DISCA - Earnings call transcript Q3 2017 | Warner Bros. Discovery, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Discovery Communications Third Quarter 2017 Earnings Conference Call.

As a reminder this conference call is being recorded. I would now like to turn the conference over to Andrew Slabin, Executive Vice President, Investor Strategy.

Andrew T. Slabin

Good morning, everyone. Thank you for joining us for Discovery Communications' third quarter 2017 earnings call.

David Wiedenfels, President our are Officer Chief today Gunnar and Chief me Zaslav, and our Executive Joining Financial Officer.

we received if access the for keep website and Gunnar have people feel call with some call, up should our then possible many from but begin one can release, as to You David comments if we free accommodate will to Please www.discoverycommunications.com. we it your at our and so questions. opening on as question On today's earnings not, possible. will open

Private would made Before differ knowledge based we future actual statements, or plans, XXXX. of update to start any are make provisions comments intent they that involve are assumptions Securities today statements could them. financial These from the obligation the and and the I forward-looking business projections Litigation to company events like disclaims future Reform other materially results to providing our remind that we and about harbor cause on pursuant you uncertainties and Act and that company's statements current risks to the and performance regarding safe prospects management's forward-looking of expectations

call affect on Commission. And XX, the with that, these information that to U.S. will report Exchange and over subsequent the the David. Securities and please important additional filings annual factors our year see our For XXXX expectations, December could for ended made turn with I

David M. Zaslav

global distribution by suite was with pivotal reported solid results our digital a our morning, from gains driven operating everyone you We enhanced advertising products. Discovery. of channels, revenue Good quarter set for us. and thank growing performance joining in another and steady linear for of This by

revenue growth a to generating transaction first a process dual and value leader laser-focused Scripps, business and continues to and mobile As for long-term drive on pivoting to become the base we content. digital where stable, remain Maximizing our Discovery. cash two stream linear provide tracks designed our continue we in the around

to As across consumers strategic subscriber continue pivot, to declines the across continue our and to television take every screen service. landscape, pursue our we pay content

global company, get stronger addition content only a and with and IP we brands. are Scripps the We leading of the will

to products, like we the owning do, almost niche, continue portfolio all IP will are differentiate unique. their truly we brands as and ahead. the distributors in and monetization lead on global globally, to platforms and flexible other look will makes IP languages, our XX And of We in opportunities platform deep superfan strong on capitalize consolidate mobile and strong operators moreover, us convinced year

a Bush are companies platform very companies brands We TV IP long global content, package we can are of linear offer portfolio, media with IP. I'll the to all led top of maintained into its this begin XX to DAY where the ad the across XX users in TLC and network to through persons in in this top as popularity network with one persons total the XX highlighted year-to-date, female and number ID pipeline of fastest day enjoyed XX an among third getting tied as FIANCÉ and women by Discovery story, XX September, we remained growth, for continues Channel and primetime XX one it has respectively. series audience XX% number and third for quarter, cable franchise. are quarter, unscripted number number cable one by Alaskan men TLC the keeps to better. With quarter, with world. prime the the serving two men offer persons few enjoying hit terrific XX. delivery momentum of a growth the ID for development and the to is morning that cable just as its cable ad impressive and a network ID networks XX People, year Deadliest delivery in has supported one breaking our global non-sports our of channels. net growing the in supported new position among a Catch content the impressive of in XXXX. a also about and millions for the recognizable looking just few details milestone network healthy

of TV, pay to GO launching base, In of ad every over are relevant is U.S., beyond since our measurable just one revenue supported ensuring a short and and we across nationally including growth these, Everywhere each GO the deliver year point we paid platform. leveraging incremental screen XXXX. our On three contributed apps, remain expect strategy. have Ad mid-form as in the results now achieve and on pillars beginning core the in digital, our GO sales digital meaningful and subscription has to content. revenue We to increase TV we identified we of are mobile-first forward direct-to-consumer portfolio video, foundation IP in every another

GO, linear third on as to franchises, cannibalizing no and quarter and half Importantly, signs platform GO leading the first increased are ID quarter. business, XX. the TV weekly exclusive U.S. the GO TLC XX% with to we around see of users that GO way nearly original our with helping Everywhere our is records, age XX drive efforts total to new from content digital existing streams screening

story ahead, Spaces, partners to expand all highly joint augment within markets. we including we linear first-hand insights channels while offering Looking delivering successful, our return accompanied to to content good with are look deals TLC's viewers. If by the nine own marketing future. and is ProSieben most valuable launched but air the fact series, in company, future the of example will AVOD helping platforms, is structured business, Germany, our also and entertainment template Training and a Trading create channels digital-first about offering Spaces, premium together our reinforcing younger our original audience content support and in available the our an TLC in to with GO venture across series, we is our exclusively programming not be how digital anticipated which this content Internationally, only our and on of exciting resonates could streaming, the Germany, service and free that recently bringing in of joint additional key popular for GO.

