Good afternoon. I'm Andrew Slabin, Head of Global Investor Strategy for Discovery, and I'm pleased to welcome you to the second portion of Discovery's announcement today. For those of you that joined us earlier, welcome back. With me here in New York City is David Zaslav, our President and Chief Executive Officer, and Gunnar Wiedenfels, our Chief Financial Officer. Joining us via Zoom from London is J.B. Perrette, President and CEO, Discovery Networks International. Gunnar will open with some remarks and walk through a brief slide deck. Then we'll open up the discussion to your Q&A. Please select the Raise Hand icon. We will call upon you accordingly, and you'll be prompted to unmute your microphone. You can reference the slides as well as today's press release on our website at www.corporate.discovery.com. Without further ado, the safe harbor disclosure.
Comments today regarding the company's future business plans, prospects, and financial performance are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are made based on management's current knowledge and assumptions about future events, and they involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our annual report on Form 10-K for the year ended December 31st, 2019, and our subsequent filings made with the U.S. Securities and Exchange Commission. With that, turn it over to Gunnar.
Thank you, Andrew, good afternoon, and thank you everyone for joining us on this very exciting day. As Andrew said, I want to go through a couple of slides before we open it up for Q&A. Let me start by talking about the operating momentum that we're enjoying right now. As you can see on this first slide here, page three, we have been able to grow share both domestically and internationally, as [Guy-Pierre] just said, that's from the moment two years ago when we all came together under a new roof between Discovery and Scripps. Also on this slide, as you can see, for the first time, we're talking about the aggregated subscriber number, 5.2 million paying subscribers across our D2C portfolio, up 3x from two years ago. Tremendous momentum, you will hear more from us about these trends as we go forward.
We're intending to report on a regular basis how we're doing. What's most important to me is free cash flow. We've been talking about this a lot, the tremendous ability for this company to generate free cash flow. Let me talk about current trading a little bit here as well. As you heard, over the past couple of weeks when we reported Q3 and then the subsequent conferences, we have been seeing improvements week after week, since we've started coming out of that summer trough, let's call it. Our advertising revenues are looking better and better. We had already guided to sequential improvement. I want to give a quick update. Both internationally and domestically, we're seeing further improvement of the situation and now expecting low to mid-single- digit declines for ad sales for Discovery domestically and internationally.
We had already spoken about the sequential improvement for affiliate international and that mid-single- digit number up for U.S. affiliate is solidifying as well. We're really taking a step back here, looking at tremendous operating momentum. With this, we're launching into this new product. I want to go back to the addressable market that I just spoke about a couple of minutes ago, give you a little more detail. We have taken a very systematic approach here, looking at the U.S. and the international target markets. In the U.S., clearly a huge opportunity of finally being able to address broadband-only homes, which to this point have had no access to our content. As we said, and as you could see from the presentation earlier, there is tremendous value in our product as well for those consumers who already have a cable subscription.
In addition to that, want deeper engagement, an ad-free experience, et cetera. On the international side, we're looking at 1.2 billion TV homes in the target markets that we're addressing here. We have applied a number of filters to bring us down to the core serviceable addressable market that we just spoke about, of 470 million homes globally. We do want to quickly talk about mobile and broadband outside of TV homes as well. It's something that we haven't fully baked into our models yet. As you can see on this chart, needless to say, all of a sudden with this product, we're able to address a much, much larger global community here. This might be less of a factor in the U.S., even though with the Verizon partnership, obviously we're making a big step forward here.
You should keep in mind, in our international footprint, we're active in virtually every territory globally. Some of those markets are dealing with very small, comparatively small pay TV penetration. Our access to those territories has been focused on a small part of the country. Now we're open to address the entire population. To give you one example, Italy, a country of 60 million inhabitants, 20 million homes, with only a 20%-25% pay TV penetration, which is also pretty much dominated by one big player. This product here is going to come to the market in partnership with Telecom Italia Mobile, which is going to give us access to 30% of the entire broadband and mobile community. A big difference, and I'll talk more about international, because I do think it's one of the key differentiators here for us and gives us enormous opportunity.
Talking about monetization for a second here, this is a very simplified look at our ARPU in linear today. This is focusing on the U.S. If you just take our reported revenue numbers for the U.S. divided by the number of cable households that we're distributed in, gets you to a roughly a $7 ARPU per month per subscriber. I'm very confident that with our discovery+ product, we're going to be able to achieve at least that same ARPU, if not more. That can be achieved even in the near term. Clearly on the right side, you have our retail price points undiscounted for the ad-free version, $6.99, and for the ad-lite version, $4.99, plus a roughly $4 advertising per user per month that we're assuming here. I want to qualify this a little bit. Obviously, this is pre-discount, this is pre-partner shares, et cetera.
