Okay, we are good. Good morning, everybody. Welcome to day two of Morgan Stanley's 2025 TMT Conference. I'm Ben Swinburne, Morgan Stanley's media and telecom analyst. Quick disclosures: for important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com. If you have any questions, reach out to your Morgan Stanley representative. I'm really excited to welcome back to the conference David Zaslav, the CEO of Warner Bros. Discovery. David, thank you so much for coming back. It's great to see you, Ben. Good to see you. Thanks, everyone, for coming out a little early this morning. That's right. We're kicking it off early this morning out here on the West Coast. So, David, I thought a good place to start. You recently described, I think on your last earnings call, the media landscape as one being reshaped by generational disruption, creating opportunities and challenges. I think that's an apt way of describing the backdrop. As you step back and look at your company, now three years into the post-merger, how would you assess the portfolio of assets at Warner Bros. Discovery, its competitive position, and ultimately the growth opportunity ahead? Great, thanks. Look, we saw very quickly after we closed on Warner Bros. that this was not a traditional disruption, that it was a real generational disruption, and we had a lot of work to do. So we spent the last three years restructuring our businesses with an eye toward what does each of these businesses look like to be a business for the future. And it was a lot of hard work, but we feel like we're in really good shape right now. We've built a very strong foundation under each of our businesses. We paid back by the end of this quarter $19 billion in debt. And we really see our business as kind of two baskets. We have our traditional business, which is cable, free-to-air, and sports. It's a really good business, but it has some free cash flow and growth pressure, which we expect is going to continue, so we're defending that business, but on the other side, this was a very big year for us 2024 in that we finally launched Max globally. We still have half the markets to go, but we're now in 117 million homes. We're growing quite aggressively. We'll talk about it. We have a clear path to over 150 million homes next year, so we have a global streaming product that's distinguished: local content, local sports, as well as the full bouquet of great quality content. Our streaming business, we think we got that growing again in a meaningful way, and it's very unique. We're the biggest maker of quality TV content in the world. We have the biggest library. We'll get into the different pieces of that business, but it feels like a real good business for the future, and then we have our gaming business, which was, you know, we had a great year two years ago. We had quite a challenge last year, but we took that challenge on. We restructured the business, and so I feel like we've really made the turn as a company. We have great assets. As you look at the assets that we have, we have great assets to grow for the future, and I feel like we've really made the turn, and we're going to be accelerating, so I'm quite optimistic. I want to get into the businesses, David, with you. But before we do, you guys announced a pretty significant strategic kind of realignment towards the end of last year. You talked about it last week on your earnings call, kind of separating the company into global linear networks and then streaming and studios. What was sort of the impetus behind this decision? What's the process, and how do you think it impacts sort of shareholder value long term? First, it's how we really run the company, so I think it provides strategic clarity to everyone within our company as to how do we really run this business. Two is we're always looking at shareholder value, and we really see these as two very different businesses. One is free cash flow, high margin, declining, defending, and it looks different in different markets. In Europe, it looks a lot stronger, and we've worked very hard to stabilize that piece of the business so that you can model that business pretty effectively depending on what you think the slope of decline is, and we have some unique ways to try and push to grow on that, and then we have our global streaming business and studio business, biggest TV library in the world, a great TV and motion picture business. And it's unique, the fact that we have such a great studio and such a big maker, and that we have a meaningful global streaming business. And we don't think we're getting real credit for that or value for that. And so we want real transparency on both of those businesses. Take a good look at what we have globally. In terms of our traditional business, we're the largest international media company in the world. We're fully global: global content, global infrastructure. Take a good look at what we have, because we think we could defend it, and we think it's unique. And two, we look at our streaming and studio business and gaming business. And we think that they're kind of enmeshed. So this will give a chance for you all to see it and see the growth and see all the characteristics of growth and opportunity and challenge that we see, so that it'll help us get fair value. And finally, with generational disruption comes things that we could predict and things that we can't. And so this structure will give us real opportunity to respond to the marketplace. It'll give us an opportunity at the right time, if we make a determination, to go on offense or defense in different ways, because we're already structured that way. And we've made