Warner Bros. Discovery, Inc. (NASDAQ:WBD) J.P. Morgan’s 52nd Annual Global Technology, Media and Communications Conference May 22, 2024 10:40 AM ET
Company Participants
Gunnar Wiedenfels – Chief Financial Officer
Conference Call Participants
David Karnovsky – J.P. Morgan
David Karnovsky
Okay, great. We’ll get started. My name is David Karnovsky, I cover media, entertainment and advertising at JPMorgan. Very happy to have back at the conference Gunnar Wiedenfels, Chief Financial Officer of Warner Bros. Discovery. Thanks for being here.
Gunnar Wiedenfels
Thank you. Hello.
Question-and-Answer Session
Q – David Karnovsky
Okay, maybe to start high level. There’s certainly no shortage of things going on at Warner Bros. discovery. It seems almost unfair to start with this, but what are your key priorities? Where is the team focused right now?
Gunnar Wiedenfels
Yes. Thank you, and good morning, everyone. Yes, I mean, it’s hard to believe we only reported earnings for the first quarter two weeks ago. And it’s like forever because we’ve been busy executing page after page our playbook here, so lot going on. We’re in the middle of the U.S. ad sales upfront, the Warner Bros TV production team finished a very successful LA screenings just recently. We secured the first presidential debate for CNN, which is something to look forward to in June.
Just yesterday, J.P. Parrett and Gerard Zeiler very successfully launched the first wave of our EMEA rollout for the D2C platform, huge, huge endeavor and the great opportunity to apply the learnings from the rollouts previously. And then something near and dear to my heart is I talked about the tremendous opportunity in our capital structure from the great debt stack that we put in place two years ago, and we started taking advantage of that with the successful issuance last week in the euro market. And the tender that’s still out there that’s going very, very well, which, combined, will have a very positive impact on our leverage.
So we’ve been busy. The priorities are the same that we’ve laid out, focusing on creating the best quality content in the world, a strong distribution platform with the D2C platform, the key priority right now to get that in place for a significant acceleration into 2025. And then continuing on the theme of operating the company as one of Warner Bros. Discovery, which we’ve made great progress, but there’s still more opportunity for us to capture.
David Karnovsky
Great. Great overview. So earlier this week, Max began its Europe launch in 20 countries. You want to talk about the process there? What are the best practices you’re applying over from LatAm or U.S. relaunches?
Gunnar Wiedenfels
Yes, we should spend a lot of time talking about D2C, because it’s such a priority for the company and such an exciting growth opportunity. The — in terms of the launch process, it’s really great to see how we’re applying the learnings from earlier launches where this month also a year into our U.S. launch for the Max platform, we had a very successful Latin America launch in February. And now the first step in Europe, essentially applying the learnings from what we’ve done before and getting ready for the remaining European countries.
We’re going to have the Netherlands, Poland, the Belgium, France, some new market that we’re not present yet with HBO Max, all that coming up over the next six weeks, leveraging House of the Dragon Season 2, and then getting ready for the Paris Olympics, which is a huge event for us because with Eurosport, we’re essentially, this is our home country.
So we’re getting ready. The change here cannot be underestimated. We really decided two years ago to build a new streaming platform from scratch, really a brand-new technology, made tremendous progress. And the entire company has really had to come together for this from the creative side, from a product side, from the technology side. The operational broadcast operations team, and it’s great that we’ve gotten better and better. And every single time, we’ve essentially overestimated the amount of churn and disruption we would see from these launches so…
David Karnovsky
Maybe just touching on that. So if I’m a Max customer in Europe, I open the app, what’s new for me in terms of features?
Gunnar Wiedenfels
Obviously, depends market-by-market, but there’s a lot of change. I think the most important one is that in many of the territories we’re more than doubling the amount of content that’s available. I think that’s probably the most important point, but also in terms of a features, pricing, tiering structure, many markets we weren’t able historically to have an ad-light offering, which is available now. And we did see a lot of improvements in just the user experience, the stability of the app, et cetera, relative to the old platform, which to some extent, on the — for HBO Max went back into the ‘90s in terms of some of the technology that wasn’t used.
David Karnovsky
Interesting. And the ad-light, that’s available in, I think, five countries to start, but then the goal is to roll that out across the region?
