europe. We are now a global streaming service and one of the strongest international media companies in the world. It's an important and strategic advantage. With films, series, local content, local sports, and the very best original entertainment in markets around the world, which is an absolute requisite for a successful direct-to-consumer business. I am convinced that to be successful, you have to be global. It's a core belief I had at Discovery, and our global attack plan at Discovery was what fueled the majority of our shareholder value creation there. Now, after 18 months of rebuilding our product and platform at Max, refocusing our proposition and brand, restructuring our cost, and reloading our content arsenal, we're beginning to really scale and grow the service worldwide, and momentum is building. We are only just beginning to unlock the global value opportunity that exists. We added 2 million subscribers sequentially in the first quarter and more than 3.6 million subscribers in the second quarter. It's worth noting that we began launching in Europe in the middle of the quarter with only 2 weeks of House of the Dragon and before the Olympics had even kicked off. We'll see even greater subscriber growth this quarter. Meanwhile, we've scaled the platform while driving increased revenue. We have lots of runway still ahead and real momentum. Our big advantage is our channels, infrastructure, and local teams in almost every market that can now all row together to promote our SVOD service. Max is finally in 65 international markets, and yet still not present in almost half the global addressable markets, including sizable streaming markets where our content and franchises have significant fan bases like Australia, Japan, the U.K., Germany, and Italy. We intend to continue our drumbeat of new market launches over the next 18-24 months. At the same time, we've been very active in reimagining our existing partnerships with international distributors of our linear channels to encourage them to support the distribution of Max in ways that are a true win-win for both parties. These partnerships help get Max on the devices of more consumers faster and at a fraction of the acquisition cost. We've done more than 150 of these deals to date in Europe and in Latin America, and you'll begin to see them really pay off, and we have more to come. We've also been big proponents of bundling, given the benefits it can provide on lowering the cost of entry for consumers, reducing churn, and having an overall more positive consumer experience. We continue to lead in this space with key players around the world, including a new bundle launched last month with Claro, the biggest cable distributor in Brazil. The bundle offers Max, Netflix, and Globoplay, the largest local streamer in the market, and Claro tv+. Here in the U.S. two weeks ago, we launched the ultimate bundle in the Disney+-Hulu-Max package. We've been extremely pleased with the response from consumers and look forward to tracking and updating you on what we believe is a compelling consumer experience that will provide an even stronger retention profile. In the fall, we'll roll out Venu Sports with ESPN and Fox. Of course, the most important driver of our direct-to-consumer growth is great content, and we have one of our strongest lineups over the next 2+ years to support our global expansion. Among the many highlights from the quarter, Season 2 of the hit series House of the Dragon and the Hard Knocks franchise featuring the Giants, which have both done incredibly well. Looking ahead, we're excited for the highly anticipated HBO series, The Penguin, written and directed by Matt Reeves, premiering in September. The new Dune series coming in November. Blockbuster international titles like the new series, City of God: The Fight Rages On, premiering later this month, along with new seasons of hit shows, The White Lotus and The Last of Us, coming next year, just to name a few. Bottom line, the increased momentum we're enjoying underpins our outlook for positive EBITDA in the second half of the year, which will set us up well to deliver on our goal of achieving over $1 billion in EBITDA in 2025. Our direct-to-consumer business has also been a meaningful driver for advertising. In fact, ad sales had its biggest streaming quarter ever in Q2, in part driven by greater engagement, increased ad-lite subscribers, and early international traction. This contributed to a notable sequential reduction in total company advertising declines to 3% from 7% in Q1. While trends across our advertising business continue to reflect the bifurcation in the broader ad market, we remain encouraged by the healthy momentum and growing scale we see in streaming. Turning to the upfront, we performed well relative to the industry. Max volume grew by almost 50% as clients continue to see great value in our upscale and younger skewing audience, as well as in sponsorship opportunities in award-winning content like Season 3 of the hit series, The White Lotus. In linear, we did especially well in sports, with strong pricing and double-digit volume growth, led by increased demand for our coverage of March Madness, Major League Baseball, NBA, the NHL, including the Stanley Cup Finals, and new properties like NASCAR and the French Open. Shifting focus to our studio business, we are still in the midst of what we have said will be a multi-year turnaround. There's been a great response to Twisters, which we're 50% partners with Universal Pictures and Amblin. The film has become a nearly $275 million box office hit and one of the year's top 10 highest grossing films worldwide. We're excited for what's ahead with Beetlejuice 2 coming in September, and Joker: Folie à Deux, starring Joaquin Phoenix and Lady Gaga, premiering in early October. There's also a lot of great stuff coming from DC Studios across live action and animated film, television, games, and experiences. James and Peter are fully focused on delivering on their 10-year plan for DC. If you just look at the next 6 months, the new adult animated series, Kite Man, premiered on Max in July and is doing very well. The incredibly moving documentary, Super/Man: The Christopher Reeve Story, will have a brief run in theaters in September before coming to Max. As I mentioned, the live-action series, The Penguin, premieres in September, followed by the Joker in October. Then Creature Commandos, an original animated series from the mind of James Gunn, kicks off in December. And beyond that, James and crew just wrapped on Superman, which is set for release in theaters on July eleventh. We can't wait to show this amazing film to a whole new generation of moviegoers. On the Warner Bros. TV side, Channing and her team are currently producing