Operator: Our next question comes from the line of Batya Levi with UBS. Your line is open.
Batya Levi: Great. Can you provide a bit more color on the recent deals you’ve signed with the DSPs and some of the benefits you expect to see beyond the price increases we’ve seen at them? And a second question in terms of acquiring new catalogs. Can you talk what you’re seeing in the market right now? We’ve seen some activity among the smaller labels. What do you think about valuations and availability of new IP?
Robert Kyncl: Sure. Thank you. So, we obviously don’t talk about the details of our DSP agreements. But what I can say on the most recent one, with these, we’re really excited to work with them on what was the second prong of our driving the value of music strategy, right? The first prong is price optimization and second one is new royalty models, and that’s where this one is falling in. And we again, really like it when we’re engaging with our partners. And again, I’m stressing that it’s not just one company that you have multiple companies in the industry doing so. That’s really, really important because, again, from my experience on the DSP side, if you just have one engaging with you. Yes, it’s helpful but not that helpful because you need to scale things appropriately across the ecosystem and the industry, so I’m always focused on the fact that it shouldn’t be just us or it shouldn’t be just the other guys, it should be multiple large companies, independent as many of us working together, trying to develop better models and drive the value of music.
So, we’re committed to doing that on multiple fronts. And we want to make sure that the better value for music is reflected. That value is reflected better. And I forgot the second part of the question catalog acquisitions. Yes. I look at catalog as our natural resource in general. It’s incredible. The catalog that Warner Music Group has is priceless. It’s a gift that keeps on giving. And I use the example of my 20-year-old daughter, who two years ago, discovered Fleetwood Mac and became their biggest fan. That says everything, right? And that is what drives a big, big driver of the value of our company and then all of our efforts to keep on creating new catalogs on new releases and finding new stars that we mentioned. Zach Bryan is an amazing example of that.
Obviously, there’s been a lot of catalog sales over the last few years that drove up valuations. I think we’re starting to see all kinds of fluctuations in that space. And we are very active, and we’re watching things in all geographies, and it’s a really big part of our focus to make sure that we’re opportunistic and strategic at the same time about deploying our capital at the right price where we, through our predictions see a strong and growing performance of the underlying entities.
Bryan Castellani: Yes. And I would just add on that capital allocation that Robert mentioned. And I think he had mentioned it before as well. We were always looking to invest in A&R and new artists and licenses. There’s also JVs like 10-K, we can do that through. And then, there is the purchase of catalog that is certainly a big part of our business that we continue to mine and their value continues to grow. And then that’s supplemented by marketing and tech investments to for some fuel to grow those returns. But overall, we look at this through the lens of how do we drive our return on invested capital and keeping that and growing in the high teens.
Batya Levi: That’s great. Just a quick follow-up. I think, Robert, last time, you had mentioned that you did not renew with Spotify yet. We seem to think that you have since then, would you be willing to provide an update?
Robert Kyncl: Yes. So generally, we do not provide updates on timing of our deals. So, I would say speculating on those is probably not the best practice. And there’s really nothing to announce. And when, we have something, we will. But there’s nothing of note to speak of.
Operator: Our next question comes from the line of Benjamin Black with Deutsche Bank.
Benjamin Black: Robert, I just want to go back on your comments around sort of optimized retail pricing. So beyond just broad-based price increases, what would that entail? Are you sort of speaking about the introduction of new tier segments in the market a little bit differently? Sort of how should we interpreting your comments there because you dig into that a little bit? And then my second question is on the advertising side of the business. So what are we seeing in terms of a core music ad supported revenue, if we exclude the impact of some of these new platform deals? And just looking forward, can you sort of talk about the ad market environment and how we should think about ad supported revenue going forward?
Robert Kyncl: Sure. So when you — I think it’s for price optimization, I think it’s really important to sort of broaden the scope of thinking. And I don’t mean — I mean, it’s both for our partners as well as for ourselves, the suppliers. And let me give you an example. Aside from, obviously, everything that I said before, which is catch up to inflation, get ahead of inflation, compare yourself to other industries, understand price elasticity, all of those things. So those are sort of basics. And so I’m not going to go back into that. But there are other things to look at for instance the relationship and the ratio of family plan pricing relative to individual plan pricing. Is it at the right place? So even as price increases are happening, is the ratio of these two correct?