Gunnar Wiedenfels
Yes. And again, the interesting thing about the EMEA market is the complexity really territory by territory. So we’ll always tackle this market by market. But clearly, there is an opportunity there. We’ve been thinking about the streaming opportunity pretty much the same way we’ve been thinking about the traditional TV opportunity where you’ve got the fast segment sort of resembling the free-to-air and then you’ve got a basic segment and a premium segment. We’re trying to target everyone and address them with their preferences in terms of advertising tolerance versus willingness to pay. So we’re in a much better position now to make those decisions, and we can talk more about sort of how that drives value for our D2C business.
David Karnovsky
Got it. I’d be remiss if I didn’t follow up on some comments last week from your President of international regarding regions like the U.K. or Germany. You still operate there through a license. Seems like there’s potential for change at some point? What can you say about the long-term model in those markets?
Gunnar Wiedenfels
Well, Italy, Germany, U.K., those are obviously very important markets for us in the European footprint. They are specifically important, because we have very strong free-to-air positions in those markets. So longer term, there is no doubt we want a streaming service accompanying those free-to-air operations in those markets. And we obviously still have a lot of time left on the Sky agreement, and we’ll be open to different models.
But clearly, a pure licensing model is not something that I think is in the best interest of our shareholders and also not the consumer going forward. So we’ll be negotiating and seeing what makes sense from a go-to-market perspective for these markets. We have applied that model successfully across our entire global rollout. We’re looking market by market at what makes sense, what the licensing opportunity is, what the upside longer term from an asset value perspective is from running an owned and operated platform, and in some markets, looking at partnerships. So all of that is available on the spectrum of potential go-to-market options.
David Karnovsky
Great. You recently reiterated a target of at least $1 billion in DTC profitability for 2025. What are the key areas of execution from here? How do you balance that goal against wanting to show significant improvement in 2024?
Gunnar Wiedenfels
Well, so as we’ve said before, we really view the D2C business as still in the early quarters. We started with the new rollout of the Max platform a year ago. The first priority was to get the streaming service to profitability. We’ve checked that box last year, when maintaining profitability by 2024 is much less focused on necessarily growing profitability than it is focused on laying the foundation for that long-term, very dynamic and profitable growth that we’re looking at, starting with that 2025 target of $1 billion plus. But we’ve also been clear that, that’s just one step along the way to a much greater and much more profitable service longer term.
So with that in mind, we’re laying a lot of the operational foundations and putting in place those stepping stones to set us up for real success in 2025. And it’s virtually along the entire P&L, it’s entire — across the entire operating stack. We have subscriber growth opportunities from launching in international markets. Remember, we still have about 50% to go. That’s what I mean by early quarters here. We have partnership — distribution partnership opportunities. We have a bit of a password sharing opportunity. We have pricing opportunities.
And then very, very importantly, we have a real upside from the consumer perspective when it comes to the content offering and the overall consumer experience. We’re still rolling out improvements in recommendation algorithms. The entire machine learning part is going to get better and better with more time under the belt and greater reach under the — across the entire platform.
And again, back to content, we’ve got one of the strongest lineups coming up, starting with House of Dragon in a few weeks, the second season. The Penguin in the fall, all our films Dune 2 just dropped on the Max platform. And it’s a very, very strong lineup for the next 18 months after coming out of that strike-related dearth of fresh content last year.
David Karnovsky
Yes. And in Europe, the Olympics are coming, right? That will be available, I think, across the region?
Gunnar Wiedenfels
Yes, and it’s going to be the only place where you can see every single event of the Olympics. So that’s going to be very exciting.
David Karnovsky
Maybe to follow-up on some of your comments there. Password sharing, any way to frame that opportunity? Is it too early? Do you have to get through the kind of launches, relaunches to kind of determine or frame that?
Gunnar Wiedenfels
Yes, you’re right. I mean obviously, we have prioritized. There’s so much to do, and we have prioritized our initiatives a little bit and certainly, the LATAM and EMEA launches have taken top positions on the priority list. Look, it’s going to be an opportunity as for any other service in terms of sizing it. I don’t want to get into specific numbers. But what I will say, because we’ve gotten a lot of questions on it, it’s important to keep in mind that, obviously, everybody looks at the Netflix password crackdown impact. They’ve been in business for much longer with their streaming service than we have. So you should definitely assume a significantly smaller opportunity, but it can be meaningful.
David Karnovsky
Okay. I mean, I think one thing we’ve noticed from WBD, but your peers as well is maybe an incremental emphasis on engagement, at least relative to what it was for growing subs overall previously. Content plays a big part in that. It would be great for you to refresh. You’ve done that a little bit so far, ‘24, ‘25. What are other tools in your control that you can use to drive more watch time on the platform?