A lot of this is going to, in actual terms, very much depend on how the mix evolves, how much is going to be direct to consumer or subscribers, how much is wholesale with partners, how attractive is the ad-free version versus the ad- lite version, et cetera. A lot of that is still going to evolve. Net-net, I do think that we have the opportunity to generate more revenue per subscriber over time than today. I do see upside here, both on the advertising side as we generate scale, and that puts us in a position to better monetize these eyeballs, and on the affiliate or the subscription side as well. Clearly, you have seen the enormous amount of content and quality content that we're offering here at a very, very attractive price.
I do want to point out, again, this is a U.S. example. Obviously, the international market is much, much more diverse with very different characteristics in individual territories. You should know that comparing linear and direct to consumer ARPU potential internationally, we believe that the uplift can be closer to 3x- 4x what we're generating in linear today. Another very important point that I want to make here is the advertising opportunity from a CPM perspective. This is not speculation, but we're already seeing a lot of upside potential that has started materializing. If we're starting on the left, our linear CPMs, and again, this is all against the backdrop in which we have a much stronger position than ever before. We're seeing ratings growth, share growth, across global territories. We've had a very solid upfront. We have pricing opportunities in linear itself.
We've also started to see that in our addressable linear products, in our TV Everywhere product, Go, we're already generating 2.5x price premiums. discovery+ is now going to take us to a whole new level. For the first time, we have full access, real access to first-party data. We're going to be generating that data at scale and at growing scale over time. Our estimate is that we can at least get a price premium of 3x of what we're generating in linear. Again, the product experience from a viewer perspective is going to be less clutter, less minutes, but much broader monetization opportunities for us. That is to a large extent, obviously, driven by the opportunity to also offer new advertising products. We're going to be offering over time binge ads, pause ads. You'll have keyword links.
Our advertisers can use geographical overlays to whatever advertising we're putting on. An enormous amount of additional opportunities. Again, we've talked about the data impact. We already have our OneGraph product in the market. This is going to supercharge that product and the power of that product. You have seen in the presentation earlier that we were able to line up some very exciting launch partners here with PepsiCo, Kraft, Toyota, and the likes. Having spoken about the top part of the P&L, I want to focus on expenses and margins as well. Again, we're starting from an ARPU potential that's above what we're seeing in linear, and we will apply the same efficient model that has made us so successful financially in our existing business to this business as well.
That's why we are confident that we will be operating this business at a 20% margin once we hit scale. The three buckets of cost that I want to talk to are content, technology, and marketing. We have already given you some background here, I want to quickly go through each one of them and help you better understand why we believe that we are going to be able to operate very, very efficiently in this new space. Starting with content, again, I think one thing that has like nothing else allowed us to be so successful, achieve the margins that we are enjoying, achieve the cash conversion rates that we're enjoying, like the content exploitation model. IP is at the core of this company. David and the team and the board have made the decision very, very early on.
We will own our IP no matter what. We're not engaging in syndication deals. We have all our rights. We own them across territories, across platforms. That way, we're getting multiple bites at the apple, U.S. linear, advertising, affiliate fees. We have seen very nice contributions from TV Everywhere over the past couple of quarters, years actually now. We go into international, same model, pay TV, affiliate fees. In some markets, we've been able to utilize the content to launch [free-to- air] offerings on top. discovery+ comes in here bringing to the table two more very nice revenue streams and revenue opportunities that I've just taken you through.
Again, let me assure you, we will continue to apply that same model that we have successfully applied over the years, taking multiple bites at the apple and optimizing the value and the exploitation of our content on a global cross-platform basis. The bottom right corner of this chart, very exciting. You can see that we're able to bring in even more of the content. You just saw all the fantastic brands and personalities in the video that we showed earlier. Again, if you just look at these logos here, this is the definitive home of real-life entertainment. Turning to technology. I want to take a step back here. We have been at this for a couple of years, and especially on the technology side, at least since I can have a view on this here. We have made tremendous progress.
We have gone from sort of very entrepreneurial individual pods of technology to one central platform that I would consider to be state-of-the-art. It is allowing us to leverage financial efficiency across that platform. It has allowed us to be independent from third parties. Launching something like discovery+ takes a number of clear prioritization decisions. We were able to make those decisions and just drive it through Avi and the team, a team of very professional, very experienced tech software developers, and tech leaders from the likes of Amazon, Microsoft, Google, et cetera, have done a tremendous job. Just as one example, we have been talking about the Sky partnership a couple of times already this morning and this afternoon. It is just remarkable that we were able to set this up and roll it out literally within weeks of signing the agreement. Very proud of what has been achieved.
As I said before, this is another cost category that is going to give us some real operating leverage as we roll out our product and as we grow the subscriber base because it has more of a fixed cost nature. Finally, and arguably the one that's most different here, from a traditional media perspective, is marketing. Again, I think we're in an incredibly powerful position. We have taken you through this amazing portfolio of brands that we're leveraging. These are beloved brands that people engage with on a daily basis, which takes us to the global reach. Again, we're in every territory, 800 million monthly unique viewers across our portfolio globally. As David said earlier, 250 million hours of content watched every day.
