Barclays WBD U.S. Media - Q3 Preview - Still Fishing For A Bottom

Equity Research
9 October 2023
U.S. Media
Q3 Preview: Still fishing for a bottom

CORE
While expectations for the quarter seem to be in the right place,
the linear improvement in trends expected beyond the quarter
may be tough to achieve. U.S. Media
NEUTRAL
Unchanged
Most of the investment debate about the legacy media industry is about defining a downside U.S. Media
floor for estimates given that many of the forces pressuring revenues are structural. Upside from Kannan Venkateshwar
+1 212 528 7054
growth drivers like streaming are now seen less as independent value drivers and more as
kannan.venkateshwar@barclays.com
offsets to deal with declines in legacy revenues. There continues to be significant lack of
BCI, US
visibility beyond the very near term, which has effectively resulted in sector flows being
dominated by tactical considerations. The one name where focus could gradually shift towards Siyuan (Cindy) Huang
+1 212 526 7952
a longer term outlook is Disney. The company should disclose financials in the new reporting
siyuan.huang@barclays.com
structure which breaks out ESPN, ahead of earnings. Investor focus should also turn more
BCI, US
towards steady state economics of streaming including a potential Hulu/Disney+ combination
post the Comcast deal and sports streaming. In addition, the company's growth plan in parks Lauren Bonham
+1 212 526 3856
should provide top-line visibility longer term, even though tough comps and macro remain
lauren.bonham@barclays.com
overhangs for this business. In this context, we look at key issues to consider heading into media
BCI, US
earnings:
• Advertising across media companies will have easier comps but this is unlikely to help given
continued weakness in pricing as well as ratings across most media companies. Our
estimates for the quarter in most instances are not changing much for ad revenues (except
Fox cable nets) but across the industry, advertising revenue declines will be double digits in
most instances, especially in the sports lite cable network businesses. Investor focus is likely
to be more on second derivative trending as consensus estimates assume a more or less
linear recovery in ad revenues beyond Q3 (Figure 1) despite limited visibility. Media
companies have claimed that ad revenues are weak at present partly due to cautious spend
by advertisers but this is not evident in digital advertising and seems isolated to television. In
fact, ad revenues at internet companies (Google, Meta, Snapchat, Pinterest) appear to have
bottomed early in the year and now started to improve a few points every quarter.
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could affect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
Please see analyst certifications and important disclosures beginning on page 21.
Completed: 09-Oct-23, 02:46 GMT Released: 09-Oct-23, 04:10 GMT Restricted - External
Barclays | U.S. Media
FIGURE 1. Advertising estimates have come down since July but consensus expectations assume a
linear recovery
YoY% growth ex
Olympics & World Cup Consensus TV ad revenue for DIS, WBD, NBCU, PARA, FOXA
2%
0%
CY23Q1 CY23Q2 CY23Q3E CY23Q4E CY24Q1E CY24Q2E CY24Q3E CY24Q4E
-2%
-4%
-6%
-8%
-10% Consensus Estimate as of October 5

Consensus Estimate as of July 10
-12% Actual
-14%
Source: Company Reports, Bloomberg, Barclays Research
• The growth in digital is admittedly much more driven by impression and mix (travel, pharma,
retail and CPG verticals holding up, auto and M&E are roughly flat while finance and tech
spending is weak1 ) rather than pricing, but in the case of television neither pricing nor
volumes are holding up yet. Upfront pricing appears to be down LSD-MSD (but sports pricing
is up) and volume flat to down LSD2 . Ratings remain under significant pressure (Figure 2-5),
which may be partly impacted by the writers strike but is more likely structural, at least in
part given cord cutting and streaming engagement growth. Ad agencies noted that they
haven’t seen a recession-type pullback in ad spending but marketers are trying to preserve
more flexibility. CPG and F&B companies (P&G, Unilever, Nestle, Pepsi) have recently spoken
about continuous investment in advertising as inflation pressure abates and are expected to
raise ad spending by MSD for the full year 2023. However, they seem to be moving more ad
dollar to retail media and digital. Directionally, ad buying consortiums and their
measurement bodies like MAGNA have revised down their linear TV estimate while raising ad
forecast for the overall market3 .
The risk for quarters beyond Q3’23 comes from issues such as the Auto strikes and continued
macro uncertainty. In addition, ratings pressure coinciding with higher exposure to scatter
may not help pricing or volume. Therefore, we believe there could be further downside to
numbers beyond Q3. In addition, there continues to be company specific impacts. For
instance, pressure in direct response advertising at Fox will remain a significant headwind for
cable network advertising.
1
Source: Magna
2
[2] Source: Media Dynamics
3
national TV ad (ex. One-time events) to be down 7% and 6.6% in 2023 and 2024, compared to 5.2% and 5.6% growth
expectation in 2023 and 2024 for total ad across all mediums
9 October 2023 2
FIGURE 2. Broadcast TV ratings have seen MSD decline for the past FIGURE 3. Prime time ratings at broadcast networks plummeted 12%
three quarters. 3Q23 ratings seem to be trending down sequentially potentially on account of fewer shows amidst writers and actors
strikes
Ratings YoY% Ratings YoY%

ABC CBS FOX NBC Aggregate ABC CBS FOX NBC Aggregate
Change (Total Change (Prime
Day) Time)
20% 30%
15%
20%
10%
5% 10%
0.9%
1.9%
0%
0%
-5%
-3.6% -2.9% -2.4%
-5.2% -4.5% -10% -4.6%
-10% -6.0%
-8.8% -10.3% -11.0% -11.8%
-15% -12.3%
-20%
-20%
-30%
-25%
-30% -40%
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23
Source: Nielsen, Barclays Research Source: Nielsen, Barclays Research
FIGURE 4. Ratings decline at cable networks moderated in 3Q but it FIGURE 5. Ratings decline at cable networks moderated in 3Q but it
were still trending at mid-teens level were still trending at mid-teens level
Comcast / NBCU Disney Ratings YoY% Comcast / NBCU Disney
Ratings YoY%
Fox Corp Warner Bros. Discovery Change (Total Fox Corp Warner Bros. Discovery
Change (Total
Paramount Global Aggregate Paramount Global Aggregate
Day) Day)
25% 10%
20% 5%
15%
0%
10%
5% -5%
0% -10%
-5% -10.6% -10.9%
-15% -12.5% -12.6%
-13.1%
-10% -15.4% -14.6%
-20%
-15% -11.2% -10.0%
-12.5% -13.8%
-14.2% -15.2% -25%
-20% -15.9%
-25% -30%
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23
Source: Nielsen, Barclays Research Source: Nielsen, Barclays Research
• Another area of focus will be the impact of the new agreement with writers and actors on
costs. Despite the agreement with the writers and potentially an agreement soon with actors,
studios may not be able to resume productions until late this year/early next year, accounting
for the timeline for pre-production prep and holidays. Studios will have to absorb the impact
of these costs and the catch up spending on production backlog due to the strike at the same
time in 2024, which could result in both margins and cash flow coming under pressure vs
2023, unless revenue growth recovers. It is tough to see a strong ad revenue recovery given
weak ratings and therefore, revenue growth may have to rely more on licensing as
productions resume next year. We also believe this backdrop could result in volumes
structurally coming down.
• Streaming revenue growth is likely to remain weak across most major services due to
subscriber growth remaining weak and yield on price increases being low. Disney will benefit
from the Charter distribution deal for Disney+ but this may not kick in before next year. Also,
it is not clear how this will be accounted for as in theory, these subs come with a fixed
payment likened to Charter’s base of subscribers rather than actual sign ups or usage. We
expect Disney+ to get 6mm incremental subscribers, assuming 4mm out of the 10mm eligible
9 October 2023 3
Charter subs already subscribed to the Disney+ service, based on Disney+ domestic
penetration rate. We assume Charter will pay Disney a wholesale rate of ~$4 ARPU but
advertising revenue from these subs will take longer to ramp. The debate around streaming
is now less about its value as an independent business and more about the extent to which it
can offset legacy revenue declines. In this respect, streaming profitability is coming into
sharper focus across many companies such as Disney, Warner Bros and Comcast/NBCU,
which is encouraging but is also paired with slowing subscriber and revenue growth. In order
for investor sentiment to change materially, legacy revenue losses have to slow in pace along
with streaming businesses getting to break even.
• Affiliate pressures are unlikely to abate given continued acceleration in cord cutting and a
number of carriage disputes in the quarter (Directv/Nexstar, Dish/Hearst, Disney/Charter).
These issues typically manifest with a quarter’s lag at media companies and therefore, will be
a drag in terms of Q4 outlook.
FIGURE 6. Cord cutting continues to accelerate. Video sub loss is now at almost 7% YoY decline rate.
Video Subs
YoY% Decline
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23
Source: Company Reports, Barclays Research; Note: includes skinny bundles. Excludes DBS subs.
Overall, this backdrop explains why an equal weighted basket of legacy media companies4 is
down 8% YTD, underperforming the SPX by 20%, wiping out all the gains earlier in the year on
premature anticipation of a turnaround in the second half. Trends in the quarter are unlikely to
change the negative investor sentiment in media for the most part given that advertising and
affiliate trends are likely to remain challenged and licensing revenues will be impacted by the
lack of productions due to the strike. We do believe approaches towards streaming are
becoming more rational and are heading in the right direction but this has coincided with linear
declines accelerating, a pattern that is likely to continue for at least a few more quarters, if not
more. Also, we doubt the steady state profitability of streaming will be anywhere close to legacy
media margins (please see Signal in the Noise: Vol. 159: What could steady-state margins for
streaming be? 6 Oct 2023), which means in order for investor sentiment to change materially,
legacy revenue losses have to slow in pace along with streaming businesses getting to break
even. Given that advertising trends are partly structural and the fact that the macro outlook
doesn’t appear to have a lot of visibility, valuation will likely continue to reflect downside risk to
estimates.
4
Equal weighted basket of DIS, WBD, PARA, IPG, OMC, FOXA
9 October 2023 4
The catalyst that could turn around sentiment is a more viable industry structure resulting from
M&A as we have looked at in detail in the past (please see Signal in the Noise: Vol. 155: The great
realignment of media, 8 Sep 2023, and Signal in the Noise: Vol. 157: Looking beyond the present
turmoil in media, 22 Sep 2023). However, not every permutation makes equal sense and
therefore outcomes are likely to be asymmetric across the space. In addition, there is unlikely to
be a rush among likely buyers in the present rate environment and timing constraints at some
sellers (WBD for instance due to its RMT tax limitation). While we do not expect M&A to be an
immediate driver of value therefore, we believe the name that may benefit the most from this
cycle is WBD. From a valuation perspective, WBD is now starting to get to a level where
unlevered free cash flow yield at 10.5% (2024 FCF estimate) is relatively cheap vs other names in
the sector (Figure 7). However, realizing this yield will depend on advertising revenue trends
improving next year which is far from given. In addition, the outcome of the new NBA deal may
also involve some revenue and cost trade offs (potentially smaller portfolio to keep costs
manageable).
Disney is another name where we have received increasing interest from investors trying to fish
for a bottom in the name but conviction levels remain low. The company's upcoming deal with
Comcast on Hulu, launch of mainstream ESPN streaming and capex ramp in parks will result in
greater balance sheet focus among investors. While liquidity is not a concern in Disney given
cash on hand of $11bn and another $11bn of commercial paper facility, leverage may creep up
as a result of these needs. The offset may come from asset sales but this process is unlikely to
be easy and may result in its own valuation surprises from some assets. This is why, while we do
believe Disney could come out of the present cycle in much better shape than most media
companies (please see Walt Disney Co.: Thinking through the Bull vs Bear debate in Disney, 21
June 2023), we believe tactical considerations are likely to dominate near-term stock
performance.
FIGURE 7. Unlevered FCF yield for covered media companies
CY24 UFCF Yield

