Ladies and gentlemen, welcome to the Warner Bros. Discovery Second Quarter 2024 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Additionally, please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mr. Andrew Slabin, Executive Vice President, Global Investor Strategy. Sir, you may now begin.

Good morning. Thank you for joining us for Warner Bros. Discovery's Q2 earnings call. Joining me today is David Zaslav, President and Chief Executive Officer; Gunnar Wiedenfels, Chief Financial Officer; and JB Perrette, CEO and President, Global Streaming and Games. Today's presentation will include forward-looking statements that we made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements may include comments regarding the company's future business plans, prospects and financial performance and involve risks and uncertainties that could cause actual results to differ materially from our expectations. For additional information on factors that could affect these expectations, please see the company's filings with the U.S. Securities and Exchange Commission, including, but not limited to the company's most recent annual report on Form 10-K and its reports on Form 10-Q and Form 8-K. In addition, we will discuss non-GAAP financial measures on this call. Reconciliation of these non-GAAP financial measures to the closest GAAP financial measure can be found in our Earnings Release and in our Trending Schedules, which can be found in the Investor Relations section of our website. With that, I'd like to turn the call over to David.

Hello, everyone. Thank you for joining us. This has been a busy, productive quarter, albeit against the backdrop of what continues to be tough market conditions. Two-plus years after launching our company, we are still in the midst of a long-term transition, marked by many notable progress points as well as some tough challenges. Our direct-to-consumer business is doing very, very well, and we see a tremendous amount of upside. At the same time, there are tough conditions in the legacy business. With that as a frame, let me walk you through some of the highlights. On the direct-to-consumer side, as the home of the Olympics in Europe, Max and Discovery+ are the only place to watch virtually every minute of the Olympic Games, and it's really worked for us. It's been a multi-platform experience spanning linear, digital, social, and streaming, with more than 141 million people engaged across our channels and platforms. We purposely timed the launch of Max in Europe to capitalize on the attention around the Olympics. It was a heavy lift, and it paid off. We broadcast the games on Max and Discovery+, on Linear TV, and online through our Eurosport channels, to 47 markets in 20 different languages. A challenging endeavor by any measure, and yet the team at our broadcast center in the heart of Paris has made it look easy. More importantly, the response from consumers since the start of the Games has exceeded our highest expectations, both in terms of subscriber growth and viewership. The success of the Olympics, and our whole offering, reflects an incredible amount of work over the last two years, fighting to make our content available outside the U.S, and now we are finally there, in Latin America and in Europe. We are now a global streaming service,…

Thank you, David. Good afternoon, everyone. I'd like to focus my remarks on a few key topics before I briefly run through the quarter. First, I want to highlight the progress we're making on paying down our debt balance. During the second quarter, we successfully executed a tender for $3.4 billion of debt, utilizing $2.6 billion of cash, capturing $800 million in value from the embedded discount. We funded this debt purchase with free cash flow and an upsized Euro bond offering of EUR1.5 billion. We ended the quarter with $37.8 billion of net debt or around 4 times net leverage. The primary use of our free cash flow will continue to be debt pay down. We will maintain a balanced and flexible posture in weighing the benefits of purchasing debt that may be trading at a deeper discount versus the $3.8 billion that we have maturing through the end of 2025, including $800 million through the end of this year. With a weighted average maturity of nearly 14 years and an average cost of 4.6%, and with our strong free cash flows significantly greater than our maturities in any given year for the foreseeable future, we have an advantageous capital structure to support our transformation and the growth opportunities ahead. I can't stress this point enough. Importantly, we have not wavered in our commitment to achieving our 2.5 times to 3 times gross leverage target. Though admittedly on a longer timeframe than initially anticipated. I am also firmly committed to maintaining our investment grade rating. Second, I'd like to build on David's comments regarding the impairment charge for the network segment. To take a step back first, Warner Bros. Discovery's balance sheet carries significant amounts of goodwill created over a series of past M&A transactions, including the formation of…

Thank you. [Operator Instructions]. We will take our first question from Robert Fishman with MoffettNathanson. Your line is now open.