close to 90 live-action, scripted, unscripted, and animated series for nearly 20 different platforms. In fact, Warner Bros. Television Group is the only studio with shows on every major platform industry-wide, including Presumed Innocent on Apple TV+, which is now the number one drama series in the history of the platform. This is one of our superpowers. We are the most prolific producer of content for ourselves as well as third parties. As I've said many times, I believe the best content wins, and we've been working hard over the last few years to bolster our storytelling capability even further. We have the best talent, the best assets, and we're confident this gives us a strong, maybe even the strongest, seat at the table. Pivoting to sports, we're pleased with the growth and activity we're seeing across the business, both in the U.S. and abroad. I mentioned the Olympic Games, which has been a huge driver of growth for us internationally. We also saw strong momentum leading into the Olympics with a record-breaking Roland-Garros across all platforms and our best-ever streaming performance for Tour de France. We also have a strong sports presence in Latin America, where we achieved record levels of engagement for Max during the knockout stages and finals of UEFA Champions League. Also of note, we rebranded BT and Eurosport to TNT Sports, which is a leading, at scale, and growing sports platform in the U.K. The strength and growth of TNT Sports will be helpful as we launch Max in the U.K. in early 2026. In the US, we had a big second quarter with especially strong performances by the NCAA's Men's March Madness National Championship on TBS and the NHL Stanley Cup playoffs on TNT. As a part of the growth plan we put in place at TNT Sports, we continued to build our strong portfolio of sports rights. In just the last 12 months, we added NASCAR, Roland-Garros tennis, Big East men's and women's basketball, Mountain West football, as well as College Football Playoff games, all multiyear partnerships. These new rights will add scale and breadth to our existing best-in-class portfolio of Major League Baseball, NBA, NHL, U.S. men's and women's soccer, all spread across TBS, TNT,t ruTV, Max, House of Highlights, and Bleacher Report. As a result of all this additional quality live sports, we are now also converting truTV to TNT Sports in primetime in October. All of this will help support the upcoming launch of Venu Sports. When the service rolls out in the fall, fans will have access to an extensive offering of live games and event coverage of all the major professional sports leagues and top college conferences, and popular studio shows and shoulder programming. As we announced last week, this service will be available at a compelling price point that we're confident will appeal to the cord cutter and cord never fans not currently served by existing pay TV packages. Needless to say, we're excited for the future of our sports business and the tremendous value we provide to fans and our partners. I wanna make one final point. As you saw, this quarter, we recorded a non-cash impairment of the goodwill attributed to our linear networks. It's fair to say that even two years ago, market valuations and prevailing conditions for legacy media companies were quite different than they are today, and this impairment acknowledges this and better aligns our carrying values with our future outlook. Gunnar will have more to say on this in a moment. We recognized early on this was a generational disruption impacting our industry, requiring us to take bold, necessary steps and to pursue opportunities we see across the media landscape to best position Warner Bros. Discovery for the future. We are uniquely advantaged with globally scaled businesses and a capital structure that allow us to make these moves in a thoughtful and strategic way. We have finally launched Max globally and are pursuing bundling opportunities domestically and internationally, all to serve customers around the world with our unparalleled storytelling and content. We are positioned to grow, and while there's still lots to do, we are more confident than ever in our global strategy. Local content, local sports, best-in-class library, and quality branded storytelling, a unique recipe few can do. With that, I'll turn it over to Gunnar. Thank you, David, and good afternoon, everyone. I'd like to focus my remarks on a few key topics before I briefly run through the quarter. First, I want to highlight the progress we're making on paying down our debt balance. During the second quarter, we successfully executed a tender for $3.4 billion of debt, utilizing $2.6 billion of cash, capturing $800 million in value from the embedded discount. We funded this debt purchase with free cash flow and an upsized Eurobond offering of EUR 1.5 billion. We ended the quarter with $37.8 billion of net debt or around 4x net leverage. The primary use of our free cash flow will continue to be debt paydown. We will maintain a balanced and flexible posture in weighing the benefits of purchasing debt that may be trading at a deeper discount versus the $3.8 billion that we have maturing through the end of 2025, including $800 million through the end of this year. With a weighted average maturity of nearly 14 years and an average cost of 4.6%, and with our strong free cash flows significantly greater than our maturities in any given year for the foreseeable future, we have an advantageous capital structure to support our transformation and the growth opportunities ahead. I can't stress this point enough. Importantly, we have not wavered in our commitment to achieving our 2.5-3 times growth leverage target, though admittedly on a longer timeframe than initially anticipated. I am also firmly committed to maintaining our investment-grade rating. Second, I'd like to build on David's comments regarding the impairment charge for the network segment. To take a step back first, Warner Bros. Discovery's balance sheet carries significant amounts of goodwill, created over a series of past M&A transactions, including the formation of WBD in 2022. And of course, we regularly monitor the value and use of our assets. In the second quarter, a number of triggering events, including the difference between our current market cap and the book value of the company, the continued softness in the U.S. ad market, and uncertainty related to affiliate and sports rights renewals, required us to adjust our planning assumptions and take a $9 billion non-cash impairment charge against the carrying values in the network segment. While I am certainly not dismissive of the magnitude of this impairment, I believe it's equally important to recognize that the flip side of this reflects the value shift across