Welcome to the Warner Music Group Third Quarter Earnings Call for the period ended June 30, 2024. At the request of Warner Music Group, today's call is being recorded for replay purposes, and if you object, you may disconnect at any time. Now I'd like to turn today's call over to your host, Mr. Kareem Chin, Head of Investor Relations. You may begin.

Good morning, everyone, and welcome to Warner Music Group's fiscal third quarter earnings conference call. Please note that our earnings press release, earnings snapshot and Form 10-Q are available on our website. On today's call, we have our CEO, Robert Kyncl; and our CFO, Bryan Castellani, who will take you through our results, and then we will answer your questions. Before our prepared remarks, I would like to refer you to the second slide of the earnings snapshot to remind you that this communication involves forward-looking statements that reflect the current views of Warner Music Group about future events and financial performance. We plan to present certain non-GAAP results during this conference call and in our earnings snapshot slides and have provided schedules reconciling these results to our GAAP results in our earnings press release. All of these materials are posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency, unless otherwise noted. References to normalized revenue and adjusted OIBDA are adjusted for items that impact comparability. The details of these can be found in our filings. All forward-looking statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs and projections are expressed in good faith, and we believe there's a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will result or be achieved. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that can cause actual results that differ materially from our expectations. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in our filings with the SEC. And with that, I'll turn it over to Robert.