Hi, good afternoon. Thank you. I'm curious, now with over 100 million DTC subscribers, how do you think about the future of Max in the streaming marketplace and whether you have a preference to exploring formal JVs either in the U.S. or internationally or looking to expand the content offering through third-party licensing deals? And then maybe for Gunnar, if you can help us think about the Goodwill write-down, can you just talk a little bit more about the uncertainty with the outcome of the NBA and how that led to any sensitivities around future affiliate fee negotiations? Thank you.

Thanks, Robert. As you know, we spent the last two years rebuilding Max and we are at our core of a global media company. We have infrastructure in every country. We have local content and sports in most countries, and we have relationships with distributors. So we've really been kind of chomping at the bit to get this product launched globally. In order to be competitive and ultimately to be long-term and have sustainable growth, we think one of the key advantages is that we are and can be a global leader. The fact that we're now launched in Latin America and we launched in the second half of the quarter in Europe, we're off to a terrific start. It'll be a blend. We're seeing real growth, as you've seen, almost 4 million subscribers internationally last quarter. We'll see more this quarter. We're also in the U.S., we're off to a very good start with our Disney bundle and so I think this is all going to be driven by the consumer experience. The offering that we have and the content that we have is working very well in Europe and Latin America, and in some cases, like the example I gave in Brazil, or it's very early, but what we believe will be a very compelling consumer offering with Disney+ and with Hulu, that all of those will add to sustainable and more accelerated [Technical Difficulty] JB?

All right. We lost you – or I list you for a second. Look, echoing David's comments, we have – the exciting thing about the international rollout is we have more and more partners outside of the U.S. who are coming to us saying, ‘hey, we'd love to figure out ways to do more things together, whether that be as David said on the traditional distribution side, whether that be other players in the streaming space. And particularly, which is important, outside the U.S., local content players in a lot of markets who are looking for a partner and look at us as having a very strong platform capability and obviously an incredible international content offering and lineup that we can do something together. So, we've had a lot of strength already, as some of the examples David's shown, but we do have a lot of active conversations with additional partners that will help us scale and help us localize and get more local content into these offerings as we roll out, which we'll certainly tell you more about over the weeks and months to come.

Okay Robert, this is Gunnar. Little more color on the Goodwill impairment. And to get straight to the point here, there is no one factor that is driving this impairment. So the way this works is obviously with the amount of goodwill that we have, there's a systematic process that we go through every quarter and we're monitoring for so-called triggering events. And this is clearly where a sports right discussion like the one with the NBA comes into play as a triggering event, which then compels us to re-evaluate our business case in a strategic planning process with the latest assumptions, the best view of where the industry is and how we play in that field. And that's what then leads to evaluation, which in the second quarter happened to be $9.1 billion below what was on the books for the network segment. So it's really a full re-evaluation, not a response to one individual factor. I do think that the outcome is, from my perspective, consistent with where the market is, where not only the linear television market, but also what, frankly, the investment community reflects in our current share price. And I do want to go back to what I said a minute ago. There is a very significant other side of the coin here, right. David mentioned the distribution deals that we're engaging in on a global basis. We're increasingly talking about both sides of our business. This is really a distribution ecosystem in transition, not a content ecosystem in transition. And we're using our content increasingly and increasingly more successfully in the streaming space and less so on the linear side. The ad sales, the outcomes up front here in the U.S. are another example as I mentioned earlier. So I just want to stress that point as well. There is a transition in the industry. There is a transformation of the company. We are actively driving that to some extent. And the goodwill impairment at the end of the day is the accounting reflection of that state of the industry and our strategy.

Great. Thank you all.

Great. Next question.

Thank you. We'll take our next question from Michael Ng with Goldman Sachs. Your line is now open.