a lot of progress in finalizing that structure. So I'm excited about it. Great. That's a helpful description. Let's dive into some of the businesses now. You mentioned streaming, right? So this is your fastest growing business. You guys have put in a lot of work, Casey, JB, and the team to get Max to this position. So you're going to be nicely profitable, over $1 billion of profits in 2025. What's the strategy in your mind, David, to grow D2C at Warner Bros. from here? Look, for us, this is the big distinguisher, I think, for us. There's very few global streaming services, and we have, and we thought we had when we put this business together, something that was really unique: great high-quality content from HBO, and we built on that with Max, the biggest TV and motion picture library in the world, and then local content and local sports. We've been in each of these markets for more than 20 years, and John Stankey's coming up next, but that was the core element of why we thought this business could be so powerful, because Discovery was the leading international media company in the world with local content, local sports, and infrastructure virtually everywhere in the world. Warner was the highest quality content with brands, whether it's Harry Potter, Game of Thrones, DC, Lord of the Rings, that people understood and would want to leave before. If somebody said Batman, people would leave dinner and say, "When does it start?" in every language in the world. And so if we put those together, what would happen? And I think the thing that gets us so excited and encouraged for what lies ahead is it took us a long time to launch that product. We needed a platform that could sustain the sports and the wealth of content. But we finally did it. And we only rolled out in half the world, but we added about 20 million subs in eight months. We're growing very aggressively now. We see real growth throughout this year. And it's a different menu of opportunity for consumers. There are a lot of regional products, but there are very few truly global. And there's almost nobody that has sports, local content, and very high quality together. And what the marketplace is saying is, "We really love this. Consumers want it. We're finding a great reception from consumers." And distributors are saying, "How can I participate with this great product?" This idea of exceeding 150 million subscribers next year is a big deal for us, because when we look around in these markets, we don't really see anybody else. And so this is what we thought would make the company unique. We got a ways to go and a lot to prove, but we're seeing real demand for the product. And there are some markets, if you look at the U.K., Germany, and Italy, our content is loved. We didn't have a chance to launch in those markets because we licensed our product there. But we have just been waiting and excited about the opportunity because our content is loved in each of those markets. So when House of the Dragon or The Last of Us or The White Lotus comes back, there's millions of people in each of those countries that have been watching that on Sky. And now we'll be able to offer that to distributors in each of those markets. So we have a very—we got a strong and excited audience for that. And so we know we have about 10 million subscribers that are locked up early 2026 in the U.K. But that's with one distributor, and it's non-exclusive. So we look at those three markets, and we think that's an incremental 10 lock, but another 15-20 million subscribers just from that. Then we have the traditional rollout. We're rolling out in Australia this quarter. We'll roll out in Turkey next quarter. That extra 50% that we see internationally, we really have a growth business. We have something that I think is really unique for consumers. It's exciting. David, one of the things we're always trying to figure out is when we try to value these businesses is how much investment they need. And I'm just curious, as you look at sort of the long-term plan for Max, does the business require, in your mind, significantly more investment in either programming or technology, especially when you think about the international opportunity? Well, look, we are really learning. The ultimate goal here is to really nourish a consumer so they wake up every day and we're one of the places that they go, and everybody in the family comes and spends time with us. People are watching more content than they ever have. And that's ultimately the goal. And we're making real progress with that. And we have to decide. We've invested an awful lot of money in the content. So in addition to generating free cash flow, our strategy has been to invest more in content, focus on our product, which is the storytelling, and attack everything else in the company. And that's what we've been doing, and that's what we're going to continue to do. But HBO right now, just in and of itself, has the most robust, strongest lineup over the next 24 months it's ever had. Casey and that team, right now we have The White Lotus and The Pitt. Then we're going to have The Last of Us, The Gilded Age, and And Just Like That..., Euphoria, True Detective. We have more big tentpoles. So that, I think, is going to also help generate more growth for us. But we'll figure out what else we need. And I've been saying for three years that this marketplace is kind of broken for consumers. You put the TV set on, or you go to your device, and there's 20 apps. And then you Google the show or the sport that you want to watch, and then you figure out how to get into one, and then how do I get into another. It's a very challenging