Thanks, Kareem. Good morning, everyone, and thank you for joining us. Our commitment to our artists and songwriters has been bearing fruit, and I'm very pleased with the work our team is doing from signing and developing great talent, to strengthening our global presence to improving efficiency to drive the business forward. Let's turn to Q3 results. Subscription streaming was strong accelerating to 14% on a normalized basis, driven by improved performance as well as subscriber growth and price increases. This impressive performance was offset by the effects of a softer ad market and challenging comparisons in both artist services and physical revenue. As a result, Q3 total revenue increased 1%, with recorded music decreasing 1% and music publishing increasing 9%. On a normalized basis, total revenue grew 3% with recorded music up 1% and music publishing up 12%. Total adjusted OIBDA increased 8% with margin growth of 130 basis points. On a normalized basis, total adjusted OIBDA grew 10% with margin increasing 120 basis points. As you may have seen, last week, we announced organizational changes in our recorded music business. Before I go into further detail on this, I'd like to thank Max Lousada for his exceptional contributions to this company over the past two decades, especially for his last seven years as our recorded music CEO. A first-class leader, he's been instrumental in building the WMG of today and creating a strong foundation for our future. He's agreed to stay on until the end of our fiscal year on September 30, and after that, he'll remain an adviser through the end of January. Our reorganization will help us achieve three important things: one, we'll have new flatter structure that will elevate our creative regional leadership, setting up more direct channels between local expertise and global opportunities. We have a deep bench of executives. Going forward, we'll be organized into four major regions in recorded music, each overseen by a talented leader who will report directly to me. Two, we'll be compounding our strength in the United States, the world's biggest music market by organizing our frontline labels into two groups: Warner Records which is on an incredible run with chart-topping orders such as Zach Bryan and Benson Boone will expand its responsibilities to oversee Warner Music Nashville. Atlantic Music Group which already includes Atlantic Records and 300 Elektra Entertainment will now also encompass the recently acquired 10K Projects. At the same time, there will be changes at the top of Atlantic Music Group. Julie Greenwald is beginning a leadership transition. She will take on a new role as Chairman with Elliot Grainge coming in as CEO. We're excited by the prospect of taking Atlantic's culture making capabilities and adding Elliott's digitally native approach into the mix as we grow the label's outstanding reputation. And three, we'll be strengthening our central operations in order to maximize our worldwide impact and provide operating leverage across the entire organization. As a result, the Heads of Global Catalog, Marketing, WMX and ADA will directly report to me. When you take these three things together, I am confident that over time will become both more effective and more efficient in how we serve our artists. Today, music moves at the speed of light. Our new structure better reflects the fast-moving nature of cultural trends. We'll nurture audits through our local expertise while plugging them into a big powerful platform that will amplify their success globally. We're making changes from a position of strength, and I'm happy to say that we're firing on all cylinders across new releases, catalog, distribution and publishing. For decades, one of the hallmarks of WMG's success has been our focus on artist development, building careers from the ground up from Aretha Franklin, Led Zeppelin and Madonna to more recent superstars like Ed Sheeran, Bruno Mars and Dua Lipa. Each of them is a homegrown WMG artist. And this remains true today. So far, in 2024, WMG has more new artists debuting on the Spotify Global Top 10 than any other music company. And many of them are homegrown successes signed very early in their careers. Including Artemas, Benson Boone, Teddy Swims and many others. Meanwhile, our recent successes include blockbuster albums from Megan Thee Stallion and Gunna, who both went #1 in the U.S.; Dua Lipa, who reached #1 in numerous countries, including the U.K., Spain and France, Zach Bryan, who topped multiple billboard charts, including the top streaming album chart and Charlie XCX, when we signed in 2010. Her sixth studio album, Brat has received rave reviews and spawned rap culture. The pop sensation of the summer with many influencers, celebrities and even politicians joining in. Globally, we've had dozens of massive hits across multiple regions, including Capo Plaza, Baby Gang and Rose Villain in Italy, SCH and Soprano in France; Myke Towers in Mexico and Spain and Charlie Xiao [ph] in China and TitoM, Yuppe and Burna Boy in Nigeria. The beauty of streaming is that newly released hits have a halo effect on the rest of an artist catalog. As we help artists develop loyal fan bases, each new hit drives an uptick in their catalog. And when we amplify and extend that halo effect, it builds the stickiness that transforms hits into evergreen deep catalog. As one example, Twenty One Pilots released their latest Album Clancy. It more than doubled the streams across the bands entire body of work that week. We continue to reinvigorate our entire catalog, which extends back over seven decades and includes legendary artists such as the Eagles, Fleetwood Mac, Prince, Joni Mitchell, Ray Charles, The Doors and Tracy Chapman, among many others. Turning to distribution. ADA, which serves independent audits and labels has been generating solid momentum this year. We launched ADA over 30 years ago and in the streaming universe where scale is especially important. It plays a key role in our recorded music ecosystem. Recent developments include a global distribution deal with regional Mexican label, Elegante Records and a partnership with Brazil's Sua Música. In Music Publishing, Warner Chappell's impressive run continues and we're seeing an increasing number of artists who want to partner with us across both recorded and publishing rates. There is power in having a unified global team supporting every aspect of their careers and catalogs, and it's true for everyone from legends like David Bowie and Tom Petty to current stars like Teddy Swims and Lizzo. Our amazing songwriters continue to contribute to huge hits, including I Had Some Help by Post Malone, featuring Morgan Wallen and Shaboozey's A Bar Song Tipsy, both of which hit #1 on Billboard Hot 100. Amy Allen is also on a spectacular hot streak as she corrodes Sabrina Carpenter, Summer Smash, Please Please and Espresso. A powerful example of our ecosystem in action is Benson Boone, the breakout star of the year who signed with us for both recorded music and Publishing. Benson was first discovered by Warner Chappell, who work closely with him to hone his songwriter skills. He later joined Warner Records before he had even released a single record, supported by a targeted strategic artist development plan, his Single Beautiful Things, became a global smash, topping the charts in over a dozen countries and holding the #1 spot on the billboard Global 200 Chart 7 weeks. It was also the first record released in 2024 to hit 1 billion streams, keeping it in the top 10 of the billboard half 100 for '24 of the last 27 weeks. Benson, like all of our newer artists and songwriters, is already beginning to grow this catalog of tomorrow, demonstrating how we can help turn dreams into careers and build lasting value in partnership with genuine talent. As we look forward, we're excited about the future of the music industry and our horizon for WMG. I know that investor attention has recently been focused on the dynamics between the labels and the DSPs with some speculating that were adversaries playing a zero-sum game. That's simply not the case. We're actively engaged with our partners around ways to drive growth for all of us. Streaming dynamics remain healthy with plenty of headroom for subscriber growth in both established and emerging markets across multiple partners. Also, price optimization and improvements in the royalty models will provide ongoing opportunities for additional growth. On the AI front, as I told you last quarter, I testified at the Senate Judiciary Committee hearing in April on the needs for Deepfake legislation. I'm grateful to Senators, Coons, Blackburn, Klobuchar and Tillis for their thoughtful crafting of the NO FAKES Act, which was introduced in the U.S. Senate last week. This act strikes the right balance between propelling the next wave of technology powered creativity while safeguarding every Americans right to control the use of their own image and voice in the age of AI. We're closing the year with great new music coming from Coldplay, David Guetta, Benson Boone, Myke Towers, [indiscernible] and many others. It's been a transformative year for WMG and the entire industry, and there's lots to be optimistic about. Now here is Bryan.

