Warner Bros. Discovery Inc (WBD) — Q3 2019 Earnings Call Transcript

Good morning, everyone and thank you for joining us for Discovery's third quarter 2019 earnings call. Joining me today are David Zaslav, our President and Chief Executive Officer; Gunnar Wiedenfels, our Chief Financial Officer; JB Perrette, President and CEO, Discovery Networks International; and Peter Faricy CEO, Global Direct-to-Consumer. You should have received our earnings release, but if not, feel free to access it on our website. On today's call we will begin with some opening comments from David and Gunnar, and then we will open the call for David, Gunnar, JB and Peter to take your questions. Before we start, I would like to remind you that comments today regarding the company's future business plans, prospects of financial performance are forward-looking statements that we make pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are made based on management's current knowledge and assumptions about future events, and may involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our Annual Report for the year ended December 31, 2018 and our subsequent filings made with the U.S. Securities and Exchange Commission. And with that, let's turn the call over to David.

Good morning, everyone, and thank you for joining us to discuss our Q3 results and outlook. Discovery reported an impressive quarter of operating and financial results, with performance at the top end of our competitive set. Across all businesses and regions, we met or exceeded our guidance, with a notable acceleration in our international segment high single-digit growth. Overall, a very strong set of numbers by any measure. I believe we have the best operating team in media today. I am proud of what we have accomplished both in the quarter and since our acquisition of Scripps early last year. It is a story of promises made and promises delivered and in most cases over-delivered. To that point, well before we closed on Scripps, we talked about our goal of being able to generate $3 billion of free cash flow. Before the acquisition, we were generating about $1.4 billion and Scripps was generating about $700 million. Today, we are at $2.9 billion for the trailing 12-month period. And having generated nearly $900 million in free cash flow this quarter, we feel good about that goal. On net leverage, we had been relentlessly focused on reducing our financial leverage from the post-merger peak of nearly 4.8 times net debt to EBITDA. And at the end of Q3, our net leverage of 3.1 times is close to the low end of our target range. We've begun to return capital to our shareholders having repurchased $300 million of our equity or nearly 12 million shares in Q3, with additional purchases in Q4, while at the same time reinvesting in our future growth strategy. From the beginning, we viewed Scripps as much more than a portfolio of cable channels, but rather a trove of global IP, with among the strongest lifestyle brands, programming and personalities in the world. We envisioned a major opportunity to not only enhance their position globally, but also to carve out a differentiated direct-to-consumer strategy. A few weeks ago, we launched another key component of that strategy with Food Network Kitchen, a world-class customer experience in the kitchen with live and on-demand cooking classes with the most celebrated chefs from around the globe. We worked closely on all elements of the product with our partner Amazon over the last year to get it off the ground. We are very pleased with the product and very excited about the opportunity for value creation it presents. And to support our broad strategic initiatives, we've taken a major step forward in the seamless rollout of our singularly owned and operated tech stack, onto which all of our direct-to-consumer platforms will sit from Dplay across Europe and Motor Trend OnDemand to the Eurosport Player, our Global Cycling Network, GOLFTV, Magnolia and our factual content service. Everything we said we were going to do, we've done. And looking forward, we are equally focused on delivering against an aggressive set of objectives within an industry undergoing real disruption. Yet Discovery has always punched above its weight, by being nimble, opportunistic and flexible in leveraging every opportunity to put our content and beloved brands everywhere consumers are across an unrivaled global footprint. It is core to how we operate. It's our North Star and the engine behind what drives our broader strategy and investments in our future. Today there are more ways than ever to get content to consumers. And we are as well positioned as anyone to leverage every path and platform to monetize our content investment across both linear and direct-to-consumer. It starts with strategic decisions we made many years ago to control our destiny and build long-term value, by owning and controlling our IP globally, content and brands that people love, which was further strengthened by the Scripps portfolio. We generate roughly 8,000 hours of original content annually, alongside a library of titles in every language that aggregates several hundred thousand. It's a huge competitive advantage, especially as we watch our industry peers on the premium scripted side pay whatever it takes to amass enough content for a slice of the fragmenting entertainment space within the direct-to-consumer market. We are not in that scripted and movie side of the entertainment business. It's crowded, aggressive, expensive and risky. As women over the past year around America have put their TV sets on, they can choose to watch movies, scripted series, or anything they want. But more have chosen to watch our programming than any other media company, which makes us the number one media company for women in the United States. In addition, our strategy of pivoting into sports has made us the largest producer of live sports outside the U.S., another aggregation of IP that we think is high on the value chain. Our investment in world-class IP defines our beloved brands in areas people love and drives powerful engagement across our portfolio. Our international footprint across 200-plus markets is unrivaled, with an average of 10 to 12 free-to-air or cable channels in every key television market. Owning great content that people love, strong brands and operating at scale is important, but no longer enough. We are also focused on building industry-leading capabilities and proprietary tech