so familiar and those is interest you this like For product, we are German far. we of and level have it not the with very about Hulu, of excited prospects seen a

continues direct-to-consumer led large The paid second subscription Eurosport by pillar, the gain in to part Player. traction video,

while Player pass to a time same sport exclusively a to we model, the focus the a rights, our As keep on strategic user. to we for pivoting where summer, discussed season we Bundesliga decision made Eurosport this Player, the one at

we We We've have solid are throughout starting the a season. lot, seen learned traction. to and subscriber growth gain real

Games, brand into overall Eurosport's of Olympic XXXX about and Winter viewers Player to momentum minute linear excited our well, As to deliver throughout the Europe across awareness particularly events every of going digital. to plan we're continues Further, and TV build. the

and We in distribution expensive delivering than from and and remain of the XXX differentiated Games away party yet days Europe, internal confident the games with We're for less are start third viewers about most advertisers. on estimates our sales. digitally now both the track our Olympic for in Pyeongchang,

venture including the further Discovery brands, The Discovery and direct-to-consumer Motor OnDemand product niche. in deals strategy Olympic long OnDemand a UK, as Germany streaming highlighted and Amazon significant Austria the well bring see direct-to-consumer video programming, well nearly of Hotrod offering growth announcements opportunity Motor online Eurosport. with Trend, Amazon wealth Games, We of content the in form Europe has this with subscribers, partnerships was making events. XXX,XXX Automobile, as as and for Our as editorial the Velocity, events in joint recent in Trend the vibrant with sporting well to channels, Motor as to new across of subscribers superfan a library markets. with Network, a of car consumer for as recently content live leading content. and closed offering our live to and serving transaction from auctions top-tier Also, Amazon Enthusiast and it comprised layer other Indeed, U.S. as form already huge a we Prime the we these auto service Trend library our The

can days, other high-value Motor content venture we a still offerings. as roadmap believe niche the for While Trend joint early serve

our one billion year tech just Nine asset, has terrific Group against digital-first a to plan. become segment, superfan data. and Nine over strong launch, strategic companies X traffic, content executing brands, within be Group In proven aggressive since has media mobile-first a monthly streams, the Lastly, with smart leading of and one

and Group in short other mid-form and investment allowed digital-first relationships. capabilities open doors grow our Nine Our to content us to has

Olympics partnership Eurosport for month, to a recently example, show concept content for the XXXX Discover around Snap, Winter announced we For MythBusters. we platform. greenlit exclusive create a with Snapchat's And last have

Lastly, word a Scripps. about

for grow be advertising integration excited true. join we opportunities Our we when planning broader We're right see at and content, has enhance what were right to our work This the to is even our we brands, plans time even we companies today Discovery. transaction two ago, three than and months recent and announced globally. more reinforced knew the distribution to and

you in real-life our We continue months to global ahead XXXX vision in leader and in forward the to entertainment. look create early as updating anticipate to closing the

we as remain delivery new increasingly new As will adapt. Discovery whether the years. well committed particularly the invest opportunities that consumer as is changes to company, or media of emerge, our methods envision ecosystem meet and we for establishing in value products, to opportunities in the to in technology the evolve, to due terminal enhanced continues We and both basis to new the behavior, challenges coming and positioned for content unfold

turn monetization. We a engagement of deep go the core are our through over global portfolio drive future-forward of fully third now it and our quarter and to IP, engaged broad details content, of I'll superfan in results. model to our leveraging and Gunnar assets to

Gunnar Wiedenfels

Thanks, morning, David, everyone. and good

focus international Our growth, the continued third global in our with strict again U.S. strong combined management. growth distribution quarter uptick both by and nice driven on were cost continued ad results and

constant was financial up and X%, with OIBDA result positive While and were quarter were revenues up from total FX changes. up in OIBDA X% X% reported adjusted on revenues up currency constant another company X%, our our impact was currency adjusted

net with quarter $XXX Discovery of million Third income to Communications consistent available year a reported was ago.

we benefit operating side, impacts results also see global and and impact we had net our a asset on to We more of deal continued realized positive positive the associated our deals. improved tax tax to base. positive with a solar timing, much higher due rate On

net-net, $XXX line to below transaction offset interest However, related rate rate and these and a expense positive year a hedges conjunction the million of unwinding expect of XX% still to couple effects versus share interest in of we with investments last net after-tax per the additional these trends, full basis our including impact or full year by the losses on and costs the taxes, positive acquisition be the our Scripps on based $X.XX solar rate gain points currency-related income. hundred were Scripps debt year. On tax below costs,

free us turn let flow. to adjusted EPS and cash Now

Third diluted increased quarter which adjusted earnings the $X.XX. non-cash per of impact amortization acquisition-related X% of to intangible assets, excludes share,

the FX currency, transaction last excluding and XX%. months, adjusted increased EPS, Scripps For XX costs

cash of capital, content spent million, Third solar to flow cash quarter our call. earnings from XX% was on as investments to as on resulting working due discussed $XXX timing up taxes as well second free quarter lower the

the For excluding flow cash later, will Scripps full reiterating I up free we was up are transaction both cash free as the last for more reported and XX%, And flow year. currency months, XX XX%. discuss guidance was costs, metrics and