Thank you, Robert, and good morning, everyone. Before I get into details of our Q3 results, I want to remind everyone that growth rate comparisons will be in constant currency and where appropriate, I will reference normalized growth metrics. The items affecting recorded music streaming revenue comparability include the previously disclosed BMG digital revenue roll-off, which was $25 million unfavorable in the quarter and the renewal with one of our international digital partners, which was $3 million unfavorable this quarter. Additionally, the CRB rate increase provided a $7 million benefit to music publishing digital revenue in the prior year quarter. In Q3, total revenue grew 1%, and adjusted OIBDA increased 8% with a margin of 20.3%, an increase of 130 basis points over the prior year quarter. On a normalized basis, total revenue grew 3% and adjusted OIBDA increased 10%. Recorded Music revenue declined 1% and grew 1% on a normalized basis as strength in streaming was offset by lower physical and artist services revenue. On a normalized basis, streaming revenue grew 10%, with subscription streaming growth accelerating to 14% while ad-supported revenue increased 1%. The improvement in subscription growth was driven by subscriber growth and price increases. The deceleration in ad supported revenue was driven by a challenging comparison to the prior year quarter. Physical revenue decreased 4% due to the timing of releases and strong U.S. physical releases in the prior year quarter. Artist Services and Expanded Rights revenue decreased 26% due to lower merchandising revenue, lower concert promotion revenue in Japan and France and foregone revenue related to the previously announced exit from our owned and operated media properties. Licensing revenue decreased 1% driven by increased revenue from copyright infringement settlements in the prior year quarter. Recorded music adjusted OIBDA increased 8% with a margin of 22.5%, an increase of 190 basis points. On a normalized basis, adjusted OIBDA increased 9% and margin increased 160 basis points. Music Publishing continues to deliver strong results with revenue growth of 9% or 12% on a normalized basis, driven by streaming, performance and sync revenue. Digital revenue increased by 7% or 11% on a normalized basis. Streaming revenue increased by 8% or 12% on a normalized basis reflecting continued market growth, continued investment in and the expansion of our catalog and timing of payments. Performance revenue increased by 33% due to an increase in touring activity outside the U.S. and an increase in U.S. radio airplay. Sync revenue increased 2% driven by timing of copyright infringement settlements. Mechanical revenue decreased 19% due to lower physical sales. Music Publishing adjusted OIBDA grew 8% with a margin of 26.2%, an increase of 10 basis points. On a normalized basis, adjusted OIBDA increased 11%, margin increased 20 basis points. Total operating cash flow increased 29% to $188 million from $146 million in the prior year quarter. Operating cash flow conversion was 59% of adjusted OIBDA. We remain on pace to achieve our 50% to 60% multiyear target for the full-year. Free cash flow increased 42% to $160 million from $113 million in the prior year quarter, driven by strong operating performance and timing of working capital. As of June 30, we had a cash balance of $607 million, total debt of $4 billion and net debt of $3.4 billion. Our weighted average cost of debt was 4.5% and our nearest maturity date remain 2028. As we look ahead, we continue to estimate the roll-off from BMG digital distribution will be in the range of $25 million to $30 million in Q4. Looking at Q4, we see continued strength in subscription streaming revenue, while an ad-supported revenue, we expect challenging comparisons to the prior year quarter. As we approach the two-year anniversary of our existing Meta deal, we want to flag that they will no longer be making available premium music videos to their users. This change to Meta's offering will result in a revenue impact of approximately $10 million per quarter across both recorded music and music publishing, which will start to impact us in Q4. We continue to be excited about the portfolio of emerging streaming platforms and expect this category to be a driver of long-term growth. We are focused on delivering a strong close to the year, and I'm pleased that Q4 is off to a solid start. While macro challenges in the ad market persists, the health of the industry remains strong with multiple vectors for growth, and we continue to position ourselves for long-term success. We look forward to delivering exciting new music in the quarters to come. Thank you for joining us today. We'll now open the call for questions.

Thank you. [Operator Instructions]. Our first question comes from Kutgun Maral with Evercore ISI. Your line is open.