IP so we can create truly compelling customer experiences and ecosystems. As I noted we launched Food Network Kitchen two weeks ago, a first of its kind experience offering the most complete food and cooking digital ecosystem, with content and interactive features, as well as the largest roster of iconic cooking talent. We are the Peloton of food but we are priced for the masses. We'd like to be in everybody's kitchen. It is powered by a unique partnership with Amazon, as well as the biggest promotional push ever across our network portfolio, with food and cooking being big funnels to drive and create value. Food Network Kitchen is also the first new product to launch on our owned and operated tech stack. And it is becoming increasingly apparent that owning and operating our own tech architecture is a distinct competitive advantage and one that should allow us to further scale opportunities across multiple verticals, meaningfully driving global functionality, efficiencies and speed to market. Peter Faricy who oversaw a marketplace for Amazon has been a big help to us and he's here with us today and will be able to answer some questions during Q&A. Switching gears to our core traditional business. Our performance has been solid. Though domestic ratings are a work in progress across certain properties networks like TLC have been nothing short of a phenomenon in our industry. The team at TLC has done an extraordinary job turning around and building that network. Just two years ago it was the ninth or tenth network in America for women. Today it continues to be the number one ad-supported cable network in prime time for women 25 to 54 and women 18 to 49. Together with TLC and our other networks it allows us to reach almost 35% of women on Sunday nights in America. It's a great, great story. It's what we do. And we're attacking every one of our channels for growth. And at HGTV, A Very Brady Renovation delivered its biggest hit of all time, a prime example of us leaning into our scale with an ambitious creative swing supported across our broad network portfolio. We recently announced that the Brady Bunch gang will return for a holiday special. Our portfolio performance helped us secure our position as the number one TV destination for women 25 to 54, once again during the quarter. And in fact for the better part of the year and our best-in-class GO apps along with products like Discovery Premiere and Engage form the backbone of a uniquely secular growth narrative within an industry that has been largely static. And as such, we are definitively taking share. On the international front our business continues to show signs of steady growth in part driven by continued programming and audience strength, traction of our direct-to-consumer products, as well as further integration of the Scripps content and brands around the world. Once again our share of market and delivery across our top 10 markets was up with growth of 3% and 2% respectively building upon last quarter's very strong increases. Our international growth was driven by the highest Q3 ever for EMEA, led by strength in the U.K. and Italy both of which delivered record audiences in July and August, up 12% and 9% respectively. This also has helped to insulate us from ongoing macro weakness in these key markets, especially in the U.K. where our commercial share of market has increased to roughly 8%. JB Perette is here with us and can discuss in more detail the strides we are making not just in Europe, but all around the globe. With exciting locally differentiated streaming products gaining traction and expanding, we aim to become the Hulu equivalent in select TV markets in Europe. Our strategy in certain cases has been to partner with key local players that broaden the content offering and share of market. In Germany our joint venture with ProSieben Joyn which combines 55 channels into one app has become a leading streaming platform since launching in June with more than four million monthly average users. And we announced a few weeks back that in our largest European market, Poland we will launch a single streaming destination to access a powerhouse of Polish content in partnership with leading media and distribution company Polsat. We are very excited about this opportunity and our team is looking at other large market opportunities. I would also add that getting deals like this done is not easy. We lean on our local teams and the credibility and relationships they have built over the years. There's a lot to appreciate in getting these structured deals, content, technology and partnership in the aggregate off the ground. There are a number of markets where we aggregate all of our content and go-to-market alone. And the brand we use is Dplay. And Dplay has now expanded to 10 countries internationally including; Japan, the Nordics, Italy, Spain and most recently in the U.K. and Ireland. Dplay has some great momentum particularly after having been repositioned onto our own tech platform and it's given us a lot of learning about how to position a large aggregated content service. People are consuming more content in the aggregate than ever before, but every programmer is battling for people's free time and attention. And we are driving deeper connections with our fans in a far more cost-effective manner than many others. Behind our brands and personalities big personalities, which have delighted audiences for in some cases decades, we are taking that engagement and those personalities and putting it on steroids, whether it is unique view-and-do experiences like Food Network Kitchen, aggregated AVOD and SVOD platforms in Europe and even looking at lifting large collections of our channels and taking them on to OTT and pushing them into distribution around the globe. We have great assets, resources, IP and an adept management team with local knowledge and infrastructure that are well equipped to succeed across the ecosystem. We are super excited about the direction and opportunities ahead. Our operating performance is strong and stable. And while the industry is undergoing secular challenges, we are facing disruption head on with a very confident operating posture and strategic position. Our focused financial investments in our world-class IP and relentless pursuit of new revenue opportunities makes us a stronger company than we were a year ago and one that is on a path to continued sustainable success. Many thanks and I will turn the call over now to Gunnar.

