The paragraph is a transcript of the opening segment of the Warner Bros. Discovery First Quarter 2025 Earnings Conference Call. The operator introduces the conference call and mentions that it is in a listen-only mode, with a question-and-answer session to follow. Andrew Slabin, the Executive Vice President, Global Investor and Strategy, introduces the call participants, including David Zaslav, the CEO, and other key executives. Slabin notes that the presentation will contain forward-looking statements subject to risks and uncertainties. David Zaslav then remarks on the company's success, emphasizing a focus on quality storytelling as a key driver of Warner Bros. Discovery's progress.

The paragraph highlights the strong performance and cultural influence of the company's content engine, which includes popular shows and movies like "The White Lotus" and "The Last of Us." The company has seen significant subscriber growth and financial success, with a goal to achieve $1.3 billion in EBITDA by 2025 and surpass 150 million subscribers by the end of the next year. This success is attributed to diverse growth strategies, including high-quality storytelling from HBO, local content and sports, and a global distribution network. Additionally, there's an ongoing focus on product improvement and a target to reach $3 billion in EBITDA from Warner Bros. studios.

The paragraph highlights Warner Bros. Discovery's success and future plans across its television and film divisions. It mentions the success of recent movies like the Minecraft Movie and Sinners and the anticipated launch of Final Destination. The company is excited about its upcoming offerings, including a new Superman movie and other DC projects as part of a broader strategy to rejuvenate the DC brand. Warner Bros. Discovery aims to sustain growth and shareholder value through its global streaming service, studio operations, and linear networks. It also suggests that the company's strategic organization allows for financial flexibility, with questions welcomed from the audience. Steven Cahall from Wells Fargo is introduced for the first question.

In the paragraph, Gunnar Wiedenfels responds to a question regarding potential capital structures and leverage ratios for a company's assets. He refrains from speculating on hypothetical capital structures but emphasizes their satisfaction with a recent reorganization, which positions the company well for future opportunities amidst industry changes. Wiedenfels highlights the transparency achieved through the division structure and the importance of not speculating on capital structures at this point.

The paragraph discusses the restructuring efforts by David Zaslav involving two subsidiaries to improve visibility and flexibility for the company and shareholders. It highlights the company's status as a major content producer with extensive global production capabilities and a growing streaming service. The restructuring provides options for quick adjustments in strategy if necessary. Gunnar Wiedenfels adds insight into their strategic approach, noting that recent initiatives, such as a U.S.-only launch and adjustments in password sharing policies, are expected to deliver benefits starting in 2025. These initiatives are part of a phased approach expected to expand globally and become more assertive through 2026. The paragraph concludes with a mention of a question from Peter Supino of Wolfe Research.

The paragraph discusses the sports strategy for Max, particularly focusing on the differences between U.S. and international markets. David Zaslav emphasizes the global reach of Max and how sports, along with local content and HBO, differentiate their offerings outside the U.S. JB Perrette elaborates on the U.S. approach, noting they are experimenting with different models as they transition sports from wholesale to potentially a hybrid streaming model. Internationally, sports offerings are more a la carte, as seen with TNT Sports in the U.K. They recognize the benefits of sports content in terms of customer acquisition and engagement but are also mindful of the costs associated with sports rights. The company is committed to continuing strategic experimentation to find a profitable model for streaming premium sports content.

The paragraph discusses Warner Bros. Discovery's strategy of focusing more on leveraging its owned content, such as popular franchises like Superman, Batman, DC, Harry Potter, and Lord of the Rings, rather than relying heavily on sports rights, which are viewed as a rental business. David Zaslav emphasizes the value of their extensive library of storytelling content and the potential to further exploit these assets. He mentions plans to invest more in these owned properties in the future. The paragraph ends with Bryan Kraft from Deutsche Bank asking about the success of HBO's programming, how the streaming service Max appeals to different demographics, especially younger consumers, and the time spent on Max in the U.S.

David Zaslav emphasizes the strength and quality of HBO's creative team led by Casey Bloys and their commitment to delivering high-quality content rather than a large quantity. He highlights HBO's longstanding reputation for quality storytelling and its current strength with shows like "House of the Dragon," "Euphoria," and "The Last of Us." He compares HBO's approach to storytelling to NBC's "Must-See TV" era, aiming for cultural events that bring people together. Zaslav underscores HBO's philosophy of creating shared viewing experiences, whether at home or in theaters.

The paragraph discusses the future of HBO Max, emphasizing its focus on delivering high-quality content that fosters cultural engagement. It mentions the positive reception of long-form storytelling, like "White Lotus," and highlights the popularity of series like "Euphoria" and "Harry Potter" among younger demographics. The paragraph also notes regional engagement, with Latin America leading due to its comprehensive offering, including local originals, while the U.S. and Europe closely follow. Engagement in Asia Pacific is lower due to its primarily Hollywood-focused content.

The paragraph discusses the current state of a company's advertising and financial situation. It highlights that there has been no material impact on advertising despite potential concerns such as declining consumer sentiment or slowing GDP growth. The company has been monitoring indicators closely and finds that Q2 is tracking consistently with Q1 when adjusted for specific factors. The diversification of the company's portfolio is also noted as a strength. Additionally, it mentions improvements in corporate EBITDA and seeks clarity on permanent savings.

In the article paragraph, the speaker discusses the potential impact of advertising risks and slower upfront discussions at the beginning of the year, which are expected to be offset by strong scatter advertising. The leadership team is prepared to manage costs in a potentially turbulent environment, especially following the announcement of tariffs. The corporate costs are anticipated to decline year-over-year. During a Q&A, Rich Greenfield asks about the financial impact of the NBA in 2026, and whether Q1 and Q2 financial outcomes would have been different without NBA-related costs. Gunnar Wiedenfels confirms that costs would have been significantly lower without the NBA.