11.4%
10.5%
3.3% 3.5%
0.8%
Paramount Disney Netflix Warner Bros. Fox

Discovery
Source: Bloomberg, Company Reports, Barclays Research
9 October 2023 5
Summary of our Ratings, Price Targets and Earning Estimates
Rating Price Price Target EPS FY1 (E) EPS FY2 (E)
6-
Company Old New Old New %Chg Old New %Chg Old New %Chg
Oct-23
U.S. Media Neu Neu
FOX Corp. (FOXA) EW EW 30.38 35.00 33.00 -6 3.11 3.00 -4 3.65 3.53 -3
Paramount Global (PARA) UW UW 11.82 13.00 11.00 -15 0.23 0.17 -26 0.91 0.73 -20
Walt Disney Co. (DIS) EW EW 82.94 88.00 88.00 - 3.62 3.57 -1 4.82 4.77 -1
Warner Bros. Discovery, Inc. (WBD) EW EW 10.28 15.00 13.00 -13 0.06 -0.02 -133 0.28 0.27 -4
Warner Music Group (WMG) EW EW 32.90 33.00 33.00 - 0.80 0.79 -1 1.16 1.15 -1
Source: Barclays Research. Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency. FY1(E): Current
fiscal year estimates by Barclays Research. FY2(E): Next fiscal year estimates by Barclays Research. Stock Rating: OW: Overweight; EW: Equal Weight; UW: Underweight; RS:
Rating Suspended Industry View: Pos: Positive; Neu: Neutral; Neg: Negative Potential +/-: Potential Upside/Downside 1 Percentage change in EPS relative to previous year.
9 October 2023 6
Valuation Methodology and Risks
U.S. Media
FOX Corp. (FOXA / FOXA)
Valuation Methodology: Our price target of $33 uses a sum-of-the-parts methodology based on 4.7x core average CY 2023/24E EBITDA, 1.6x FY 2025E
revenues for Tubi, and an asset value of $4.8bn for the sum of sports betting options, the tax asset, real estate asset, and Fox's equity stake in Flutter.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Risks to investment include decline in viewership,
subscriber declines, and competition from OTT bundles. Also, Covid is likely to negatively impact TV ad dollars and duration/magnitude of the impact
is difficult to quantify.
Paramount Global (PARA / PARA)
Valuation Methodology: We value Paramount Global at $11 based on 2024 EV/EBITDA multiple of 7.5x using 2024E adj OIBDA of $2.7bn.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Upside risks include significant asset
monetization events and better than expected improvement in advertising trends.
Walt Disney Co (DIS / DIS)
Valuation Methodology: Our price target of $88 is based on a sum-of-the-parts methodology based on 4.8x FY2024 Linear Networks EBITDA multiple,
1.8x FY2025 DTC revenues multiple, 10.5x FY2024 Parks, Experiences & Consumer Products EBITDA multiple, 0.8x FY2024 Content Sales, Licensing &
Other Revenue multiple, and 5.5x FY2024 Corporate EBITDA multiple.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Risks to investment in DIS include: (1) execution
risk on multiple initiatives; (2) potential fatigue with the supply of tentpoles over the coming years; (3) potential changes in the pricing model for
sports; (4) subscriber loss trends continue impacting accounting model; and (5) increased competition for sports rights and consequently step
function changes in cost; 6) Covid variants' likely lingering adverse impact on Disney's Parks, Studio, and Media Networks segments. Somewhat
offsetting this is strong sub growth in Disney+.
Warner Bros. Discovery, Inc. (WBD / WBD)
Valuation Methodology: Our $13 price target is based on a 6.6x multiple on 2024E EBITDA estimate of ~$11.3bn.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Downside risks include 1) not able to execute
streaming strategies well 2) high integration costs 3) macro concerns; Upside risks include better than expected streaming revenue optimization and
advertising and affiliate revenue growth
Warner Music Group (WMG / WMG)
Valuation Methodology: We value WMG at $33 based on ~15x CY24 adjusted OIBDA (15x Recorded Music EBITDA, 8x Publishing NPS).
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Downside risks include ad-supported streaming
slowdown, the growth of podcast content which could change distribution agreement structures, loss of market share to other major labels, growth of
independents, and artist revenue shares continuing to increase. Upside risks include higher than expected price increases by DSPs at a faster than
expected pace, favorable deal terms with new and legacy distribution sources, market share gains and better cost mix on account of more favorable
artist mix.
Source: Barclays Research
Model Updates
We reduce our WBD PT to $13 from $15 based on 6.6x ’24 EBITDA of $11.3bn (vs 7x ’24 EBITDA of
$11.3bn). We reduce our PARA PT to $11 from $13 based on 7.5x 2024 adj OIBDA of $2.7bn (vs.
7.5x 2024 adj OIBDA of $2.9bn prior). We reduce FOXA PT to $33 from $35 based on 4.7x core
average CY 2023/24E EBITDA (vs 5x prior), 1.6x FY 2025E revenues for Tubi, and an asset value of
$4.8bn for the sum of sports betting options, the tax asset, real estate asset, and Fox's equity
stake in Flutter (unchanged).
9 October 2023 7
FIGURE 8. DIS - Estimate Revision