Thank you David and thank you everyone for joining us today. I am very pleased with our third quarter operational and financial performance. We continue to build momentum as we deliver on our strategic objectives to transform and pivot Discovery. I'd like to share some financial highlights from our third quarter. My comments will be in constant currency terms for our international business as well as for total company unless otherwise stated. And please refer to our earnings release published earlier this morning for a more comprehensive view of all the drivers of our third quarter financial results. In the third quarter, Discovery again achieved healthy operating performance delivering 3% U.S. advertising growth, 6% U.S. affiliate growth 10% international advertising growth which included a full quarter of impact from the consolidation of the three networks acquired from UKTV which added about 300 basis points of growth and 8% international affiliate growth. We grew total company adjusted OIBDA 9% driven by revenue growth and 7% decline in U.S. expenses which helped us to maintain an almost flat expense base. As we've previously flagged, we've anticipated that expenses in our international business will ramp up as we invest for future growth. Turning to one of my priority topics, we reported $884 million of free cash flow in the third quarter keeping our trailing 12 months free cash flow at $2.9 billion which is inclusive of about $200 million of cash restructuring costs, as well as the funding for our growth investments. At quarter end our net leverage was 3.1 times. Now let me share some forward-looking commentary starting with the four key revenue drivers for the fourth quarter 2019. First, for U.S. advertising growth is expected to be again in the low single-digit range driven by the typical dynamics in pricing, digital monetization, the health of the market and of course the impact from ratings which remains the greatest variable impacting U.S. ad revenue growth. While ratings of some key networks have been challenged in the third quarter, we have doubled the amount of premiere content on the Food Network for the holiday season and we are excited about our programming slate for the remainder of the year such that our Q4 estimate of low single-digit growth could turn out to be conservative. In addition, we expect to continue to benefit from increased viewership on our GO platform further growth from our data-driven Engage product as well as upward CPM pressure from innovations such as Discovery Premiere all of which are contributing to our top-of-peer performance and revenue growth, despite the noted ratings headwinds. Second, U.S. affiliate is projected to increase in the 3% to 5% range for the fourth quarter and we reaffirm our full year guidance for U.S. affiliate revenue growth in the mid-single-digit range. As you know in the fourth quarter we will let our initial inclusion in certain virtual MVPDs such as Hulu and Sling TV. Accordingly, implicit in this projection is a sequential decline in our core subscriber growth. Third, we expect international advertising growth in the mid-single-digit range, driven by share growth in our top markets and contributions from our digital investments. Contribution from the consolidated UKTV Lifestyle Business is projected to again add 2 to 3 percentage points of growth. While the balance of our international advertising business remains healthy there are some increasingly more challenging markets such as Mexico and Argentina, creating an overall more volatile picture and one that we will keep a close eye on during the remainder of the quarter. And finally, international affiliate growth is expected to be again in the high single-digit range supported by favorable terms in certain new affiliate deals, new channel launches and traction from our suite of D2C products. Turning to total company guidance. We continue to expect solid free cash flow growth for the remainder of the year even as we continue to invest in the build-out of our expanded digital ecosystem and our previously noted step-up in CapEx from such items as global real estate consolidation and transformation projects related to technology infrastructure and software development. Turning now to our direct-to-consumer investments. We now expect the impact from direct-to-consumer investments on full year 2019 adjusted OIBDA to be at the lower end of the $300 million to $400 million range we have previously discussed. And though, we again enjoyed another quarter of total company margin improvement, which was 100 basis points higher this quarter, the expected ramp in our digital investment spending will flow through more meaningfully in Q4 as we have previously detailed with you. Turning now to our capital allocation strategy, our priorities remain consistent. We continue to expect to: Number one optimize leverage. While we are nicely within our three to 3.5 times net leverage range, we expect to continue to delever further towards the very low end of this range. Number two, concurrently we will continue to evaluate value-enhancing investments along with strategic M&A. And number three, finally, we will opportunistically return excess capital to shareholders. As noted in the third quarter, we repurchased nearly 12 million Class C common shares for a total consideration of $300 million at an average price of $25.93 per share with additional purchases thus far into Q4. Before I close, let me quantify the expected impact that foreign exchange will have on our 2019 financial results. Given the movement of the dollar at current spot rates, FX is now expected to negatively impact revenues by roughly $245 million to $255 million and OIBDA by $90 million to $100 million versus our 2018 reported results. In closing, our results today highlight the consistency of our company's overall performance, particularly at a time of great change within our industry. And I couldn't be more pleased with our strategic and financial position. Looking ahead, we remain confident in our ability to generate healthy free cash flow and execute on our long-term growth initiatives.