Good morning and thank you for taking the questions. Two, if I could. First on subscription streaming. Some of your peers have called out pressure points on the streaming outlook as it relates to a slowdown in subscriber growth at certain DSPs. I know you've touched on a number of opportunities for the industry and WMG and called out continued strength into Q4. But is there any more you can share on the trends you're seeing at recorded music subscription streaming and the outlook ahead? And second, on the recorded music reorg, it's sometimes hard for us on the outside to appreciate the implications of these decisions and how it might impact the business. Robert, you called out a number of items that you hope to achieve to ultimately become more effective and efficient in the ways that you serve artists. I know it's early days, but any thoughts on how these moves might impact the financials over the coming years? Thank you.

Thank you for the question. I appreciate it and good morning. So first, on the streaming market. The demand side of our business is very resilient and very strong. And I think other industries would wish for that kind of demand to continue. Two, we're not seeing any change in our revenue mix. So I'd like to -- we have always cautioned the financial community to make sure that you don't look to just one company, Spotify namely as the proxy for the entire industry because it's much more diversified and we're not seeing any change in what's been happening and in our revenue mix. And three, I am very encouraged and deeply engaged together, obviously, with our teams, with our DSP partners around four things to drive growth. First one is obviously the continued growth between emerging and established markets and taking different approaches within those. Two on price optimization, which includes family plans and various pricing increases, which you've obviously seen play out over the last year or so, and we'll continue to. Three, the evolution of royalty models, how the pie is divided. And four, we're on the precipice of audience segmentation with adding nonmusic contents to the music offering and through that, improving the underlying subscriber acquisition and retention metrics, which drive the overall business forward, which has obviously played out really well in many other industries. So overall, I'm very bullish on streaming for all of these reasons, and we're leaning into it as hard as we can, together with our DSP partners. On the reorg, I'll repeat the three things, which is flatter organizational structure allows us to really lean into the global nature of the business which has accelerated overall. And there are only a handful of companies in the world that can do what we do, which is have an infrastructure in all these growing emerging markets and international not just emerging in all markets around the world. And unleashed trade routes of content exchange effectively and have the infrastructure to take local stars and make global stars out of them. And that's a very unique and a difficult thing to do and only a handful of companies can execute on that. So our flat organizational structure elevates that local creative leadership team; two, we're compounding our strength in the U.S. by consolidating Warner Records, Warner Nashville into Warner Records and 10K into Atlantic. So simplifying the organization and then three, centralizing several functions for operating leverage. As to the financial impact of it, this is a strategic decision, not a cost-saving exercise. And so therefore, it's far too early to speak to any impact of it, but it's strategic to set us up incredibly well for the future market today.

Kutgun, it's Bryan, and Robert took the words out of my mouth on the second part of that. But on the first part of that, just to reiterate what we believe is the health resiliency and growth of the industry, we continue to see pretty consistent growth across our handful of top DSPs and certainly led by subscriber growth and that rising tide, but as well as price to a lesser extent, and underpinned by, as Robert pointed to a number of new releases and carryover from prior ones that a strong slate gave us momentum in this quarter.

Very helpful. Thank you both.

One moment for our next question. Our next question comes from Cameron Mansson-Perrone with Morgan Stanley. Your line is open. Cameron Mansson-Perrone: Thanks. Good morning guys. Two if I can. One, just on DSP pricing over time. I think historically, you've talked about wanting to facilitate different strategies and approaches across your distribution partners. But if we start to enter a world where there's a meaningful divergence across DSPs in terms of how well they're monetizing streaming users, how does that impact your approach or mentality. And then obviously, a couple of lawsuits against Suno and Udio. Any update on how you're thinking about the risks and opportunities around those technologies? And maybe just how you see the relationship between content owners and generative or IP owners and generative AI businesses developing over time? Thanks.

