The speaker welcomes participants to the Warner Bros. Discovery First Quarter 2024 Earnings Conference Call and introduces the executive team. He mentions that the call will include forward-looking statements and reminds listeners to refer to the company's SEC filings for more information. The CEO, David Zaslav, then speaks about the company's focus on building for the future and embracing technological innovation in the rapidly changing industry.

The company has had a successful start to the year, with positive momentum in key areas such as subscriber growth and ad sales. They are also focused on rebuilding their studios and utilizing new technologies to improve their offerings. The company's focus on transformation and efficiency has led to improved free cash flow and they will continue to manage their capital structure.

Warner Bros. Discovery has made progress in the last two years but still has a lot to do in order to grow. They have made tough decisions to position the company for the future and are confident in their assets. They have expanded their direct-to-consumer presence and will continue to do so, with the goal of achieving $1 billion EBITDA in 2025. They have already seen positive EBITDA this quarter and are laying the foundation for future growth in the Direct-to-Consumer segment.

The company's strategic and financial objectives for Direct-to-Consumer are supported by three key metrics: subscriber growth, engagement and monetization. The company is nearing 100 million subscribers and expects continued growth in the second quarter. They are also focused on improving engagement through product enhancements and a strong content lineup. Additionally, global ARPU grew by 4% in the quarter, with a higher growth rate in the US. The company has a strong content lineup for the next 12-18 months, including popular shows and events such as March Madness, Hacks, and House of the Dragon.

Over the next 18 months, Max will release a variety of highly anticipated original series and tentpole productions, including House of the Dragon, The White Lotus, The Last of Us, And Just Like That, The Penguin, Dune: Prophecy, IT, Welcome to Derry, A Knight of the Seven Kingdoms, Godzilla x Kong, Furiosa, Beetlejuice, Joker 2, and more. Churn, or customer turnover, is decreasing due to a diverse range of content and improved user experience. A new bundling option with Disney+ and Hulu was also announced, providing consumers with a wide range of entertainment at an attractive price and benefiting both companies.

The modest overlap between Disney+, Hulu, and Max presents an opportunity for incremental subscriber growth and increased retention. The bundle will launch later this summer and the company is confident it will bring increased efficiencies and marketing effectiveness. The company's main focus is storytelling and they are using their assets and creative minds to return the luster to Warner Bros. Pictures. The heavy lifting being done by the leadership at Warner Bros. Pictures and DC will take time to reflect in financials, but the studio has already generated over $1.8 billion in global box office this year. The team is now in the early stages of developing a new Lord of the Rings movie to be released in 2026.

Peter Jackson, Fran Walsh, and Philippa Boyens are producing the Lord of the Rings franchise, which is a significant opportunity for Warner Bros. Discovery's theatrical business. The company's IPs, including Harry Potter and DC, are currently underused, but they are working to change that. The company's Q1 financials were impacted by a tough comparison in gaming and a disappointing release in the gaming group. However, there has been a sequential improvement in advertising sales, particularly in international linear advertising. The company sees potential in linear advertising, especially through their legacy broadcast assets, and is launching new offerings in Latin America and soon in EMEA. Despite challenges, there are still opportunities in linear, such as using US networks' production hubs to create popular content for both linear and streaming.

The company plans to use Max's intelligent platform to allocate content budgets and create more successful shows, such as Quiet on Set from ID. They also aim to leverage AI to enhance products and experiences for consumers and improve efficiency. This includes using AI for ad targeting and recommendation algorithms, as well as personalizing content discovery and optimizing ad-break opportunities. The company has numerous other experiments in various areas to improve efficiency and targeting.

The author discusses their company's experimentation with AI and their belief that creativity and humanity can only be found in people. They also mention their partnership with the NBA and their ongoing negotiations. The company is preparing for potential outcomes and is confident in their assets and playbook. The financials for the quarter will be presented by Gunnar.

The company experienced a $1.3 billion positive swing in free cash flow in the first quarter due to improved working capital, disciplined content investment, lower restructuring costs, and reduced interest expenses. They plan to continue deleveraging the balance sheet and have already paid down $1 billion in debt. Their debt is a valuable resource and they plan to be more opportunistic in monetizing it, starting with a debt tender announced this morning. They intend to use up to $1.75 billion in cash to repurchase outstanding debt.