business models, and our conviction and confidence in the growth and value opportunity across studios and our global direct-to-consumer business have never been stronger. Third, and to that point, I am very pleased with the progress we continue to make, taking Max around the globe, most recently with the successful rollout across Latin America and Europe. We have seen great momentum over the past quarter and even more so into the current, with the Olympics serving as a fantastic launching pad. We have talked about the substantial investments we've made, the heavy lift, and the multi-year journey we're on, and it finally feels like we're beginning to see the fruits of that labor, both operationally and financially. As David pointed out, with our strong content, both global and local, our global sports, our beloved brands, the state-of-the-art and scalable product platform now available across a rapidly expanding international footprint, and our promotional and operational infrastructure in virtually every territory of the world, now fully aligned as one truly global team, we could not be more excited about what lies ahead for our streaming growth story for many years to come. Turning briefly to some of the key highlights from our second quarter results, which I will discuss, as always, on an exFX basis. Continuing with D2C, subscriber-related revenues grew 6% during Q2, largely due to the strong momentum in advertising revenues, while content revenue declined 70%, as we have previously noted, due to the timing of certain large licensing deals in the prior year. Domestic net add trends remain similar to the recent quarters. That is, continued growth in the retail Max base, which was slightly more than offset by linear wholesale headwinds. As we expected, we did see a modest uptick in churn after March Madness and the conclusion of the NBA and NHL seasons. While we continue to expect the bulk of total subscriber growth to emanate from outside of the U.S., as evidenced by nearly 4 million net adds internationally during Q2, we do expect to see monetization gains from all regions, with perhaps the biggest upside opportunity domestically, at least in the nearer term. We recently raised the domestic ad-free price by $1 and saw a better-than-expected churn during July when the price increase rolled through the existing subscriber base. Streaming ad revenues doubled year-over-year on continued strong demand for Max inventory and the addition of sports content, which drove healthy engagement. We expect meaningful growth ahead as more subscribers opt for the ad-lite tier, which represented over 40% of global gross ads last quarter. EBITDA was a negative $107 million, in part impacted by allocation of sports costs and EMEA launch costs. All taken together, D2C is tracking better than our expectations, even with the investment-heavy first half of the year. With key launches behind us, we should begin to pivot towards second half EBITDA profitability, driven by improving subscriber-related revenue trends, continued momentum behind our content slate, stronger engagement fueled by a more personalized content discovery experience, and continued expense discipline. In fact, I expect the D2C segment to be nicely profitable for the full year and with a strong ramp in the second half, which will represent a meaningful step towards our 2025 EBITDA target of at least $1 billion. That said, as I've noted, we will always prioritize investing to secure profitable Max subscribers versus maximizing near-term EBITDA in any given quarter or year. Turning to networks, distribution revenues decreased 8% on a reported basis. Excluding the impact of the AT&T Sports Nets, distribution revenues decreased 5% as pay TV subscribers declined 9% domestically, while domestic affiliate rates increased 5%. Network ad revenue decreased 9% as domestic impressions declined 13% during the quarter and were partially offset by strong sports-related pricing. EMEA continued to outperform and was up nicely during the quarter. I am also pleased that on a total company basis, we enjoyed significant sequential improvement in advertising trends, down 3% in Q2, versus down 7% in Q1. Tying this back to the impairment conversation, this is another great example of how pressure in one segment goes hand in hand with tailwinds in another. Finally, on the Olympics, we expect just over $100 million of negative impact to EBITDA, mostly at Networks. Recall, this is the final Olympic Games under the agreement we struck in 2015. We are looking forward to our continued partnership with the IOC, as our new Olympics rights agreement will begin with the 2026 Winter Games in Milano Cortina, and which is better aligned to our streaming and pay TV platforms. Now turning to Studios. We enjoyed healthy theatrical revenue growth, despite underperformance of recent releases and aided by strong carryover from Q1 releases. Experiences and consumer product revenues continued to perform nicely, and we remain very upbeat about the opportunity we see in better coordinating processes around managing franchises. Television was down, particularly as we worked through the last of the strike-delayed deliveries, which sets us up for a big swing up in the second half, while, as we've called out last quarter, games are still struggling against last year's Hogwarts Legacy comp and a muted response to Suicide Squad this year. From a modeling standpoint, while the strike impact will present a favorable year-over-year comp on EBITDA during the second half of the year, it will be a headwind to cash content spend. Turning to free cash flow, we generated nearly $1 billion during the quarter, representing a $750 million decrease year-over-year. This was largely driven by two key factors. First, an increase in net content investment against the modest cash savings with the start of the WGA strike in the prior year. Second, lower operating profits, partially offset by lower cash restructuring costs. Finally, a few puts and takes to consider for free cash flow during the second half of the year. Number one, like in Q1, we will have our normal semiannual cash interest payments during the third quarter. Number two, we will be comping against the most strike-impacted quarters last year. Number three, the Olympics will be a meaningful drag on free cash flow during the third quarter, including in part due to working capital dynamics. As such, cash conversion will certainly be lower than the very elevated levels last year. That said, I remain confident in our ability to continue to both generate meaningful free cash flow in the second half and pay down debt. And we expect to finish the year at lower net leverage than at the start of the year. I remain very proud of our organization's