Sounds good. Thanks, Cameron. So on the divergence between approaches between the different ESPs. I think generally diversity is good. I know you're using the word divergence and I use diversity, but it really means the diversity of approaches. And because from that, you learn what works, what doesn't. And when you have strong demand side of the business, for people where something may not work, they adjust and go for the thing that does work as long as there is a strong demands in the industry, because people obviously chase growth. So I'm not worried about that. I will come in and experimentation is good and sometimes you win and sometimes you lose. But you have to focus on the long-term and drive growth and experimentation at all times. On GenAI risks and opportunities. So one, I'll just repeat our -- what I said maybe a year ago or a few quarters ago, I'll repeat sort of our prioritization of how we think about the stakeholders in this space. There are three. One, the platforms where content is consumed. And that's really our current DSP partners, because whatever GenAI content has created somewhere else, we'll end up in the places where people used to listening, YouTube, Spotify, et cetera, all of our partners. Two, then it's the Generative AI engines, right? You mentioned some of them; and then three is the government. I have them in that order because that is the picking order of AI, at least from our standpoint. You have to start with the consumption will take place. And there are some partners who are both in the platform business as well as in the GenAI business. YouTube is a good example of that. Meta is a good example of that, et cetera. So of course, those are the partners where we focus first and foremost, because we can have the most thoughtful approaches on how we solve it for the future. Obviously, we're making great progress with regulation and government. We're not alone. It's obviously entire content industry and they're varying approaches. But you can see a lot more alignment within the music industry, but also within the content industry it's coming to fruition. And so I'm actually quite optimistic about this. And you touched on Suno and Udio. Obviously, we have -- there's a lawsuit that's been filed. There's nothing new to report on that. So we're waiting for the next step on that. But we're very, very focused on this. Well religiously defend our IP, our artists, and songwriters name and likeness and because it is the right thing to do, and it is a good business to do. Cameron Mansson-Perrone: That's really helpful. Thanks.

One moment for our next question. Our next question comes from Batya Levi with UBS. Your line is open.

Great. Thank you. Can you confirm if you had any -- if you lapped any price increases in fiscal 3Q and how we should think about the upcoming roll-offs? And maybe just on the recent price increase that we saw from Spotify for bundled services. Can you talk about if you think you'd be able to participate in some of that increase?

Batya, hey it's Bryan. Thanks. On the price increases, we're at the end of lapping the YouTube. We still have a bit of lapping of Spotify and those are really, I would say the biggest. But there are geographic and certainly tier mixes around the world that can influence it as well?

Yes. And I'll take the second one. So as you know, there are many different SKUs already in existence between the various family plans and duals, et cetera. And we've never disclosed how we participate in any of those. So we obviously don't plan to change that going forward. But I can tell you that any assumption that key anchor tenants such as us, would not participate is not -- it's not the best assumption to put in mind.

Thank you.

One moment for our next question. Our next question comes from Stephen Laszczyk with Goldman Sachs. Your line is open.

Hey, great. Thanks. Two, if I could. First, maybe on the release slate. Robert, you talked a little bit about your expectations for the upcoming slate into the back half of the year. I was wondering if you could elaborate a little bit more on that. It feels like some artists who are releasing albums later this year might have some deeper catalogs. You might have the potential to move the needle on market share a little bit. Just curious if you would agree with that? And then on emerging streaming, I appreciate the meta deal and the headwinds from premium video, but just curious if you could update us on how you're thinking about the opportunities for incremental growth across some of the emerging streaming IP rights holders just the opportunity there in general of the next year to more broadly? Thank you.

All right. Thanks, Stephen. So first, I want to say -- I know the question is about new release slate. But I feel that we actually consistently don't do justice to our catalog on the earnings costs that we talked about. We focus on one thing only. Yes, we have an incredibly strong release slate for Q4 and going forward. But I really want to also say that our -- the performance of our catalog is strong and continues to be strong. And obviously, a lot of it is also if it's Shallow Catalog uplifted by the performance of new releases, but it's the strength of our company is on a combination of three cohorts. New releases, Shallow Catalog and Deep Catalog. And it's really -- it's great to see it all firing on all cylinders. To specifically answer your question, we have music coming from Coldplay, David Guetta, Benson Boone, Myke Towers, [indiscernible] and many, many others. So there's a lot, lot coming out. We're incredibly busy and the team is doing a phenomenal job shipping the slate. On the emerging streamers. It's a very -- this is one of the great things about music that we are incredibly relevant to all generations. And one of the reasons is that we're deeply embedded into platforms, whether they have long-form content, short fall content or completely bite-sized content. And all of those markets continue to grow. We're working really hard on our relationships with them and make sure that we're growing with them and that we experiment and do lots of innovative things that help drive the business forward, not just for us but also for them. So I'm excited about it. And every day, I just kind of wake up and say, amazing that music is so relevant across all types of mediums, whether short or long or medium size. And we obviously have to do our job to make sure that we monetize it the right way and bring it all to a robust growth rate on the whole.