Gunnar Wiedenfels
Well, let me make a general comment on this part of your question, subscribers. We were among the first to depart from this strategy of subscribers at all cost, right? That was this proxy metric that was looked at for a very long time, and I think has led to some weired not necessarily very rational economic developments in the industry. Subscribers are still an important driver, was the first driver I mentioned when you asked about the growth opportunity, but it’s just one input factor and one that we pursue very carefully with an eye towards greater lifetime value than subscriber acquisition cost.
Engagement is incredibly important for a number of reasons. Number one, you’ve already mentioned the advertising monetization. That’s playing a much greater role today than it did two years ago, and we have a lot of runway there. We grew 70% in the first quarter in DTC advertising revenues, and we still have a lot of room to grow. A lot of our top content still doesn’t have a lot of ad (Indiscernible) and some of it has no ad against it at all. So there’s tremendous opportunity.
Obviously, engagement is a huge driver to generate that inventory. But engagement, or more specifically habituality, is also important from a subscription perspective, because increasingly, we’re moving towards a more saturated market, especially domestically here in the U.S. where it’s much more about making sure that people have no incentive to ever cancel their subscription. And you coming back to the platform on a regular basis every week, every day, ideally is the best predictor of retention.
David Karnovsky
How important is it from — to get a ride from a technology standpoint, right? I’m coming in every day, make sure I’m seeing the right content. Where’re the potential improvements there?
Gunnar Wiedenfels
Well, as I mentioned earlier, we — it’s important to keep in mind where we started just a year ago. We were looking at a completely manually curated HBO Max service. And so obviously, the Max platform has machine learning algorithms in place to improve on recommendations. But the nature of these algorithms is that the more data you have on your user behavior, which rose over time, the more opportunity the algorithm has to actually learn better the recommendations get. So we have a lot of runway there, I think, but also generally speaking, we always get the question on what are some of the silver bullets that are really get to a step change in operating metrics.
The reality of this business is it’s a 1,000 initiatives, very small improvements, A/B testing and sort of gradually improving the consumer experience and gradually driving that churn rate down and creating stickiness. And we’re very happy with how the platform is performing. It has got very strong reviews out of the gate. But that’s only the starting point. We’re gaining yards every week, but there’s still more opportunity and more to do.
David Karnovsky
Great. When I look at Max domestic versus launch a little over a year ago, two tiles available now, BR sports news, news is still in beta. I would love to hear what you can share as far as impact of engagement gross adds. And then you’ve been adding rights like MotoGP, NASCAR. How do you think about the role of Max in the broader sports strategy?
Gunnar Wiedenfels
Yes. Look, the — we believe in — back to the engagement point, right? The big hypothesis here was, and that actually got confirmed so far. It’s still early days, obviously, but people who are engaging across different genres — across different content categories, turn out to be stickier, and that’s what you want, right? And so I think we have the great opportunity of managing a portfolio that’s incredibly diverse and a broad range of offerings, and we’re very happy to keep offering that to the consumer in as many ways as possible. So we’re happy with how this is going so far.
When it comes to sports, it is fair to say that our top priority right now is to get that venue venture up to speed. It’s going very well. That is an incredibly exciting opportunity for us because it will address one point that I think many sports viewers are actually consumers of any content they’re struggling with right now, and that’s the fragmentation that you just don’t know where to find it. And you realize that many of the offerings in the market are just too small.
And with menu, we’re going to have all of the national hockey, baseball, basketball, lot of the NBA — sorry, the NFL. So it’s — there’s a lot in one place. It’s not complete, of course, but it’s going to be a very, very attractive and interesting offering. And so we’re full steam ahead on getting that to the market. We saw the beta version of the technology that’s going well. The team is coming together, so that’s all looking good.
David Karnovsky
Has the name confident that you’ll launch about fall short time…
Gunnar Wiedenfels
Yes, very confident.
David Karnovsky
Just sticking on streaming. So partly as an effort to reduce churn. You announced a bundle with Disney+ and Hulu, one comment, we found interesting is that you framed the agreement is strong for ARPU. We assume since there’s a middle man here being cut out, a question that we’ve gotten since earnings is, how do you kind of square that against what will be, we assume, an attractively discounted price for consumers?
Gunnar Wiedenfels
Well, that’s what makes this deal so unique, right? And look, again, taking a step back, we’ve been big believers in bundling for a while. I mean, David has been talking about bundles for years now. At a time when it wasn’t really on vogue, but the tone across the industry has changed, and we now see a lot more of these bundles popping up. This one — the challenge is obviously to make sure that you find an alignment of interests, right, because different players might have very different expectations or different objectives, and inevitably, you got to reconcile that somehow.