The Studios segment saw a decline in revenue due to a tough comparison to the success of Hogwarts Legacy and the disappointing release of Suicide Squad. However, the segment is still performing well with the success of recent theatrical releases. The company has also made investments in expanding their production facility in the UK. The new 1WBD processes are expected to help improve the bottom line by reducing the impact of misses. In the D2C segment, the company successfully migrated HBO Max subscribers in Latin America, with better-than-expected churn rates, thanks to their experience from the US relaunch.

The relaunch of LatAm has allowed for more consumer-friendly pricing and packaging options, including installment billing. The company plans to apply a similar approach to customer segmentation in EMEA and is focused on increasing the international subscriber base while improving monetization. The company remains confident in achieving their $1 billion plus EBITDA target for 2025 and has seen sequential improvement in both linear and D2C advertising in the first quarter. Total company advertising was down 7%, but D2C saw a 70% growth and is expected to have another record quarter in Q2.

The paragraph discusses the company's approach to monetizing viewership on both linear and Max platforms, with a focus on offering partners incremental reach and customized ad solutions. The trend in quarter-to-date linear cash pacings in the US is improving, with the exception of the impact of the NCAA Men's Final Four and the Championship Games. EMEA is a standout bright spot for advertising revenue growth, particularly in free-to-air markets such as Poland, Italy, and Germany. However, Latin America is facing challenges due to cyclical and secular headwinds, with a shift towards streaming impacting the pay-TV ecosystem. With the introduction of Max in the region, the company is better positioned to capture a share of this migration. The company has also made significant progress in cost efficiency through transformation efforts.

The company is pushing forward with new initiatives and expects to exceed their previous cost savings target. They are focusing on continuous improvement and utilizing AI to increase productivity. They are also consolidating real estate, facilities, and content workflow systems. The company is making difficult decisions to position themselves for long-term success and will now take questions. The first question is about the bundling relationship with Disney+ and Hulu, including details on pricing, marketing, coordination, and funding. The company also discusses the performance of the Max, Netflix bundle with Verizon and the possibility of future domestic bundles.

David Zaslav, the CEO of Discovery, discusses the success of their bundle with Netflix and the upcoming bundle with Disney. He believes that bundling services together is more efficient and provides a better consumer experience. He also highlights the strength of Disney as a company and their global presence. Zaslav sees this partnership as a positive for consumers in the US and believes that the best content ultimately wins in the marketplace.

The speaker discusses the importance of having the best content in the TV and motion picture industry and how distribution companies and content companies will both be successful. They also mention that the new bundle with Disney and WarnerMedia will be priced attractively for consumers and will receive strong marketing support from both parties.

The speaker discusses the company's international strategy, which includes partnerships with Telco, Mobile, and Broadband players in Europe. They also mention their relationships with distributors and the potential for replicating deals similar to the innovative one with Charter and Disney in the US. The speaker believes that their existing business and consumer base will give them an advantage in transitioning viewers to their Max product. A question is asked about the Disney bundle and the current trend of re-bundling services in the streaming industry.

The speaker discusses how the company is positioning itself in the industry transition by focusing on creating the best consumer experience and investing in direct-to-consumer options. They also mention the importance of being prominent in major bundles and staying true to their strengths in content. Another speaker adds that the industry previously tried to be everything for everyone, but now they are refocusing on excelling in their respective areas, with Disney being a leader in kids and family content.

The speaker discusses their company's success in various areas and their ability to invest in their strengths through bundling services. They also mention the current disruption in the industry and their focus on quality content. They believe the business will look different in the future and be better for consumers. The speaker also references their company's restructuring in the past two years while adapting to industry changes.

David Zaslav, CEO of WBD, discusses the company's restructuring efforts and their focus on creating high-quality content. They have invested in talented creatives and have gotten rid of content that is not beneficial. Zaslav believes that the key to success is having great content on all platforms and running the business efficiently for growth and free cash flow. He also mentions the success of HBO and Warner Brothers Television and their plans for the motion picture business. Overall, their mantra is to have great content as the foundation for their business.

