President and Chief Executive Officer at Warner Bros. Discovery
Hello, everyone, and thank you for joining us. We've been hard at work since our last call and look forward to updating you on our progress. First, let me say, this promises to be a very exciting year for our company. We took bold decisive action over the last 10 months and the bulk of our restructuring is behind us. We have full command and control of our business and we are one company now. We have a fantastic leadership team moving us forward, everyone rowing in the same direction. And together, we are focused on making our businesses better and stronger.
Last year was a year of restructuring. 2023 will be a year of building, and off we go. In today's increasingly dynamic and a crowded media environment, the best hand has great storytelling IP, brilliant creatives, a full slate of production and distribution capabilities, and broad global reach that stretches across premium, pay-TV, free-to-air, theatrical, streaming, licensing and gaming, the entirety of the ecosystem. And that is exactly the hand that we have and we intend to play it decisively and with a focus on free cash flow and an eye towards sustainable future growth.
Warner Bros. Discovery is a storytelling company, and we are very fortunate to have a huge share of the most beloved and globally recognized storytelling IP in the world, including Harry Potter, Game of Thrones, Superman, Batman, Lord of the Rings, and we intend to take full advantage of these one-of-a-kind franchises across our various platforms.
In all that we do, we are guided by three strategic pillars. We want to tell the best stories, share them with the broadest audience possible, and we do that by working together as one team, one company. The decisions we've made and the strategies we've set in motion 10 months ago have created a solid foundation, and we're starting to see strong momentum. It's working. In an increasingly challenging environment, we were able to deliver over $3.3 billion of reported free cash flow in 2022, a healthy conversion, notwithstanding significant merger and integration-related expenses. Gunnar and the team are laser-focused on driving transformation throughout the organization, supporting our ability to further generate real free cash flow. Gunnar will take you through all of the financials in our outlook, but I'm very pleased that we see our net leverage clearly below 4 times by the end of this year, below 4 times by the end of this year.
It's working. On direct-to-consumer, we are making meaningful progress on our goal to achieve real profitability in streaming, a key and powerful segment of our company. We brought our losses down considerably and are even more confident in the financial targets we laid out a few quarters ago. We reduced EBITDA losses by $500 million year-over-year to $200 million in Q4, supported by 1.1 million net sub adds in the quarter. And most importantly, we saw improvement across key KPIs. More on this from Gunnar in a minute, but I'm pleased with the trend line we see in Q1, particularly as we are managing towards close to breakeven segment EBITDA in the quarter.
Consistent with what we told you last August, we are getting ready to launch our combined streaming service here in the U.S. in a few months with Latin America to follow later this year and markets in EMEA and APAC in '24. The product will offer compelling content for every member of the household. SVOD and ad-lite tiers and a significantly enhanced product platform to drive better performance, improved user experience and stronger engagement.
We're excited about the upcoming launch of the enhanced product and look forward to sharing more details at a press event on April 12. In the meantime, we completed a new distribution agreement that puts HBO Max back on Amazon Prime video channels. And on the traditional side, we renewed agreements representing 30% of our U.S. affiliate revenues. And we're able to align our networks on a coterminous basis with these distributors.
We also signed fast content deals with Roku and Tubi, adding to these popular platforms hundreds of our TV shows and movies, while maximizing the reach and overall value of our content. It's working. And our new studio heads are hard at work putting their unmatched creative stamp on our future slate. We believe strongly in the importance of the motion picture window and having that shared experience with other people. I'll talk more about that in a minute.
This year, we celebrate the storied Warner Bros. Studios 100th anniversary with a deepened commitment to telling quality, diverse stories, with the power to entertain, inspire, and when we are at our best, impact or even change the culture. And we are excited for Mike and Pam to lead the studio into its next chapter, which in 2023, will see output more than double. Today, I'm thrilled to announce that Mike and Pam signed a deal to make multiple Lord of the Rings movies. Lord of the Rings is one of the most iconic storytelling franchises of all time, and we're so excited. Stay tuned for more to come on this front.
A few weeks ago, James and Peter rolled out Phase 1 of their highly anticipated multiyear plan for DC Studios across film, television and animation. With five films and five television series already in the works, the new era for DC under a single creative vision is in full swing, and we are especially eager to thrill fans with new Superman and Batman movies in 2025. There hasn't been a standalone Superman movie in a decade. This is some of the most recognized and beloved storytelling IP in the world and we're excited to tell even more of those stories.
We're also excited for the release of four DC films this year, starting with Shazam in two weeks and followed by The Flash, which James Gunn called one of the greatest superhero movies ever made, a masterpiece. I saw it and loved it. It's a wow. I can't wait for The Flash to hit the theaters in June.
We're also thrilled by what we're seeing coming out of our games business, which represents a core part of our overall strategy. As the only studio scaled in gaming, we see it as a meaningful differentiator with substantial opportunity. With the successful launch of Hogwarts Legacy two weeks ago, we reimagined one of the biggest global franchises in the world. The game was one of the most highly anticipated of 2023. And consistent with our overall commitment to great storytelling, we delayed the launch to get it right. And the response from consumers has been overwhelmingly positive. We've already seen more than $850 million in retail sales and we still have more platforms launching over the next few months.