operating to Turning units. the

U. our Networks. with start me Let S.

Our advertising Nine, U.S. growth. strength the and X%, our of delivery added of Advertising quarter X% and were by GO overall X% Networks led platform, excluding ID, due growth, point which one offset due X% growth X% impact Group or higher monetization to grew universe of more this declines. primarily pricing to overall revenues lower distribution partially total of continued of and TLC by than improved up

looked in ahead XXXX, quarter range. growth fourth to expect ad the U.S. be to currently the we low As we of digit up organic single

revenues. let look Now at us affiliate

distribution up quarter revenues were domestic X%. third Our

content had quarter a decline last by increases timing this fourth content in much in versus revenues, driven subscribers. partially revenue lower as rates content expect licensing We offset contributions delivering quarter. upon the increases was SVOD quarters revenue recognition of licensing higher due in growth by licensing as well two affiliate to more and the Our the in

third TLC, U.S. drivers of like affiliate in which consistent the economics, X% Driven with into Finally, top share quarter we're of portfolio with declines our mid-single and growth. the Distribution lion's confident our by year-over-year. full-year declined subs Delving around in subscriber digit driving smaller second the again by quarter, were subs guidance X%. nets, steeper our total the further at down of trends, nets U.S. our are Discovery still

cost I now up quarter turn OIBDA side. in of expenses International X%. to the operations. were Operating growth leading X%, our the adjusted to to Turning will

increased again, up Excluding reported and flat. quarter, currency, OIBDA increased impact adjusted this was revenues revenue positive changes, FX X% our X%. XX% and had revenues on adjusted so a were OIBDA

my revenue International purposes, will and the to growth distribution was X% comments organic results comparability following of growth. third quarter X% only, so of growth The impact X% exclude we'll For our refer currency. advertising comprised

revenue was on X% seeing nice that double-digit the content the growth continue traction extended Europe, portfolio realize higher affiliate Our we our includes by distribution on where and where growth sports, driven Eurosport strong are we back rates in of Player. to

in solely remain of gains in Player of was by progress We to throughout America. signing with up platform. have been Latin we And our after higher Europe, rate pivot growth strategic our Bundesliga this plan. Outside also on ahead subsequent our pleased Germany, driven our

growth particularly impact Asia, where in overall we sports Mexico rates the hurricanes third current to Brazil partially smallest come have lower of by small Puerto and the or Caribbean strong deals as some affiliate was macroeconomic at our and from pricing to end and subscriber up America, this for the Rico market third, quarter. lack And second, due Latin those content recently the However, continued first, offset due including renewal. in declines conditions, natural in market in and contracted the declines disasters kids a

we our from trends quarter continued expected currency outages full Asia, and growth constant and as in year's growth in current our a And assuming America Latin Mexico, next we Rico, be currency full well of XXX these trends points as our to we XXX more XX%. trends affiliate ahead as Puerto in impact current year digits below affiliate XXXX, sub of below Caribbean to Bundesliga approximately continuation of growth likely double a prior power of now expect strategy, look the XXXX into in a pricing Assuming come well. constant is goal think to to as basis continuation

Turning increase Latin in driven higher all America to and and our in had Europe, particular, by regions. X% higher Latin and Southern growth Advertising, we In was CEEMEA America. ratings across pricing CEEMEA

head fourth expect we be look flat. sales around ad we growth As to the to quarter,

to level declines be impacted We the be expect growth primarily in by Eastern continue expected Latin Nordics offset and America which and Europe to in part decline. Southern by

cost Turning OIBDA due primarily to higher production expenses to side, content X%, operating and internationally and grew sports the costs adjusted was up X%.

spent our at we financial third our suspended picture. program. buyback look us let overall only Now In the $XXX total of our we a repurchasing million as quarter, shares

stated, capital will within of our continue all to have range allocate new gross is to back down we we paying ratio our X As of target leverage our towards X.X times, debt. virtually until

to reduction. We have for make debt have end from our to to within able will we investments capital our solar within target ability deal the desire also range decided latest. closing to we not when very after be the Consequently, at be this two back fulfilled additional bring leverage to current commitment, our given year, years to continue our confident the preserve of in

to our costs, transaction under we're guidance, free of pleased up XX% both EPS of flow, impact up and currency Turning the nine transaction metrics. well currency I'm tracking Scripps-related flow and the cash cash mentioned, months year and the excluding our year-to-date. belt, XX% of with impact Scripps-related excluding year EPS, guidance to as full costs, the adjusted and the reiterate free our With adjusted

course, also we noted, expect still to teens. currency, digits. the flow be the of costs though, growth, low Scripps expenses. from transaction and million including least excluding $XXX an to adjusted growth, quarter, impact to expect million additional we at the low the still from at currency and we transaction double expect cash of impacts Scripps mid Please And pre-tax $XXX the fourth other note in least EPS free excluding that interest Scripps-related be As XXXX to and

already color started transactions, majority contributions million the note Contributions we our have that the autofocus Velocity around from is provide of be which Trend financial not our parties the third OIBDA. production includes initially on the businesses, include does $XX me at Motor joint brands services expect revenues, consolidating to quarter, coming some from the impact licensing also a of and adjusted to of TEN impact the from the venture revenue includes $XX are minimal end expected which around million and financial, in TEN with to is quarter. SVOD per third other and content events, Let that live new this for