consumer experience, which is a great opportunity. Because when you have a challenging consumer experience, there's almost always value creation as you create a better consumer experience. So eventually, we believe you have to be global in order to have real sustainable growth in the future. And there's only going to be a few global players. And we're at that table now. We expect we're going to be at that table, and we want to be an important force. And you will see, I believe, consolidation that'll restructure those 20 choices. One of them is what we're doing in the U.S. with Disney. Hulu together with Disney+, together with Max. Our churn is less than half. We're growing quite aggressively here in the U.S. And most importantly, the consumer experience is really strong. And you learn along the way. I thought bundling was really an economic opportunity for consumers. But it turns out it isn't just that you want to offer them together. You need that once you get on that bundle, that you can move between all of the content without coming in and out. You don't want to have to leave Hulu to go to Max. You don't want to have to leave Max to go to Hulu. We're not there yet, but eventually you're going to see that. And a lot of the regional players are struggling. And you could see it in the economics. And that presents an opportunity, I think. As things get more difficult, those around the world, regionally, that are spending a lot of money on platforms that are losing, many of them are calling us now and saying, "You're global. You have scale. You're making money. You talked about doubling your EBIT this year from last year. How do we become part of you?" And so we've been evaluating. Some were doing it through bundles. Others, we've said, "We're doing so well right now. Let's continue to grow and accelerate." And over time, there will be, I think, consolidators. And for the right economics or the right dynamic, we will look at having others come into us, because that's much more efficient than going and spending a lot. When we looked at this, we said early on, our strategy is it's not how much, it's how good. And we're not trying to be everything to everyone. That's a good strategy maybe for other companies. So we're going to be very disciplined about what we do and do the things that we think are going to help grow the business. Just picking up on that point, David, because obviously this rebundling is a big debate. We had Chris Winfrey on stage yesterday. You guys did a great deal. Chris is great. Yeah. He's obviously very focused on. We're rooting for him. Yeah. I'm bringing all the D2C apps together. Dana will be here later. So Brian. So there's a lot of focus on rationalization. How much can you get done with these synthetic bundles that you're talking about versus actually real consolidation and bringing assets into the same company? Do you need to go that further step to kind of get to where you want it to be? Well, I think it's probably going to be both. The quickest to market is to be working together with other distributors. For us, a year ago, we were looking, we were in Brazil on our own. And now we're in a bundle with Netflix and Globo. That's a better consumer experience. And we don't have to go for a whole regulatory structure. The same in Mexico, where I'm on the board of Televisa. For a long time, we talked about being, we'll both go it alone. But now we're bundling together. So I think that's very quick to market. And you get quick data. How much of a better consumer experience is this? In some of these markets, it's quite helpful to us, because we already have a lot of local content. And then you take a dominant local player. And then on top of that, you put our movies and our content. It's quite potent. So I think a lot of it will be that. And in many cases, it's going to be players just saying, "This is uneconomic for me." Just the fact that this is a big growth business for us now with real money. It's one of the reasons we want to break out this segment. We want to show you how we're growing subs, growing revenue, growing EBIT. But those that aren't, we all see what's happened to the value of media stocks. One of it, a big piece of that is who's going to survive. And so those days of big spending on platforms and content with a lot of ambition for many that are local is turning into, "How do I become part of something where I can stop losing money, or I could be part of something that's sustainable?" And then I think I've been saying for a long time that the governments need to allow media companies to consolidate where appropriate. We have great companies like Netflix and Amazon and YouTube that are fully global companies, but they're direct competitors of ours in one sense. On the other sense, we're one of the biggest suppliers to a lot of them with our TV content. But the world has changed. And this idea of looking at media as who are the traditional media players in each market, and maybe they shouldn't come together because they'll be too big. They're the most important nourishment locally for these communities. We're the ones that are producing content that represents the culture and the values of each country. We're really not, even though Warner Bros. Discovery is a fully global company, we rely on producing local content in every country. And we have local sports in every country with local announcers. And so I think that having the markets be more regulatory light, whether it's here in the U.S. or whether it's the E.U., I believe that's starting to turn. It's a different approach here in the U.S., which we're excited about. But as you look at Europe, Europe