dedication, resiliency, and focus while maintaining the flexibility and adaptability within an industry going through so much change. I feel confident with the path that we're on, and I believe we have made the right investments while better aligning our capital allocation with discipline to set the company up for long-term success. Now, I'd like to turn the call over to the operator, and David, JB, and I will take your questions. Thank you. At this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star and one if you would like to ask a question, and we will take our first question from Robert Fishman with MoffettNathanson. Your line is now open. Hi, good afternoon. Thank you. I'm curious, now with over 100 million DTC subscribers, how do you think about the future of Max in the streaming marketplace, and whether you have a preference to exploring formal JVs, either in the U.S. or internationally, or looking to expand the content offering through third-party licensing deals? And then maybe for Gunnar, if you can help us think about the goodwill write-down. Can you just talk a little bit more about the uncertainty with the outcome of the NBA and how that led to any sensitivities around future affiliate fee negotiations? Thank you. Thanks, Robert. Well, you know, as you know, we spent the last 2 years rebuilding Max, and we are, at our core, a global media company. We have infrastructure in every country, we have content, local content and sports in most countries, and we have relationships with distributors. So we've really been kind of chomping at the bit to get this product launched globally. In order to be competitive and ultimately to be long-term and have sustainable growth, we think one of the key advantages is that we are and can be a global leader. And the fact that we're now launched in Latin America, and we launched in the second half of the quarter in Europe, we're off to a terrific start. It'll be a blend. We're seeing real growth, as you've seen, almost 4 million subscribers internationally last quarter. We'll see more this quarter. We're also in the U.S., we're off to a very good start with our Disney bundle. And so I think this is all gonna be driven by the consumer experience. The offering that we have and the content that we have is working very well in Europe and Latin America. And in some cases, like the example I gave in Brazil, it's very early, but what we believe will be a very compelling consumer offering with Disney+ and with Hulu, that all of those will add to sustainable and more accelerated... JB? ... All right, I lost you for a second. Look, echoing David's comments, we have the exciting thing about the international rollout is we have more and more partners outside of the U.S. who are coming to us saying, "Hey, we'd love to figure out ways to do more things together." Whether that be, as David said, on the traditional distribution side, whether that be other players in the streaming space, and particularly, which is important outside the U.S., local content players in a lot of markets who are looking for a partner and look at us as having a very strong platform capability, and obviously an incredible international content offering and lineup that we can do something together. And so, we've had a lot of strength already, as some of the examples David showed, but we do have a lot of active conversations with additional partners that will help us scale and help us localize and get more local content into these offerings as we roll out, which we'll certainly tell you more about over the weeks and months to come. Okay, Robert, and then, just going to, a little more color on the goodwill impairment. And, to get straight to the point here, there is no one factor that is driving this impairment. So the way this works is, you know, obviously, with the amount of goodwill that we have, there's a systematic process that we go through every quarter, and we're monitoring for so-called triggering events. And, this is clearly where, you know, a sports rights discussion, like the one with the NBA, comes into play as a triggering event, which then, compels us to reevaluate our business case and the strategic planning process with the latest assumptions, the best view of, where the industry is and how we play in that field. That's what then leads to a valuation, which in this second quarter happened to be $9.1 billion below what was on the books for the network segment. It's really a full reevaluation, not a response to one individual factor. I do think that the outcome is, from my perspective, consistent with where the market is, where, you know, not only the linear television market, but also what, frankly, the investment community reflects in our current share price. I do want to go back to what I said a minute ago. There is a very significant other side of the coin here, right? David mentioned the distribution deals that we're engaging in on a global basis, where increasingly we're talking about both sides of our business. This is really a distribution ecosystem in transition, not a content ecosystem in transition, and we're using our content increasingly and increasingly more successfully in the streaming space, and less so on the linear side. The ad sales, the outcomes of the upfront here in the U.S. are another example, as I mentioned earlier. So I just want to stress that point, as well. There is a transition in the industry. There is a transformation of the company. We are actively driving that to some extent. The goodwill impairment, at the end of the day, is the accounting reflection of that state of the industry and our strategy. Great. Thank you all. Great. Next question. Thank you. Thank you. Our next question from Michael Ng with Goldman Sachs. Your line is now open. Hey, good afternoon. Thank you for the question. I just have two. First one, on video games. You know, Warner acquired Player First Games last month, but there's, you know, certainly been some uneven performance within games over the last couple of years, but clearly lots of potential as well. Could you just talk a little bit about the strategic value of video games for Warner Bros., and whether you view it as a core part of the portfolio? Then I have a quick follow-up. JB? Yeah, look, I think we look at the evolution of the storytelling and interactive entertainment, as a space and say, it's the one of the unique areas in media that is growing, both growing in terms of time spent, growing in terms of engagement, and growing in terms of revenue. And so we still see this as a huge opportunity for us. We know that our franchises, particularly in a world where the gaming industry, launching brand-new franchises, is getting harder and harder, for a number of reasons, including IDFA deprecation and, more challenges