Stephen, it's Bryan. I'll add to that, and I called out the Meta in my commentary as we come upon our anniversary of that they have changed their offering and moved away from premium music video licensing. Having said that, our underlying relationship with Meta is strong, growing. There is real and Instagram that also are growing well. And so we remain excited about the category. And like last year, we had our TikTok step-up. So we also have that. But the category continues to be a growth category.

Great. Thank you both.

One moment for our next question. Our next question comes from Omar Mejias with Wells Fargo. Your line is open.

Hey guys. Thank you for taking the question. Maybe first on subscription streaming growth was very strong during the quarter and accelerated sequentially. Can you unpack some of the drivers of the sequential acceleration as it relates to sub growth pricing and more importantly, some internal actions that you guys have taken to drive our catalog. Maybe along those lines on just the overall health of the industry, and based on the underlying trends you guys seen. Are you seeing -- or do you have a changing view to the total addressable market for the industry over the long term?

All right. Let me -- thank you Omar. So on subscription streaming, let me make sure I understood the question correctly. Was it what were the underlying drivers of that growth? Was that correct? I just wanted to make sure I got it.

So our subscription streaming strengthen it was 14 up a couple of tenths or a few from last quarter. And obviously, that's underpinned by sub growth, which, again, we continue to see pretty consistent across the top DSPs still some impact to a lesser extent on price. And again, our carryover slate last quarter as well as additional releases this quarter help support it. And so that's what really drove it. And then on the health of the industry, I would just say we're at a place where penetration of music subscriptions are still really low. I think they're overall about 15% and there's a lot of headroom there to go from 700 million to 800 million subscriptions today to well over $1 billion over the next five years. And as Robert has talked earlier and we've spoken about, there's still more sophistication and optimization to be done on price as well as audience and product segmentation or innovation. So still optimistic about it, Omar.

Let me take the catalog optimization question. There's two ways to think about it. One, which is sort of a super high touch marketing campaigns that you do for select titles, right, that have high impact that our team executes on incredibly well. And then the second one is sort of at-scale optimization of the entire catalog and making sure that it's set up correctly on all DSPs to effectively work really well within the algorithms for recommendations, which drive growth. So we have like two different approaches, and we continue to push on both at the same time.

Thank you guys.

One moment for our next question. Our next question comes from Kannan Venkateshwar with Barclays. Your line is open.

Thank you. Maybe just drilling into the subscription streaming trends a little bit more. As you're probably aware, when your competitors obviously reported different numbers, and they called out a few headwinds in terms of industry growth between different DSPs diverging to some extent. Maybe you could just talk about what you're seeing broadly across the landscape. I mean it seems like there's a big market share shift towards Spotify away from the others. And if you expect that to impact our growth trends as well going forward. And there's been some commentary again from your peers with respect to maybe some social media platforms looking at their content at least specifically. So if you could talk about what's going on broadly in the landscape and why that convergence that would be the detail. Thank you.

Thank you. So again, I'll sort of repeat, which is we're not seeing any change from what we've been saying before. We don't have a different -- we don't have a change in our revenue mix. And I would say that's probably our sort of strongest answer on that point. So I'm not -- I can't really comment about our competitors. I don't see inside their business and what the drivers of their performance is. We're pleased with the progress that our DSP partners are making. As I forget, somebody mentioned in the question was there's divergence and approaches, which I view as positive because people are experimenting different ways. And again, sometimes they work out, sometimes they don't, but people adjust and they continue as long as there is a strong demand side of the business, which there is and I think that's underpinned by sort of this interplay between the emerging platforms and the sort of music services, because all of those are effectively elevating the role of music and the relevance of music in today's world, because it is more relevant than it's ever been before. It's more ever present. And it's between both the bite-size consumption within the emerging platforms as well as the full consumption within the streaming platforms. And all of that forms an incredibly strong ecosystem for us to play in. And we obviously have to do our job to grow our share both in catalog and new releases and also grow the overall time together with our DSP partners.

All right. Thank you.

One moment for our next question. Our next question comes from Tim Nollen with Macquarie. Your line is open.