impact on full results. you exchange Finally, to update I expected the reported foreign our year want year-over-year on

weakening the year at for be of nice movements adjusted the European now. revenues current both to full versus the are OIBDA the Given the currencies, of and expected currency dollar tailwind rates, a

constant expected the FX So on million, impact stay positive of is to expected revenues to to AOIBDA, be to is impact $XX year, assuming on and positive the $XX rates now for million $XX million a the million. be rest the $XX year-over-year

currency cost Finally, combination. EPS remain about David to Please long-term upside, you both and time your morning. now will cannot answer to you keep questions and results, please Scripps and mentioned, Thank David the full extremely transaction will Scripps ask on happy track to therefore I will to note early impact drive Scripps-related your and our shareholders. value year as internationally, domestically your the question. multiple Discovery. this for again to for be and is adjusted which remain optimistic discuss transaction the we significant And specific In I revenue on and to potential close XXXX be $X.XX. see by expected the negative we closing, year-over-year cost's combined of areas $X.XX

Operator

Thank you.

Jessica is Bank Lynch. from of America question of first Merrill Reif The

open. is line Your

Jessica Jean Reif Cohen

on guess, I question you. International. thank first Oh,

that due How just overall to elevated stepping which be the think some seeing do about on can or And and domestic On the the down you two? like outlook? about year It with And making costs fees, over next in you universe you're what say the like known the sports, monetizing? expenses? side, affiliate you're it's progress can cost talk to the both there, see pricing, sports. bit. seems seems You've factors to the about overall Player. year about three you some did do swing of next you then you a Can for talk you five talk

David M. Zaslav

don't done with is We've domestic We Jessica. for we're deals. deals the time. start we're single our affiliate. period a What seeing over said we're Thanks, through I with by out very increases decline. that got high of with digit hit X% those Why the term a getting of effectively cycle

We are Hulu not on skinny YouTube. Sony And other and those on and we're DIRECTV. bundles, meaning

we're we to might be causing seeing macro the very growing. all flat people and we market only that. get most them having and market, we're And talk so have sports on the work fairly is that, the very have where the even continuing we're only most and having or looking that And focused that packaging up world fact And on bundle might sport. what's without a to a hard market argument the be doesn't U.S. X%. some chance the re-trans other to other with expensive with constructive discussions in there is and some are entry-level We the the the And significant a U.S. else that And that. constructive to markets, But opportunity And over-the-top see market decline. around some attack X% a distributors world. like to are that markets everywhere is provides this stable; for discussions be without a of into younger meaningful programmers. with

ahead at that the over-the-top. done, in surveys, for many that. fact, the ID, broadcast four we'll front most superfan Discovery, think when the high-quality, get the are there. Food, think of we And the cases, if I want of the of get you networks. top And driving services HGTV, they're And deal I look really pack have in Scripps at of we'll people channels. eventually We're

disadvantaged, on we're IP. on think, from you, those we're continuing our in platforms. the We've a that. by drive I it being content marketplace little So we're not heard and being we think to well-positioned And and

Gunnar Wiedenfels

Jessica, Okay. the expenses on And sports International specifically. content and

long-term we know, given any specific you As guidance. haven't

On making couple will capital of core for I now secured sports, continue to significant think to that made we deal be some that Olympics a as one, have rights on have premium allocation. to continue sports focused safe our we with other for are specifically, we you points feel the investments, we the of a in will investments priority into and several be and that's a Europe. Number we're position know, our IP; and say. good business, very

very, good So position there. we're very in a

developments single for you very then profits pretty majority that mean, outside before from at there's plus year of on low internationally, look clearly, line, outlook, a For at of be by you deal. top the our much of increase. with that sports rights line said, from first impact content both about managing to be XXXX And is impact digit being to I've those expenses is the of increase we've on the the of the rights the on very sports the impact line $XXX going an financial marginal additional been and driven XXXX. And and sales assume a I going Olympics an all expense million cost. can sort And said cost production if

David M. Zaslav

Yeah.

has So bit little an the Gunnar you'll be relatively it'll out. And sports important bumpy point. in steady. made of Olympics because But see IP and a coming the

time at We itself. if And decision And IP other be platforms. out are he when platforms, me, long. worth Malone will made to just at moment the rights but he mean, to it John that we're he to the the buy right. he value those And then be back point, turned bought running some he at Stars investing not long-term. movie for I in Stars, thinks Stars, look said for all for was very more you

In strategy in on own for just everywhere our as The platforms. our IP the We all sports core providers company. we all of channels. on all almost That is all a world those platforms. other in our own Europe sport, bought premium of rights

if So that to fully that France, we distributors of with some gets it gets upside, because all all or monetized some to Telekom we've IP. Drahi But is done Deutsche as we sold haven't, BT, if at sold Vodafone exclusively IP. this own Bolloré in or that and point, of

We the or Google. doing or of Facebook have optionality or Amazon deals with Apple