Thank you so much. Can you give us some color on what's going on with Food Network Kitchen? I know it's only two weeks but how many users do you have so far? Can you give us some color on ancillary revenue? The shopping app look is amazing. And then on just D2C kind of what your view is? Where will Discovery be over the next five years? What are the services you can launch? You have so many brands. What do you think that this will look like to you? Thank you.

Thanks, Jessica. I'm going to pass it over to Peter for the food segment, but first, let me address the bigger picture. We've been cautious about the seven or eight competitors in the entertainment industry. The competition is becoming increasingly expensive, and we believe only three or four will succeed. It will be tough for even strong companies. In terms of our overall strategy, we think many people will have a few of those services while still enjoying content like golf, natural history, and science. With our recent acquisition of BBC content, we now offer a comprehensive collection in areas like Planet Earth and space, which we believe every family and child should experience, distinguishing it from scripted shows and movies. We're also partnering with Chip and Joanna Gaines for a direct-to-consumer launch in 2020 and focusing on niche areas like cycling and cars. We are making significant progress and developing an integrated platform that enhances user experience with interactive features and commercial opportunities for purchasing equipment. Our direct-to-consumer product, GO, is growing rapidly, showing that non-cable subscribers appreciate our content, especially alongside Dplay, which is scaling globally. For example, our collaboration with ProSieben in Germany has resulted in 5 million regular users on Joyn, significantly outpacing established players like Sky Deutschland. We've created a strong local offering in Germany by aggregating 55 channels with substantial local content. A similar situation is unfolding in Poland, where we're partnering with Polsat to develop a local streaming service. Our strategy in Europe is progressing well, ahead of schedule, and we're learning extensively from our platform's performance. In the U.S., we're exploring new opportunities by analyzing viewing patterns. Our channels attract a diverse audience, particularly women, and accumulate a vast library of content that retains viewer interest. We are considering the possibility of creating a comprehensive U.S. service that aggregates our diverse offerings, which could set us apart from competitors focused on entertainment and scripted series. More details will emerge in the coming months, but we feel optimistic about our niche strategy and our partnership efforts in Europe with Dplay, Joyn, and Polsat. With our U.S. successes, we believe we have a compelling array of content and a deep library. Now, let me turn it over to Peter for an update on Food Network Kitchen, which is off to an excellent start.