We have extensive social media following, all of this is going to be harnessed to help drive the rollout of this product and get people excited to sign up. Another point I want to hit here is performance marketing. Clearly, the most important part for those subscribers that we're trying to target outside of a traditional ecosystem. Again, we have learned a lot over the past couple of years. You're all familiar with the breadth of our direct-to-consumer portfolio. We have very early made the decision to centralize and drive performance marketing out of one center of excellence, leveraging all of the best practices that we're seeing across all these products and platforms and territories.
We have learned a lot and, as you all know, the technology advances, and we get better measurability and a better basis for a really efficient ROI calculation. As I said earlier, the marketing cost bucket is the one that has the largest variability because the way we approach this is we will spend against a better and better measurable customer lifetime value. If we see opportunity to acquire more customers at a price that's lower than the customer lifetime value, we will get behind it.
One point on that, we showed you it in the presentation, that if you think about Disney's product, and they've done a wonderful job. They have effectively, every time you see Disney+, you see five brands or handles or portals. It, from a curation perspective, tells people, "I love Disney Family," or, "I love Marvel," and they want to go there. We have that same thing and that we have super fans that love crime, that love HG, that love food, that love science and natural history. The advantage that we have is we have channels everywhere in the world in every language that have those super fans watching.
That one spot that we showed you, we've actually done more than a dozen of those already in the different genres where we'll be attacking home with all the great characters from HG and all the new product that we're going to be putting on HG. We'll air that on our networks. We don't have to go out and buy those spots. Yes, we're going to be promoting outside, but we have the ability to promote on all of our food networks around the world and have the characters that are on food, talk about all the great shows that they're doing that are only on discovery+ and what else is up there, and that the entire library is up there and come hang out with us. We have these super fans in crime and in natural history, and we have the ability.
Our inventory is much lower in terms of what we're selling now because of COVID. As Gunnar said, our pricing is way up. The advertising market has been very strong, particularly for us in our quest to kind of close that. Part of it is more people are watching our channels and our share is up. Also, the value of our channels is being more recognized now in this marketplace. The ability to promote on those channels is a very unique advantage, and you saw Netflix actually buy a channel in France.
I think the view is, hey, these channels are declining. For us, as Gunnar said, this is a very compelling business for us right now that's operating at a level in terms of scale and economics that we haven't seen in a long time. A lot of this is moving our way. The fact that Netflix bought a channel so that they can let people know about what's on Netflix and that to buy Netflix, we have 10-12 channels in every country in the world, in every language, and free-to-air channels.
Yeah.
The efficiency of putting spots on there is unprecedented.
Right.
Effectively.
Again, putting it all together, content fully owned across platforms globally, not encumbered in long-term syndication deals. A technology platform which is already supporting 5.2 million paying subscribers. We're already seeing some operating leverage out of that. These advantages on the marketing side. That's why I have no doubt that we will not only be able to reach an attractive 20% margin at scale with this product, but also probably reach a break-even point earlier than others in the market. Talking about scale and the technicalities of the rollout here, again, you've heard this this morning already, incredibly excited about the partnership with Verizon. An incredible endorsement, I think, for our product. An amazing opportunity to get access to a large number of homes very quickly.
I think this underlines the opportunity that we have in the market, in addition to all the other strong affiliate and distribution partnerships that we have. We have already spoken about Sky Q as well. It has already been out in the market for two weeks. As David said, incredibly excited, coming in much better than what Sky expected or what we expected. This has more to come. You should stay tuned, obviously, other key partnerships, Roku, Amazon, are in negotiation. You should consider this to be a when, not if situation, we will continue to announce more of those partnership deals over the next couple of weeks.
The thing that I would add is that what we've learned is having, Disney learned it very effectively with Verizon, who I think is the best of class. Great marketing company. They understand exactly how to service their subscribers by providing quality video and what they did for Disney. We've seen that having a partner that uses our quality content to effectively enhance or de-commoditize their platform is really effective in terms of scale. We've spent a lot of time with Hans and Ronan and Frank and Erin. They're a really great team at Verizon. We've been working with them for a few months. You saw some of the creative, there's a huge amount of creative. We have all the characters, which makes us unique, that'll be driving our brand and will be driving Verizon and Sky.
J.B. will talk a little bit later, but you should expect that there will be multiple deals like this that you'll be hearing about from us in the weeks ahead. We have a very unique product, a huge amount of IP, a lot of original content, and Verizon has had it work very well for them with Disney. All the mobile players across Europe now are looking for quality IP that could help them. We're in a lot of very compelling discussions right now. Europe, Latin America. In Europe, we have a really strong hand because we have all of our sports as well as an extensive amount of local content in every country which we have around the world, which makes us really ripe for these kind of one and one equals five.