Disney Sep-23 FY 23 FY 24
$ millions Current Old Delta Current Old Delta Current Old Delta
Revenues:
Linear Networks 6,048 6,038 0% 26,656 26,646 0% 25,847 25,902 0%
Domestic Affiliate 3,710 3,710 0% 15,456 15,456 0% 14,916 14,916 0%
Domestic Advertising 1,325 1,325 0% 6,528 6,528 0% 6,362 6,399 -1%
International Affiliate 598 598 0% 2,535 2,535 0% 2,358 2,358 0%
International Advertising 271 271 0% 1,458 1,458 0% 1,468 1,561 -6%
Other 144 134 7% 679 669 1% 744 669 11%
Content Sale, Licensing & Other 1,684 1,823 -8% 8,423 8,562 -2% 8,406 8,805 -5%
Direct-to-Consumer 5,588 5,590 0% 21,934 21,936 0% 24,730 23,859 4%
Eliminations of Intrasegment Revenue (292) (282) 3% (1,166) (1,156) 1% (1,273) (1,190) 7%
DMED 13,028 13,169 -1% 55,847 55,988 0% 57,710 57,377 1%
PEP 8,200 8,249 -1% 33,038 33,084 0% 34,634 34,470 0%
Total revenues 21,228 21,418 -1% 88,885 89,072 0% 92,344 91,847 1%
Operating Income:
Linear Networks 1,606 1,612 0% 6,578 6,584 0% 5,978 6,049 -1%
Domestic 1,374 1,379 0% 5,650 5,655 0% 5,067 5,126 -1%
International 107 108 0% 236 237 0% 205 218 -6%
Equity in Investees 125 125 0% 692 692 0% 706 706 0%
Content Sale, Licensing & Other (276) (272) -1% (781) (777) 0% (198) 61 -424%
Direct-to-Consumer (477) (474) -1% (2,701) (2,698) 0% (558) (561) 1%
DMED 854 866 -1% 3,097 3,109 0% 5,221 5,549 -6%
PEP 1,843 1,848 0% 9,487 9,492 0% 10,493 10,532 0%
Segment Operating Income 2,697 2,714 -1% 12,584 12,601 0% 15,714 16,081 -2%
Corporate and unallocated shared expenses (297) (297) 0% (1,151) (1,151) 0% (1,126) (1,126) 0%
Total Operating Income (ex-Step up D&A) 2,399 2,416 -1% 11,432 11,449 0% 14,588 14,956 -2%
Adjusted EPS $0.62 $0.67 -9% $3.57 $3.62 -2% $4.77 $4.82 -1%
GAAP EPS $0.47 $0.51 -7% $1.64 $1.67 -2% $4.03 $4.16 -3%
FCF 2,496 2,500 0% 3,965 3,969 0% 5,177 5,434 -5%
Disney+ Subs 146 149 -2% 146 149 -2% 155 153 2%
Total Net Adds (0.3) 2.7 -112% (18.4) (15.4) 20% 9.7 3.7 162%
Disney+ ex-Hotstar Net Adds 2.7 2.7 0% 5.5 5.5 0% 9.7 3.7 162%
Disney+ ex-Hotstar ARPU $6.35 $6.46 -2% $6.29 $6.32 0% $6.90 $6.71 3%
Disney+ ARPU $4.81 $4.85 -1% $4.48 $4.49 0% $5.35 $5.08 5%
Total DTC Subs 220.1 222.9 -1% 220.1 222.9 -1% 231.8 228.7 1%
Source: Company Report, Barclays Research
9 October 2023 8
FIGURE 9. WBD- Estimate Revision

New Old New Old New Old
($mm, except for per share data) 3Q23 3Q23 % Change 2023 2023 % Change 2024 2024 % Change
Revenues
Networks 4,942 4,981 -1% 21,542 21,602 0% 21,400 21,576 -1%
Advertising 1,750 1,759 -1% 8,547 8,556 0% 8,577 8,700 -1%
Affiliate 2,835 2,835 0% 11,501 11,501 0% 10,963 10,963 0%
Content 271 291 -7% 1,101 1,142 -4% 1,460 1,502 -3%
Other 86 97 -11% 393 403 -3% 401 411 -3%
Direct-to-Consumer 2,440 2,509 -3% 10,166 10,343 -2% 11,119 11,362 -2%
Advertising 133 163 -18% 503 548 -8% 701 765 -8%
Subscription 2,188 2,188 0% 8,766 8,768 0% 9,529 9,549 0%
Content 116 155 -25% 881 1,010 -13% 873 1,031 -15%
Other 4 4 0% 16 16 0% 17 17 0%
Studios 3,518 3,651 -4% 13,232 13,801 -4% 13,620 14,151 -4%
Corporate and Elims (718) (718) 0% (2,699) (2,699) 0% (2,754) (2,754) 0%
Total Revenue 10,183 10,423 -2% 42,240 43,046 -2% 43,385 44,336 -2%
OIBDA
Networks 2,396 2,592 -8% 9,113 9,491 -4% 8,740 8,954 -2%
Direct-to-Consumer (183) (218) 16% (104) (201) 48% 437 410 7%
Studios 937 885 6% 2,802 2,926 -4% 3,019 3,118 -3%
Less: Corporate, Elims (203) (263) 23% (1,111) (1,258) 12% (910) (1,138) 20%
Total Adj. OIBDA 2,947 2,996 -2% 10,700 10,958 -2% 11,286 11,344 -1%
Adjusted EPS $0.12 $0.13 -10% -$0.02 $0.06 -128% $0.27 $0.28 -5%
Free Cash Flow 1,737 1,716 1% 5,048 5,216 -3% 5,672 6,014 -6%
US Net Adds -1.0 -1.0 0% -1.1 -1.1 0% 2.5 2.5 0%

International Net Adds -0.5 -0.5 0% -0.2 0.2 -200% 10.0 10.0 0%
Global Net Adds (Reported Basis) -1.5 -1.5 0% -1.3 -0.9 -44% 12.5 12.5 0%
Revenues by Type
Advertising 1,874 1,913 -2% 8,889 8,943 -1% 9,116 9,304 -2%
Affiliate and subscription 5,026 5,026 0% 20,279 20,282 0% 20,504 20,524 0%
Licensing 3,001 3,192 -6% 11,919 12,658 -6% 12,588 13,320 -5%
Other 281 292 -4% 1,153 1,163 -1% 1,177 1,187 -1%
Total 10,183 10,423 -2% 42,240 43,046 -2% 43,385 44,336 -2%
9 October 2023 9
FIGURE 10. PARA - Estimate Revision

PARA New Old New Old New Old
($mm, except for per share data) 3Q23 3Q23 % Change 2023 2023 % Change 2024 2024 % Change
Revenues
TV Media 4,588 4,710 -3% 20,394 20,692 -1% 20,531 20,628 0%
Advertising 1,761 1,765 0% 8,388 8,424 0% 8,584 8,711 -1%
Affiliate 1,950 1,950 0% 8,003 8,003 0% 7,742 7,742 0%
Licensing and Other 876 995 -12% 4,004 4,265 -6% 4,205 4,176 1%
Direct-to-Consumer 1,661 1,719 -3% 6,589 6,727 -2% 7,959 8,260 -4%
Advertising 449 463 -3% 1,838 1,871 -2% 2,278 2,357 -3%
Subscription 1,212 1,256 -3% 4,751 4,857 -2% 5,681 5,903 -4%
Filmed Entertainment 838 860 -3% 3,075 3,464 -11% 3,236 3,269 -1%
Advertising 4 4 0% 24 24 0% 24 24 0%
Theatrical 340 351 -3% 763 1,074 -29% 900 855 5%
Licensing and Other 494 505 -2% 2,289 2,366 -3% 2,312 2,390 -3%
Eliminations (36) (36) 0% (175) (175) 0% (181) (181) 0%
Total Revenue 7,051 7,254 -3% 29,884 30,709 -3% 31,544 31,976 -1%
OIBDA
TV Media 1,087 1,107 -2% 4,762 4,791 -1% 4,671 4,829 -3%
Direct-to-Consumer (440) (455) 3% (1,891) (1,930) 2% (1,450) (1,509) 4%
Filmed Entertainment 65 90 -28% 45 127 -65% 162 226 -28%
Less: Corporate, Elims & SBC (140) (140) 0% (648) (648) 0% (647) (647) 0%
Total Adj. OIBDA 573 603 -5% 2,268 2,340 -3% 2,737 2,900 -6%
Adjusted EPS $0.07 $0.09 -28% $0.17 $0.23 -27% $0.73 $0.91 -20%
Free Cash Flow 89 96 -7% (334) (304) -10% (514) (405) -27%
Paramount+ Net Adds 1.8 1.8 0% 10.7 10.9 -2% 7.7 7.7 0%
Global Streaming Net Adds -7.1 -7.1 0% 2.3 2.5 -9% 7.9 7.9 0%
Pluto MAUs 85.6 85.6 0% 90.8 90.8 0% 104.2 104.2 0%
Revenues by Type
Advertising 2,212 2,230 -1% 10,232 10,301 -1% 10,869 11,075 -2%
Affiliate and subscription 3,162 3,206 -1% 12,754 12,860 -1% 13,423 13,645 -2%
Theatrical 340 351 -3% 763 1,074 -29% 900 855 5%
Licensing and other 1,338 1,467 -9% 6,135 6,474 -5% 6,352 6,401 -1%
Total 7,051 7,254 -3% 29,884 30,709 -3% 31,544 31,976 -1%
9 October 2023 10
FIGURE 11. FOXA - Estimate Revision
($mm, except EPS) FYQ1 24E FYQ1 24E % delta FY24E FY24E % delta FY25E FY25E % delta
Revenues
Cable Networks 1,377 $1,404 -1.9% 5,959 $6,032 -1.2% 5,823 $5,896 -1.2%
Affiliate Fee 1,004 1,004 0.0% 4,151 4,151 0.0% 4,036 4,036 0.0%
Advertising 281 308 -8.6% 1,311 1,380 -5.0% 1,280 1,349 -5.1%
Other 92 92 0.0% 498 501 -0.8% 508 511 -0.8%
Television 1,746 $1,744 0.1% 8,159 $8,139 0.2% 9,236 $9,203 0.4%
Advertising 881 879 0.2% 4,396 4,376 0.5% 5,279 5,246 0.6%
Affiliate Fee 734 734 0.0% 3,117 3,117 0.0% 3,298 3,298 0.0%
Other 130 130 0.0% 646 646 0.0% 659 659 0.0%
Other, Corporate and Eliminations 47 47 -0.8% 154 155 -0.4% 164 164 -0.3%
Total revenue ($m) $3,170 $3,195 -0.8% $14,272 $14,326 -0.4% $15,223 $15,263 -0.3%
Segment OIBDA
Cable Networks 598 $624 -4.1% 2,471 $2,536 -2.6% 2,380 $2,444 -2.6%
Television 303 303 0.0% 497 505 -1.4% 783 791 -1.1%
Other, Corporate and Eliminations (56) (56) 0.0% (276) (276) 0.0% (262) (262) 0.0%
Total Segment OIBDA $846 $871 -2.9% $2,693 $2,765 -2.6% $2,901 $2,974 -2.5%
Net Income 515 516 -0.3% 1,492 1,529 -2.4% 1,642 1,696 -3.2%
Adj. Diluted EPS $0.98 $1.02 -3.7% $3.00 $3.11 -3.5% $3.53 $3.65 -3.2%
FCF $84 $105 -19.7% $1,717 $1,770 -3.0% $1,900 $1,955 -2.8%
% of ebitda 9.9% 12.0% -207bps 63.7% 64.0% -28bps 65.5% 65.7% -25bps
YoY growth
Domestic Cable Affiliate growth -2.4% -2.4% 0bps -0.6% -0.6% 0bps -2.8% -2.8% 0bps
Domestic Cable Ad growth -10.9% -2.5% -842bps -6.6% -1.6% -491bps -2.4% -2.3% -9bps
TV Affiliate growth 7.6% 7.6% 0bps 8.4% 8.4% 0bps 5.8% 5.8% 0bps
TV Ad growth -2.6% -2.8% 21bps -15.5% -15.9% 38bps 20.1% 19.9% 21bps
Total Affiliate 1.6% 1.6% 0bps 3.1% 3.1% 0bps 0.9% 0.9% 0bps
Total Ad -4.8% -2.7% -202bps -13.6% -12.9% -74bps 14.9% 14.6% 36bps
9 October 2023 11
FIGURE 12. WMG - Estimate Revision

