Jean-Briac Perrette: Yes, and I think just to add to it, when we look at the next two years, the things, the levers that we rely on to get us to that financial profile that we outlined a year ago, over a year ago, really is anchored in strength of content, which David talked a little bit about with a much more impressive 2024 and I’d say an even stronger 2025, price you’ve seen us obviously move on price. We’ve had very good results in both minimized churn and great incremental revenue growth related to our price increases around the world, advertising strength through the release of more of the AdLite product here in the U.S., as well as more markets coming around the world. New market launches, churn reduction, which David mentioned a little bit about earlier.
But we are seeing finally some great progress, particularly with the introduction of live here in the U.S. on both cancel rates and auto renew off coming down, which are great indicators. And so we are ultimately we feel very confident that we’re at an exciting moment over the next 12 months to 24 months, particularly as we look at the global rollout starting in the first quarter next year of Max to take this to a whole another level.
Operator: Your next question comes from the line of Rich Greenfield from LightShed. Your line is open.
Rich Greenfield: Hi. Thanks for taking the questions. I think if I look at your D2C segment, you’ve taken a pretty incredible amount of cost out of the business. I wanted to shift and focus a little bit on the network segment. If I just look at the Q3 numbers, I think the cost structure is down to about $2.5 billion between cost of revenue and SG&A. How much room going forward do you have to reduce that? Obviously, Gunnar, you were very open and honest about the state of the ad market and core cutting, et cetera, and just wondering how to think about how much that $2.5 billion sort of quarterly cost base can come down and what are the big levers you can pull and then just. Gunnar, maybe if you could just from a housekeeping standpoint, I think everyone’s just trying to do the math on sort of what you’re implying for next year.
EBITDA, anything you can do. I mean, it seems like you’re pointing it sort know roughly down. But I’m just curious if there’s sort of any sort of range you want to point the street to when you’re thinking about leverage being higher than your target would be super helpful to just understand the thought process. Thanks.
Gunnar Wiedenfels: Yes, Rich, let me maybe start right there, because I did not intend to guide down EBITDA for next year relative to where we are today. The only reason I brought this up is we had guidance out there of hitting our leverage target range by the end of next year. And again, based on the early indications that we’re seeing from how the market is developing right now, I’m just not confident to stand here today and say, don’t worry about it. We’re definitely going to hit that range. Now, if you have a view on ad market recovery, and if you think there is an ad market recovery in 2024, we’re going to have a great year. I’m just not in a position right now to provide firm guidance to that. I’ve laid out some of the building blocks again, a much more profitable streaming business, which we’re going to try to fuel growth.
But again, let me be clear, that doesn’t mean that I’m expecting to start losing money again. We’re just shifting marginally to prioritize growth over sort of the maximization of immediate profit growth. Linear business, the network business, it is what it is. And I’ll talk about the cost side in a second. And then on the studio side, we should be seeing a recovery as the strike hopefully comes to an end. But it’s too early to be any more specific here. To your point on the linear cost base, first of all, I do want to just call out how, what a great job Gerhardt, Kathleen and others, including at CNN, people have done in right sizing the business as we brought these two companies together. And I think we’re looking at a very competitive cost structure, which is one of the reasons why I’m so confident that when the market comes back, we’re going to be participating with a pretty high flow through to profits.
But as I said earlier, we’re not going to be standing on the sideline here and just watching. There’s a lot more that’s in the pipeline. Some of our transformation initiatives, especially on the technology side, just have longer lead times. And we’re still evolving when it comes to, let’s call it, the operational backbone of how we operate our content workflows throughout the company, by the way, not only impacting the network segment, but the company as a whole as well, so there is definitely more opportunity there. And then one other point that I’ve made before is, again, we decided to go with this three segment reporting structure because that’s how David looks at the company and how I think from an investor perspective, you get the full transparency into the different business models and their financial profiles.
But one thing that’s going to be increasingly relevant is managing our content investments and our content utilization across one Warner Bros. Discovery. And that’s one area where so far it’s been a bit of a one way street of the studios and networks creating content that ends up on the streaming platform. Longer term, as that platform grows and drives more revenue and profit contributions, there may also be a flow in the other direction which inevitably will drive profitability of a linear business beyond what we have today.
Operator: Your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.
Benjamin Swinburne: Good morning. A couple of housekeeping. Gunnar, I was wondering if you are able to quantify the benefit to cash flow from the strike this year. I know it’s still a moving target. And then also whether there’s a way to quantify the sort of incremental synergy capture you expect next year versus this year. You had some numbers in your prepared remarks. And then maybe a more interesting question for David. David, the strategy around expanding Max with news and sports seems quite logical and compelling. You’re adding reach, maximizing distribution, ultimately revenue. And it seems like you think the charter Disney read is a positive one, which I just wanted to hear more about because I could also see the other side of the argument, which is taking your core linear IP and CNN, the NBA baseball, et cetera, and putting it on Max could actually cause some consternation on the distribution side of your business.
So maybe you could spend a minute just talking about how you see that glide path working with your Max strategy. Thanks a lot.
David Zaslav: Sure. Thanks, Ed. Well, first CNN Max, not CNN. There are some hours that are simulcast, but it’s largely independently produced for a younger and different audience. And we saw this in Eastern Europe, that it provided real value, reduced churn and provided real value. And the people that spend time watching live content, as JB has said, and we’ve seen it here already and it’s only six weeks in, you spend time watching news and sports that the engagement is higher and the churn is lower. That’s a big deal. Churn is the biggest issue that we face. This is a very compelling service. The churn is too high. So this is an all on attack to reduce churn. Reducing churn also will reduce marketing because we’re out going out and marketing over and over again to subscribers that are coming in and out.
So the idea that a big majority, the overwhelming majority of people that are watching Max don’t have pay TV, and they’re now able to come in and see what’s going on in Israel, what’s going on the floor, on the Hill, it feels like it could be compelling. And the same thing with sports. We saw real big numbers. So overall, we think this buffet, entertainment, nonfiction, as we’ve said all along, the better the engagement, the more people in the family are watching, the better we’ll be. And we still haven’t really been able to crack the kids. We have a huge amount of kids content. When they haven’t been able to crack that, we’re going to attack that as well. So we think that strategy is really differentiates us and we’re going to have to really promote it.
We haven’t been. JB, you’re at ground level here.