Okay. I want to close by hitting some financials here. Again, most importantly, as you've already heard from us, we're targeting tens of billions of subscribers. As you would imagine, this is early days, we're still finalizing distribution deals, et cetera. We'll certainly keep you updated, and most importantly, as I said, we are going to continue on a regular basis providing updates on our next generation revenue, on our paying subscriber numbers, on the development of our investment losses, and hopefully soon profits. Let's go through a couple of building blocks here. For next year, we do believe that we will see a step-up in startup losses, an extra $200 million, $300 million on top of the $500 million that we're expecting for this year. Roughly in the $700 million-$800 million range.
As I said, I'm very confident that this is going to be the peak investment year, because I do think that we're going to generate more scale effects and operating leverage towards the end of the year. Again, keep in mind, we're already looking at 5.2 million paying subscribers as of today, contributing to the covering of those fixed expenses. We are also going to continue the transformation journey. For two years, hundreds of people across Discovery have worked very hard to really not only integrate the two companies but use that opportunity to recreate a new transformed structure, setup of systems, processes, and organizations that allow us to be operating much more efficiently. We will continue that. We have a large number of additional initiatives in the hopper.
Not at the $1 billion+ magnitude anymore that we've achieved in the first wave, but we do think low to mid-single- digit cost savings in the core OpEx structure are possible and are our target for next year. We had already told you that the Olympics impact with $300 million of revenues and roughly $500 million of costs is shifting over. That's going to be a factor for you to keep in mind for 2021 versus 2020. The last two points here, I'm very confident that we will continue to operate at industry-leading cash conversion rate. I think it's a remarkable performance that we have seen in the past.
Obviously, we are making some investments. You should expect that number to come down a little bit. I'm very confident that at least 50% of cash conversion is going to be what we're seeing for next year. Again, it's early. There are a lot of uncertainties in the ecosystem right now. We're not in a position to give detailed guidance for next year. You should expect very significant growth of our next generation revenues. Remember, we did $800 million this year, up mid-teens from the number in 2019.
We obviously had higher goals, which were parked because of especially the sports environment as far as COVID lockdowns. We will see very significant revenue growth next year, and I hope that I can give you more detail on that once we report the fourth quarter performance and have a better view on what the ecosystem and the macro environment is shaping up to when we come back in early March. With that, I would finish the presentation here and open it up for Q&A. Andrew is going to take the questions here, and we've got J.B. in London and David and myself here in the room.
Great. Thanks, Gunnar, and thanks, David. We'll open up for Q&A. Please select the Raise Hand icon that you should see, and when I call on you will have a prompt to unmute. Please unmute and ask your question, and if you have another question, please select the raise hand icon again. With that, let's go to questions. First question, Jessica Reif Ehrlich. Please unmute.
Hi. I hope this works.
Yeah, we can hear you.
All right, perfect. I guess a couple of things. First of all, can you talk about the cost of the originals per annum, and is that all incremental investment, or are you reallocating some of the funds? Will these originals find their way onto the pay TV platform? Secondly, how are you thinking about cannibalization? Is there a way to drive discovery+ without changing the trajectory of pay TV subs? Can you give us some color? I know you talked about this a little bit in the presentation, but how many subs do you think will want both services? Just, sorry, finally, a throwaway, but does Food Network Kitchen get consolidated in this, or does it stay separate? Thank you.
Let me maybe start, Jessica. By the way, first of all, happy birthday.
Thank you.
Let me start with the content piece. As I've laid out, we look at this as not one or the other. We are exploiting IP. Content is the backbone of our company, and the answer is yes, we will be spending more. We will be spending more on an aggregate level, and there is a component that is original for discovery+. To your point, we will apply the same logic as always. We will look at the value-maximizing windowing strategy, and I would expect that some of the content is going to end up on linear. The way we manage this, and have always managed this, and will continue to manage this, is one perspective on our content assets across all platforms.
I think we're going to experiment. We are launching. We felt it was important that we really make a statement to people that subscribe, that not only is it the depth of the library and that we really own real-life non-fiction, all the quality brands, all the great characters domestically and around the world, but that we have a huge amount of original, compelling content. We're launching with 50 original series. Some of those, "A Perfect Planet," we've been working on for five years with Attenborough and the BBC. I think it's some of our best work. That very well may show up on Discovery six months from now. Other series may never show up. So we'll kind of play with it and see how we go. We may do it differently in different countries, depending on the platforms that we have.
We felt that we want to launch and really provide meaningful nourishment, value, and a reason to buy. One of the big other reasons to buy is value. That at $4.99 and at $6.99. Some people may just get this because they love food and HG, but they don't love commercials, and they could see all of our stuff commercial-free, our entire library. I think we're going to just see how people use it. Are they spending most of their time with our library and a little bit with the originals? What's most valuable to them? Why did they buy it? Why are they keeping it? It'll evolve.