(millions of USD) CQ3 23 CQ3 23 Delta FY 23E FY 23E Delta FY 24E FY 24E Delta
Revenue
Recorded Music 1,291 1,311 (1.5%) 4,955 4,975 (0.4%) 5,134 5,315 (3.4%)
Music Publishing 283 283 --- 1,073 1,073 --- 1,151 1,151 ---
Revenue 1,573 1,593 (1.3%) 6,024 6,044 (0.3%) 6,281 6,462 (2.8%)
Adjusted OIBDA 304 316 (3.8%) 1,222 1,234 (1.0%) 1,329 1,356 (2.0%)
% margin 19.3% 19.9% -51bps 20.3% 20.4% -13bps 21.2% 21.0% 17bps
Adjusted EBITDA 320 345 (7.2%) 1,289 1,314 (1.9%) 1,369 1,372 (0.2%)
% margin 20.4% 21.7% -131bps 21.4% 21.7% -34bps 21.8% 21.2% 56bps
EPS $0.26 $0.28 (6.2%) $0.79 $0.80 (2.1%) $1.15 $1.16 (1.2%)
FCF 327 336 (2.5%) 587 596 (1.4%) 700 714 (1.9%)
FCF Conversion 102.1% 97.2% 491bps 45.5% 45.3% 21bps 51.1% 52.0% -88bps
OCF 360 369 (2.4%) 709 718 (1.3%) 807 824 (2.0%)
FCF Conversion 118.4% 116.7% 58.0% 58.2% 60.7% 60.7%
Recorded Music
Streaming 855 861 (0.7%) 3,230 3,236 (0.2%) 3,422 3,592 (4.7%)
Downloads & Other 22 22 --- 92 92 --- 77 78 (1.2%)
Digital 877 883 (0.7%) 3,322 3,328 (0.2%) 3,499 3,670 (4.7%)
Physical 127 127 --- 504 504 --- 454 454 ---
Total Physical & Digital 1,004 1,010 (0.6%) 3,826 3,832 (0.2%) 3,953 4,124 (4.1%)
Artist Services & Expanded Rights 194 204 (5.0%) 749 759 (1.3%) 790 783 0.9%
Licensing 93 97 (4.4%) 380 384 (1.1%) 391 408 (4.1%)
Total Recorded Music Revenue 1,291 1,311 (1.5%) 4,955 4,975 (0.4%) 5,134 5,315 (3.4%)
Gross Profit 627 636 (1.4%) 2,446 2,455 (0.4%) 2,562 2,657 (3.6%)
% margin 48.6% 48.5% 9bps 49.4% 49.3% 3bps 49.9% 50.0% -8bps
Adjusted OIBDA 270 271 (0.3%) 1,082 1,083 (0.1%) 1,171 1,185 (1.2%)
% margin 20.9% 20.7% 26bps 21.8% 21.8% 7bps 22.8% 22.3% 51bps
Music Publishing
Streaming 179 179 --- 645 645 --- 713 713 ---
Downloads & Other 4 4 --- 15 15 --- 13 13 ---
Digital 183 183 --- 660 660 --- 725 725 ---
Mechanical 16 16 --- 62 62 --- 57 57 ---
Performance 41 41 --- 171 171 --- 179 179 ---
Sync 41 41 --- 167 167 --- 175 175 ---
Other 3 3 --- 14 14 --- 14 14 ---
Total Music Publishing Revenue 283 283 --- 1,073 1,073 --- 1,151 1,151 ---
NPS 104 105 (0.5%) 403 404 (0.1%) 433 433 (0.1%)
% margin 36.8% 37.0% -20bps 37.6% 37.6% -5bps 37.6% 37.6% -5bps
Adjusted OIBDA 72 73 (1.5%) 294 293 0.3% 322 323 (0.4%)
% margin 25.5% 25.9% -40bps 27.4% 27.3% 8bps 27.9% 28.1% -11bps
Adjusted Free Cash Flow 327 336 (2.5%) 587 596 (1.4%) 700 714 (1.9%)
9 October 2023 12
U.S. Media NEUTRAL
FOX Corp. (FOXA) EQUAL WEIGHT
Income statement ($mn) 2023A 2024E 2025E 2026E CAGR Price (06-Oct-2023) USD 30.38
Revenue 14,913 14,272 15,223 14,678 -0.5% Price Target USD 33.00
EBITDA 3,191 2,693 2,901 2,708 -5.3% Why EQUAL WEIGHT?
EBIT 2,665 2,258 2,457 2,256 -5.4% We believe that while Fox's
Pre-tax income 1,736 2,030 2,233 2,048 5.7% broadcast growth story has some
Net income 1,253 1,492 1,642 1,505 6.3% merit, there remains some
EPS (adj) ($) 3.50 3.00 3.53 3.43 -0.6% execution risks in a secularly
EPS (reported) ($) 2.34 3.03 3.53 3.43 13.6% challenged environment. Fox’s
Diluted shares (mn) 530.5 488.1 460.7 434.6 -6.4% current valuation already has up
DPS ($) 0.50 0.52 0.52 0.52 1.3% front growth expectation
embedded and therefore this
Margin and return data 2023A 2024E 2025E 2026E Average
valuation premium is likely to
EBITDA margin (%) 21.4 18.9 19.1 18.4 19.4
sustain.
EBIT margin (%) 17.9 15.8 16.1 15.4 16.3
Pre-tax margin (%) 11.6 14.2 14.7 14.0 13.6 Upside case USD 53.00
Net margin (%) 8.4 10.5 10.8 10.3 10.0 Upside to our estimates could come
ROIC (%) 7.1 8.9 9.4 8.4 8.4 from stronger than expected
ROA (%) 5.6 6.8 7.6 6.8 6.7 advertising, retransmission/affiliate
ROE (%) 11.4 13.0 12.7 10.9 12.0 fee, and content growth in
broadcasting. Our upside case is
Balance sheet and cash flow ($mn) 2023A 2024E 2025E 2026E CAGR based on a core average CY2023/24
Tangible fixed assets 1,708 1,708 1,708 1,708 0.0% EV/EBITDA multiple of 6.5x and a
Cash and equivalents 4,272 3,483 3,542 4,102 -1.3% 4.5x FY 2025E revenue multiple for
Total assets 21,866 21,331 21,644 22,434 0.9% Tubi.
Short and long-term debt 7,250 6,000 5,400 5,400 -9.4%
Downside case USD 27.00
Total liabilities 11,421 8,922 8,322 8,322 -10.0%
Slowdown in retrans and affiliate
Shareholders' equity 10,378 12,342 13,255 14,045 10.6%
fees from acceleration in sub losses
Net debt/(funds) 2,978 2,517 1,858 1,298 -24.2%
or higher programming costs could
Change in working capital -270 -254 -254 -229 N/A
significantly weigh on the multiple.
Cash flow from operations 1,800 2,045 2,235 2,130 5.8% Our downside case is based on a
Capital expenditure -322 -329 -335 -342 N/A core average CY2023/24 EV/EBITDA
Free cash flow 1,696 1,967 2,124 1,996 5.6% multiple of ~4.2x and a 1.0x FY
Valuation and leverage metrics 2023A 2024E 2025E 2026E Average 2025E revenue multiple for Tubi.
P/E (adj) (x) 8.7 10.1 8.6 8.8 9.1 Upside/Downside scenarios
P/E (reported) (x) 13.0 10.0 8.6 8.9 10.1
EV/sales (x) 1.1 1.2 1.0 1.0 1.1
EV/EBITDA (x) 5.3 6.2 5.5 5.7 5.7
FCF yield (%) 9.9 11.8 13.3 13.0 12.0
Dividend yield (%) 1.6 1.7 1.7 1.7 1.7
Payout ratio (%) 23.9 17.1 14.7 15.1 17.7
Net debt/EBITDA (x) 0.9 0.9 0.6 0.5 0.7
Selected operating metrics ($mn) 2023A 2024E 2025E 2026E CAGR
Retransmission consent 1,907 2,097 2,274 2,406 8.1%
Cable affiliate fees 4,175 4,151 4,036 3,914 -2.1%
Note: FY End Jun
Source: Company data, Bloomberg, Barclays Research
9 October 2023 13
U.S. Media NEUTRAL
Paramount Global (PARA) UNDERWEIGHT
Revenue 30,154 29,884 31,544 31,400 1.4% Price Target USD 11.00
EBITDA 1,937 -1,111 1,852 1,961 0.4% Why UNDERWEIGHT?
EBIT 2,342 -684 2,294 2,420 1.1% We believe that Paramount Global's
Pre-tax income 1,266 -1,544 1,257 1,359 2.4% valuation more than adequately
Net income 725 -1,624 475 581 -7.1% prices in improving trends in the
EPS (adj) ($) 1.71 0.17 0.73 0.89 -19.5% legacy business. Additionally, we
EPS (reported) ($) 1.03 -2.54 0.73 0.89 -4.7% believe that the majority stock price
Diluted shares (mn) 651 651 651 651 0.0% already more than reflects the
DPS ($) 0.96 0.39 0.20 0.20 -40.7% growth opportunity for the
company in streaming.
EBITDA margin (%) 10.9 7.6 8.7 9.2 9.1 Upside case USD 17.00
EBIT margin (%) 7.8 -2.3 7.3 7.7 5.1 New OTT platforms and content
ROIC (%) 1.9 -4.3 1.2 1.5 0.1 licensing present an upside
ROE (%) 3.1 -7.5 2.1 2.5 0.1 opportunity that could generate
high-margin dollars. Asset sales of
Balance sheet and cash flow ($mn) 2022A 2023E 2024E 2025E CAGR
BlackRock could be used to reduce
Tangible fixed assets 1,762 1,678 1,594 1,500 -5.2%
leverage and resume share
Intangible fixed assets 32,777 31,119 31,119 31,119 -1.7% buybacks. Our upside case is based
Cash and equivalents 2,885 2,079 1,435 1,562 -18.5% on a 2024E EV/EBITDA multiple of
Total assets 58,393 55,365 55,966 56,663 -1.0% 9x.
Shareholders' equity 23,036 21,659 22,260 22,957 -0.1% There could be additional downside
risk to estimates if investments
Net debt/(funds) 12,961 13,721 14,365 14,238 3.2%
continue to accelerate while the
Change in working capital -1,728 -848 -1,328 -664 N/A
legacy broadcast and cable network
Cash flow from operations -142 17 -156 622 N/A
businesses worsen. Our downside
Capital expenditure -358 -351 -358 -365 N/A
case is based on a 2024E EV/EBITDA
Free cash flow 464 478 160 949 26.9% multiple of ~6.5x.
Share repurchase 0 0 0 0 N/A
Upside/Downside scenarios
Valuation and leverage metrics 2022A 2023E 2024E 2025E Average
P/E (adj) (x) 6.9 69.9 16.2 13.3 26.6
P/E (reported) (x) 11.5 N/A 16.2 13.3 13.7
EV/sales (x) 0.7 0.7 0.7 0.7 0.7
EV/EBITDA (x) 10.7 -19.3 11.9 11.2 3.6
FCF yield (%) 2.2 2.2 0.7 4.3 2.4
Dividend yield (%) 8.1 3.3 1.7 1.7 3.7
Payout ratio (%) 56.1 230.8 27.4 22.4 84.2
Net debt/EBITDA (x) 1.9 6.1 5.2 4.9 4.5
Advertising revenue ex-D2C 9,373 8,412 8,608 7,661 -6.5%
Affiliate revenue ex-D2C 8,180 8,003 7,742 7,485 -2.9%
Pluto TV MAUs (mn) 79 91 104 113 13.0%
Global direct-to-consumer subs (mn) 77 80 87 93 6.2%
Note: FY End Dec
9 October 2023 14
U.S. Media NEUTRAL
Walt Disney Co (DIS) EQUAL WEIGHT
EBITDA 13,368 15,231 18,262 20,275 14.9% Why EQUAL WEIGHT?
EBIT 7,597 9,437 12,911 14,878 25.1% In order to reach its long term
Pre-tax income 5,285 5,451 11,719 14,054 38.5% streaming sub guide, DIS needs an
Net income 3,145 2,996 7,384 8,959 41.8% acceleration from the current pace
EPS (adj) ($) 3.53 3.57 4.77 5.34 14.8% of sub growth, which may be tough
EPS (reported) ($) 1.72 1.64 4.03 4.89 41.6% to do. Achievement of 2024 DTC
Diluted shares (mn) 1,825 1,829 1,831 1,833 0.1% breakeven may require a significant
DPS ($) 0.00 0.00 0.40 0.41 N/A turnaround in costs or a much
faster pace of ARPU growth. A
continued shift in the valuation
EBITDA margin (%) 16.2 17.1 19.8 21.2 18.6
framework away from SOTP back to
EBIT margin (%) 9.2 10.6 14.0 15.6 12.3 EPS could weigh.
Pre-tax margin (%) 6.4 6.1 12.7 N/A 8.4
Net margin (%) 3.8 3.4 8.0 N/A 5.1 Upside case USD 125.00
ROIC (%) 4.5 6.0 7.0 N/A 5.8 Execution of new OTT service could
ROE (%) 5.9 7.6 8.6 N/A 7.4 lead to even stronger multiple
expansion. ESPN could see further
Balance sheet and cash flow ($mn) 2022A 2023E 2024E 2025E CAGR tailwinds with a contract renewal
Tangible fixed assets 33,596 34,451 34,105 33,828 0.2% cycle. Our upside case is based on a
Cash and equivalents 11,615 13,781 17,536 13,062 4.0% FY2024 Core EV/EBITDA multiple of
Total assets 203,631 205,718 212,443 210,741 1.2% ~7.6x and ~3x '25 DTC revenue.
Execution risk is a major concern for
the new OTT product and
Net debt/(funds) 36,709 33,353 29,598 24,072 -13.1%
additionally, Covid variants could
Change in working capital -5,829 -3,307 -4,189 -4,018 N/A
impact DPEP segment longer than
Cash flow from operations 6,002 8,906 10,177 12,017 26.0%
expected. Our downside case is
Capital expenditure -4,943 -4,941 -5,000 -5,116 N/A based on a FY2024 Core EV/EBITDA
Free cash flow 1,625 5,598 6,043 7,497 66.5% multiple of ~5.6x and ~1.5x '25 DTC
Valuation and leverage metrics 2022A 2023E 2024E 2025E Average revenues.
P/E (adj) (x) 23.5 23.3 17.4 15.5 19.9 Upside/Downside scenarios
P/E (reported) (x) 48.1 50.6 20.6 17.0 34.1
EV/sales (x) 2.3 2.1 2.0 N/A 2.2
EV/EBITDA (x) 14.4 12.4 10.2 N/A 12.3
FCF yield (%) 0.8 3.0 3.3 N/A 2.4
Dividend yield (%) 0.0 0.0 0.5 0.5 0.2
Payout ratio (%) 0.0 0.0 7.5 N/A 2.5
