Correspondence 0001437107-24-000153 from Warner Bros. Discovery, Inc. (WBD) (CIK 0001437107) (WBD)
Warner Bros. Discovery, Inc. (WBD) (CIK 0001437107)
Date: Aug. 5, 2024 · CIK: 0001437107 · Accession: 0001437107-24-000153
AI Filing Summary & Sentiment
File numbers found in text: 001-34177
Referenced dates: July 9, 2024
Letter
Via EDGAR: Division of Corporation Finance United States Securities and Exchange Commission Washington, D.C. 20549 Re: Warner Bros. Discovery, Inc. Form 10-K for the Year Ended December 31, 2023 Form 8-K filed May 9, 2024 File No. 001-34177
Dear Ms. DeLabar and Mr. Littlepage:
Set forth below are Warner Bros. Discovery, Inc.’s (the “Company”, “we” or “our”) responses to the comments of the Securities and Exchange Commission (“Staff”) set forth in its letter dated July 9, 2024 (the “Comment Letter”), regarding our Annual Report on Form 10-K for the year ended December 31, 2023 and our Form 8-K filed May 9, 2024. For ease of reference, we have repeated the Staff's comments in bold preceding our responses.
Form 10-K for the Fiscal Year Ended December 31, 2023
Management's Discussion and Analysis of Financial Condition and Results of Operations
Consolidated Results of Operations, page 35
1.We note that throughout your discussion of consolidated and segment revenues and costs that you list several different reasons for the increases and decrease without quantifying each of those changes. We also note that several of the reasons for changes relate to changes in subscribers and/or changes in rates. Please expand the discussion of consolidated operations and each operating segment to quantify the various impacts on your results of operations in 2023, including any offsetting amounts if material, pursuant to Item 303(b) of Regulation S-K.
In response to the Staff’s comment, beginning with our Form 10-Q for the quarter ending June 30, 2024, we will expand our discussion of consolidated and segment results. Pursuant to Item 303(b) of Regulation S-K, such discussion will describe factors that result in material changes to the Company’s results in quantitative and qualitative terms to the extent such information is available and necessary to enhance readers’ understanding of the Company’s reported results. We respectfully advise the Staff that management considers both a quantitative threshold and applicable qualitative factors when assessing materiality. As the relevant factors approach the quantitative threshold, or qualitative factors are identified, management evaluates providing additional disclosures keeping in mind the objective under Item 303(a) of Regulation S-K to provide material information relevant to an assessment of the results of operations.
230 Park Avenue South, New York, NY 10003
wbd.com
For illustrative purposes, the following are examples of the modified disclosure from our Form 10-K for our DTC segment for fiscal year 2023.
Prior language:
Revenues
As of December 31, 2023, we had 97.7 million DTC subscribers (as defined under Item 1. “Business”).
Distribution revenue increased 2% in 2023, primarily attributable to new partnership launches, price increases in the U.S. and most international markets, the launch of the Ultimate tier for Max in the U.S., and the TNT Sports Chile shift to DTC, partially offset by U.S. wholesale declines.
Advertising revenue increased 35% in 2023, primarily attributable to higher Max U.S. engagement and ad-lite subscriber growth.
Content revenue increased 17% in 2023, primarily attributable to a higher volume of licensing deals.
Costs of Revenues
Cost of revenues decreased 7% in 2023, primarily attributable to lower content expense and the shutdown of CNN+ in the prior year, partially offset by increased content licensing costs commensurate with higher content revenue.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses decreased 32% in 2023, primarily attributable to more efficient marketing-related spend.
Adjusted EBITDA
Adjusted EBITDA increased $2,150 million in 2023.
Revised language:
Revenues
Subscriber information consisted of the following (in millions).
230 Park Avenue South, New York, NY 10003
wbd.com
December 31, 2023 December 31, 2022 % Change
Total Domestic subscribers1
52.0 54.6 (5) %
Total International subscribers1
45.6 42.3 8 %
Total DTC subscribers1 97.7 96.9 1 %
Distribution revenue increased 2% in 2023, primarily attributable to a 1% increase in subscribers associated with new partnership launches, price increases domestically and in most international markets, the launch of the Ultimate tier for Max in the U.S., and the TNT Sports Chile shift to DTC, partially offset by domestic linear wholesale subscriber declines.