Yeah. And-
One other thing, Dave and Gunnar, that I was just going to add, and Jessica, that I think is relevant is the majority of the 5.2 million subs that Gunnar mentioned that we have today have been acquired using essentially prepaid for content. Just as a matter of uniqueness of our model and I think the power of our content, at least based on the track record we've gotten to date, the majority of those subs have been gotten with content that was not original for D2C, but actually existed in our existing multi-platform and linear ecosystem.
Right.
One other point that I thought you were going to make, J.B., is of the 5.2 million subs, the overwhelming or the real majority of those are discovery+ subs. We start with, we launched in the U.K., we've launched in India, then we have dplay and the Eurosport Player that'll be seamlessly converted. The majority of that 5.2 are at a real $5 ARPU, and they're discovery+ subs, or as of January they are today, or as of January 4th, they will be.
Jessica, on your question on cannibalization. The most important point here is, first and foremost, both domestically and internationally, there's a large segment of consumers that we currently don't reach. We believe that the majority of the subscribers we're getting are going to be incremental to what we have today. 30 million broadband homes that we're not covering in the U.S., and I've taken you through the structural difference internationally, where in many markets our penetration was capped at a pay TV penetration of 20%-25%, and even lower in some European markets. That's an important point to keep in mind. A lot of these subscribers, vast majority, incremental to what we have at least the same, if not significantly better internationally, ARPUs. Right? That's number one.
Domestically, we're going to learn. We don't know if people will have us in the home and other people will want to have us on every device. They'll want to have us commercial-free. They'll love the idea that we're in the bundle. At the same time, they love the originals, and they want to have access to our entire library on command. We have the $30 million incremental here in the U.S., but in addition, we have a very compelling and very cost-efficient product, and we've seen with Go how appealing that product is to the young demo. We've purposely produced this product in a way that people can have both, and we expect that in many cases, they will have both. We're going for scale domestically and around the world. We're going to be a real scale player here.
We're not in this to be small. We're in this to be very big. We think that we uniquely have that ability. We think the pricing and the value helps us, the appeal of the brands and the characters, and all the local language, which J.B. will get into a little later in what our local and sports strategy is. The cannibalization, we'll see, but people love our channels. They love them more than ever. As Gunnar explained earlier, we've never been stronger to the cable bundle. We're effectively like the NFL times five right now for women. If you took our channels off of the cable bundle, then the majority of what women watch wouldn't be on there. We did a survey, and we found that the majority of women, five or six of our channels are where they spend almost all their time.
Very few didn't choose us as three of the top six channels that they watch. We think that in the end, we are very important to the bundle. The cable distributors and satellite distributors have been extremely happy with us because we've been producing the most content during COVID, and they're making more money selling us. We're making more money selling us because of the value of our content and the share of us going up. We think we're great in the bundle. We're the glue, news, sports, and us. Now we have something that's really unique. As you look at all of entertainment, there's six or seven players that are playing for the scripted series and scripted movies. They're one of five, one of six, one of three, or one of eight. We're one of one.
We laid claim today in the most aggressive way to say, not only are we one of one, but we're going to have it all. If you love real-life entertainment and you love nonfiction, which is what people spend more than 55% of their time consuming on television. Maybe the scripted series is really sexy, but what they really watch is our stuff. We've added to it and aggregated to it between the BBC and all the new content in science and natural history, and A&E, and History, and Lifetime, as well as all of our originals. We think that this is a really dominating and compelling offer for people. We think that they're going to want it in addition to it.
Jessica, just to close out your question on Food Network Kitchen. I think that product, A, we've had obviously developed a very powerful and strong relationship with Amazon, which has been very meaningful to us and to them. They couldn't be more excited about the product. It was really always designed as more of a utility product, not a viewing product. I think discovery+ is obviously the primary focus and our biggest priority as it relates to an aggregated viewing service. FNK will continue to evolve and develop, really focus more on the utility of Kitchen and the food in the Kitchen rather than a video viewing service.
I'd just say the last point is that Verizon did a lot of work and looked at a lot of different quality IP players. They came to the same conclusion that we did, that we super serve families, we super serve men, we super serve women. We're completely differentiated from great services like Disney, great services like Netflix. We're a great companion to them. We're great on our own and robust with an extraordinary library and easy to curate, and we're a great connector. Sky and a number of the other players in Europe have come to the same conclusion or are finding the same as they do more research. I think that's the strength that we bring to the market.
Okay, good. Thank you, Jessica. Thanks, guys. Let's go to Doug Mitchelson. Please unmute.
Thanks, guys. Look, Dave, up to your commentary over the last year regarding launching OTT, and you talked about your brands and marketing efforts, and you saw the fast start Disney+ had. What do you think discovery+ can do out of the gate this first year?