Hey, good afternoon. Thank you for the question. I just have two. First one, on video games. Warner acquired Player First Games last month, but there's certainly been some uneven performance within games over the last couple of years, but clearly lots of potential as well. Could you just talk a little bit about the strategic value of video games for Warner Brothers and whether you view it as a core part of the portfolio? And then I have a quick follow-up.

JB?

Yes, look. I think we look at the evolution of the storytelling and interactive entertainment as a space and say it's one of the unique areas in media that is growing, both growing in terms of time spent, growing in terms of engagement, and growing in terms of revenue. And so we still see this as a huge opportunity for us. We know that our franchise is particularly in a world where the gaming industry, launching brand new franchises is getting harder and harder for a number of reasons, including IDFA deprecation and more challenges with marketing and customer acquisition. And that franchises, like the ones that we have, are in high demand and can help in launching games. Now, you still need a great game. And the reality is we've had the unfortunate, in the short period of 12 months, we went from having the record year that we had in 2023 with Hogwarts Legacy, to unfortunately having the opposite side of that spectrum with Suicide Squad. And it is still, they will still be a hit driven nature of some of that business, but one of the areas that we are particularly leaning into, is the – which is about half of the $200 billion games business, is the free to play space. And the player first deal was really about strengthening our capabilities in that space, because we do think we are subscale and we have more opportunities to grow in that space, which is a big part of the market. And when we do, that it will help also provide some more balance to our games business from the inevitable cyclicality of more console based releases, which have a three to four year time horizon and a little bit more lumpiness, even when you do get it right. And so we continue to be strong believers in the game space. We want to continue to see and figure out how we lean into it and get bigger in that space, and we'll certainly tell you more about it as time goes on.

One of the strategic advantages of owning all of our IP is, as the world has changed, it used to be you launch a movie or you launch a TV series and then you do a game. But one of the reasons that Hogwarts Legacy was so successful and the number one game last year is that you went to Hogwarts Legacy and you entered the game and you were able to become part of that world. And that ultimately, I think, is a big piece of where this industry is going. It will create a movie, whether it's Batman or Superman or Harry Potter, and then maybe there'll be a TV show. But the ability to go into that world and have that experience of spending time with all the characters is something that we still own. We have 11 studios here and we have a lot of IP, and there's also a lot of interest among others in coming to take advantage of some of that IP for gaming, which we're looking at. Because as JB said, we need to get bigger, and the IP that we own and the value that it has in the gaming space, is something we're looking to take advantage of.

Great. Thanks David. Thanks JB. And then second, I was just wondering if you could talk about the strategy around carriage negotiations, just given the potential changes related to NBA programming. Are there any changes in terms of the number of carriage deals that come up in the next year or so, just given the wide expectation of the NBA negotiation that just wrapped up? Thank you.

Thanks Michael. I'm not going to speak to any specific negotiation or specific piece of content or IP, but this is what we do for a living. We're in 200 countries. Aside from the excitement and drive that we have around Max and our studio business of being the biggest maker of TV content and our library business, is that we have free-to-air and cable channels all over the world and those channels are B2B businesses. They require carriage agreements. And we've been in that business for 40 years. We've been very effective in that business. And it's our job, whether it's a food channel or an entertainment channel or a sports channel, to make sure that we have a very robust offering of content that nourishes and excites an audience. So that, one, they want to spend a lot of time with us, so that we can monetize it with advertising. But two, that distributors get significant value by carrying that, and therefore pay us significant value. And we've been able to get meaningful increases for our content, and we've worked very hard here in the U.S. and around the world, whether it be sports channels or other channels, to make sure that our offering is robust and meaningful. And as you look at our different sports services around the world, you'll see that we may be the leader or we are one of the leaders of sports globally.

Excellent! Thank you, David.

Thank you. And we'll take our next question from Benjamin Swinburne with Morgan Stanley. Your line is open.