Advertising revenue increased 35% in 2023, primarily attributable to higher Max domestic engagement and ad-lite subscriber growth.
1 Direct-to-Consumer subscriber - We define a “Core DTC Subscription” as:
(i) a retail subscription to discovery+, HBO, HBO Max, Max, or a Premium Sports Product (defined below) for which we have recognized subscription revenue, whether directly or through a third party, from a direct-to-consumer platform; (ii) a wholesale subscription to discovery+, HBO, HBO Max, Max, or a Premium Sports Product for which we have recognized subscription revenue from a fixed-fee arrangement with a third party and where the individual user has activated their subscription; (iii) a wholesale subscription to discovery+, HBO, HBO Max, Max, or a Premium Sports Product for which we have recognized subscription revenue on a per subscriber basis; (iv) a retail or wholesale subscription to an independently-branded, regional product sold on a stand-alone basis that includes discovery+, HBO, HBO Max, Max, and/or a Premium Sports Product, for which we have recognized subscription revenue (as per (i)-(iii) above); and (v) users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires.
The Company defines a “Premium Sports Product” as a strategically prioritized, sports-focused product sold on a stand-alone basis and made available directly to consumers. The current “independently-branded, regional products” referred to in (iv) above consist of TVN/Player and BluTV. Subscribers to multiple WBD DTC products (listed above) are counted as a paid subscriber for each individual WBD DTC product subscription. We may refer to the aggregate number of DTC Subscriptions as “subscribers”.
The reported number of “subscribers” included herein and the definition of “DTC Subscription” as used herein excludes: (i) individuals who subscribe to DTC products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player and BluTV) that may be offered by us or by certain joint venture partners or affiliated parties from time to time; (ii) a limited number of international discovery+ subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time; (iii) domestic and international Cinemax subscribers, and international basic HBO subscribers; and (iv) users on free trials except for those users on free trial that convert to a DTC Subscription within the first seven days of the next month as noted above.
Domestic subscriber - We define a Domestic subscriber as a subscription based either in the United States of America or Canada.
International subscriber - We define an International subscriber as a subscription based outside of the United States of America or Canada.
230 Park Avenue South, New York, NY 10003
wbd.com
Global ARPU consisted of the following.
Year ended
December 31, 2023 December 31, 2022 % Change (ex-FX)
Domestic ARPU $ 11.20 $ 10.67 5 %
International ARPU $ 3.85 $ 3.58 8 %
Global ARPU2 $ 7.78 $ 7.55 3 %
Global ARPU increased 3% in 2023, primarily attributable to subscriber growth of the ad-lite tier domestically along with a continuing subscriber mix shift from linear wholesale, partially offset by growth in lower ARPU international markets.
Content revenue increased 17% in 2023, primarily attributable to a higher volume of third-party licensing deals.
Costs of Revenues
Cost of revenues decreased 7% in 2023, primarily attributable to a 17% decrease in content expense, partially offset by increased content licensing costs commensurate with higher content revenue.
Selling, General, and Administrative Expenses
Selling, general and administrative expenses decreased 32% in 2023, primarily attributable to a 43% decrease in marketing expense.
Adjusted EBITDA
Adjusted EBITDA increased $2,150 million in 2023.
2.Refer to page 5 which describes the various types of impacts of the WGA and SAG-AFTRA strike in 2023, such as a pause on certain theatrical and television productions, positive impact on cash flow due to delayed production spend, negative impact on results of operations due to timing and performance of the 2023 film slate as well as your ability to produce, license and deliver content. Please expand the discussion of consolidated operations and each operating segment to quantify the various impacts of this strike on your results of operations in 2023, including any offsetting amounts if material, pursuant to Item 303(b) of Regulation S-K.