doesn't want to have just global players that aren't producing a lot of local content in their markets. And they don't want the diminishment of the strength of the media company. So I think that narrative is starting to take a turn. I think you will see consolidation, because a lot of these players just, without that opportunity, some of them are just going to go away. Yeah. Let's shift gears to Warner Bros., a business that obviously benefits from, what, a 100-year-old library and tremendous franchises and IP. I know the Oscars were on Sunday. You guys have talked about a $3 billion EBITDA or EBITDA opportunity long term, which would be basically almost a double from last year. Can you kind of unpack this business for us and why you're so bullish on sort of the long-term cash flow opportunity here? Sure. Last year, we made about $1.7 billion. It wasn't a good year for us for a series of reasons. Having said that, we have really unique assets in our studio business. We're the largest studio. We have the largest library. We're the biggest maker of content. And we uniquely own our IP for gaming. So let me just unpack it for you. One is a big piece of our business is monetizing our library. That's a big piece of our studio business. And it's lumpy. We have shows like Big Bang and Friends, and we have these big shows. And when do they come up? We didn't have much that came up last year. This year and for the next few years, we got some big slugs coming up. And so we know for a fact we will do. You'll see a lot more value coming through our library. We can model that. Two is our gaming business. Two years ago with Hogwarts, we had the biggest game in the history of Warner Bros. Last year, we had a real struggle. The good news is we really dug in. We had about eight products. We've restructured the business. We now have four core products, which is DC, Hogwarts, which will be coming back. When it does, it'll be real value for us, Mortal Kombat and Game of Thrones. Let's focus on the stuff that we have that's really strong. We took $350 million in write-offs. We expect that we'll be profitable in our gaming business. You'll see a real improvement from where we were last year. I spent an hour and a half yesterday with James Gunn and Peter Safran and our global marketing team talking about Superman on July 10th. We got Superman, which is a huge moment for us, relaunching DC. And it comes at a time where they had real success with The Penguin. We got a show that's going on HBO called Lanterns that's in production. And we're already shooting Supergirl, which James and Peter are really excited about, and a movie called Clayface that's going into production soon. So there was a real 10-year attack strategy on DC. This was a really undervalued asset within Warner Bros. That starts to move a little bit, and you start to see big value creation. And so we're very excited about DC. We've been at it now hard for two years, and we're excited to see that. And then we have our motion picture business. And we're winding out of it. It's a long-cycle business. And we've been winding out of what wasn't ours that we fought hard to make better. And over the next few years, you're going to see what is ours. And we're optimistic about it. What about some of the core franchises like Lord of the Rings, Harry Potter? Your animation business, are you optimistic you can get those back to kind of profitability levels we've seen in the past and bring those to market? We hired a great guy about a year and a half ago, Bill Damaschke. He ran DreamWorks Animation. He hired a whole new team. We have a six to seven-year plan now on animation. That's a big deal for us. If you look at the performance of animation in theaters, that was a big miss for us that we weren't in that game. We have Cat in the Hat starting, which the team is really excited about. That'll be in early 2026. We have Oh, the Places You'll Go! that'll be coming a little after that. We have four or five movies that Damaschke is now working hard on that he'll unveil for all of you guys. It's a segment that's important to us. We then have New Line, which was doing a lot of other stuff. They were doing DC. They were doing big motion pictures. And now they're going back to what they do better than anyone in the world, which is horror. So we had The Nun II. We're coming up with The Conjuring this year. They do it for a price. This is part of the motion picture business. How do we do that? That's a good audience in horror. We have a real competency with New Line. So we're revving up kind of our strengths with real discipline. And then we needed to bring creative people back to the company. And so in some cases, we may have overspent. I don't think we did, because we wanted to bring the best and the brightest people back to Warner Bros. It's key for us at HBO and Max. It's key for us with Channing and our TV business. And it's key for us in the motion picture business. That's sort of the entry place for the best and most creative people in the world that want to be on that big screen. And so we brought Tom Cruise to Warner Bros. We have Paul Thomas Anderson and Ryan Coogler and Maggie Gyllenhaal and M. Night. That was a piece of our strategy. It may only be 20% of our motion picture business, but we haven't lost anybody. No creatives have left this company since we came in. And we've added a lot of great creatives. And then finally, tentpoles. Minecraft is one of them. But we just saw what Amazon did with Bond. And I get it. Almost every big movie that was successful in the last two years was a piece of quality IP that people knew and loved and missed. We're on that, because nobody has more great IP that's recognized and loved in the world. It's probably our most important asset at Warner Bros. So right after we closed, we went right to Peter Jackson and said, "Let's get going with Lord of the Rings." 