And so so with love our we that's own why it used Scripps along that hasn't we IP, because been fits and much, globally, it all superfan IP global strategy.

we we we feel investing it, be good that so more rights. linear lot we EBITDA And about to a but just we dropping also in if could recognize or money weren't were if buying IP

going work long-term issue for all content value that go hear So believe Apple, to companies I the other believe them and be to our hear right long-term as of IP. and work and mobile, guys direct-to-consumer, to with you going work for it's to is that work any us the we anything announce that mobile our we and will because it's they're looking And want Facebook, for compelling when of have going announce to it's going content. terminal do think the if it, that for value create to we you on we addresses it'll they're de-commoditize can that going really

Gunnar Wiedenfels

the exploitation. in Bundesliga as we're some end seeing whole our technical August, to platform XX We've Player, season and footprint, the launches. platform switched uptake. the And healthy are launched with Clearly progress The theme that markets, his speech, also is these very type of across more in very base. encouraging small on seeing and well, Jessica, a hiccups went the of very than that BAMTech we're usual in the some said on the back subscriber David

So happy very there. we're

In the the up terms we're that ramping of keep mind in monetization, subscriber base.

right, and will one And the premium we do going to see two that aspects Eurosport feeds. forward. more effect I brand, Number seeing well. ratings Player is there's We're have we this. think repositioned a of Europe. on German the network with really So really impact as but an pollination between Eurosport this market, the the in up There's linear linear positive across the especially

it's now next expecting learning lot platform. that And come we And we of have very some up valuable very well. rights on all the So a is a premium of us, the demand then good very working with Olympics lot because we're year. a finally, learnings on as for

all I think So well. that's going very

David M. Zaslav

on which value right I said point, in Eurosport, a baskets. Eurosport as find think for year we an important it record could is now is like looks year And two Last Gunnar was take of with now ratings right a ratings. we're that, IP. time the right we over And at And Eurosport direct-to-consumer. have IP taking same up XX% that that are to any that

on to match So that Player, on the deliver game can can player. we decision it IP, make kind the then Eurosport or talk get just a take to that someone of you who certain off the promote the wants if that more on we Eurosport, it to player and

Jessica Jean Reif Cohen

Thank you.

Operator

is Royal the Steven from And Canada. next Bank you. of Thank of Cahall question

line Your is open.

Steven Cahall

out you morning. and Yeah. strategic to pivot Apple, Amazon just as Thank threw you partners. you, Maybe follow first mentioned, the up that potential good on and Facebook just

burgeoning of of sale and you for can content content partnerships? pressures the licensing about to the might managing side may relationships also, you're the pivot. Olympics. So thinking linear And talk any how then about how But I that that on how have regard on about you guess, exacerbate thinking some number into side maybe one, and separately, then that seeing that you're the you're

able traction holistic to measurement sort as that all be platforms. a you if to been a more multiplatform-centric reports taking time. with wondering currency, on give I about of I getting was might the you're and just a across could company more you Eurosport what you some there's press little think us how adopt approach become that over more detail

David M. Zaslav

we're to Thanks, to going is this trying figure where point, go. is Steven. At the soccer do ball what out

Google to core And at more both which so IP, of channels some to going in get you years distributors. IP X distribution Apple. the that billion, different position a have, is niche countries, core we're real people company, in of, like business, we like windows starting be. platforms strategy to our But with build we've trying then in content different ball is still that seen, that owning my love. and our is in providing never In least four, where we're in very that we Amazon can And of idea more sell and has with in XX this stable that big to this really and with the think footprints Facebook case momentum growth that global being the and

all to So we're them. of talking

Amazon in quite already in selling Eurosport deals markets X.XX. creative. Discovery going ball's We have In Amazon to years We're the They're in and with direct-to-consumer back Amazon. go on UK, those think ago, those the look you place Austria. three Today, platforms. Player the selling for We they're that game is with Germany we're going the our IP. for if all Germany. were to

so, be sense transaction can that's like go that's going a Randall. million a going of point, or France, distributor, as Europe AT&T in effective go Time probably you're a go it And out the you're if and and in media very across go But people. make to if out really across in lot And Canal+ That XXX a Warner. not you to buy at and for sense makes Asia, buy company. Latin a is to you market you're and Poland that America or Polsat big U.S.

IP companies. have? you everywhere offer Apple person say, do and to think IP you're to to if accelerate other with we'll we or that one very content ball. be is wanted companies And do content. looking And go for overall and looking rejuvenate mobile been have. that could we for How Facebook to a be deal they less the How add There's a in we're we'll the is so said, media we a the in Europe, It's we've working than we we think to to to Scripps if pack three. market think that to do players we maybe big So more that and to? the we and those wanted and if we've or more share? we see so the them on be we world, family those less ball XX Amazon, where and what do accelerate beginning. times years to massive wanted X.X than do years go do direct-to-consumer? that going it brands and in and see trying of it. And And two ball have that amount Within will few we levered, for our or for and as who what as distributors renew Scripps XX countries then have And

Gunnar Wiedenfels

Okay.