In response to the Staff’s comment, we confirm that when discussing industry trends in future filings, we will supplement our discussion by quantifying, to the extent such information is reasonably available and necessary to enhance readers’ understanding of the Company’s reported results, any objectively identifiable material changes in results. In the case of the WGA and SAG-AFTRA strikes, while general trends and circumstances were known and disclosed by the Company, it was not reasonably possible to isolate and quantify the precise impacts on revenue and expense reductions solely related to the strikes because of the interrelated effects of the strikes on a multitude of factors that contributed to changes in our results of operations, and the inherent uncertainty in quantifying unrealized revenues and related delayed expenses.
2 ARPU: The Company defines DTC Average Revenue Per User (“ARPU”) as total subscription revenue plus net advertising revenue for the period divided by the daily average number of paying subscribers for the period. Where daily values are not available, the sum of beginning of period and end of period divided by two is used.
Excluded from the ARPU calculation are: (i) Revenue and subscribers for DTC products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player and BluTV), that may be offered by us or by certain joint venture partners or affiliated parties from time to time; (ii) A limited amount of international discovery+ revenue and subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time; (iii) Cinemax, Max/HBO hotel and bulk institution (i.e., subscribers billed on a bulk basis), and international basic HBO revenue and subscribers; and (iv) Users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires.
230 Park Avenue South, New York, NY 10003
wbd.com
We considered that, in the adopting release for Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, Release No. 33-10890 (effective Feb. 10, 2021), the Staff acknowledged that “isolating reasons for specific material changes, and quantifying such isolated reasons, can sometimes be challenging because they can be highly interrelated. In such circumstances, we encourage registrants to acknowledge this fact, and to explain such interrelated circumstances to the extent possible.” In addition, we considered Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations, Release No. 33-8350 (effective Dec. 29, 2003), which provides that “[q]uantitative disclosure should be considered and may be required to the extent material if quantitative information is reasonably available.”
We respectfully advise the Staff that it was not reasonably possible to isolate and quantify the precise impacts of the strikes. The Company instead provided qualitative information about the impact of the strikes, based on management’s judgement and best estimates. As discussed in the Form 10-K, in Business – Industry Trends, the impact of the strikes included a positive impact on cash flow from operations attributed to delayed production spend, and a negative impact on the results of operations attributed to timing and performance of the 2023 film slate, as well as the Company’s ability to produce, license, and deliver content. As further discussed in the Form 10-K Management’s Discussion and Analysis of Financial Condition and Results of Operations, the strikes contributed to a decrease in TV licensing revenue, lower studio production services revenue, and lower television product content expense, which in turn impacted our revenues and costs of revenues. In future filings, we will supplement our discussion by quantifying, to the extent such information is reasonably available and necessary to enhance readers’ understanding of the Company’s reported results, the material changes in the drivers of revenue and costs of revenue – such as a decrease in TV licensing revenue, lower studio production services revenue, and lower television product content expense – and qualitatively describing whether those changes were impacted by the strikes.
3.Refer to your press release on May 9, 2024 included as Exhibit 99-1 to the Form 8-K filed on that date. We note that the impact of the AT&T Sportsnet exit was a 3% decrease in Distribution revenues out of a total decrease in Distribution revenues of 6%, which is clearly material to your revenues. We also note that the AT&T Sportsnet exit also negatively impacted the overall growth rate of Network revenues, which decreased by 8% and the AT&T Sportsnet exit contributed 2%, or 25% of the decrease in the growth rate. Please expand your discussion of results of operations to separately quantify the impact of the AT&T Sportsnet exit on revenues and costs for the periods presented.
We acknowledge the Staff’s comment. In future filings, to the extent business dispositions materially impact reported results, we will discuss the underlying reasons for these material changes in quantitative and qualitative terms to the extent such information is available and necessary to enhance readers’ understanding of the Company’s financial condition and results of operations.
As discussed in response 1 above, we respectfully advise the Staff that management considers both a quantitative threshold and applicable qualitative factors when assessing materiality. As the relevant factors approach the quantitative threshold, or qualitative factors are identified, management evaluates providing additional disclosures keeping in mind the objective under Item 303(a) of Regulation S-K to provide material information relevant to an assessment of the results of operations.