Good morning, Jessica. We're very happy with the results so far. One important lesson I've learned at Amazon is that if you want to drive results like subscribers and revenue, you need to focus on the inputs right from the start of launching a new product. Currently, we're focused on inputs such as customer ratings, the overall customer experience, engagement levels, and the opinions of early users of the product. We're quite pleased with what we've seen. One major advantage of having our own technology is that it allows us to create products that we know consumers will appreciate. The feedback has been fantastic, with a 4.1 rating across Amazon devices, 4.5 on Android, and 4.8 on iOS. This positive feedback is encouraging from the outset. Many consumers were already familiar with us through Food Network, but we're particularly looking into feedback from new customers experiencing Food Network for the first time. Their ratings are even higher than the ones I just mentioned, suggesting we're moving in the right direction. The highlight of our offering is our live and on-demand cooking classes, which have seen strong engagement. Some popular classes include Bobby Flay's pork chops and Molly Yeh's fried cheese pickles. It's an engaging product where audiences can interact with the chefs, and there’s increasing buzz on social media about how much people love it. For those who have the app, I hope everyone on this call does, we have a lineup featuring Alex Guarnaschelli, Marc Murphy, Rachael Ray, Geoffrey Zakarian, and Bobby Flay over the next five days, with Bobby doing three classes on Sunday. The demand for the classes has been so high that we’re making two changes: increasing the number of live classes from 25 to 40 per week, and opening a new Food Network Kitchen studio in Los Angeles to double our capacity. This will help us serve customers across the U.S. better while allowing us to add more classes over time. We are very pleased with the response to our live and on-demand classes. As you may know, November to January is a peak season for cooking and food-related activities, and we are excited about the marketing strategies we have in place. You'll see constant references to Food Network Kitchen across all of our networks in the Discovery portfolio. If you’re watching Food Network or the Cooking Channel, you’ll notice numerous calls to action inviting viewers to try making dishes on Food Network Kitchen. Additionally, our partnership with Amazon has been outstanding. Many consumers in the U.S. will be on Amazon during the holiday shopping season, and I’m happy to report that Food Network Kitchen will have a prominent presence across the site, including Alexa devices and Fire TV, which currently has millions of users. The visibility we're gaining on Fire TV is incredibly encouraging. Overall, we're very satisfied with the results from the first weeks. I'd like to add to David's points about our broader portfolio for direct-to-consumer offerings. We've publicly shared plans for next year, including initiatives involving Magnolia, a factual product with BBC, and something with cycling and the global cycling network. I encourage you to stay tuned, as we have more exciting ideas that we plan to pursue aggressively. To conclude, many people ask why I made the move from Amazon to Discovery. The reason is simple: we possess the most powerful brands in the world, with dedicated consumer bases, and now we’re creating products that resonate with them. This opportunity allows us to innovate and transform the industry, and I couldn't be more excited to be part of it. I look forward to sharing more results in the future.

Peter, can you just elaborate a little bit on the ancillary revenue opportunity, the shopping and selling other products, whether it's kitchenware or other things?

I would love to discuss that more in the future. We're seeing people using that feature, and I want to provide more feedback on it. Additionally, we've mentioned our plans to launch in 2020 the capability for customers to purchase kitchen utensils and equipment. I would be eager to discuss this further in a future call. Right now, one of the biggest positive signals we have is that conducting live classes across the nation every day is quite challenging, but the technology has proven to be highly effective. This gives us confidence that we can increase the number of classes offered. Last weekend, we even held a series of live classes with Molly Yeh in North Dakota, streaming from her actual kitchen, and it was truly enjoyable to watch. The feedback from customers was fantastic. We see significant potential for growth in this area, and we are fully committed to exploring all these opportunities.