Net debt/EBITDA (x) 2.7 2.2 1.6 1.2 1.9
Selected operating metrics (mn) 2022A 2023E 2024E 2025E CAGR
Disney+ ex-Hotstar subs 102.9 108.4 118.1 120.9 5.5%
Disney+ Hotstar subs 61.3 37.4 37.4 37.4 -15.2%
Hulu SVOD only subs 42.8 44.2 45.5 46.6 2.9%
ESPN+ subs 24.3 25.5 26.3 26.8 3.4%
Note: FY End Sep
9 October 2023 15
U.S. Media NEUTRAL
Warner Bros. Discovery, Inc. (WBD) EQUAL WEIGHT
EBIT -4,906 -570 148 576 N/A While WBD has emerged as a scaled
Pre-tax income -6,892 -2,969 -2,009 -1,375 N/A media company across legacy and
Net income -5,359 -2,541 -1,580 -1,104 N/A new media revenue streams with
EPS (adj) ($) -0.38 -0.02 0.27 0.46 N/A valuation support from its FCF
EPS (reported) ($) -2.21 -1.04 -0.64 -0.44 N/A stream, the lack of near term
Diluted shares (mn) 2,428 2,441 2,471 2,503 1.0% visibility is likely to limit upside till
DPS ($) N/A N/A N/A 0.00 N/A viability of estimates is established.
Margin and return data 2022A 2023E 2024E 2025E Average Upside case USD 19.00
EBITDA margin (%) 21.3 25.3 26.0 27.0 24.9 Our upside case is based on a ~8.4X
EBIT margin (%) -11.4 -1.3 0.3 1.3 -2.8 2024E EBITDA.
ROIC (%) -6.1 -0.5 0.1 0.5 -1.5
ROE (%) -18.3 -5.5 -3.5 -2.5 -7.4
Our downside case is based on a
Balance sheet and cash flow ($mn) 2022A 2023E 2024E 2025E CAGR ~5.3x 2024E EBITDA.
Tangible fixed assets 5,301 5,473 5,473 5,473 1.1%
Cash and equivalents 3,731 7,051 8,764 10,668 41.9%
Total assets 134,001 132,167 133,733 135,490 0.4%
Total liabilities 85,334 85,359 87,964 90,272 1.9%
Shareholders' equity 47,095 45,476 44,436 43,885 -2.3%
Net debt/(funds) 45,337 40,226 34,859 28,808 -14.0%
Change in working capital 3,098 1,693 -191 -191 N/A
Capital expenditure -987 -1,305 -1,370 -1,439 N/A
Free cash flow 3,317 5,048 5,672 6,356 24.2%
P/E (adj) (x) N/A N/A 38.6 22.5 30.6
P/E (reported) (x) N/A N/A N/A N/A N/A
EV/sales (x) 1.6 1.5 1.4 1.2 1.4
EV/EBITDA (x) 7.7 6.1 5.3 4.5 5.9
FCF yield (%) 4.7 7.8 9.5 11.9 8.5
Dividend yield (%) N/A N/A N/A 0.0 0.0
Payout ratio (%) N/A N/A N/A 0.0 0.0
Net debt/EBITDA (x) 4.9 3.8 3.1 2.4 3.6
Selected operating metrics (mn) 2022A 2023E 2024E 2025E CAGR
Equity free cash flow ($mn) 3,317 5,048 5,672 6,356 24.2%
Direct to consumer subscriber 96 95 107 121 8.0%
Direct to consumer net addition 10 -1 13 14 11.4%
DTC ARPU ($) 8 8 8 8 4.1%
Note: FY End Dec
9 October 2023 16
U.S. Media NEUTRAL
Warner Music Group (WMG) EQUAL WEIGHT
EBIT 714 787 915 1,051 13.8% While WMG has long term potential
Pre-tax income 740 578 803 904 6.9% based on structual tailwinds, we
Net income 555 420 599 673 6.7% believe its financial performance
EPS (adj) ($) 1.07 0.79 1.15 1.29 6.5% has been too volatile to justify a
EPS (reported) ($) 1.07 0.79 1.15 1.29 6.5% premium valuation. In addition, we
Diluted shares (mn) 515 516 517 518 0.2% think positive catalysts like
DPS ($) 0.61 0.64 0.64 0.68 3.7% emerging digital revenue and DSP
price increases are well understood
and priced in. Our PT reflects a 10x
EBITDA margin (%) 17.8 18.6 20.0 21.2 19.4
multiple on CY23 adjusted OIBDA.
EBIT margin (%) 12.1 13.1 14.6 15.9 13.9
ROIC (%) 15.2 10.0 13.2 13.9 13.1 Upside case USD 43.00
ROE (%) 608.8 167.0 118.3 78.7 243.2 WMG could see upside if streaming
growth accelerates, renewals for
emerging digital platforms pick up,
Tangible fixed assets 415 470 492 518 7.7%
and catalog/label acquisitions slow
Cash and equivalents 584 818 1,062 1,359 32.5% down. Our upside value equates to
Total assets 7,828 8,452 8,917 9,418 6.4% 18x CY24 adjusted OIBDA.
Short and long-term debt 3,732 3,987 3,983 3,979 2.2%
Total liabilities 7,660 8,095 8,255 8,397 3.1% Downside case USD 17.00
Shareholders' equity 168 357 662 1,021 82.5% WMG could see downside if ad-
Net debt/(funds) 3,148 3,169 2,921 2,620 -5.9% supported streaming slows down
dramatically, the company sees
Change in working capital -87 -96 -171 -155 N/A
more negative resets in DSP
Cash flow from operations 742 709 807 888 6.2%
renewals, or if WMG loses share to
Capital expenditure -135 -122 -107 -112 N/A
UMG and SMG. Our downside value
Free cash flow 726 726 848 924 8.4%
equates to ~9x CY24 adjusted
Valuation and leverage metrics 2022A 2023E 2024E 2025E Average OIBDA.
P/E (adj) (x) 30.7 41.9 28.6 25.5 31.7
P/E (reported) (x) 30.7 41.9 28.6 25.5 31.7
EV/sales (x) 3.4 3.3 3.2 3.0 3.2
EV/EBITDA (x) 19.1 18.0 15.8 14.0 16.7
FCF yield (%) 3.6 3.6 4.3 4.7 4.0
Dividend yield (%) 1.9 1.9 1.9 2.1 2.0
Payout ratio (%) 57.3 79.5 55.3 52.3 61.1
Net debt/EBITDA (x) 2.6 2.5 2.1 1.8 2.2
Recorded music revenue 4,966 4,955 5,134 5,364 2.6%
New digital sources revenue 364 417 500 591 17.5%
Note: FY End Sep
9 October 2023 17
North America Cable, Satellite & Telecom Services NEUTRAL
Comcast Corp. (CMCSA) EQUAL WEIGHT
EBIT 14,032 23,284 24,362 25,017 21.3% While Comcast has a diversified
Finance costs - net -3,895 -4,055 -4,005 -4,005 N/A revenue base and industry leading
Pre-tax income 9,284 19,650 20,107 21,012 31.3% capabilities in a number of areas,
Tax rate (%) 47 27 25 25 -18.7% the company is exposed to the
Net income 5,371 14,663 15,080 15,717 43.0% overall slowdown in industry
EPS (reported) ($) 3.64 3.83 4.24 4.64 8.4% growth to the same extent as its
Diluted shares (mn) 4,430.0 4,150.6 3,937.9 3,739.0 -5.5% peers due to new competition. As a
DPS ($) 1.07 1.15 1.25 1.35 8.2% result, the company's growth
cadence is likely to slow further in
the coming quarters as a result of
EBITDA margin (%) 30.0 31.2 31.5 32.1 31.2 which we rate it Equal Weight.
EBIT margin (%) 11.6 19.3 19.7 20.3 17.7
Pre-tax margin (%) 7.6 16.3 16.3 17.0 14.3 Upside case USD 56.00
Net margin (%) 4.4 12.1 12.2 12.7 10.4 Stronger-than-expected broadband
Operating CF margin (%) 18.7 18.3 19.2 20.4 19.1 subscriber and ARPU growth and
ROIC (%) 4.9 9.5 10.0 10.1 8.6 potential repositioning of asset
base could help free cash flow and
ROA (%) 3.4 6.5 7.0 7.1 6.0
valuation. We value it at blended
ROE (%) 18.0 19.1 19.6 19.7 19.1
8.1x 2024E EBITDA .
Cash and equivalents 4,749 6,247 6,304 8,109 19.5%
Total assets 257,275 262,717 264,536 267,227 1.3% Further industry weakness in
broadband combined with the
Short and long-term debt 94,811 97,497 97,497 97,497 0.9%
impact of macro slowdown on the
Other long-term liabilities 25,567 20,280 20,280 20,280 -7.4%
company’s media businesses could
Total liabilities 175,236 177,665 176,565 175,420 0.0%
cause further pressure on cash flow
Net debt/(funds) 90,062 91,250 91,193 89,388 -0.3%
and valuation. We value it at
Shareholders' equity 81,627 84,813 87,732 91,568 3.9% blended 6.2x 2024E EBITDA .
Capital expenditure -10,625 -12,269 -11,879 -11,253 N/A Upside/Downside scenarios
Free cash flow 12,646 12,844 13,528 14,995 5.8%
NOPAT 9,085 16,997 18,272 18,713 27.2%
P/E (reported) (x) 11.9 11.3 10.2 9.4 10.7
EV/sales (x) 2.2 2.3 2.2 2.2 2.2
EV/EBITDA (x) 7.5 7.3 7.0 6.9 7.1
FCF yield (%) 4.7 4.7 5.0 5.5 5.0
P/BV (x) 2.4 2.1 2.0 1.8 2.1
Dividend yield (%) 2.5 2.6 2.9 3.1 2.8
Payout ratio (%) 29.4 30.0 29.4 29.2 29.5
Total debt/capital (%) 110.3 107.6 103.9 97.6 104.9
Net debt/EBITDA (x) 2.5 2.4 2.3 2.3 2.4
Selected operating metrics 2022A 2023E 2024E 2025E CAGR
Basic video subs N/A N/A N/A N/A N/A
Total broadband subscribers N/A N/A N/A N/A N/A
Telephony subs N/A N/A N/A N/A N/A
Note: FY End Dec
9 October 2023 18
U.S. Media NEUTRAL
Netflix, Inc. (NFLX) EQUAL WEIGHT
EBIT 5,633 6,754 8,635 10,443 22.8% We are positive on Netflix on
Pre-tax income 5,264 6,052 7,950 9,821 23.1% account of (a) virtuous cycle of
Net income 4,492 5,365 6,718 8,299 22.7% content/distribution scale and
EPS (adj) ($) 9.95 11.90 15.01 18.73 23.5% consumer inertia; (b) consequent
Diluted shares (mn) 451 451 448 443 -0.6% pricing power; (c) international
DPS ($) 0.00 0.00 0.00 0.00 N/A TAM; (d) management and
execution quality; (e) longer-term
Margin data 2022A 2023E 2024E 2025E Average
operating leverage. However, the
EBITDA margin (%) 20.7 22.4 24.7 26.8 23.7
growth potential has mostly been
EBIT margin (%) 17.8 20.0 22.5 24.7 21.3
priced in. Monetizable streaming
Pre-tax margin (%) 16.6 17.9 20.8 23.2 19.6 TAM is being questioned.
Net margin (%) 14.2 15.9 17.5 19.6 16.8
ROIC (%) 12.8 13.7 16.0 18.8 15.3 Upside case USD 485.00
ROE (%) 21.6 22.3 24.5 26.4 23.7 If Netflix is able to convert password
sharing subs and launch AVOD
better than our expectations,
Tangible fixed assets 1,398 1,498 1,521 1,558 3.7% present valuations could prove
Cash and equivalents 5,147 8,108 9,102 9,579 23.0% conservative. Our upside target is
Total assets 48,595 52,634 55,593 57,780 5.9% based on faster subscriber growth
Short and long-term debt 14,353 14,988 14,588 12,714 -4.0% ('21-'25)
Other long-term liabilities 2,452 1,760 1,760 1,760 -10.5%
If some of the newer competitors
are successful in gaining scale and
Net debt/(funds) 8,295 5,965 4,572 2,221 -35.5%
locking in valuable content away
Change in working capital 758 207 1,079 919 6.6%
from Netflix, a slowdown in growth
could become self perpetuating as
Capital expenditure -408 -371 -394 -417 N/A it could embolden more
Free cash flow 3,978 5,771 6,195 7,868 25.5% competitors, limit Netflix’s access to
Valuation and leverage metrics 2022A 2023E 2024E 2025E Average the credit markets and reduce
P/E (adj) (x) 38.3 32.1 25.4 20.4 29.1 operating leverage.
EV/sales (x) 5.7 5.3 4.6 4.1 4.9 Upside/Downside scenarios
EV/EBITDA (x) 27.6 23.6 18.7 15.4 21.3
FCF yield (%) 2.2 3.2 3.5 4.5 3.4
Dividend yield (%) 0.0 0.0 0.0 0.0 0.0
Net debt/EBITDA (x) 1.3 0.8 0.5 0.2 0.7
Selected operating metrics (k) 2022A 2023E 2024E 2025E
UCAN streaming net adds -919.0 3,793.0 1,509.8 1,358.8
UCAN streaming subscribers 74,296 78,089 79,599 80,958
EMEA streaming net adds 2,693.0 7,978.0 4,359.6 4,141.6
EMEA streaming subscribers 76,729 84,707 89,067 93,208
LatAm streaming net adds 1,738 3,367 1,505 1,355
LatAm streaming subscribers 41,699 45,066 46,571 47,926
APAC streaming net adds 5,391 6,562 7,509 7,840
APAC streaming subscribers 38,023 44,585 52,094 59,934
..
P&L content costs ($mn) 14,026 14,810 16,291 17,432
Cash content costs ($mn) 16,660 14,942 17,182 18,115
.
Note: FY End Dec
9 October 2023 19
U.S. Media NEUTRAL
Netflix, Inc. (NFLX) EQUAL WEIGHT