said have we to as sure ever. mean, I the accessible times, we're question, digitally Eurosport make games these multiple games the going are that most On

rules to the We And on will in platforms. of one deliver obviously, more position we which, that us we is put up be there's for making the And multiple information advantage very an identifiable is does in over will a big that available have strict every also protection benefits Player so personal wide Europe, a of across data platforms. a event range audience have these people especially lot signing will there. the because a big

or course booster Olympics sort really for we the it's products a kickstarter see specific ability of early too data-driven advertising targeted our numbers, into as for of deliver any So to Clearly, now. right event and this audience. a

David M. Zaslav

leading doing Europe, the With we're deal Group demo. a think were a providers one of have with partnership. they very mid-form. the extensive providers Nine, one bring a will launched we we with of already and And when across in leading we short-form, of of mid-form, younger And Snap Facebook,

staying think two from of close our what ago. short-form, type a figuring content years way long to come catering and both out companies, mid-form, baskets, need terms of long-form. We've I so in they superfan And those and

now. a menu have full We

Steven Cahall

you. Thank

Operator

Bazinet next is Citi. Thank Jason from you. of question The

Your open. line is

Jason Boisvert Bazinet

mentioned the and helpful. Yeah. is I to why it change? Mr. that non-sports But the guarantees that if you some they it And something for would lesson presume the bigger linear. Maybe you is in to color distributors' then on there that minimum bit little I Thanks. you could a a that's of has out with do give how of do share be that of us sports just country channels U.S. you think Zaslav, could I wondering have. assume any package. easy was the have history only is. a doesn't terms

David M. Zaslav

that only has market Sure. Well, is retransmission the U.S. the consent.

broadcasting out in So we'll other start market. that is every truly free

or good use which of a good because $X it sports so so level but full are a good owned a to their month, the you the of most together the have broadcasters grew channels now, who for combination. that for channels charging this by carriage it's market is and and it's and cost, the quite also are re-trans broadcast sports have them, to all distributors Here up with for channels, sports require leverage of not their consumers, entry. market companies, $X the becomes that not in fact the where, It's the combustible only additional eat

And the an this country network, the really regional – regional is if so and extensive the to only want structure. you to sports that you has broadcast network if get get want sports

and to between driven So has hyperextended networks the been networks, regional are sports serious. of is mostly sports point effectively re-trans, big which here sports you by sports,

you're skinny bundle your been the is And of that's the dealing of are And And Brazil, four ticket. then in could entry XX% Mexico the skinny we the sports one the the cost because the to believe down then, In market, so your marketplace consumers in market last reasons $XX. market other has that why of and you it's of the for bundle. entry, growth every years in the level the X%, with. get is in XX% that

combination. everywhere And much around been I the because creakier subscriber on It's is to in not drive strong able hasn't it we world. of to more creaky it don't packages compelling content ecosystem that's get ecosystem think sustainable. being the to environment, is us. think we it's Europe, here, content, that it's wanting fees of which very I done concept the was it's to else. sports went pretty before, Look, don't so in and the going. stable stage for think get scale that's really what is of it's done a see the we said subscriber And getting obviously and costs because much sustainable lower. a buy be to I But Eurosport that people use enough early It's with and one because reasons has

at The level what leverage into news minute. but the saying, Here, there's over-the-top. lucky do stuff to point And a of have all to subscribers. almost well, over-the-top of most consumers case, do starting agreements entry see agreements We're is all losing be not every carried, market. stuff those just should wait And Maybe want bundle. not are those we're this to eventually is larger good package. extra skinny you're an that in collapses have that because a to what distributors now we what extend companies packaging in providers that that against require

as take be will likely in in breakup to to to the sports the hit accelerate and so without then the then buy start the the round. we the see And service you're forced will be broadband next over-the-top big And hit, over-the-top an to and it'll back sport. consumers take forced distributors guys,

see have The consumers limited. likely attack, be have services not requirements bundles so right carriage you broadband, lower to and and bigger more linear, requirements but consumers think, some it's if change for except they'll sport think – There's effective I so skinny marginally. on on some that'll for linear, of be you might for quite the I don't America go subscribers And to And them Netflix? the market. you real in really they Netflix. – there's If can anything anything silly. buy they is something, college Netflix. and Why that only then choice they do want not in broadband-only and they that's buy they we're to XX your buy And meaningful Because there's have Amazon. the million get offering now

to some going to will think it and think I happen. that time. others and working that so remediate It's some we're And so I take are

Jason Boisvert Bazinet

Very helpful. helpful. Very Thank you.