Thanks. Good afternoon. David, there's been a lot released in the press over the last few weeks or months about kind of unlocking value at the company through everything from kind of smaller asset sales to splitting the company up. You and Gunnar talked about the strength at D2C. That's a business that could be pretty interesting as a standalone company in the public markets. I'm just wondering if you are considering more aggressive action to try to unlock some value in your stock price, just given all the press speculation out there. And then I know it's a tough question, but certainly investors are wondering how to think about the potential impact of losing the NBA on your basic networks EBITDA. So anything you or Gunnar can share with us as we think about that potential outcome into 2026 would be much appreciated. Thanks so much.

Yeah, I mean, look Ben, on the last point, I mean, we have said in the past that the NBA is a profitable right, and we've been very clear about that. Again, as David said earlier, this is not the time to go into any level of detail. But obviously, you should assume that whatever we just refresh in our analysis appropriately reflects the scenarios that we're seeing. So that's all I want to say about that. And then on the strategic options, and I'll hand it back to David in a second. But just to make one thing clear. First of all, don't expect a specific answer on any individual speculation or rumors out there. But second, look, we're a public company. This is a public company management team, and we're very well aware of our responsibility to have a view on whatever strategic options are out there and the same applies to the board. We are very clearly focused on evaluating everything beyond just running the operational business. So we've said before, you shouldn't be surprised to see us engaging in whatever M&A processes are going on out there. You shouldn't be surprised to see us engaging in partnership discussions. David has been talking about this for quite some time, and where it makes sense, you have seen us engage in those things. Regarding our own portfolio, of course, we are constantly updating our views on the value of the assets in our portfolio, and whether or not we believe that they are properly reflected in the valuation of the company. This is all…

The strategic value of those I think.

Yeah, yeah. So this is all ongoing professional management, I would say. And to your question specifically, there have been rumors about potentially splitting up the company. Look, we have been operating under the One Warner Brothers Discovery strategy for the past two and a half years since creating Warner Brothers Discovery. And every day I'm seeing evidence everywhere in the business of the benefits of those strategies. David mentioned in a sentence earlier that the DC 10 year plan, just seeing how that team is now leveraging all of our assets, all of our IP, our various business units, all the cash registers that we can coordinate, I have no doubt that we're going to get great results. And it is important to be able to use all of that across distribution platforms and across business units. So the focus is on running the business. The focus is on making sure that we get the studio to where it should be. It's an incredibly valuable asset from my perspective. And unfortunately, that business, as JB alluded to for the game space, the same is true for film and TV production. It takes a little longer to see the results of the very significant changes that the team has been making. And then third, as you've heard us say multiple times on this call already, we're really starting to see the fruits of our labor in the D2C space. And the studio and the D2C segment have, from my perspective, a tremendous value opportunity. And once we start seeing more evidence for that and seeing more materialization of that value, I believe that corporate structure is actually a secondary consideration. I don’t know, David any…?

I would just add that the market conditions within the traditional business are tough and they are challenging. But from our perspective, two years ago, we saw that the business was being generationally disrupted. And so we did an awful lot of work to get our balance sheet in good shape. We have a terrific capital structure. Our debt is – we view our debt as an asset. We're generating meaningful free cash flow. We're investing substantially in content. We're a storytelling company. The strength of this company is that we're a global storytelling company with content that works well all around the world, local and entertainment and sports, and so we feel very good about where we are. And we have to, as Gunnar said, look at all and consider all options. But the number one priority is to run this company as effectively as possible. And you will see as our studio begins to grow and if our global direct-to-consumer business scales the way we believe it's going to, then that'll be very apparent to investors, and we expect that that'll create shareholder value.

Thanks guys, I appreciate the answer.

Thank you. We'll take our next question from Vijay Jayant with Evercore ISI. Your line is open.