with marketing, and customer acquisition. And that franchises, like the ones that we have, are in high demand, and can help in launching games. Now, you still need a great game, and the reality is, we've had the unfortunate. In the short period of 12 months, we went from having the record year that we had in 2023 with Hogwarts Legacy to unfortunately having the opposite side of that spectrum with Suicide Squad. And it is still. There will still be a hit-driven nature of some of that business, but one of the areas that we are particularly leaning into is the which is about half of the $200 billion games business is the free-to-play space. And the Player First deal was really about strengthening our capabilities in that space because we do think we are subscale, and we have more opportunities to grow in that space, which is a big part of the market. And when we do, then it will help also provide some more balance to our games business from the inevitable cyclicality of more console-based releases, which have, you know, a 3-4-year time horizon and a little bit more lumpiness, even when you do get it right. And so we continue to be strong believers in the game space. We want to continue to see and figure out how we lean into it and get bigger in that space, and we'll certainly tell you more about it as time goes on. You know, one of the strategic advantages of owning- ... all of our IP is, you know, as the world has changed, it used to be you launch a movie or you launch a TV series, and then you do a game. But one of the reasons that Hogwarts Legacy was so successful and the number one game last year is that you went to Hogwarts Legacy, and you entered the game, and you were able to become part of that world. And that ultimately, I think, is a big piece of where this industry is going. It will create a movie, whether it's Batman or Superman or Harry Potter, and then maybe there'll be a TV show. But the ability to go into that world and have that experience of spending time with all the characters is something that we still own. We have 11 studios here, and we have a lot of IP. There's also a lot of interest among others in coming to take advantage of some of that IP for gaming, which we're looking at because, you know, as we- as JB said, we need to get bigger, and the IP that we own and the value that it has in the gaming space is something we're looking to take advantage of. Great. Thanks, David. Thanks, JB. And then second, I was just wondering if you could talk about the strategy around carriage negotiations, just given the potential changes related to NBA programming. You know, are there any changes in terms of the number of carriage deals that come up in the next year or so, just given you know, the wide expectation of the NBA negotiation that just wrapped up? Thank you. Thanks, Michael. I'm not gonna speak to any specific negotiation or specific piece of content or IP, but this is what we do for a living. You know, we're in 200 countries. Aside from the excitement and drive that we have around Max and our studio business of being the biggest maker of TV content and our library business, is that we have free to air and cable channels all over the world, and those channels are B2B businesses. They require carriage agreements. And we've been in that business for 40 years. We've been very effective in that business, and it's our job, whether it's a food channel or an entertainment channel or a sports channel, to make sure that we have a very robust offering of content that nourishes and excites an audience, so that, one, they wanna spend a lot of time with us so that we could monetize it with advertising, but two, that distributors get significant value by carrying that, and therefore pay us significant value. We've been able to get meaningful increases for our content, and we've worked very hard here in the U.S. and around the world, whether it be sports channels or other channels, to make sure that our offering is robust and meaningful. You know, as you look at our different sports services around the world, you'll see that. We may be the leader or we are one of the leaders of sports globally. Excellent. Thank you, David. Thank you. We'll take our next question from Benjamin Swinburne with Morgan Stanley. Your line is open. Thanks. Good afternoon. David, there's been a lot, at least in the press, over the last few weeks or months about kind of unlocking value at the company through everything from kinda smaller asset sales to splitting the company up. You talked about... You and Gunnar talked about the strengths at D2C. You know, that's a business that could be pretty interesting as a standalone company in the public markets. I'm just wondering if you're, you know, considering more aggressive action to try to unlock some value in your stock price, just given all the press speculation out there. And then, you know, I know it's a tough question, but certainly investors are wondering how to think about the potential impact of losing the NBA on your basic network's EBITDA. Anything you or Gunnar can share with us as we think about that potential outcome into 2026 would be much appreciated. Thanks so much. Yeah, I mean, look, Ben, on the last point, I mean, we have said in the past that the NBA is a profitable right, and we've been very clear about that. Again, as David said earlier, this is not the time to go into any level of detail, but obviously you should assume that whatever, you know, we just refreshed in our analysis, appropriately reflects the scenarios that we're seeing. So, that's, that's all I wanna say about that. And then on the strategic options, and I'll hand it back to David in a second, but just to make one thing clear, first of all, don't expect a specific answer on any individual speculations or rumors out there. But second, look, we're a public company. This is a public company management team, and we're very well aware of our responsibility to have a view on whatever strategic options are out there, and the same applies to the board. We are very clearly focused on evaluating everything beyond just running the operational business. So we've said before, you shouldn't be surprised to see us engaging in, you know, whatever M&A processes are going on out there. You shouldn't be surprised to see us engaging in partnership discussions. David has been talking about this for quite some time, and where it makes sense, you have seen us engage in those things. Regarding our own portfolio, of course, we are constantly updating our views on the value of the assets in our portfolio and whether or not we believe that they're properly reflected in the valuation of the company. This is all- As well as the strategic value of those assets. Yeah. Yeah. So this is all, you know, ongoing, you