Operator

The is of from next Bernstein. Juenger question you. Todd Sanford Thank

line open. Your is

Todd Michael Juenger

Oh, for had couple to David, hi. quickly, up with Gunnar on and love I great Good fees. two you got discussion then just Thanks. boy, that a affiliate on super Gunnar, pick morning. just Jason. just housekeeping just I'd

I So this. affiliate on missed I'm domestic sorry if fees,

also player, be wonder? that'd if – number outs licensing don't that states, the And of you're you're affiliate think did I to you'd so if would great. so great. give quarter. fee And SVOD say licensing us wonder a of on I comments know Because or know forward I not I willing in sort the go where to quarter and that, the be content clean without distribution ins just Just the number a of next licensing for sort any licensing, the

indicated the wonder quick that you for currency year. one, double-digit On sorry, The it's affiliate promise other had feel if way. just I International, still fees guys International I I constant quick. think you

with this are mention distribution David, important you're then were help. sort I just about think agreements cycle you up go launch can't through guys. that non-sports Thanks for for an team any, some there. with low And consumers? next agreements, from implications, you up, sort if ask you bundle, you cycle, the sharing It's of if and and your existing non-sports the your Appreciate if Okay. cable distribution pricing priced you're a can skinny the of package you the it. as some companies even What it. such of option over-the-top on sort picking for if traditional NVBDs maybe topic to did thoughts over-the-top how and that of they bearing your exist on increases have On sort

David M. Zaslav

I'll just last answer one. the

done. offering restrictions has an in marketplace. We DIRECTTV going NOW YouTube be marketplace. the the marketplace. it's an Philo marketplace. And being that's to the in so have is has can no do. that's in we an Hulu offering that's the an mean, in offering offering is already I that's

would additional And the And lot with an existing as that time. Netflix we with what out product We providers. you're starting losing? an do going anything we we figure to with over-the-top do And I discussion are Why Is over-the-top could offer? to had at as can see, offers hey, and and in satellite They're an there's like bunch We do I has a of decline think to this do some others a marketplace. in there a over-the-top you're trying we we're looking see would I mobile operators. are customers, of package. the agnostic. serve that. to subscriber end, decline, changed. that is a last saying, existing would We the So cable in or direct think them gaining we face why don't customers? don't

were rate are very now us think a strength with We important. lot then are and than most the getting of one terms us would X% that that length together important only about have they broadcasters. in their of as when the important channels things view, year five people XX% that we're channels with a even helps or more And their ago. of either about we more you is of channel second channels we Our the Scripps, with be might stronger put We view, care of watch but including money. they most that or the Scripps X.X%

to many pay channels? And when XX that's one us a of lot mean so a as price over increase argument fraction about, of regional so is an increase there's an something the to having you're but worth for network paid does channels really paying sports more, to what money. good is it brag an opportunity it that not not we're getting And and

Gunnar Wiedenfels

domestic Okay, you some on color. revenue, me give more affiliate let

And the numbers, single as full the are digit. see, for also as that you reiterated that year well heard, with QX line guidance I full in year. guidance very mid the we've So for given the you of

estimate So that's we still have. the that best

out of that revenues, you line. single do distribution we the contributions terms licensing content those know not individual In to

content As are impact quarter. pointed we we we as scheme in those specifically. That's out the of more have it I often deals said, licensing why the bit said seen have a third but in small greater previously, things,

you some do terms And find also Netflix. stuff with Hulu. very selective ours will who selling on In deals we're we of to, of

evolves, deal But again, the that's a in lot always case example to get that. decision of monetization. common to a our be where for Netflix, we're might of a a to And from miniseries part engage type strategy value in more we like a of distribution So going is as of careful fine the landscape of going very we're that just be making. this deal

number sort more more see nature, they we previously, will again, SVOD slightly by times a revenues have small But the deals. were mean business we ARPU think component and and side these said against we very of in as again, very to of for work linear And than loss we I and valid the the our And about a subscriber lumpy on CAGRs it obviously, said secure distribution. this. as from pricing still single-digit of able So it's high simple linear traditional are the kind subscriber come through. that's cycle numbers perspective, way to previously, last the then our

David M. Zaslav

could not our broad different it offering. opted building a this could about be more of package in do The be more very could value. we've how and we holding an strategically we and strategy But are and existing you us compelling quite do selective to providers, compelling monetize We and that, investing We in much other something with in to or player terminal an see view and think it own it. offering of much side we is year. onto as year next we're And more IP our to it. windows owning result some those doing a more of SVOD

Gunnar Wiedenfels

slightly And also on so growth affiliate, quarter. speech, my guide XX% below D&I a third the for in year. for said seen I then And underlying during we full as we've X% the

planned half, and we've negative also in which there our of in just anymore we're the for yet positive happened had headwind a Asia anticipating few that recently. had not a not double continue we sports individual would What at on look in digit of side. is we in that to you growth, has success the had a through If contributions with come lot support second We hasn't slight America. renewals Latin as growth healthy planning. the Europe hoped a to recovery in with And it see bit

to why conservative the disasters also seen a outlook that an we impact that that's now had wanted the And we've more that So we there's forward and now. slightly given bit is look XX% as just of natural be from previously. then been guidance we just below

Todd Michael Juenger

great. Thanks. Yes,

Operator

you. Thank

of next the question And Okay. is from Alexia JPMorgan. Quadrani

is Your open. line

Alexia S. Quadrani

to I you. Thank switch Hi. gears advertising the side. might

to you networks, inventory was improvement like Discovery some And TLC You've you market? wondering ID. key color seen still any monetize some your And ratings the health in available just and you I I constrained scatter the think currently have that you're which at momentum, good the scatter general market. some by highlighted if good make-goods? of of about what somewhat in seeing the in market, and Are