The paragraph discusses the financial implications and strategic moves related to sports rights, particularly focusing on the NBA. The company has successfully transformed its sports rights portfolio and renewed affiliate deals, which are crucial for monetization. They anticipate a $300 million cost increase in 2025 due to overlapping outgoing and incoming rights, with significant impacts in Q2 and Q3 but an improvement from Q4 onwards. By 2026, they expect a decrease in sports rights expenses as NBA costs decrease. The potential future financial improvements are attributed to the NBA's profitability and its influence on affiliate negotiations. The discussion shifts to the direct-to-consumer segment, where the company has entered into several distribution agreements with lower average revenue per user (ARPU) and seeks strategies to increase ARPU over time.

The paragraph discusses JB Perrette's insights on streaming service strategies, focusing on Average Revenue Per User (ARPU) and lifetime value evaluation amidst streaming consolidation expectations. Perrette highlights that while some partnerships involve reduced wholesale rates, they are profitable in terms of long-term value. He acknowledges potential short-term pressure on ARPU due to the growing ad-supported model, which launched in the U.S. and has expanded to over 45 markets with increasing demand. Despite initial lower revenue from distribution, the advertising component of ARPU is rising, especially internationally, suggesting future growth in net ARPU from the ad-supported model.

The paragraph discusses the growth strategies for a streaming service, focusing on increasing subscribers and revenue in Europe, despite declines in traditional business. Strategies include cracking down on password sharing, adjusting pricing, leveraging sports upsells, and enhancing user engagement, particularly with ad-supported models. There is significant demand for streaming inventory, especially in Europe where there is noted growth, contributing to a net positive outcome internationally. However, in the U.S., achieving similar growth remains uncertain, and the company plans to highlight its streaming inventory on Max in upcoming promotions.

The paragraph discusses the strategy shift from a "more is better" approach to focusing on higher-quality content for streaming on Max. This involves considering changes to content spending, with a possible reallocation rather than reduction. It highlights licensing opportunities, such as producing originals for third-party services like Netflix and Apple, providing examples like a Scooby Doo show and titles like "Ted Lasso" and "Presumed Innocent." David Zaslav emphasizes the value of producing high-quality content for various platforms, mentioning collaborations with Apple and Disney, and highlighting the successful leadership of Channing's team in managing these efforts.

The paragraph discusses Warner Bros.' strategy to leverage its extensive intellectual property (IP) assets to build global asset value, particularly focusing on iconic franchises like DC Comics characters (e.g., Wonder Woman, Batman, Superman, Supergirl), Harry Potter, Lord of the Rings, and Game of Thrones. The company is committed to developing these as major global differentiators and enhancing its motion picture and streaming segments. It also highlights the potential to reinvigorate classic IPs such as Hanna-Barbera, Looney Tunes, and Scooby Doo, expanding their value through both internal and external collaborations, like partnering with Ted and Netflix. The conversation also notes that this strategy will not require a significant increase in content spending.

The paragraph discusses the strategic growth plans for a streaming service and studio, focusing on a moderate increase in content spending and a shift towards using more of Warner Bros.' output internally, thus building future streaming profit. David Zaslav emphasizes the focus on quality over quantity, aligning with the HBO brand, and explains past content cuts as part of this strategy. JB Perrette adds that the content mix is shifting from children's content and unscripted shows to more Pay-1 movies and global scripted originals.

The paragraph discusses the future growth strategies for a streaming service. JB Perrette highlights several key drivers for business growth, including globalization, penetration growth in existing markets, and ARPU growth through better ad sales and initiatives like password sharing crackdowns. Globalization efforts include expanding into major European markets like Germany, the U.K., and Italy. Additionally, the introduction of a lower-priced ad-supported plan is aimed at attracting price-sensitive consumers. Content remains a crucial factor in fueling growth. The ultimate goal is to balance these factors to ensure sustained growth in subscriber numbers and revenue.

The paragraph discusses the company's content strategy and growth plans. It highlights the strong and consistent content slate curated for the next couple of years and ongoing product enhancements aimed at improving user engagement and monetization. Additionally, the company is focusing on strategic bundling, using examples like the successful bundling of Hulu, Disney+, and Max in the U.S. This strategy aims to reduce marketing costs, lower churn rates, and enhance the consumer experience by offering a more integrated service that doesn't require switching between multiple apps. The overall goal is to achieve real growth and increased global scale through strategic partnerships and bundling.

The paragraph discusses the evolving landscape of the entertainment industry, predicting that eventually, there will be five or six major global players providing better consumer experiences, possibly through content bundles. Success is tied to solving consumer problems and delivering quality content. Gunnar Wiedenfels mentions a $3 billion target for the studio, emphasizing opportunities in TV production and a shift from broadcast to streaming. The film sector benefits from a portfolio strategy combining existing IP with new films of varying scales. Overall, there’s anticipation of longer-term growth and success, with significant progress expected in the near future.

The games business experienced challenges last year, leading to a significant restructuring by JV, which is expected to drive long-term growth. Over the past three years, the company has undergone transformational changes, focusing on collaboration and strategic franchise management. This includes revamped processes from greenlighting to monetization, aiming for more success and reduced losses in this hit-driven industry. The company is supporting growth through increased content investments and studio infrastructure. While aiming for a bright long-term outlook, the company anticipates a strong second quarter. The conference call concludes without further questions.

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