And here, in this bundle, we’re perfectly aligned. We’ve got two well-established great products in the market. To your point, where there is no distributor taking a share in the middle between the consumer and us. And so that’s why — and that’s why I made the point about the ARPU because it’s unique. Typically, the way you rationalize the bundle is, well, we’ll have an attractive consumer price point, and we’ll get a churn benefit and we might save some on the marketing and we pay for that with a lower ARPU number, right? This one is different, I have no doubt we’re going to see great term benefits. I have no doubt we’re going to see great marketing efficiencies. And I have no doubt that we’re going to generate an ARPU that’s above our domestic overall average.
Obviously, the overall average is, to some extent, driven down by wholesale deals. So that’s where the middleman comes into play. So I think top to bottom, fantastic deal from a consumer value proposition perspective, but also economically. And I can’t wait to get this out because I really think this could be big.
David Karnovsky
Going to your point on the ecosystem, not even two weeks post your agreement, Comcast comes out, they announced their own bundle, Peacock, Netflix, Apple. Curious your view, is this the kind of beginning of an end state for the streaming ecosystem? And should this overall create more stability overall for everyone’s packages?
Gunnar Wiedenfels
Look, I don’t want to make a prediction about an end state here, but back to what I said earlier, I think it’s pretty clear at this point that there is some consumer frustration. And I have these conversations every day with friends and family, professional contacts is like it’s frustrating. You don’t know where to find what you’re looking for.
Then if you’re lucky enough to know where it is, you got to find out or remember whether you have a subscription or not, and then you got to key in your passport and it’s just not a great experience, kind of contrary to what everybody thought initially, right? So I do think that bundling is going to play a very important role. I don’t know if it’s the end game, but it’s going to play a very important role, I think, in the ecosystem.
David Karnovsky
Got it. Maybe just shifting gears, WBD held their upfront two weeks ago. I know it’s way early to ask on price or volume, but maybe you could speak directionally to tone with buyers, reception of some of the products you put out? And if it is too early, maybe you could just discuss the health of the wider ad market, domestic international, any color?
Gunnar Wiedenfels
Yes. Look, I would start by making the same point that I made two weeks ago. We’re cautiously optimistic here. We’ve seen gradual improvements in the market over the past few quarters. It’s not the dramatic recovery that I would love to see, but it’s moving in the same positive direction. And I think that’s an important factor. The second point I want to make is what’s going to be very different this year really in the upfront is the full focus on conversion and digital sales. We’re out there with our only product.
So for the first time, offering advertisers the opportunity to do the complete chain of planning, activation and measurement across our entire inventory offering regardless of platforms. I think that’s going to play very well. We’ve gotten very positive feedback. And I mentioned the growth rate that we’re already experiencing in our streaming advertising business. I mentioned that earlier, and we’re going to double down and push that really hard in this upfront.
David Karnovsky
Maybe zooming out a bit, obviously, the pressure is linear well known. How do you, as CFO, think about operating the suite of channels from a cost standpoint to reflect the ecosystem, while also kind of leveraging these networks to — in your streaming build-out?
Gunnar Wiedenfels
Yes. Look, our streaming — sorry, our linear business is incredibly important from a cash flow perspective, right? So that’s — there’s the shiny objects are the studio and the D2C business, but there’s a lot of cash coming out of that linear business, and I have no doubt there will be a lot of cash coming out of that business for a very long time. And we’ve talked about the opportunities that we have with better monetization on the advertising side, more use of data-driven linear, dynamic ad insertion, the bundled offerings with streaming products, et cetera.
And we also have, I think, a pretty strong position when it comes to the affiliate ecosystem, where we’re still, by my estimation, if anything, under-monetizing relative to the rest of the ecosystem rather than over-monetizing. So that gives us certain amount of protection on the top line. And then to your point on the cost structure, I made some remarks when we reported earnings two weeks ago. We have now gone from integration and transformation towards sort of a continuous improvement process that’s become muscle memory for the entire organization, be it on the corporate side, on the linear side, but also for the studio and DTC.
But specifically for linear, we were — there’s no doubt we’re going to drive for the most efficient setup possible. And if you look at the individual cost drivers when it comes to content, we have a very good understanding now of the return on investment that we’re generating with every dollar spent on content. And it is a very profitable business model and it will be for a while. So we’re investing behind it as longer tail networks kind of drop to a level where additional investments are not justified anymore. We will know that early enough to make those decisions very rationally in the best interest of shareholders.