Good afternoon. This is Kutgun Maral on for Vijay. Thanks for taking the question. Just one on the EBITDA outlook. I know that you are not providing guidance, but it's tough to have a lot of visibility given linear challenges, DTC investments, and the hate-driven nature of the studio. But I wanted to see if you could help level set expectations a bit for the back half. Gunnar, the outlook you provided on DTC was certainly very encouraging. Can you help us and maybe walk through some of the other moving pieces? Thank you.

Sure. So again, as you said, I'm not in a position to provide detailed guidance. But if we go through the segments a little bit here, again, we're expecting a very significant step forward on the D2C side. On the studio side, as I mentioned, we have two big films in the pipeline. Also, generally speaking, if you compare the release schedules this year versus last year, I would say a little more beneficial with only one film in December, whereas last year we took a lot of marketing expenses and didn't get a lot of the benefit of some of the late releases in December. So that's definitely a factor. But I also, as you said, want to point out that each one of those are hit-driven and create some volatility as well. Elsewhere in the studio, certainly in the TV production business, things should get a lot better. We're now coming into the part of the year that was deeply impacted by the strike last year, so that should be a helper. On the network side…

On the TV side, which is encouraging, there is quantifiably a lot less investment in the marketplace in purchasing TV content. And we're not really seeing that. I think it represents the fact that we have very high-quality content. Our content is working very well. We have strong IP that's known. And so Channing and the team are seeing – the numbers are looking...

83 ongoing productions on air, pretty much unaffected by any of those trends.

Yep.

On the network side, again, as I said, we're not seeing a lot of change in the linear ad market environment in the U.S. It's differentiated. I called out earlier that Europe is actually looking almost surprisingly strong in some of the markets. That's definitely a positive outlier. But to your point, visibility is not high in that market. And I don't want to make any predictions beyond the point that in the U.S., Q3 is typically also a little bit of a weaker quarter for us, given the timing of our sports schedule. And remember, we have the Olympics in Europe, which is a smaller ad market relative to those rights, whereas in the U.S., if anything, we're taking a little bit of a hit from that event being ongoing. And so those are the building blocks that I'm happy to provide, and I hope that's helpful Vijay.

On the motion picture side, it is a long cycle business. But we have a really good team with Mike and Pam, and it is encouraging that we just have back-to-back movies this summer that are generating real value. We're rooting for that. As we launch Beetlejuice, which there's some early, very positive data that we're getting, the idea that people seem to be going back to the theater for good movies that provide some compelling or unique storytelling. We also have Joker coming up, and we've been really pushing to get Warner Brothers back aggressively into the motion picture business, whether it be DC and Warner. So we're encouraged by that, and we're encouraged by our slate ahead. We're still working our way through the slate that we inherited, and we're much more optimistic about what we have ahead.

That's very helpful. Thank you both.

Thank you. And we'll take our next question from Jessica Reif Ehrlich with Bank of America Securities. Your line is open.

Thanks. I think we all appreciate the massive efforts that you guys are putting in to restore the studios, plural, Warner Brothers and DC, as well as your TV operations, and also of course Max and HBO. But I guess at the end of the day, with the steady decline in the pay-TV universe and obviously no let-up in sight, is it or will it be enough to offset? What you're doing, is it enough to – on a consolidated basis, is it enough to offset this? So David said earlier, your position for growth. Gunnar, I know you discussed 1WBD. When do you foresee consolidated earnings growing on a sustainable basis? So that's one thing. And the second thing on the NBA loss, if you don't win the matching rights lawsuit, are the more recent sports acquisitions and maybe some upcoming rights enough to close the gap?

I'm not – we can't really, you know we're in a litigation. And at this point, we've handed it off to our lawyers. We have confidence in our position. The judge will decide whether our matching right, which is 11 pages long, represents a mat – and whether our, what we offered matched or not and we'll see. We're getting back to work and the lawyers will handle this and the judge will decide and off we'll go.