The author believes that the best content will succeed in the upfront market, and they hope to continue the momentum from last year. They are operating in a more positive environment this year and are seeing success in the convergence of D2C and linear platforms. They plan to take advantage of this by offering more data-driven products and believe there is more opportunity for growth. They also have confidence in their studio's ability to earn more in the future, despite current financials not reflecting their new strategies.

David Zaslav discusses the potential of the D2C business and content business in the future. He mentions the importance of fixing the consumer experience and the advantage of having local content and relationships in every market. He also talks about the growing interest from distributors in Europe and Latin America in offering their products on broadband. Zaslav emphasizes the need to be a global company and not just focus on the US market. In response to a question about upfront advertising, he talks about the strong relationship with advertisers and the use of analytics and data to target advertising on both linear networks and digital platforms.

Wiedenfels explains that the benefits of D2C advertising are starting to show through, but there is still more opportunity for growth. With the shift in distribution landscape, there are more opportunities for targeted advertising and dynamic ad insertion. JB's increase in subscribers also drives additional scale and reach. Wiedenfels predicts that this will be a growth cycle for many years to come. Venkateshwar asks if there is potential for other services to be added to the Disney JV with Hulu and Disney+.

The speaker discusses the role of exclusivity in their company's bundle offerings and the potential impact of advertising on offsetting linear ad declines. They believe their bundle of Disney+, Hulu, and Max is compelling enough without the need for additional content. They also mention the strong competition from Amazon and Netflix, and the importance of offering a competitive price.

The speaker believes that their bundle and a few other services can provide a satisfying entertainment experience for most consumers. This may put pressure on independent services, as there may be more serial churners who come in and out on an ad hoc basis. The speaker also mentions that the coexistence of linear ad sales and streaming is likely to continue for a long time, and there is still a lot of potential for growth in streaming advertising.

In response to a question about ad loads and the impact of the merger on advertising, David Zaslav and Gunnar Wiedenfels explain that they are taking careful steps to increase ad loads on HBO, but it will still be minimal compared to traditional television. They also mention that the combined company's advertising trend is down, but there is some support from streaming. In addition, they discuss how marketing will work for both companies after the merger, with the potential for cross-promotion between Disney+ and HBO Max. They also mention the potential decline of Paramount Plus.

The speaker discusses the marketing strategy for the newly formed bundle of Paramount sports and entertainment content. They mention that both companies will continue to market their individual offerings, but the bundle will be prominently positioned in the buy flows. They also mention their interest in acquiring more content, such as South Park, NASCAR, and Hockey.

David Zaslav discusses the success of their partnerships with A24 and their continuous efforts to improve their content offerings. He also mentions their focus on reducing churn and the potential impact of bundles on both churn and ARPU.

The paragraph discusses the importance of keeping churn rate low and the benefits of bundling partnerships for HBO Max. JB Perrette explains how their Ad Light offering in Latin America and Europe allows them to partner with distributors who are more price sensitive, while still maintaining high ARPU and LTV. The company evaluates each partnership based on its own merits, but ARPU and LTV are the core metrics used to determine their value.

David Zaslav discusses the shift towards working with existing distributors in Europe and how they are recognizing the opportunity to be part of the content economics in the new world. He also mentions the importance of recapturing economics through broadband products and working with distributors to target younger consumers. Gunnar Wiedenfels adds that the company has adopted a continuous improvement mindset and has implemented processes to improve financial discipline.

The writer suggests that if Warner Brothers Discovery was designed today, it would not have 12 different content systems and 14 different teams. The issues faced by HBO Max in 2021 were due to the duct-taped system. The company is currently working to replace multiple systems and create a more unified approach. The one company mentality has led to better global marketing and the ability to promote content with the support of the entire team. The company also maintains discipline in their growth business.

The speaker emphasizes the importance of distinguishing between an investment and an expense, and points out that their company is currently leading in profitability and expects to see significant growth in the near future. The conference call has now ended.

This summary was generated with AI and may contain some inaccuracies.