know, professional management, I would say. And to your question, specifically, there have been rumors about potentially splitting up the company. ... Look, we have been operating under the One Warner Bros. Discovery strategy for the past 2.5 years since creating Warner Bros. Discovery. You know, every day I'm seeing evidence everywhere in the business of the benefits of those strategies. David mentioned in a sentence earlier that the DC 10-year plan, just seeing how that team is now leveraging all of our assets, all of our IP, our various business units, all the cash registers that we can coordinate. I have no doubt that we're gonna get great results, and it is important to be able to use all of that across distribution platforms and across business units. So, you know, the focus is on running the business. The focus is on making sure that we get the studio to where it should be. It's an incredibly valuable asset from my perspective. And, you know, unfortunately, that business, as JB alluded to, for the game space, the same is true for film and TV production. It takes a little longer to see the results of the very significant changes that the team has been making. And then third, as you heard us say multiple times on this call already, we're really starting to see the fruits of our labor in the D2C space. And, the studio and the D2C segment have, from my perspective, a tremendous value opportunity. Once we start seeing more evidence for that and seeing more, you know, materialization of that value, I believe that corporate structure is actually a secondary consideration. I don't know, David, any- I would just add that, look, the market conditions within the traditional business are tough, and they're challenging. You know, but, you know, from our perspective, two years ago, we saw that the business was being generationally disrupted, and so we did an awful lot of work to get our balance sheet in good shape. We have a terrific capital structure. You know, our debt is. We view our debt as an asset. We're generating meaningful free cash flow. We're investing substantially in content. We're a storytelling company. The strength of this company is that we're a global storytelling company with content that works well all around the world, local and entertainment and sports. And so we feel very good about where we are, and we have to, as Gunnar said, look at all and consider all options. The number one priority is to run this company as effectively as possible. You will see, as our studio begins to grow, and if our global direct-to-consumer business scales the way we believe it's going to, then that'll be very apparent to investors, and we expect that that'll create shareholder value. Thanks, guys. Appreciate the answer. Thank you. We'll take our next question from Vijay Jayant with Evercore ISI. Your line is open. Good afternoon, this is Kutgun Maral on for Vijay. Thanks for taking the question. Just one on the EBITDA outlook. I know that you're not providing guidance, and that it's tough to have a lot of visibility given linear challenges, DTC investments, and the hit-driven nature of the studio. But I wanted to see if you could help level set expectations a bit for the back half. Gunnar, the outlook you provided on DTC was certainly very encouraging. Can you help us and, and maybe walk through some of the other moving pieces? Thank you. Sure. So again, as you said, I'm not in a position to provide detailed guidance, but if we go through the segments a little bit here, again, we're expecting a very significant step forward on the D2C side. On the studio side, as I mentioned, we have two big films in the pipeline. Also, generally speaking, if you compare the release schedules this year versus last year, I would say a little more beneficial with, you know, only one film in December, whereas last year we took a lot of marketing expenses and didn't get a lot of the benefit of some of the late releases in December. So that's definitely a factor. But I also, as you said, want to point out that, you know, each one of those are hit-driven and create some volatility as well. Elsewhere in the studio, certainly, you know, in the TV production business, things should get a lot better. We're now coming into the part of the year that was deeply impacted by the strike last year, so that should be a helper. On the network side- On the TV side, which is encouraging, there is quantifiably a lot less investment in the marketplace in purchasing TV content, and we're not really seeing that. I think it represents the fact that we have very high-quality content. Our content is working very well. We have strong IP that's known. And so Channing and the team are seeing the numbers are looking- 83 ongoing productions on air, pretty much, you know, unaffected by any of those trends. Yep. On the network side, as I said, we're not seeing a lot of change in the linear ad market environment in the U.S. It's differentiated. My call out earlier, that Europe is actually looking almost surprisingly strong in some of the markets. That's definitely a positive outlier. But to your point, visibility is not high in that market, and I don't want to make any predictions beyond the point that in the U.S., Q3 is typically also a little bit of a weaker quarter for us, given the timing of our sports schedule. And remember, we have the Olympics in Europe, which is a smaller ad market relative to those rights, whereas in the U.S.-... If anything, we're taking a little bit of a hit from that event being ongoing. And so that, you know, those are the building blocks that I'm happy to provide, and I hope that that's helpful, Vijay. On the motion picture side, it is a long cycle business, but we have a really good team with Mike and Pam, and it is encouraging that we just have back-to-back movies this summer that are generating real value. We're rooting for that. You know, as we launch Beetlejuice, which there's some early, very positive data that we're getting, the idea that people seem to be going back to the theater for good movies that provide some compelling or unique storytelling. We also have Joker coming up, and we've been really pushing to get Warner Bros. back aggressively into the motion picture business, whether it be DC and Warner Bros. So we're encouraged by that, and we're encouraged by our slate ahead. We're still working our way through the slate that we inherited, and we're much more optimistic about what we have ahead. That's very helpful. Thank you both. Thank you. We'll take our next question from Jessica Reif Ehrlich with Bank of America Securities. Your line is open. Thanks. So I think we all appreciate the massive efforts that you guys are in to restore the studios, plural, Warner Bros. and DC, as well as your TV