Look, as Gunnar said, you're going to see it along with us. We will be on a quarterly basis telling you exactly what we have. There's a lot more subscribers that we have, but we gave you 5.2. Those are our paying subscribers. We're giving you the ARPU. We're going to be very transparent about how this is growing. I don't think we could have a better position than right now. There are other great services, as I said, we're completely differentiated. We've strengthened and we own this area of real life and nonfiction, which is very compelling. Unlike other services, we have all of our talent that's going to be caught. Chip and Jo are already out there saying, "You want to see our content? It's exclusive on discovery+.
Attenborough is going to be on Fallon talking about A Perfect Planet, it's exclusively on discovery+. I think we have that advantage. The addition advantage that we have is that our quality brands and family brands have become very comfortable for people and at a time where there's a lot of stress. Our share has gone up around the world. All of our research says that our brands are more important and our characters and the familiarity is more important. We hit the market now with a fresh library that's as big as Netflix, with 50 originals and loads of people that you love and brands that you love that you can hang around with at a time when most people in the U.S. are asking the question, like, "What series do I watch now?" I get this call three times a week.
What have you watched?" I've said, "Netflix is fantastic. I've seen most of this." Disney+. They have great services. With us facing, over the next couple of months, a continuing challenge of people spending more time at home, it's one of the reasons why we wanted to hurry up and get this launched in January. We want to get this into the marketplace. We think this is something that people will really love. We think this can be very big. We got the right partners. We're going to announce some more partners in the coming weeks. We're going to be pushing on it. They're going to be pushing on it.
We're fully global. We have ambitions to be very, very big, and as Barry Diller said to me, nonfiction is out there for our taking. If we can own it, we could really be a competitive service to Netflix globally, and that is our ambition. That's what we want to be. We think that's who we are. I don't know, J.B., you want to talk a little bit about our ambition internationally?
Yeah. I think we see the opportunity as taking all that incredible U.S. pipeline of content and supercharging it with all the great local content and local brands and local stories that we have. As I mentioned in the talk earlier, I think in this world where, credit to Netflix for having actually flattened the content world in a big way, the world continues to flatten in the content. All that content that is being developed and created internationally is going to find global audiences, whereas historically it's been confined to borders in individual countries. So that also is a huge advantage that we have because we don't just bring the great U.S. content to global audiences anymore. We bring all the content we produce globally to global audiences and to your home. We think that opportunity is also very compelling.
Just to clarify, we do see ourselves as a competitor to Netflix and as a competitor to Disney. We see it in that we're competing to be as successful as they are. Netflix has been able to get so many subscribers around the world to sign up. They have a brand that people love around the world. Disney has been so successful here in the U.S. They're taking it around the world. We think we're a great companion to those two services. We expect that there are people who love Netflix. There are loads of people that love Disney. There are people that love HBO. We're one of one. We're completely different. We fill out the entertainment pie. We're at full broad scale in nonfiction and real-life entertainment with all of our brands and characters.
We're competitive that we should be a real scale player that's profitable and global as an IP company in every language around the world, which Netflix has been able to do. That's how we want to compete. We want to be there with them. We'd love to be alongside of them and alongside Disney and alongside all those great services that are providing scripted series and scripted movies. I think our competitive advantage in Europe and Latin America is kind of unique, which J.B. has been all over because we have local content, and in Europe, we're the leader in sports.
Great. Thanks so much. Let's go next to Ben Swinburne. Ben, if you can unmute.
Yep. Can you hear me?
Yep, we can.
Great. First, just a couple of clarifications from earlier. Is the plan long term to have basically one single app, discovery+, that incorporates all the programming across unscripted and sports and around the world? That's sort of what I heard, but I wanted to make sure that was accurate. Secondly, are you planning to include any live linear feeds of your networks in these apps at all?
Very quick answer. No live feeds. The portfolio of our D2C assets, we will continue reviewing and looking at them. What we are going to do is there are a lot of services right now, more aggregated in nature, and J.B. already spoke about Eurosport in some markets that we're going to convert into discovery+ at very short notice. Some other models, and J.B. talked about FNK, it's a different proposition. Hard to say right now whether that makes sense to be included. We will continue looking at it, but we're looking at this as leveraging the same platform, one umbrella, and driving a large subscriber base across all of our offerings.
I think if anything, we see an opportunity for some of the non-video-led other products in the portfolio, like Food Network Kitchen, like MotorTrend, that as we grow the base for discovery+, which clearly will be the biggest, most scale product, that we have a very good opportunity for a virtuous flywheel of knowing who the users are within that product that love automotive content, for example, and helping them upsell them to a MotorTrend product, which is much more targeted, much more about being part of a club, an auto enthusiast, or FNK, which is all about helping you out in the kitchen.