David M. Zaslav

slightly Great, upfront, but The pricing scatter below is the thanks. pricing above good. on what was volume year. The scatter market, last is

if on stabilized. it little thought now bit this is money thought – it made more It's bit, drops we in a of fact than a the up number sense way. fact, but of push I could hedge have strategic We don't we that network; and number of was sense that in helped little so women. The upfront is we grow be of issue for to more point, moving upfront, our We the up, TLC volume normally to there a use money little So took us. us. bit ID was deeper risk we XX for pricing. a mean, And got make-good scatter would. meaningful up, the at little take a some a any if more has next volume was quite well six did a Discovery we XX%, and it's really good sold and the network might to has the continues We little we bit year a what good dollars. that a little market to

quite us. it good So was for

Gunnar Wiedenfels

U.S. low I for similar into number growth we the digit for as us. see single Alexia, fourth ad said, And quarter, going the

Alexia S. Quadrani

think just how that And a your core you you way rate of spending ahead? quick just sort more much networks? to your your in bit your smaller fact I Does in of spending that bigger of you the about some a non-core bit networks higher subscriber obviously some influence your decline likely to investment better investment networks. are there and mean, reallocate about of trends here, then follow-up and your talked of little the your declines terms the a in networks seeing of are on networks, you're

Gunnar Wiedenfels

majority already it in the I There's We deals generically and doing where exceptions. yes, our six overwhelming in been deals did think that. some big our are of to we've economics our networks.

together is magazine a editorial, actually was the the buy the Trend the and on pictures, direct-to-consumer the but the superfan the with around is business, short-form call Velocity, creative. car magazine the XX have Velocity, OnDemand. all and that being titles. all did generated have the business, all We Motor basket compelling library, cars, We channel quite IP together We that with all something network. We titles we of content that put didn't live very new we Velocity as well content the as auctions in this the

XX And And brands at now video short-form that's to terrific so these have would can get $X this lists the as we little less with magazines in that's superfans. below and you'd along million that XX that this that about drive to cable real OnDemand. profitable a all we paying have start between all and that see business top has Velocity, direct-to-consumer we IP Motor Trend be And XXX,XXX, homes writers, subscribers the XXX,XXX these quite of channel use and we that then well great we that and than of month. this that as go with move

a XXX,XXX library real about and any happens We it's auto, short-form? in they any have and auctions were together an any enthusiastic of live auto editorial So fact position in dominant auctions. subscribers take you What with auto promotion without with XX material, auto titles with together the when a together experiment. live almost huge enthusiast long-form content

is of a side-by-side. strategy And direct-to-consumer of part a so business this our as building

smaller mobile on on investing as of and audience, we and linear sustainable already On and don't cascade channels focusing that some less we started and that big the hand, are globally. other core have we more think sustainable our of an that have sustainable brands on

Alexia S. Quadrani

much. you very Thank

Operator

Thank you. will Nathanson from question the And last MoffettNathanson. come of Michael

is line open. Your

Michael B. Nathanson

you the falling? Thanks. those to talk of bit fall a perhaps minimums for big of self-planned sites? change go I loosening versus about, I loosened guys had a non-core non-core traded the maybe this the have some the of So Or two maybe erosion non-core pricing? six fact Can in that a type of the better distribution? of function that back for channels the platforms you Is David. was up and

David M. Zaslav

those shaving. it's would of It's not could and just It's $XX. at that No. very extra It's the for do absolutely It's saying basically saying, high save I say that. somebody extra be channels, you being somebody being paying actually, XX expensive that I'll price tiered. cable. I looking think broadband and $XXX for It's need just the

Michael B. Nathanson

Okay.

sense. makes fit that all, which Okay, talked normal linear outside dish get at you and a haven't of to be done? Sling a about Sling tiering. Is then, seems good given pretty a Sling you like And done their being deal having done given can deal pricing a or their of function

David M. Zaslav

to I don't want specific. speak this to

an is Sling think platform. I effective

restricting just to the driving less do significantly the cost to content of are and of that's platform? we'll if issue top at an customers six I very channels or that's And that I asking one equal at channel. that, Charlie's us, the agreements have list, all decline agreed studies, And because to I customers, probably driving one as distributor or of other our industry to my am every themself question, than or the are being I said serve you secular eventually, have look looking all is from that Netflix people away attacking think on either I he's and with earlier. the my customers recent at I in And two we talked those about innovative be I've almost think, the of that behind it very platforms, think ahead. retrans for along the broadcast ability

to consumer argument. a think I value so we And have great

every channels. more a getting it if good viewers we more shot time, think a doing keep like close I platform. more job our gives we versatility programming be when aggregation, optionality. Scripps, at would And and quality think I we over good And to got even us we and on

Michael B. Nathanson

Okay. Thanks, David.

Operator

gentlemen, and conference. the you This thank today's Ladies for program. concludes participating in

all a disconnect. may Everyone, You day. have great

Warner Bros. Discovery (WBD) 2 Nov 172017 Q3 Earnings call transcript