10 consecutive years of Harry Potter. It's half cast now, J.K. Rowling. We got Channing and Casey and the best creatives working on that. So DC, Game of Thrones. We're doing a Game of Thrones movie. That's the balance. I think animation, horror, DC, great creatives, great tentpoles. We think that it's a tough business, the motion picture business. There's no question. But I think it's going to give us more stability, particularly on the animation and DC side. We just weren't doing it, and now we're going to try and do it with real quality and passion. So I'm optimistic. That's great. Looking forward to Superman in July. Anything you want to share about what you've seen so far? Krypto. Krypto the dog. Fantastic. But the cast is great. The movie, we're very excited about it. So James Gunn is quite a genius. Yeah, and he's at the helm. It's unconventional. We had him writing the Superman script, and he had all these ideas. And so we said, "OK, you're running DC. That's your family. So get going." And the only thing I worry about is that's all he does. He works like he's got to relax a little bit. He's working really hard. Yeah. We're looking forward to it. Well, let's shift over to the linear networks. You talked about defending these businesses. And I think probably the biggest discussion, David, in the last year has been the NBA and sort of what that all was going to mean for the company. You renewed with Charter and Comcast post the NBA decision. And the terms, or at least what we've been able to glean from what's been in the press, have been better than people were expecting for Warner Bros. Discovery. So I guess I'd ask you, what did we get wrong? Did we overvalue the NBA or underestimate the value of the rest of your network programming and scale as you go into these distribution agreements? Or maybe both. First, we're really happy that we're back in business with the NBA. And that deal is really going to work for us. We have House of Highlights for the next 11 years globally. And we think that's going to be a place that's growing pretty significantly. A lot of the young generation don't want to watch the whole game. They want to go to one place. It's almost like a RedZone for basketball. And so we think that's a great growth engine. And we have the NBA in a number of markets outside the U.S. But we're going to be disciplined. We just talked about Lord of the Rings and Game of Thrones and Superman and Supergirl and Wonder Woman. We own those. We can monetize that. Harry Potter. We make a lot of money on those platforms by bringing joy and excitement to people through content, but also through merchandising. And it's ours. It's ours forever. Sports is a rental business. And so you've got to look and say, "Are we going to be able to make money on this?" And so we're money good on virtually all of our sports. And we're not going to pay more than we think we can afford or we can make money on. We'd rather invest. If we saved a huge amount of money by not doing the NBA, it's more money that we could spend on the quality content that we can make global that we think can strategically help us. I started in this business as running the distribution for NBC. I ran retransmission consent. I love the distributors around the world. I've been in business with them for many, many years, and we have a very strong lineup of sports in the U.S. and around the world, and I said, "Our job is to make sure we have enough quality sports so that we're creating real value for the distributors." And I think it turns out not doing the NBA was a great decision for us. We picked up college football playoffs. We picked up NASCAR in the summer. We have a great lineup globally, and we saved a huge amount of money, and we were able to get we're now in a position, and I don't think I've ever been in this position. I think it helps when you look at our two companies and you look at the traditional and free-to-air business. Historically, about 20% of the deals come up every year. So, at the end, you, when you model us, I wonder how they're going to do when this deal comes up. And how are they going to do when this deal with this distributor comes up? We've done five of the six largest distributors in America are locked for the next several years with overall deals that are increases. So, when you model us, you know that we're getting sub fee increases across the board. We've never been this stable. So, we're not looking at next year or the year after like, "OK, what do we do?" So, that provides, I think, real stability and real forecastability for you. None of us know exactly what the decline of subs and viewership will be on the platform. But that was, I think, a big, big win for us. I think it has to do with the fact that we have 29 channels, and they provide real value to consumers, whether it's Food or HG or ID. The extra value to us is we're only about 15% committed on sports. Most of our spend is non-sports related. If we're doing 600 hours of content on food every year, depending on what happens with the marketplace, we can make that 500 or 400. We've already started to change the way we program those channels to create more shareholder value and more economic value. We have Channing that ran Warner Bros. TV. She's superb. We now have her running our TV business. What that allows us to do is, one, we could use more of the Warner library, which gives us higher