So I think that over time is something we think is obviously not baked into any of our models, but over time, as discovery+ scales, a unique opportunity for us. The other just clarification to Gunnar's point about the live channels. Internationally, we do include live channels because obviously our portfolios for live sports, for example, obviously include the live channels and in markets just like we've launched in the U.K., they do include our live linear channels, including free-to-air channels in markets where we have them.
Just one final. We still have the partnership with the PGA in every country around the world except for the U.S. There may be some markets where we do like what we're doing with the Olympics. It may be that in some of the Asian markets where it's really popular, we may decide to put it together with discovery+, that that might be the best way to create value. In other markets, we may sell it independently. With golf, we're still talking to Jay and trying to figure out, it's probably going to be a market by market, whether it becomes local language, local sport, and golf becomes part of that, or whether it becomes just part of that in some countries.
Great, thanks. Let's go next to Mr. Nathanson.
Thanks. Can you guys hear me?
Yes.
Okay. Hey, David, let me ask you one then maybe I have two others for the team. Last week, John Malone was talking about the rise of these new gatekeepers, Roku, Apple, Amazon. We've seen in the past year or so, those gatekeepers start pushing back on some of the deals that HBO Max and Peacock wanted to achieve. What gives you the confidence as you go forward that you'll be able to get those gatekeepers signed up domestically, then to Gunnar, how does that answer then affect your look at the net economics on a per subscriber basis? Then to J.B., any help you can give us outside the U.S. on the impact of those gatekeepers and the role they play in growing subs outside the U.S.?
Thanks. Well, we have a good relationship with Roku and Amazon, an ongoing relationship with a lot of products. As you'd expect, we've been in discussions with them. We feel confident that we'll have deals with them in the near term. We'll keep you posted. We're confident that we'll be able to get those deals done. John and I talk about this a lot. In the end, we want to be on every platform. This is a big moment for us as a company because we're taking all of our content and all of our originals and brands. We're literally going above the globe. This year, it'll be 25 countries. Very quickly we'll have one platform. We'll be above the globe. A lot of our content is long tail.
People that love science and natural history or love food, that they'll be able to go to it. The piece that we see happening in Europe that we think will probably happen here is not only do you have these channel stores, and in our discussions, by the way, we're making real progress on getting some things that we think are more valuable to us, and helpful to them. In Europe, the distributors themselves are excited about this opportunity. We're doing deals where we're renewing our deals, we're getting our economics on our traditional channels, and then at the same time, they're offering our products to their broadband subscribers, or they're offering our products to their mobile subscribers. They're getting a little piece.
Unlike the cable model where they had to pay, which is great for us, but it's an entrenched model, a great margin because the distributor pays the content player for each. In this case, they're paying us on the traditional side, and they're making a little bit of money by marketing us and distributing us to their existing base, whether it be mobile or broadband. In Europe, they're seeing that as a real opportunity. Ultimately, we're having discussions with Comcast, we're having discussions with Charter. They're both, with Cox, with Dexter at Cablevision. In the end, these are great marketing companies.
They're reaching people, and the ability to take a great product like ours and make a little bit of money and then having the broadband subscribers and the mobile subscribers feel happier and have churn be lower and have the overall value of what the distributor is providing. We're seeing that clearly in Europe. We're seeing it, Verizon led the way with that in the most effective way here in the U.S. I think you're going to see it with the cable distributors. Because it's a win-win. J.B. structured some really interesting deals in Europe where the operators are talking to us and saying, "This is really good for both of us." It's working out really well.
From the perspective of the unit economics, that's factored into our models. As I said, the actual achieved ARPU is going to depend on mix between channels, et cetera. I mean, think about it this way. We have to spend subscriber acquisition cost for every subscriber. An ability to partner with someone with these powerful platforms, helping us marketing this product, getting us to much larger scale very quickly. Yes, at the expense of a share or a slight reduction to ARPU, but with a significant reduction as well to our marketing spend against this. This is factored in, and I think the economics, especially internationally, are still very, very attractive.
J.B., you were going to add something.
Yeah, I was just going to say, look, I think international, the interesting dynamic is the U.S. in terms of connected TVs and connected devices is obviously a much more mature market. There, the game is probably, they've scaled a lot. They've obviously got significant positions in the U.S. market. It's in the later innings of the game, and they're sort of flexing a little bit of their muscle. Internationally, it's a completely different story. It's barely early innings. As exactly as David said, in most cases, I'd say the telco and cable and satellite industry, to their credit, have done a very good job of trying to develop and jump on the lessons from the U.S. of trying to actually be more of the in-the-home media offering, irrespective of whether it's in the traditional pay TV bundle or in the apps world.