Great. Thanks. Since we have Peter on the phone, I just wanted to get any sense of sort of the size of your digital opportunity today. I mean you keep talking about all these ions on the file that are sort of growing. But if you had to sort of size Joyn, Dplay, PGA, Eurosport and the like, excluding your virtual MVPD how big is that? How is that sort of offsetting some of the linear pressures that we have in the business? And obviously, you have a lot of growth coming. So any help on that would be really, really helpful. And then probably for Gunnar, your margins keep going up. Obviously, we stopped talking about synergies, the $600 million number. It's probably hard to even quantify that now. But how much more room is there on just the Scripps-related synergies going forward? Thanks so much.

Okay. Vijay let me comment on those. So I'll start with your margin point. I mean, as you know we had already guided for no margin increase for the third quarter and came in a little better. But I continue to say do not expect further margin increase. We are operating at industry-leading margins. And that being said we will absolutely continue to be laser-focused on the efficiency of this company. We have a lot more initiatives in store. We're continuing to improve our cash conversion, et cetera. But as you know, we're also looking at a number of initiatives on the digital side that Peter just referred to that we will be funding as we look forward. So, no more margin expansion to be expected, even though we continue to be super focused.

David, Bruce Campbell, who oversees our corporate development, and I were all part of the team at NBC over a decade ago when we launched Hulu in the U.S. We've witnessed its evolution over the past ten years. We firmly believe in the aggregation strategy and the significance of local context in the U.S. market, understanding that it can be effective and scalable. In an environment where many English-language international companies are investing heavily in English-language scripted content, our experience over the last thirty years has demonstrated that as we venture internationally, local relevance is crucial. While some of these companies may eventually embrace this approach and are putting resources into certain areas, the challenges are significant and the process is lengthy. We already hold strong positions in many markets alongside leading local players. We are confident that our local strategy is essential, viable, and can position us as a leading video aggregation streaming service, similar to Hulu’s success in the U.S. With services like Joyn and our Dplay apps, we now have a strong presence in Europe, allowing us to connect major local streaming services in key markets. This strategy is proving to be effective and scalable in the markets we are in. While executing this strategy is complex and not easily accomplished, we have a solid track record and the necessary expertise to execute these deals successfully. We know how to assemble the right teams and hire qualified individuals to ensure these initiatives are launched successfully. We believe this approach is a distinctive aspect of our strategy throughout Europe.

And maybe to the question of the size of the opportunity again, as we've said many times, for us it's too early to be talking about a framework of P&L metrics for you guys at this point. But let me just say, we were convinced that it can be material. We've got super passionate audiences in all of those verticals. And as a matter of fact, if you look at our numbers that we're reporting this quarter, last quarter and what we're seeing for next quarter, we're starting to see some material contributions come through on the top-line. And I only see that expanding as we move forward. And the other thing to keep in mind is from a P&L perspective, all of these verticals that we're talking about have the great advantage again that we're not in the business of $5 million per hour production. But we have the benefit of true utility content at very low costs. So I'm excited about the opportunity not only from a revenue growth, but also from the bottom-line perspective. Again, with that being said, obviously, we want to make the right investments. We're not netting for margins in the short-term, but we'll manage for a sustainable long-term setup of this company.

Hi. Thank you. As we look into 2020, do you have any insights on how much the Summer Olympics might impact revenues and costs next year? Also, could the Olympics serve as a great platform to promote your direct-to-consumer services?

Alexia, 100%. It's a great year. It's an exciting event that's coming up. And certainly with the transition that JB and Peter have managed for the Eurosport Player it's now on our own tech stack, et cetera. So we're in attack mode for the player for sure. So it's an important event. Financially as we have discussed previously, remember we're going to see about 30% of the total rights costs for the Olympics come through next year. So that is a significant chunk of events that is going to hit the third quarter. And if you keep in mind the monetization, we're exploiting these rights across all levers sublicensing advertising affiliate deals and then our own direct-to-consumer deal. So those revenue streams are all contributing to the monetization, but obviously over a longer term while the expenses are going to hit in the third quarter. And it's also fair to say that given this is later in the year, we'll have less time in the year 2020 to recoup some of those investments because especially if you look at player revenues from additional subscribers affiliate renewals et cetera, those are longer-term impacts on the top line. I hope that's helpful.