And then when it comes to the non-content spend, there’s still more opportunity for us. We are operating a global footprint when it comes to broadcast technology that there’s more — there’s a technology advancement that we can take advantage of. We’re currently looking into creating more of a hubbed broadcast operation structure globally that should help drive efficiencies. And we’ve started taking more advantage of the great talent that’s available in some of our capability center locations. We’ve got 1000s of people now in places like Hyderabad, India, Warsaw, Mexico City, those are all going to help not only drive great outcomes, but also help on the efficiency side from a P&L perspective.
David Karnovsky
Maybe just following up on one, you talked to your networks potentially being under monetized. I would love to hear what informs that view and what gives you confidence as you go into future negotiations?
Gunnar Wiedenfels
Well, the way I look at it is, as much as we sometimes hear that some of our affiliates are at this point in different about the video business. We know what viewership we’re driving, what engagement we’re driving and what share of their economics we’re driving, and we can put that in relation to what we estimate our CPS payments to be in terms of share of their programming expenses.
And when you do that analysis, then I’m confident that they’re making a lot of money with our product, and that should provide an incentive, I think, going forward to continue this business in the most constructive way. And we’ve been great partners as well. If you look at our behaviors when it comes to the traditional affiliate landscape, we have been great partners.
David Karnovsky
Got it. With the NBA, I think many people in this room probably want me to ask you for an update. I wouldn’t expect you to break news, but maybe I can give you a follow-up to what you said on the earnings call around matching rights. Would be interested to understand better how those work? Is this entirely financial? Are there considerations around packaging? What can you say?
Gunnar Wiedenfels
Well, you wouldn’t be surprised that I’m not going to be breaking news here. And look, this is still very much an ongoing negotiation. We’ve had a great partnership with the NBA. We value the product, and we’re very hopeful that we’re going to be able to find a solution here that’s mutually beneficial to both sides. We do have a contractual matching, right? And that’s an important part of our ongoing contractual relationship, but that’s about as much as I want to say about the NBA.
I do want to say sort of maybe more generally, when we talk about sports rights, we’ve been very clear forever that sports are a very important category. And we’re fully committed to a sport strategy. We’ve been in the business for decades here in the U.S. for decades, actually internationally as well. We have great sports offerings in virtually every key market in the world, and we continue to be fully committed there.
What I also will say is, we’re always going to be disciplined. It’s very easy with sports right to burn a lot of money, and there’s also an opportunity to get your hands on some of the most emotional and most coveted products from an audience perspective. So you got to be disciplined and think through all the scenarios. And obviously, when it comes to the domestic sports strategy, this was a major factor when we went through the considerations for even combining Warner Media and Discovery. We’ve spend a lot of time thinking about what the combined go-to-market strategy from a sports perspective is. So we’ve been very focused on this for the past two years.
Louis and the team have been very focused on it. We’ve added a lot of sports rights with the NHL, with NASCAR, with the U.S. Soccer, and there’s a lot out there, and we’re very engaged whatever — back to the MBAs to whatever outcome, we thought these scenarios through, we’ve got our strategies in place, and I think we’re going to have a very, very strong sports offering, and I’ll just say stay tuned.
David Karnovsky
Great. I want to shift to the studio side. At the end of last year, David gave what I thought was a frank assessment of the performance in ’23. This year, meanwhile is off to a great start. Warner Bros. has two of the highest — or the two highest grossing films. Behind the scenes, what actions are you taking to kind of improve the batting average on content? And then you touched on this at earnings, how do you, as CFO, think about driving more profitability out of the hits minimizing losses on the misses?
Gunnar Wiedenfels
Yes. Look, I mean, the studio is a super interesting part of our business, partly because I’ve been vocal about this. I think we’re we have underearned over the past few years in the studio. And I think there is a — there’s tremendous value in that asset. I mean, it’s an unbelievable IP library. These are unbelievable talent relationships across film, TV games. And so I think there is a real value opportunity for us. And to your point, we’ve seen lower EBITDA last year and slightly less financial success on the film side, which was very much driven by a very different strategy.
You got to remember, a lot of what hit the screens in 2023 was still developed with an eye towards streaming first and just a certain number of films regardless of what was available and what the quality was. So that’s changed. Obviously, Mike and Pam are taking a very different approach here, and gradually as we move through this year and then really into next year, we’re going to see their products, their choices, and we’re going to increasingly see their handwriting on the films.