And there's lots more to come, including the highly anticipated Mortal Kombat 12 and Suicide Squad: Kill the Justice League games also set for release this year with ambitious launch projections. We have a great hand and we're doing a lot right. That said, there's still more that we need to get right and we are hard at work. To that end, linear ad sales is a top priority at the moment, particularly as we balance both cyclical headwinds and ongoing secular challenges, much of which we've dealt with for the last several years. It was a heavy lift to bring two teams together, notwithstanding the economy being what it was and we are now drilling down on all facets of the business.
We've contended with recent share shifts away from our portfolio during the NFL and College Football season and the World Cup. And we are still in the early stages of bringing this comprehensive portfolio together and harnessing all that it can deliver. I'm confident that we will get there, particularly with some of the operational and content-driven initiatives implemented by Kathleen Finch and her team. They have great plans to revitalize the nets and have also begun to use our exceptional library of film and television content in a way that will benefit our linear and cable networks.
We are also advantaged by the fact that our U.S. networks average 30% of all nightly cable viewers in the key 25 to 54 demo. And there are times when our share is significantly higher with marquee events, such as March Madness and the MLB and NBA playoffs.
On the news side, we are fighting hard and making real progress. CNN stands as a premier global news organization, and we wanted to be the place for fact-based reporting and thoughtful discourse that is broader than politics and sport. We are already seeing a more inclusive range of voices and viewpoints, as demonstrated last month, when over 70 Republicans came on our air during their congressional speaker election process, a first in a very long time, and we intend to continue advancing on this balanced strategy.
Chris Licht and the team are focused on building an asset for the long term across cable and digital that is worthy of that great global brand. We must get it right. Nowhere is this more important in my view, and it isn't going to happen overnight, and I believe we are on the right path. The efforts ongoing enterprise-wide are helping to turn the flywheel and grow and improve our businesses, and we see so much opportunity ahead. We continue to be the place creators are choosing to bring their visions to life. In recent weeks, we signed new deals with a number of the most prolific and celebrated creatives in the industry, including Greg Berlanti, Baz Luhrmann, M. Night Shyamalan, Akiva Goldsman and Zach Cregger with more to come.
Warner Bros. Television Group has more than 110 shows currently in production across our own platforms as well as third-party broadcast, cable and streaming outlets, including Emmy Winners, Ted Lasso and Abbott Elementary. Young Sheldon, network TV's number one comedy. The Voice, the number one most watched unscripted show on network TV. And the newest hits, Night Court on NBC and Shrinking on Apple TV.
I believe Warner Bros. TV is the greatest quality maker of content in the world. We're committed to creating shows that people really want to watch and they also want to experience them with other people. That is exactly what we see happening at HBO. HBO has never been stronger and is firing on all cylinders behind the recent successes of HBO Originals, Euphoria, House of the Dragon, White Lotus, and our newest mega hit, The Last of Us. These shows have averaged as many as 20 million viewers in episode with strong week-over-week growth. The Last of Us, for example, grew its Sunday premier night viewership by about 1 million with each episode over the first four weeks. And after just five weeks, an astounding 35 million people have watched episode 1.
These are huge numbers, particularly in today's day and age of binge viewing, when there is so much content to choose among. And it all stems from great storytelling. Again, creating shows that people want to watch. It reminds me of my time at NBC when Thursday night was must-see TV. Those shows had a supersized effect on people and culture. And back then, you had to watch the show on Thursday night. Today, with direct-to-consumer, more and more people are joining the party. That's the power of streaming. And HBO is streaming new must-see TV with all of its cultural impact and excitement.
Every week, a new episode comes out and by the time the next one airs, a week later, tens of millions of people have watched the last episode. Social media explodes and people are calling their family and friends to talk about what they saw. This phenomenon can go for eight, 10-plus weeks for each series. That's the power of curation. We believe that when you have content that is so good that it hits the zeitgeist, the best way to drive interest and engagement is not by dropping the entire season on a platform all at once, but by allowing the buzz and anticipation to build over time. And it's the same principle with theatrical. Perceived value of content increases when there's a great expectancy and excitement. People want to be part of something. And when you tell them a great story and they get to experience it with others, either in a packed theater or on a Sunday night, it really is magic.
At Warner Bros. Discovery, we believe we have the strongest hand in the industry, with the most complete portfolio of assets and globally renowned franchises, personalities and storytelling IP, across sports, news, nonfiction and entertainment, in virtually every region of the globe and in every language. We have an exceptional leadership team that is truly aligned across a common set of strategic, operational and financial goals and metrics. We have the largest maker and seller of content in the world. And while we've got lots more to do, we are increasingly seeing positive traction and strong proof points.
For us, 2023 is a year of building. We are more confident than ever that we have the right strategy to be successful and ultimately achieve our goal of being the greatest media and entertainment company in the world.
With that, I'll turn it over to Gunnar, and he'll walk you through the financials for the quarter.