Having said that, it is a great magnet for massive audiences and attention to the quality of what we're able to do. We're the only company that can have the Olympics in 25 languages with local hosts. It's one of the reasons that the PGA TOUR came to us. It's the reason why Thomas Bach came to us to innovate. It was in terms of innovation. Last time we were on every platform and we reached more people under 25 than ever before. And we were just getting started. JB talk a little bit about how we can use the Olympics not just for sustainable growth which you've done but also to promote a lot of these other products golf cycling the Eurosport Player.

Yes. However, if we consider the Olympics as having multiple value streams beyond the direct ones mentioned by Gunnar, there are a few additional aspects to note. First, during the 17-day period of the games, we will leverage the event significantly as a promotional tool to boost our fall season launches and new programming across major entertainment markets in Europe. This marketing push will be incredibly beneficial. We found it to be extremely successful in PyeongChang, even though that event had limited appeal across parts of Europe due to its focus on winter sports. In contrast, the summer games will capture widespread interest across the continent, allowing us to utilize it primarily as a marketing vehicle for our content. Secondly, as David has previously mentioned, while PyeongChang had somewhat less visibility due to its winter setting and being less buzz-worthy compared to Tokyo, we still managed to attract 0.5 million new subscribers to the player during that time. This summer, with the games having broad appeal, we expect to drive significantly greater penetration for our Eurosport Player product since it will be the exclusive platform to access all the games. Lastly, as we consider the larger array of direct-to-consumer products being developed by Peter and the team, including Dplay, Eurosport Player, and others like Motor Trend, we aim to leverage the Olympics to raise awareness of our entire direct-to-consumer portfolio and increase subscriptions across the board. These are the three main priorities we have as we seek to capitalize on this major global event to generate value across our offerings.

Thank you. And again, just, sort of, staying on international for a quick follow-up. Just given the initial success of the launch of your Network Kitchen and your expansion plans already in the U.S., I guess, how should we think about the timeline for the rollout in other international markets?

Yes. Our current thinking is to regroup at the very beginning of 2020 and select partners with Amazon in a few more countries for a global launch. JB and I are very excited about this opportunity. As JB mentioned in the previous call, we already have some popular food assets outside the U.S., extending through Asia and the Middle East. We'll evaluate where we have the best localized content to leverage since we prefer to own our own IP and have a head start. This approach allows us to maximize the benefits of partnering with Amazon and effectively serve consumers. We plan to roll this product out beyond the U.S. in 2020.

Thank you for answering my questions. You've detailed many of your direct-to-consumer initiatives currently in the market, and it seems there are more planned for next year. I would like to take a step back and understand the current revenue base for this year. There appear to be various services across multiple segments generating different revenue streams, but I'm curious if you could share the approximate revenue for your broader direct-to-consumer business globally for this year.

Drew so, we don't break that out specifically because as you say it's several contributions in multiple lines of business in the two segments. But as I said before, it's starting to meaningfully contribute to revenue growth and it has been for a couple of quarters. And I expect more of that next year. And just to give you an order of magnitude it's several hundred million dollars of total direct-to-consumer revenues that we already have to-date.

Thank you. You mentioned that the OIBDA impact of these investments is expected to be at the low end of the original range of $300 million to $400 million. I'm curious if you could share your thoughts on the OIBDA impact for next year.

Certainly. Let me clarify. When we set the initial budget between $300 million and $400 million, many of the products were still in the planning phase, which introduced some uncertainty. We've been prioritizing these products, which is why we landed at the lower end of that budget, around $300 million, instead of the higher end at $400 million. As I mentioned earlier, you can expect that in the fourth quarter, as we ramp up our marketing efforts for Food Network Kitchen and other international products, we will be making additional investments. It's still early to discuss specific figures for next year since we are in the budgeting process, but you can anticipate increased investments. Keep in mind that Food Network Kitchen will be active for a full year, plus some additional global markets. We're also introducing new markets for our golf initiatives. Eurosport Player will be a key focus during the Olympics, and Dplay has experienced tremendous success with subscriber growth, so we want to support that as well. Furthermore, we are launching new products, including Magnolia in the summer with our factual offerings. Therefore, you should expect a modest increase in investments overall. Again, it’s too soon to provide specific numbers. Additionally, I want the flexibility to invest in successful products because it’s essential to focus on the input factors, ensure we have the right offerings, and gauge engagement from early adopters. Once we're confident in a product, we really want to ramp up our marketing and investments to scale those products quickly. So expect a range in our discussions moving forward.