Implied ratio (x) 1.2 1.0 1.1 1.0
Note: FY End Dec
9 October 2023 20
Analyst(s) Certification(s):
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Primary Stocks (Ticker, Date, Price)
FOX Corp. (FOXA, 06-Oct-2023, USD 30.38), Equal Weight/Neutral, CD/J
Paramount Global (PARA, 06-Oct-2023, USD 11.82), Underweight/Neutral, CD/CE/J/K/M
Walt Disney Co. (DIS, 06-Oct-2023, USD 82.94), Equal Weight/Neutral, CD/CE/J/K/N
Warner Bros. Discovery, Inc. (WBD, 06-Oct-2023, USD 10.28), Equal Weight/Neutral, CD/E/J/K/L/M/N
Warner Music Group (WMG, 06-Oct-2023, USD 32.90), Equal Weight/Neutral, J/K/M
Materially Mentioned Stocks (Ticker, Date, Price)
Comcast Corp. (CMCSA, 06-Oct-2023, USD 43.47), Equal Weight/Neutral, A/CD/CE/D/E/J/K/L/M/N
Netflix, Inc. (NFLX, 06-Oct-2023, USD 381.51), Equal Weight/Neutral, CD/CE/J/K/N
Unless otherwise indicated, prices are sourced from Bloomberg and reflect the closing price in the relevant trading market, which may not be the last
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9 October 2023 21
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In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral or Negative (see
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Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month investment
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Industry View
Positive - industry coverage universe fundamentals/valuations are improving.
9 October 2023 22
Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
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Below is the list of companies that constitute the "industry coverage universe":
North America Cable, Satellite & Telecom Services
Altice USA (ATUS) America Movil (AMX) AT&T (T)
BCE Inc. (BCE) BCE Inc. (BCE.TO) Charter Communications, Inc. (CHTR)
Comcast Corp. (CMCSA) DISH Network Corp. (DISH) Rogers Communications Inc. (RCI)
Rogers Communications Inc. (RCI-B.TO) T-Mobile US Inc. (TMUS) Telus Corp. (T.TO)
Telus Corp. (TU) Verizon Communications Inc. (VZ)
U.S. Media
FOX Corp. (FOXA) Netflix, Inc. (NFLX) Paramount Global (PARA)
Spotify Technology S.A. (SPOT) The New York Times (NYT) Walt Disney Co. (DIS)
Warner Bros. Discovery, Inc. (WBD) Warner Music Group (WMG)
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9 October 2023 23
FOX Corp. (FOXA / FOXA)