After considering the quantitative impact of the AT&T Sportsnet exit and applicable qualitative factors, management determined that the changes in our results of operations attributable to the AT&T Sportsnet exit were not material. Notwithstanding this determination, in an effort to provide additional color and context for this specific business disposition, the Company qualitatively described the disposition’s impact on revenues and costs of revenues in the Form 10-Q Management’s Discussion and Analysis of Financial Condition and Results of Operations, and provi
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CORRESP 1 filename1.htm Document August 5, 2024 Via EDGAR: Ms. Claire DeLabar and Mr. Robert Littlepage Division of Corporation Finance United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Warner Bros. Discovery, Inc. Form 10-K for the Year Ended December 31, 2023 Form 8-K filed May 9, 2024 File No. 001-34177 Dear Ms. DeLabar and Mr. Littlepage: Set forth below are Warner Bros. Discovery, Inc.’s (the “Company”, “we” or “our”) responses to the comments of the Securities and Exchange Commission (“Staff”) set forth in its letter dated July 9, 2024 (the “Comment Letter”), regarding our Annual Report on Form 10-K for the year ended December 31, 2023 and our Form 8-K filed May 9, 2024. For ease of reference, we have repeated the Staff's comments in bold preceding our responses. Form 10-K for the Fiscal Year Ended December 31, 2023 Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated Results of Operations, page 35 1.We note that throughout your discussion of consolidated and segment revenues and costs that you list several different reasons for the increases and decrease without quantifying each of those changes. We also note that several of the reasons for changes relate to changes in subscribers and/or changes in rates. Please expand the discussion of consolidated operations and each operating segment to quantify the various impacts on your results of operations in 2023, including any offsetting amounts if material, pursuant to Item 303(b) of Regulation S-K. In response to the Staff’s comment, beginning with our Form 10-Q for the quarter ending June 30, 2024, we will expand our discussion of consolidated and segment results. Pursuant to Item 303(b) of Regulation S-K, such discussion will describe factors that result in material changes to the Company’s results in quantitative and qualitative terms to the extent such information is available and necessary to enhance readers’ understanding of the Company’s reported results. We respectfully advise the Staff that management considers both a quantitative threshold and applicable qualitative factors when assessing materiality. As the relevant factors approach the quantitative threshold, or qualitative factors are identified, management evaluates providing additional disclosures keeping in mind the objective under Item 303(a) of Regulation S-K to provide material information relevant to an assessment of the results of operations. 230 Park Avenue South, New York, NY 10003 wbd.com For illustrative purposes, the following are examples of the modified disclosure from our Form 10-K for our DTC segment for fiscal year 2023. Prior language: Revenues As of December 31, 2023, we had 97.7 million DTC subscribers (as defined under Item 1. “Business”). Distribution revenue increased 2% in 2023, primarily attributable to new partnership launches, price increases in the U.S. and most international markets, the launch of the Ultimate tier for Max in the U.S., and the TNT Sports Chile shift to DTC, partially offset by U.S. wholesale declines. Advertising revenue increased 35% in 2023, primarily attributable to higher Max U.S. engagement and ad-lite subscriber growth. Content revenue increased 17% in 2023, primarily attributable to a higher volume of licensing deals. Costs of Revenues Cost of revenues decreased 7% in 2023, primarily attributable to lower content expense and the shutdown of CNN+ in the prior year, partially offset by increased content licensing costs commensurate with higher content revenue. Selling, General, and Administrative Expenses Selling, general and administrative expenses decreased 32% in 2023, primarily attributable to more efficient marketing-related spend. Adjusted EBITDA Adjusted EBITDA increased $2,150 million in 2023. Revised language: Revenues Subscriber information consisted of the following (in millions). 230 Park Avenue South, New York, NY 10003 wbd.com December 31, 2023 December 31, 2022 % Change Total Domestic subscribers1 52.0 54.6 (5) % Total International subscribers1 45.6 42.3 8 % Total DTC subscribers1 97.7 96.9 1 % Distribution revenue increased 2% in 2023, primarily attributable to a 1% increase in subscribers associated with new partnership launches, price increases domestically and in most international markets, the launch of the Ultimate tier for Max in the U.S., and the TNT Sports Chile shift to DTC, partially offset by domestic linear wholesale subscriber declines. Advertising revenue increased 35% in 2023, primarily attributable to higher Max domestic engagement and ad-lite subscriber growth. 