Hi, this is Ross on for Tim. Robert, some of the industry have expressed dissatisfaction with the ad-supported tier at some DSPs given they don't sufficiently monetize the value of music that artist produced. I'd be interested in getting some of your thoughts on what role you think the ad-supported tier should take. And if windowing should apply, i.e., shouldn't only be available to pre uses after a week or so. How many levers do you have to time in order to influence the optimization of music here? Thanks.

So one, I don't have an opinion on windowing today. I think that's a very -- it's much more detailed topic to really think through together with our partners. But I do have a strong opinion on advertising in general, which is -- if you think about the advertising market that music effectively plays in, it is the advertising market that you want to be in, i.e., it's addressable, it's on mobile devices, it's on tablets, it's on computers and it's on TV screens. It's not linear advertising that is not effectively targeted. And you see the shift from sort of traditional advertising to, obviously, all the digital platforms that deliver all the things that I mentioned. And that is really where our product is exposed. So I think we are in the correct advertising market. That's number one. Number two, obviously, advertising market fluctuates with GDP. So basically, marketing budgets are a function of GDP. And GDP growth. So they fluctuate with those a little bit more than subscriptions. That's okay. It's just a fact of life. But we're swimming in the right river. So let's start with that. Two, I think your question is, is there too much content in there? And is it impacting subscriptions, et cetera. I think in order to grow subscriptions, it is helpful to have a healthy funnel. Now the question is, what does healthy mean? And these are the experimentations that I was talking about that. If we want to change something in the future, it has to be done in concert together with our DSP partners that would drive the overall growth, like focusing on driving growth and driving ARPU and driving both of those in unison can only be done if you, you can do one without the other, and you cannot do experimentation in subscription only without experimenting in ad-supported and it just has to be done together with our partners. So nothing new to report on that today, but I'm glad we're spending in the right river.

Right. Thank you.

One moment for our next question. Our next question comes from Rich Greenfield with LightShed Partners.

Thanks for taking the question. Robert, given your experience at Google and YouTube, they were really the first to bundle when you think about YouTube Premium, which includes music versus just the YouTube music service. And I'm sort of curious how you think about what that meant for the music business at Google. How we can think about how that translates over time to Spotify as they look to bundle? And then sort of a separate question, but there's a lot of speculation in the marketplace about Apple launching advertising as part of Apple TV Plus. Wondering they've never done an ad-supported music service. Clearly, Spotify has shown the power of that funnel to drive people to sort of go the freemium model. Just curious whether you think Apple might move in that direction, seeing Spotify success and how willing you are to have others in the marketplace using advertising in a freemium-like model? Thanks.

Thank you, Richard. All right. So [indiscernible] in on my past experience, I really forgot all of it. I'm kidding. It was very helpful, both for YouTube as well as for the music industry. I remember when we started, we had 5 million subscribers I'm like, Oh, how are we going to make it to 20 million, right? And now it's north of 100 million. And it was a big ride, but we created a unique offering in the market that was not replicated by anyone else, and it works for that company, right? And that's -- this is what I talk about when I -- this is what I mean when I say I am happy to see divergence and approaches, because companies should play to their own strengths. What makes them unique and what is the offering that they can do that others can do that drives the business forward. And that's what we did at YouTube and the team over there executed flawlessly. And it was good for the music industry. So it takes me to the second question on Apple. I don't have anything new to share on that. But I am the most willing to experiment and drive the business forward with any of our partners. And in whatever directions as long as it's achieving strong objectives for both of us. And again, it doesn't mean that there aren't failures along the way that always comes with unless you, which unless you fall sometimes, you don't know you're pushing hard enough, but it's most willing to experiment with companies which are small with companies which are big to find all these unique offerings that can drive more growth.

Thanks. Appreciate it.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Robert for any closing remarks.

Well, I want to close by saying how excited we are about the momentum that we have, the hits that we have on the board the execution of our teams going through obviously complicated things such as reorganizations and transitions. I once again want to give really heartfelt thanks to Max Lousada for his incredible contributions to the company. And to Julie, who has done an incredible job of creating culture over the last 20 years and great icons in the music industry and I appreciate both of their efforts to have a very smooth transition and making sure that our artists and songwriters are the ones who benefit the most from everything that we do. And I want to welcome Elliott to our -- to Atlantic and challenge him to build upon Julie's incredible legacy and which is -- there are big shoes to fill, and he's got a big job ahead of him. So with that, really excited about the direction of the company and the team that we have and look forward to talking to you guys in 90 days.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.