Jessica, on your first question, look, there is no doubt to us as a management team that the answer to that question is yes. We believe there's tremendous upside opportunity, both in the D2C business and in the studio business. And it is enough to offset what's happening on the linear side. Again, as I said, we just went through another strategic discussion, strategic planning process with our board, and we have a strong plan that supports this. I'm not in a position to perfectly predict when this is going to happen. Am I disappointed about the impairment? Yes. Am I disappointed that the trends in the linear business haven't been a little better? You know, there's been talk about recovery a year, year and a half ago. It hasn't really happened. It is what it is. We're managing this as best we can. The key point here is, that on the D2C side, we're finally after two years of heavy investment, hard work, at the point where we're ready to accelerate. And as you heard from us, we believe we are going to see an acceleration on the top line and we have significant opportunity across every driver of the business and we've been very clear. We've talked for a while about the $1 billion mark and EBITDA for 2025. That is a starting point, not an ending point. So we have a lot of confidence in that. And on the studio side as well, I can share a little bit more. The level of effort and rigor that is going into virtually every step along the value chain in the studio, from Greenlight through the physical production, the windowing approach, the coordination between the various teams, it's a night and day difference. It takes a little while to become effective. 2025 is really going to be the year when the first films, Greenlit by Mike and Pam are going to dominate the slate. JB has talked about the long development cycles on the game side, etc. So there's no question about it. The studio can operate at a very, very significantly higher level of performance.

And JB, I think it would be helpful. This is something that you and I are talking about every day, but we have an attack plan meeting every week, all hands on. Talk about – lay out the growth drivers for direct to consumer that gives us now where, what we're seeing and why we have some real substantial confidence in the acceleration of growth and the acceleration of profit in our direct-to-consumer global business.

Yeah, I mean look, we talked about our growth leverage. Obviously international growth and roll outs in more markets is by far the biggest, so that’s number one. Number two is, we have obviously a content slate, which as we’ve talked about on prior calls. The first nine to 12 months post the U.S. launch between just timing of somewhat, both series being out of cycle. The strikes obviously didn’t help. We unfortunately had one of our weakest content slates. We now go into a period, where thanks to all the great work from Casey and his team, the improved Pay 1 slate that David and Gunnar have just talked about, and more Max originals, as well as the great content from the U.S. net side, that we have probably one of the strongest content lineups with all of our tent poles coming back, starting with House of the Dragon obviously this quarter, but over the next 18 months or so. And so we feel great about the content slate, which is clearly a massive driver of our success. Our ARPU story is a third one where you've seen us obviously raise price in the U.S. We're raising price outside the U.S. We're also changing rev shares outside the U.S., which historically in some of the wholesale agreements on the HBO side. We feel we're underpriced, so we're driving that. We're rolling out an Ad Light product in many more markets, previously Ad Light on HBO. The old HBO Max was only in the U.S. We've now rolled it out in 39 markets across LATAM, a handful of markets across Europe. We're looking to roll it out in more markets. So advertising will become a bigger and bigger play for us. The product experience is one that we've talked a…

And look, this global disruption is being felt by everyone. It's a challenge. It's a transition. And as Gunnar said, this is a distribution disruption. People are consuming more content than ever. Our content is stronger than it's ever been. But the fact that it's being felt by so many, we've seen a lot of the local markets, some great content players that don't have platforms. That are looking at us and saying, you are starting to make money, you are starting to scale, maybe I can be a part of you. And if I'm a part of you, then maybe I have a chance of being more successful and turning around the economics of the business that I'm in that's declining. Some of these discussions wouldn't – the challenge and the difficulty, even though we're feeling that pain and we're fighting through it, its providing opportunity. Many of these bundles, they wouldn't be happening if people felt that they were doing terrific on their own. But it's the challenge of the marketplace that's forcing people to say, what makes sense? How could this work better? And what really works about this is the consumer experience right now is not good. And so we're all going to be driven toward, it always works this way. What's the best consumer experience and what is the best content? And so we're being driven through bundling or through – I think you're going to see a number of players become part of other players, and players that are playing in markets in the U.S. or in markets outside the U.S. that were hoping that they could make it alone. At least we believe that you need to be global. And when you look around and you say, who is global and who can I be a part of? Because building a platform for one country, no matter how big, is a huge challenge when you are competing against taking Harry Potter around the world to a billion people above the globe. And so we've positioned ourselves, I think, to be profitable this year, to be now finally global and accelerating, and be in a position where each of these countries around the world and players that have been playing at this and losing money or being challenged, can have – there's only a few people they can reach out to and say, can I come along?