And so I think David has selected a great leadership team for the studio from a purely financial perspective. What I look at is the process of how we’re making decisions and how we’re executing. That’s something that is probably not necessarily going to impact the creative success in a positive or negative way. But what I’ve got a lot of confidence in is our ability to make sure that in success, we drive better results and in the inevitable failures we limit our losses.
And that confidence is driven by what we’ve implemented in terms of processes, starting from the, first of all, the mindset of the executives making the decisions, but then also the budgeting, the fact that we’re creating accountability that we’re going back to assumptions that we’re going back to budgets, the fact that we’re leveraging the entire physical production footprint of the company, that’s something that was not in place previously. We’re using our lots. We’re just expanding a lot in the U.K. We’re utilizing our entire leverage that we have across a $10 billion own content physical production spend bucket.
There’s a lot of master service agreements that you can put in place. And so all of these things are without any negative impact on the on-screen product, potentially actually with a positive impact, but significantly improving the economics of the business. It’s going to take a little bit to flow through, as you know, because these productions take some time. But I really think that a year from now, two years from now, the studio is going to operate at a very, very different level of profitability, and it’s probably one of the biggest hidden gems and value drivers of this company.
David Karnovsky
Got it. At earnings, you noted a path to meaningfully exceed $1 billion in remaining cost savings you previously guided to. Also noted early innings on improving working capital. Maybe you can discuss a bit the incremental opportunities there?
Gunnar Wiedenfels
Yes. I mean, back to the point that I made about the muscle memory of a continuous improvement mindset, and I’ll just say this. The media industry isn’t necessarily known for crazy efficiency. And so we’ve taken a lot of that inefficiency out through to the initial merger integration, but there is still a lot more room, and we’re now very focused on the, — what I would call the back burner initiatives. We’ve started putting new systems in place. Some of those are actually starting to come online.
Now we’ve got a couple of big releases over the summer. And those are going to allow us to really streamline some back-office processes. We’re also — and we talked about this on earnings as well, we’re also increasingly looking into ways to leverage AI, again, not necessarily on the creative side, but there’s a lot of back-office processes that we can radically improve. And one of the biggest remaining opportunities for us is the fact that even though we have started running the company more as one team, we’re still unwinding three decades of divisional silo thinking.
And again, the ability to combine teams, to combine workflows, share best practices, decide on what the one sort of corporate process is going to be that we implement still has tremendous opportunity. And that’s only the P&L side. We’ve also talked about cash focus, which was never really a thing. There were a lot of projects in flight when we combined the two companies that, from a return on investment perspective, probably should have never been greenlit because in success, it was clear that shareholders wouldn’t do well with It.
And so we’ve completely retooled the entire decision-making process and systems landscape for those kinds of decisions. And there’s a lot more focus now on cash, literally from the initial investment to collecting the last dollar on the revenue receivable side. And I’ve been very clear that I think the cash flow opportunity, the cash conversion opportunity has a lot more room for a very long and sustained improvement.
David Karnovsky
Great. Maybe to close out, it’d be great to hear your view on WBD’s overall portfolio of businesses. There’s a lot of blocks in the ecosystem right now, the possibility for certain assets coming up for sale? Are you content with the portfolio? Are there areas where you think M&A could be appropriate at the right price?
Gunnar Wiedenfels
Well, again, certainly not breaking news here. And we’ve been very clear before. We have an active BD department, and we are at a point in the industry where there is a lot of change, which means a lot of opportunity. So nobody should be surprised to see our name pop up in all kinds of processes. We’ll do the right thing to make sure that our Board is in a position to decide on opportunities should they arise.
That said, there isn’t anything specific going on right now, and there doesn’t have to be anything specific going on right now, because we have a phenomenal portfolio. We have what we need, and we don’t really have anything material that we don’t need. The — if you look at where the company is trading right now, I think there’s a tremendous value creation opportunity. The studio alone and the D2C business alone could be carrying what we’re currently valued at.
And that’s what we’re very focused on, making sure that we get the studio back to the earnings level that it can easily generate and that we get the stepping stones in place for J.V., Casey and the team to build a long-term dynamically growing and profitable D2C business. We’re very focused on executing that playbook here. We’ve got the offense lineup on the field, and we’re going to keep working on it. I have no doubt that we’re going to do very well within the current corporate structure.
David Karnovsky
Okay. Great way to end it. Thanks so much for being here.
Gunnar Wiedenfels
Thank you.