Stock Rating: EQUAL WEIGHT
Industry View: NEUTRAL
Closing Price: USD 30.38 (06-Oct-2023)
Rating and Price Target Chart - USD (as of 06-Oct-2023)

Currency=USD
46
44
42
40
38
36
34
32
30
28
26
24
Jan-2021 Jul-2021 Jan-2022 Jul-2022 Jan-2023 Jul-2023
Closing Price Target Price
Source: IDC, Barclays Research

Link to Barclays Live for interactive charting
Publication Date Closing Price* Rating Adjusted Price

Target
14-Apr-2023 33.94 35.00
11-Oct-2022 31.14 36.00
11-May-2022 32.42 37.00
04-Nov-2021 41.58 41.00
06-May-2021 37.57 39.00
29-Mar-2021 37.23 38.00
19-Jan-2021 30.01 29.00
On 08-Oct-2020, prior to any intra-day change that may have been
published, the rating for this security was Equal Weight, and the adjusted
price target was 27.00.
Source: Bloomberg, Barclays Research
*This is the closing price referenced in the publication, which may not be
the last available closing price at the time of publication.
Historical stock prices and price targets may have been adjusted for stock
splits and dividends.
CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by FOX Corp..
J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by FOX Corp. and/or in any related derivatives.
Valuation Methodology: Our price target of $33 uses a sum-of-the-parts methodology based on 4.7x core average CY 2023/24E EBITDA, 1.6x FY 2025E
revenues for Tubi, and an asset value of $4.8bn for the sum of sports betting options, the tax asset, real estate asset, and Fox's equity stake in Flutter.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Risks to investment include decline in viewership,
subscriber declines, and competition from OTT bundles. Also, Covid is likely to negatively impact TV ad dollars and duration/magnitude of the impact
is difficult to quantify.
9 October 2023 24
Paramount Global (PARA / PARA)