operations, and also, of course, Max and HBO. But I guess, you know, at the end of the day, with the steady decline in the pay TV universe and obviously no letup in sight, is it or will it be enough to offset what you're doing? Is it enough to... On a consolidated basis, is it enough to offset this? So David said earlier, your position for growth. Gunnar, I know you discussed one, you know, WBD. When do you foresee consolidated earnings growing on a sustainable basis? So that's one thing. The second thing on the NBA loss, if you don't win the matching rights lawsuit, are the more recent sports acquisitions and maybe some upcoming rights enough to close the gap? I'm not—we can't really. You know, we're in a litigation. And at this point, we've handed it off to our lawyers. We have confidence in our position. We—it—the judge will decide whether our matching right, which is 11 pages long, represents a match, and whether what we offered matched or not. And, you know, we'll see. We're getting back to work, and the lawyers will handle this, and the judge will decide, and off we'll go. And Jessica, on your first question, look, there is no doubt to us as a management team that the answer to that question is yes. We believe there is tremendous upside opportunity, both in the D2C business and in the studio business, and it is enough to offset what's happening on the linear side. Again, as I said, we just went through another, you know, strategic discussion, strategic planning process, you know, with our board, and we have a strong plan that supports this. I'm not in a position to perfectly predict when this is gonna happen. Am I disappointed about the impairment? Yes. Am I disappointed that, you know, the trends in the linear business haven't been a little better? You know, there's been talk about recovery, you know, a year, a year and a half ago. It hasn't really happened. It is what it is. We're managing this as best we can. The key point here is that on the D2C side, we're finally, after two years of heavy investment, hard work, at the point where, you know, we're ready to accelerate. And as you heard from us, you know, we believe we are gonna see an acceleration, you know, on the top line, and we have significant opportunity across every driver of the business. And we've been very clear. We've talked for a while about the $1 billion mark in EBITDA for 2025. That is a starting point, not an ending point. So, we have a lot of confidence in that. And on the studio side as well, and, you know, I can share a little bit more, the level of effort and rigor that is going into virtually every step along the value chain, in the studio, from greenlight through the physical production, the windowing approach, the coordination between the various teams, it's a night and day difference. It takes a little while to become effective. 2025 is really gonna be the year when, you know, the first films greenlit by Mike and Pam are gonna, you know, dominate the slate. JB has talked about the long development cycles on the game side, et cetera. So there's no question about it, the studio can operate at a very, very significantly higher level of performance. And JB, I think it would be helpful. This is something that you and I are talking about every day. But we have an action plan meeting every week, all-hands. Talk about, lay out the growth drivers for direct-to-consumer that gives us now, where, what we're seeing and why we have, you know, some real substantial confidence in the acceleration of growth and the acceleration of profit in our direct-to-consumer global business. Yeah, I mean, look, we've talked about our growth levers. Obviously, international growth and rollouts in more markets is by far the biggest. So that's number one. Number two is we have obviously a content slate, which, as we've talked about on prior calls. You know, the first 9-12 months post the U.S. launch, between just timing of some of our tentpole series being out of cycle, the strikes obviously didn't help. We unfortunately had one of our weakest content slates. We now go into a period where, thanks to all the great work from Casey and his team, the improved Pay 1 slate that David and Gunnar have just talked about, and more Max Originals, as well as the great content from the U.S. Net side, that we have probably one of the strongest content lineups with all of our tentpoles coming back, starting with House of the Dragon, obviously this quarter, but over the next 18 months or so. And so we feel great about the content slate, which is clearly a massive driver of our success. Our ARPU story is a third one, where you've seen us obviously raise price in the US. We're raising price outside the U.S., we're also changing rev shares outside the U.S., which historically in some of the wholesale agreements on the HBO side, we feel we're underpriced, so we're driving that. We're rolling out an ad-lite product in many more markets. Previously, ad-lite on the old HBO Max was only in the U.S. We've now rolled it out in 39 markets across LatAm, a handful of markets across Europe. We're looking to roll it out in more markets, so advertising will become a bigger and bigger play for us. The product experience is one that we've talked a lot about, but the reality is, we said a year ago when we rolled out Max in the U.S., so the product went from not great to good, but it's not, still got a ways to get to world-class, and we're working every day to improve features, to improve the personalization in the product, the recommendation in the product, and that takes time. It's a game of inches that we are continuously driving. Another lever, as David talked about earlier, is just the distribution agreements. We are partnering with more and more partners who can get us to market and in front of more customers and on more devices faster, to accelerate our rollout, and do it in a more efficient and effective way. And then, then last but not least, we are rolling out, obviously, our password sharing crackdown, which will... As we've said before, will start towards the end of this year and, and bleed into 2025. And so that'll be another, revenue driver. And so we look at the building blocks, not as sort of a, you know, what if, could it be, business model exercise, but we see real fundamentals, and momentum in our business case for D2C that make us very confident about the, the profitability in the second half of this year, and also, the $1 billion plus, going into 2025 and beyond. And look, this global disruption is being felt by everyone. It's a challenge. It's a transition, and as Gunnar said, this is a distribution disruption. You know, people are consuming more content than ever. Our content is stronger than it's ever been. But the fact that it's being felt by