1 Direct-to-Consumer subscriber - We define a “Core DTC Subscription” as: (i) a retail subscription to discovery+, HBO, HBO Max, Max, or a Premium Sports Product (defined below) for which we have recognized subscription revenue, whether directly or through a third party, from a direct-to-consumer platform; (ii) a wholesale subscription to discovery+, HBO, HBO Max, Max, or a Premium Sports Product for which we have recognized subscription revenue from a fixed-fee arrangement with a third party and where the individual user has activated their subscription; (iii) a wholesale subscription to discovery+, HBO, HBO Max, Max, or a Premium Sports Product for which we have recognized subscription revenue on a per subscriber basis; (iv) a retail or wholesale subscription to an independently-branded, regional product sold on a stand-alone basis that includes discovery+, HBO, HBO Max, Max, and/or a Premium Sports Product, for which we have recognized subscription revenue (as per (i)-(iii) above); and (v) users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires. The Company defines a “Premium Sports Product” as a strategically prioritized, sports-focused product sold on a stand-alone basis and made available directly to consumers. The current “independently-branded, regional products” referred to in (iv) above consist of TVN/Player and BluTV. Subscribers to multiple WBD DTC products (listed above) are counted as a paid subscriber for each individual WBD DTC product subscription. We may refer to the aggregate number of DTC Subscriptions as “subscribers”. The reported number of “subscribers” included herein and the definition of “DTC Subscription” as used herein excludes: (i) individuals who subscribe to DTC products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player and BluTV) that may be offered by us or by certain joint venture partners or affiliated parties from time to time; (ii) a limited number of international discovery+ subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time; (iii) domestic and international Cinemax subscribers, and international basic HBO subscribers; and (iv) users on free trials except for those users on free trial that convert to a DTC Subscription within the first seven days of the next month as noted above. Domestic subscriber - We define a Domestic subscriber as a subscription based either in the United States of America or Canada. International subscriber - We define an International subscriber as a subscription based outside of the United States of America or Canada. 230 Park Avenue South, New York, NY 10003 wbd.com Global ARPU consisted of the following. Year ended December 31, 2023 December 31, 2022 % Change (ex-FX) Domestic ARPU $ 11.20 $ 10.67 5 % International ARPU $ 3.85 $ 3.58 8 % Global ARPU2 $ 7.78 $ 7.55 3 % Global ARPU increased 3% in 2023, primarily attributable to subscriber growth of the ad-lite tier domestically along with a continuing subscriber mix shift from linear wholesale, partially offset by growth in lower ARPU international markets. Content revenue increased 17% in 2023, primarily attributable to a higher volume of third-party licensing deals. Costs of Revenues Cost of revenues decreased 7% in 2023, primarily attributable to a 17% decrease in content expense, partially offset by increased content licensing costs commensurate with higher content revenue. Selling, General, and Administrative Expenses Selling, general and administrative expenses decreased 32% in 2023, primarily attributable to a 43% decrease in marketing expense. Adjusted EBITDA Adjusted EBITDA increased $2,150 million in 2023. 2.Refer to page 5 which describes the various types of impacts of the WGA and SAG-AFTRA strike in 2023, such as a pause on certain theatrical and television productions, positive impact on cash flow due to delayed production spend, negative impact on results of operations due to timing and performance of the 2023 film slate as well as your ability to produce, license and deliver content. Please expand the discussion of consolidated operations and each operating segment to quantify the various impacts of this strike on your results of operations in 2023, including any offsetting amounts if material, pursuant to Item 303(b) of Regulation S-K. In response to the Staff’s comment, we confirm that when discussing industry trends in future filings, we will supplement our discussion by quantifying, to the extent such information is reasonably available and necessary to enhance readers’ understanding of the Company’s reported results, any objectively identifiable material changes in results. In the case of the WGA and SAG-AFTRA strikes, while general trends and circumstances were known and disclosed by the Company, it was not reasonably possible to isolate and quantify the precise impacts on revenue and expense reductions solely related to the strikes because of the interrelated effects of the strikes on a multitude of factors that contributed to changes in our results of operations, and the inherent uncertainty in quantifying unrealized revenues and related delayed expenses. 