Stock Rating: UNDERWEIGHT

Currency=USD
125
100
75
50
25
Closing Price Target Price Rating Change


Target
11-May-2023 15.85 13.00
11-Oct-2022 18.56 15.00
14-Jul-2022 25.09 20.00
04-May-2022 30.27 24.00
17-Feb-2022 29.58 29.00
15-Apr-2021 39.25 36.00
19-Jan-2021 43.75 Underweight 35.00
15-Oct-2020 27.83 Overweight 36.00
CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by Paramount Global.
CE: Barclays Bank PLC and/or an affiliate is a market-maker in equity securities issued by Paramount Global.
J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Paramount Global and/or in any related
derivatives.
applicable) from Paramount Global within the past 12 months.
M: Paramount Global is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC
and/or an affiliate.
9 October 2023 25
Valuation Methodology: We value Paramount Global at $11 based on 2024 EV/EBITDA multiple of 7.5x using 2024E adj OIBDA of $2.7bn.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Upside risks include significant asset monetization
events and better than expected improvement in advertising trends.
Walt Disney Co. (DIS / DIS)


Currency=USD
225
200
175
150
125
100
75

9 October 2023 26

Target
21-Jun-2023 91.32 88.00
14-Apr-2023 100.84 107.00
09-Feb-2023 111.78 110.00
09-Nov-2022 99.90 98.00
11-Oct-2022 95.16 105.00
14-Jul-2022 93.60 120.00
12-May-2022 105.21 130.00
11-Nov-2021 174.45 168.00
18-Oct-2021 171.14 Equal Weight 175.00
13-Aug-2021 181.08 210.00
12-Feb-2021 187.67 200.00
11-Dec-2020 175.72 185.00
13-Nov-2020 138.36 150.00
published, the rating for this security was Overweight, and the adjusted
CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by Walt Disney Co..
CE: Barclays Bank PLC and/or an affiliate is a market-maker in equity securities issued by Walt Disney Co..
J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Walt Disney Co. and/or in any related
derivatives.
applicable) from Walt Disney Co. within the past 12 months.
N: Walt Disney Co. is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC
Valuation Methodology: Our price target of $88 is based on a sum-of-the-parts methodology based on 4.8x FY2024 Linear Networks EBITDA multiple,
1.8x FY2025 DTC revenues multiple, 10.5x FY2024 Parks, Experiences & Consumer Products EBITDA multiple, 0.8x FY2024 Content Sales, Licensing &
Other Revenue multiple, and 5.5x FY2024 Corporate EBITDA multiple.
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Risks to investment in DIS include: (1) execution
risk on multiple initiatives; (2) potential fatigue with the supply of tentpoles over the coming years; (3) potential changes in the pricing model for
sports; (4) subscriber loss trends continue impacting accounting model; and (5) increased competition for sports rights and consequently step function
changes in cost; 6) Covid variants' likely lingering adverse impact on Disney's Parks, Studio, and Media Networks segments. Somewhat offsetting this is
strong sub growth in Disney+.
9 October 2023 27
Warner Bros. Discovery, Inc. (WBD / WBD)


Currency=USD
80
70
60
50
40
30
20
10
0


Target
08-Aug-2023 14.47 15.00
24-Feb-2023 15.42 14.00
04-Nov-2022 11.97 13.00
11-Oct-2022 12.02 15.00
05-Aug-2022 17.48 17.00
14-Jul-2022 13.95 19.00
27-Apr-2022 19.83 Equal Weight 24.00
CD: Barclays Bank PLC and/or an affiliate is a market-maker in debt securities issued by Warner Bros. Discovery, Inc..
E: Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from Warner Bros.
Discovery, Inc. within the next 3 months.
J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Warner Bros. Discovery, Inc. and/or in any
related derivatives.
applicable) from Warner Bros. Discovery, Inc. within the past 12 months.
L: Warner Bros. Discovery, Inc. is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.
M: Warner Bros. Discovery, Inc. is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank
PLC and/or an affiliate.
N: Warner Bros. Discovery, Inc. is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays
Bank PLC and/or an affiliate.
Valuation Methodology: Our $13 price target is based on a 6.6x multiple on 2024E EBITDA estimate of ~$11.3bn.
9 October 2023 28
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Downside risks include 1) not able to execute
streaming strategies well 2) high integration costs 3) macro concerns; Upside risks include better than expected streaming revenue optimization and
advertising and affiliate revenue growth
Warner Music Group (WMG / WMG)


Currency=USD
55
50
45
40
35
30
25
20

9 October 2023 29

Target
09-Aug-2023 32.72 33.00
11-May-2023 26.22 30.00
14-Apr-2023 31.84 34.00
23-Jan-2023 35.55 Equal Weight
23-Nov-2022 31.09 35.00
11-Oct-2022 22.35 30.00
05-Jul-2022 24.36 33.00
10-May-2022 27.27 37.00
09-Feb-2022 37.75 49.00
16-Nov-2021 45.35 51.00
18-Oct-2021 47.69 50.00
23-Sep-2021 45.00 Overweight 48.00
02-Feb-2021 37.97 38.00
J: Barclays Bank PLC and/or an affiliate is a liquidity provider and/or trades regularly in the securities by Warner Music Group and/or in any related
derivatives.
applicable) from Warner Music Group within the past 12 months.
M: Warner Music Group is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC
Valuation Methodology: We value WMG at $33 based on ~15x CY24 adjusted OIBDA (15x Recorded Music EBITDA, 8x Publishing NPS).
Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: Downside risks include ad-supported streaming
slowdown, the growth of podcast content which could change distribution agreement structures, loss of market share to other major labels, growth of
independents, and artist revenue shares continuing to increase. Upside risks include higher than expected price increases by DSPs at a faster than
expected pace, favorable deal terms with new and legacy distribution sources, market share gains and better cost mix on account of more favorable
artist mix.
Disclaimer:
This publication has been produced by Barclays Research Department in the Investment Bank of Barclays Bank PLC and/or one or more of its affiliates
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U.S. Media
James Russo
+1 212 526 3385
james.russo@barclays.com
BCI, US
9 October 2023 34

Barclays WBD U.S. Media - Q3 Preview - Still Fishing For A Bottom

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Equity Research

Q3 Preview: Still fishing for a bottom

-10% Consensus Estimate as of October 5

Source: Company Reports, Bloomberg, Barclays Research

Ratings YoY% Ratings YoY%

Source: Nielsen, Barclays Research Source: Nielsen, Barclays Research

Source: Nielsen, Barclays Research Source: Nielsen, Barclays Research

FIGURE 7. Unlevered FCF yield for covered media companies

CY24 UFCF Yield

Paramount Disney Netflix Warner Bros. Fox

Summary of our Ratings, Price Targets and Earning Estimates

U.S. Media Neu Neu

Valuation Methodology and Risks

FOX Corp. (FOXA / FOXA)

Paramount Global (PARA / PARA)

Walt Disney Co (DIS / DIS)

Warner Bros. Discovery, Inc. (WBD / WBD)

Warner Music Group (WMG / WMG)

FIGURE 8. DIS - Estimate Revision

Source: Company Report, Barclays Research

FIGURE 9. WBD- Estimate Revision

US Net Adds -1.0 -1.0 0% -1.1 -1.1 0% 2.5 2.5 0%

Source: Company Report, Barclays Research

FIGURE 10. PARA - Estimate Revision

Source: Company Report, Barclays Research

FIGURE 11. FOXA - Estimate Revision

New Old New Old New Old

Source: Company Report, Barclays Research

FIGURE 12. WMG - Estimate Revision

Source: Company Report, Barclays Research

U.S. Media NEUTRAL

FOX Corp. (FOXA) EQUAL WEIGHT

U.S. Media NEUTRAL

Paramount Global (PARA) UNDERWEIGHT

U.S. Media NEUTRAL

Walt Disney Co (DIS) EQUAL WEIGHT

U.S. Media NEUTRAL

Warner Bros. Discovery, Inc. (WBD) EQUAL WEIGHT

U.S. Media NEUTRAL

Warner Music Group (WMG) EQUAL WEIGHT

North America Cable, Satellite & Telecom Services NEUTRAL

Comcast Corp. (CMCSA) EQUAL WEIGHT

U.S. Media NEUTRAL

Netflix, Inc. (NFLX) EQUAL WEIGHT

U.S. Media NEUTRAL

Netflix, Inc. (NFLX) EQUAL WEIGHT

FOX Corp. (FOXA / FOXA)

Rating and Price Target Chart - USD (as of 06-Oct-2023)

Jan-2021 Jul-2021 Jan-2022 Jul-2022 Jan-2023 Jul-2023

Closing Price Target Price

Source: IDC, Barclays Research

Publication Date Closing Price* Rating Adjusted Price

Paramount Global (PARA / PARA)

Rating and Price Target Chart - USD (as of 06-Oct-2023)

Jan-2021 Jul-2021 Jan-2022 Jul-2022 Jan-2023 Jul-2023

Closing Price Target Price Rating Change

Source: IDC, Barclays Research

Publication Date Closing Price* Rating Adjusted Price

Walt Disney Co. (DIS / DIS)

Rating and Price Target Chart - USD (as of 06-Oct-2023)

Jan-2021 Jul-2021 Jan-2022 Jul-2022 Jan-2023 Jul-2023

Closing Price Target Price Rating Change