so many, we've seen a lot of the local markets, you know, some great content players that don't have platforms, that are looking at us and saying: "You know, you're starting to make money. You're starting to scale. You know, maybe I can be a part of you. And if I'm a part of you, then maybe I have a chance of being more successful and turning around the economics of the business that I'm in, that's declining." You know, some of these discussions wouldn't need the challenge and the difficulty, you know, even though we're feeling that pain and we're fighting through it, is providing opportunity. Many of these bundles, they wouldn't be happening if people felt that they were doing terrific on their own. But it's the challenge of the marketplace that's forcing people to say: "What makes sense? How could this work better?" And what really works about this is, the consumer experience right now is not good. And so we're all gonna be driven toward, and it always works this way. What's the best consumer experience, and what is the best content? So we're being driven through bundling or through, you know. I think you're gonna see a number of players become part of other players. Players that are playing in markets in the U.S. or in markets outside the U.S., that were hoping that they could make it alone, you know, at least we believe that you need to be global. When you look around and you say: "Who's global and who can I be a part of?" Because building a platform for one country, no matter how big, is a huge challenge when you're competing against taking Harry Potter around the world to 1 billion people above the globe. And so we've positioned ourselves, I think, with to be profitable this year, to be now finally global and accelerating, and be in a position where each of these countries around the world and players that have been playing at this and losing money or being challenged, can have... You know, there's only a few people they can reach out to and say, "Can I come along? Jessica, just, for the avoidance of doubt, I want to come back to your original question. We have a plan that foresees growth, top line growth, bottom line growth. There is a transformation period that we're working through very obviously, as you saw in the impairment that we took today. We have a very strong balance sheet. We're fully committed to maintaining that investment-grade rating. We're going to generate tremendous free cash flow through the transformation period, and I have no doubt that we're gonna come out as a strong and healthy, and sustainably growing company on the other side of this. Next question. Thank you. Our final question for today will come from John Hodulik with UBS. Your line is open. ... Yeah, thank you. I just wanted to follow up on JB's comments. You know, David, I think you mentioned 65 markets now for Max. Just how big could it be? I mean, I can't imagine it'll be everywhere, you know, on the globe, but, like, how many markets do you expect that to get to? And then as it relates to the Olympics, you know, here in the third quarter, just any, you know, sort of more color on how that you expect that to drive the business, in both in terms of advertising and D2C growth? Thanks. Well, let me just start by saying we're not in three of the biggest markets where our content has huge appeal, and we see it in the viewership numbers in the U.K. and in Germany and in Italy. So, you know, at the end of 25, which is coming up soon, we'll be launching our own product in the U.K. We're also a leader in our own sports product with TNT Sports, which gives us an advantage. And so to come out in those three markets, I think you're gonna see real scale. JB, if you could talk to... We talked a little bit about Japan and some of our other markets, but more than 50% are markets we're not in yet. JB? I think that's exactly the best way to think about the scaling, and we talked about the 18- to 24-month timeframe, but the reality is by, you know, first half of 2026, the vast majority of our rollout will, will be underway and will have taken place. And David mentioned, you know, we talk about addressable market and the fact that our two bigger peers are in, if you measure theirs, is 100% of those addressable markets. We're in just over 50% of them today, and we're at over 100 million subs. So you have to do your own thinking of what our penetration and opportunity could be, but we're about half of, of, of the addressable market today at 100 million, 103 million subs. We think the opportunity, to David's point, in some of those markets are big markets where we know our content and our audiences. We know the size of them is significant. And so, we think in the next 18-24 months, the opportunity is, you know, certainly, easily in the tens and tens of millions of, of subscribers on top of where we are today. And look, that's 50% that we're gonna be attacking. We just launched in Europe and Latin America. We launched last quarter, and in Europe, it's we launched in the middle of last quarter, so we're a couple of weeks in. So we haven't had the yield, which you're gonna start to see from those markets over the next several months, and you'll see it this coming quarter. Great. And the Olympics? Oh, the Olympics, this is the last set of Olympic Games under our old contract that we struck in 2015, and that was a wholesale contract. It had various business benefits for us. There is a large sublicensing component in those markets where we don't meet the broadcast and free-to-air requirements. There was a big, obviously digital push at the time to roll out to drive the Eurosport Player, and it's very helpful today in the Max rollout. And then over the past eight years, we have benefited very significantly from having these rights in all of our affiliate discussions and renewals. The one thing to keep in mind, we've talked about this in past Olympics years, is that all of the costs are essentially recognized in the quarter where the games take place. That's why in this individual quarter, you're gonna see a loss from the Olympics and a little more pronounced free cash flow impact on the negative side, as I called out, because a lot of the benefits are generated over the entire eight-year period. And again, the next games are gonna be taking place under our new arrangement, which is much more focused on, you know, the pay TV and most importantly, the streaming rights and opportunity. We believe, you know, based on the numbers that we're seeing, that it's gonna continue to be a phenomenal driver for engagement and subscriber acquisition. Great. Thanks, guys. Thank you. That does conclude today's question and answer session, and this does conclude today's program. We thank you for your participation today. I ask that you please-