We're doing an excellent job with a strong leadership team focused on our existing ecosystem worldwide. We are performing well in growing ratings outside the U.S. and effectively monetizing that through our relationships with distributors. We are able to launch new channels globally where others cannot. While we are very effective in the current ecosystem, we are also launching a significant initiative with our intellectual property as our main tool, aiming to ensure everyone has access to our content. Whether it's Food Network Kitchen, Golf, Eurosport Player, Motor Trend, or Magnolia, these are targeted efforts driven by passion. Dplay in Europe is gaining traction among both cable subscribers and those who have shifted to streaming products. In the U.S., we are fully committed to leveraging our unique content to engage viewers, including mobile users who appreciate our characters and differentiated offerings. Our identity is well-known, and we don't need to promote ourselves through individual shows; viewers are drawn to our characters and brands. We're approaching things with a fresh perspective, as our passion for this collection of intellectual property appears to be both sustainable and robust.

Yeah. And I assume David, what you're talking about seems to be like taking your channels and offering a suite of direct-to-consumer suite. And I just want to confirm, I assume you wouldn't say this, but there's no contractual restrictions with your current MVPD partners in terms of content or anything that would restrict your decision making or your ability to do something like that just to confirm?

We have the capability to pursue various opportunities, but we have consistently been the most supportive company within the existing ecosystem. We plan to maintain this approach. We are engaging with our current distributors and are active in the marketplace. Initially, we consulted with customers to address their confusion regarding numerous scripted series available to watch. We discovered valuable insights about our offerings and are now assessing how we can preserve the existing ecosystem while also reaching those who do not subscribe to cable, allowing them the chance to enjoy the great content they grew up with.

Thanks so much. A couple of questions. David, I mean you're mentioning what sounds like a pretty remarkable strategic shift with your direct-to-consumer strategy in the U.S. So I was hoping for some more clarity. Are you talking about taking your library of content and going direct-to-consumer? Are you talking about actually taking your current content on the live networks plus the library going direct-to-consumer? Are you talking about doing this in combination with other content companies or leveraging other platforms like Peacock? Or is this something that you would do yourself?

We are assessing the strength of our intellectual property in the U.S. as a whole. We're also engaging with consumers to understand their love for our offerings. Through our GO platform, we can see the youth of our users and the amount of time they spend engaging with our content. We are exploring how to expand that content further, and while we're currently doing this independently, we are considering whether there’s an opportunity to reach those who do not subscribe to cable. This is part of the broader ecosystem that everyone is aiming to tackle: taking exceptional content and making it accessible to everyone. We want all audiences to engage with our content, similar to what we accomplished in Germany. However, we have been hesitant to partner with U.S. entertainment platforms since they do not offer a comprehensive solution. While they have approached us, their offerings are just parts of a larger entertainment landscape, and none have everything we have. When we combine our platforms, we create a compelling product. We will be exploring this further in the upcoming months.

Thanks. I have just a couple for JB. I just wanted to learn more about how you think about what markets do you partner with a local broadcaster or do you go it alone? And in those markets what have you learned? Or how necessary is maybe the local content versus just taking your Discovery products into a Dplay mode?

Our perspective is that faster and more local aggregation is beneficial. In the Polish market, where we and Polsat hold about 70% of the audience share, it highlights our dominant position as the largest broadcaster. Despite being successful on our own, we believe that simplifying the consumer experience through effective content aggregation is key. Even with a 30% audience share, partnering with one or two significant players can enhance our offerings and create a competitive local distinction. While establishing these partnerships in every market is a work in progress, broadcasters globally are recognizing the need to adapt their models. The future hinges on how swiftly they can transition to streaming. Fortunately, Discovery has a proven track record in forming partnerships and developing scalable products, making us a credible partner in these markets.