We have a very strong balance sheet. We're fully committed to maintaining that investment grade rating. We're going to generate tremendous free cash flow through the transformation period. And I have no doubt that we're going to come out as a strong and healthy and sustainably growing company on the other side of this.

Next question.

Thank you. And our final question for today will come from John Hodulik with UBS. Your line is open.

Yes, thank you. I just wanted to follow-up on JB’s comments. David, I think you mentioned 65 markets now for Max. Just how big could it be? I mean, I can imagine it will be everywhere on the globe, but how many markets do you expect that to get to here? And then, as it relates to the Olympics here in the third quarter, just any sort of more color on how that, you expect that to drive the business, in both in terms of advertising and D2C growth. Thanks.

Let me just start by saying, we're not in three of them, because the markets where our content has huge appeal, and we see it in the viewership numbers in the UK and in Germany and in Italy. So, at the end of ‘25, which is coming up soon, we'll be launching our own product in the UK. We're also a leader in our own sports product with TNT Sport, which gives us an advantage. And so to come out in those three markets, I think you are going to see real scale. JB, you could talk to – we talked a little bit about Japan and some of our other markets. But it took more than 50% of markets we're not in yet. JB?

Yes, exactly. The best way to think about the scaling, and we talked about the 18 to 24 month timeframe, but the reality is by first half of ‘26, the vast majority of our rollout will be underway and will have taken place. And David mentioned, we talk about addressable market and the fact that our two bigger peers are in, if you measure theirs, it's 100% of those addressable markets. We're in just over 50% of them today and we're at over 100 million subs. So, you have to do your own thinking of what our penetration and opportunity could be, but we're about half of the addressable market today at 100 million, 103 million subs. We think the opportunity to David's point, and some of those markets are big markets where we know our content and our audiences. We know the size of them is significant. And so, we think in the next 18 to 24 months, the opportunity is certainly easily in the tens and tens of millions of subscribers on top of where we are today.

And look, that's 50% that we're going to be attacking, we just launched in Europe and Latin America. We launched last quarter and in Europe, we launched in the middle of last quarter. So, we're a couple of weeks in. So we haven't had the yield, which you're going to start to see from those markets over the next several months and you'll see it this coming quarter.

Great. And the Olympics?

The Olympics, this is the last set of Olympic Games under our old contract that we struck in 2015 and that was a wholesale contract. It had various business benefits for us. There's a large sub-licensing components in both markets where we don't meet the broadcast and free-to-air requirements. There was a big, obviously, digital push to, at the time, roll out to drive the Eurosport player and it's very, very helpful today in the Max rollout. And then over the past eight years, we have benefited very significantly from having these rights in all of our affiliate discussions and renewals. The one thing to keep in mind, we've talked about this in past Olympics years, is that all of the costs are essentially recognized in the quarter where the games take place. That's why in this individual quarter, you are going to see a loss from the Olympics and a little more pronounced free cash flow impact on the negative side, as I called out, because a lot of the benefits are generated over the entire eight-year period. And again, the next games are going to be taking place under our new arrangement, which is much more focused on the pay-TV, and most importantly, the streaming rights and opportunity. And we believe, based on the numbers that we're seeing, that it's going to continue to be a phenomenal driver for engagement and subscriber acquisition.

Great. Thanks guys.

Thank you. And that does conclude today's question-and-answer session, and this does conclude today's program. We thank you for your participation and ask that you please disconnect at any time and have a wonderful day!