returns than producing original content. One, we're going to be looking to do that. Channing is already looking with Casey at bringing some of the HBO content that we wouldn't sell to others. We'll be talking about that in the next couple of weeks of stuff that you'll start seeing on TNT and TBS, which will be new to a lot of viewers in America and we think will provide real value in terms of viewership. But when we produce something, we produce a documentary on Diddy for ID, then we can decide, do we put that on ID? Do we put it on Max globally? Or does Channing sell it to Apple or to Amazon? Each, our food team, our home team, our ID team, they're like studios. Instead of looking at them as cable channels, we start to say, what is the productivity of each of their shows? And how does that work in terms of how good is that content around the world? How good is that content on streaming? So we're not going to be able to fight against this decline. But things like that, using more library, being very measured on what content we produce and how much we produce, which we can change and make variable. And producing content, more content that works also on our streaming service, I think will be a real helper to us. David, I wanted to make sure we at least touched on TBS, TNT, and CNN. These are decades-old brands, incredibly profitable businesses. What do you see as the long-term kind of strategic future for those assets? And particularly CNN. I mean, we are in a moment when sort of the value of political news distribution assets seems to be really high strategically. But obviously, it's a business that's facing a lot of headwinds, as we've talked about. So how do you think about maximizing the value of these brands? CNN is the number one global news brand in the world. But we can't sit idle. We have a great leader in Mark Thompson. The growth that you're going to see from CNN is not going to be as a cable channel domestic and around the world. Whether the ratings go up a little bit or go down a little bit, or even if they went up a lot, you're not going to see a real significant economic return. The economic return on CNN is what distinguishes it. The numbers we're looking at is what is the level of trust in the CNN brand domestically and around the world? That has to be higher. It is higher. We're working on that. Two, we're the leading digital news business in the world. We have 150 million people around the world that come to CNN to see what's going on. We hired the core team from The New York Times. Alex MacCallum ran The New York Times digital business for Mark Thompson. The two of them have built a really best-of-class team quietly over the last year and a half. You'll see us roll out multiple products. But ultimately, we think our entitlement is we should be on every screen. People should be able to get CNN if they want it on their phone. But they should also be able to get multiple contemporary products. If we do that, CNN could really be unique. What Mark did for The New York Times, we're fighting to have him do that for CNN. I think it's important for us. I think it's important as you look at where do you go for trusted news around the world, particularly in an environment where AI exists. So we used to look at something and say, we know it happened because we saw it with our own eyes. We can't say that anymore. Or soon, we won't be able to say that. And so when we see something, how do we see something with our own eyes that we know we can trust that really happened? And when something happens in the world, everywhere in the world, the prime ministers, the presidents of every country in the world turn to one place. They turn to CNN because we're probably the only news company that has people everywhere in the world on the ground, the best journalists. We have to monetize that in a very different way. And that's what Mark is doing. And it's exciting. And you'll hear more about it from Alex and from Mark. Right. Well, we're about to run out of time, David. How would you kind of roll it all together for us as we think about the 2025 and future for Warner Bros. Discovery? I feel we've worked really hard the last three years, and we've done a lot right. We've done some stuff that hasn't worked, but we've done a lot more right than we've done wrong, but more importantly, I think we have the unique assets at this company. I'm looking at John Stankey, and we had a lot of talks about why this company could be great. Global leader with local content everywhere in the world, the greatest makers of content and the greatest brands in the world. For the last three years, we've been struggling to modernize this company. This idea that we'll be in over 150 million homes next year, and there's been a great reception for our product, and it's unique, and our studio business is really growing, particularly our TV business is growing in a market where others are struggling because there's a flight to quality. We've got the kind of balance of content globally on our traditional business where we don't have a lot of locked costs, where we have the ability to maneuver our way to defend. I think we're going to start to see a lot of great things from this great company that John worked so hard on, that we worked so hard on. I just want to make sure that my kids and my grandkids, when they see that shield and when they see HBO and they see Max, that's something where they know that's the best storytelling in the world. It's on every device in the world. So we're making progress. I think we can do it. Well, that's a great point to end on, David. Thank you so much for being here. Thanks, everybody.