2 ARPU: The Company defines DTC Average Revenue Per User (“ARPU”) as total subscription revenue plus net advertising revenue for the period divided by the daily average number of paying subscribers for the period. Where daily values are not available, the sum of beginning of period and end of period divided by two is used. Excluded from the ARPU calculation are: (i) Revenue and subscribers for DTC products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player and BluTV), that may be offered by us or by certain joint venture partners or affiliated parties from time to time; (ii) A limited amount of international discovery+ revenue and subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time; (iii) Cinemax, Max/HBO hotel and bulk institution (i.e., subscribers billed on a bulk basis), and international basic HBO revenue and subscribers; and (iv) Users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires. 230 Park Avenue South, New York, NY 10003 wbd.com We considered that, in the adopting release for Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, Release No. 33-10890 (effective Feb. 10, 2021), the Staff acknowledged that “isolating reasons for specific material changes, and quantifying such isolated reasons, can sometimes be challenging because they can be highly interrelated. In such circumstances, we encourage registrants to acknowledge this fact, and to explain such interrelated circumstances to the extent possible.” In addition, we considered Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations, Release No. 33-8350 (effective Dec. 29, 2003), which provides that “[q]uantitative disclosure should be considered and may be required to the extent material if quantitative information is reasonably available.” We respectfully advise the Staff that it was not reasonably possible to isolate and quantify the precise impacts of the strikes. The Company instead provided qualitative information about the impact of the strikes, based on management’s judgement and best estimates. As discussed in the Form 10-K, in Business – Industry Trends, the impact of the strikes included a positive impact on cash flow from operations attributed to delayed production spend, and a negative impact on the results of operations attributed to timing and performance of the 2023 film slate, as well as the Company’s ability to produce, license, and deliver content. As further discussed in the Form 10-K Management’s Discussion and Analysis of Financial Condition and Results of Operations, the strikes contributed to a decrease in TV licensing revenue, lower studio production services revenue, and lower television product content expense, which in turn impacted our revenues and costs of revenues. In future filings, we will supplement our discussion by quantifying, to the extent such information is reasonably available and necessary to enhance readers’ understanding of the Company’s reported results, the material changes in the drivers of revenue and costs of revenue – such as a decrease in TV licensing revenue, lower studio production services revenue, and lower television product content expense – and qualitatively describing whether those changes were impacted by the strikes. 3.Refer to your press release on May 9, 2024 included as Exhibit 99-1 to the Form 8-K filed on that date. We note that the impact of the AT&T Sportsnet exit was a 3% decrease in Distribution revenues out of a total decrease in Distribution revenues of 6%, which is clearly material to your revenues. We also note that the AT&T Sportsnet exit also negatively impacted the overall growth rate of Network revenues, which decreased by 8% and the AT&T Sportsnet exit contributed 2%, or 25% of the decrease in the growth rate. Please expand your discussion of results of operations to separately quantify the impact of the AT&T Sportsnet exit on revenues and costs for the periods presented. We acknowledge the Staff’s comment. In future filings, to the extent business dispositions materially impact reported results, we will discuss the underlying reasons for these material changes in quantitative and qualitative terms to the extent such information is available and necessary to enhance readers’ understanding of the Company’s financial condition and results of operations. As discussed in response 1 above, we respectfully advise the Staff that management considers both a quantitative threshold and applicable qualitative factors when assessing materiality. As the relevant factors approach the quantitative threshold, or qualitative factors are identified, management evaluates providing additional disclosures keeping in mind the objective under Item 303(a) of Regulation S-K to provide material information relevant to an assessment of the results of operations. After considering the quantitative impact of the AT&T Sportsnet exit and applicable qualitative factors, management determined that the changes in our results of operations attributable to the AT&T Sportsnet exit were not material. Notwithstanding this determination, in an effort to provide additional color and context for this specific business disposition, the Company qualitatively described the disposition’s impact on revenues and costs of revenues in the Form 10-Q Management’s Discussion and Analysis of Financial Condition and Results of Operations, and provi