A Sky Q, for example, has been very successful in terms of being the hub for media and entertainment. Why do you need another device? I think the traditional partners internationally, A, are much more relevant and going to be much bigger for us than the newcomers in some ways. The newcomers are still going to be very important, don't get me wrong. I also think the second point that differentiates us versus Peacock and HBO is those conversations were U.S. only. These connected TV players, they desperately want to figure out how to grow internationally. For that, they need us big time.
Great. Let's move next to Steven Cahall.
Can you hear me?
Yes, we can.
Thanks, Steve.
Great. Gunnar, hey, I'd love to get a little more color on exactly how you define significant next-gen revenue. It just seems like that you only need about 3 million subs next year to more than offset the incremental investment. Maybe just any color if I'm thinking about that correctly. Then just a couple of housekeeping questions. Maybe first, is there any change to your existing linear affiliate terms with this launch? The second one, anything we need to think about in terms of how, like a split out to A&E might impact financials in the coming years? Thanks.
Sure. I'll handle the last first. In the deals that we did last year and the deals that we were able to get done over the last couple of years, domestically and internationally, we have full ability to do this with no impact. We're free and clear, and we're out attacking to build the biggest business that we can. Going back to the distributors, so that as we get more successful as is happening in Europe, they could be distributors for us on broadband or on mobile, depending on the distributor, and have a dual success.
A&E?
The A&E side. We paid fees that are included in everything you've seen. We own the BBC content as well as all new content that they produce in the nature and natural history area for the next 10 years. We're going to be producing a lot of joint content exclusively together for discovery+ globally. That's in the numbers. In addition, whether it comes to A&E or whether it comes to all the originals, we now own that content for the next several years. It's ours, it's built into the model, and we think that it enhances and nourishes the audience.
Yeah. Steve, no changes to linear terms here. To your first question, let me clarify. When I say an extra $200 million-$300 million of AOIBDA investments, I mean additional AOIBDA startup losses. Net revenue less expenses. We're spending a lot more than $200 million-$300 million in terms of expenses. We're assuming a revenue growth against that, so that the net effect is going to be based on our current estimate of $200 million-$300 million. Again, I want to be absolutely clear.
The big variable really is subscriber acquisition cost. If we find out that we can spend a fraction of customer lifetime value and we have the opportunity to penetrate markets even more deeply, then we will do that. As we've said many times, we'll take you with us. We'll be reporting on this on a regular basis. $200 million-$300 million of net additional AOBDA losses is my best estimate as of today.
Great. Let's move now to [Kutgun Maral].
Great, thanks. I just had three quick ones on subscribers, profitability, and maybe pricing. On the subscriber side, across the 70 million U.S. and 400 million addressable households abroad, it really doesn't take crazy penetration levels to come up with attractive subscriber counts. I appreciate that it might be too early to talk about subscriber expectations and your hesitancy to put out hard targets at this point, but it's just such a focal point for the investor debate. Maybe looking beyond next year, can you just provide a bit more of a framework of expectations for subscribers over the medium or longer term? On profitability, your target of 20% over the long run. Long-term, once you scale in mature markets, what does scale look like from a subscriber perspective? Maybe how long do you expect that to take? Maybe I'll just keep it at those two questions.
Yeah. Listen, we've obviously debated this, I understand that you would like nothing more than us giving you a layout of the five-year business plan or one of the scenarios that we have calculated. Indeed, it is too early. It is in flux. It's very much assumption driven. We're super confident. I do think we have an amazing proposition at a very, very fair price. We've lined up great partnerships, we're hitting the ground running globally with presence in every international market. I think we have everything it takes to be very, very successful here. We have said this is going to be tens of millions of subscribers, that's the ballpark that we want to give. David is going to be very, very aggressive with the team here, I have no doubt we're going to be pushing hard.
That's as much as we want to say now. Again, if you go back to what I said earlier in the presentation. Across the key cost buckets, starting with the fact that we're already leveraging our platform and a lot of our content, to J.B.'s point, with an existing base of 5.2 million subscribers. Looking at the point that we're expecting to generate a higher ARPU on a per subscriber basis, that we're putting to work the same content exploitation model on a global basis. That we're leveraging our marketing footprint, and that we're getting operational gearing out of our tech platform already. I have zero doubt that we're going to get into that 20% margin range. That being said, I don't want anyone to think that we're going to be managing this for margin in the short term. We're going after long-term revenue growth, shareholder value.
That's the key objective here for this product, and that's one of the reasons why we're not out here saying, "Oh, we want to be breakeven in three years." Maybe it's four years, three years, whatever the number is. If we see opportunity to really get behind faster growth, we will go for it, and we don't want to be boxed into managing towards a breakeven timeframe, a margin objective. I think that would be fundamentally the wrong way to get a product like this one off the ground.
We look at ourselves as being differentiated. In the U.S., we have this huge appeal with women and families, and we have so much scale in what we've added in real life and nonfiction. Outside the U.S., we're a full-on global IP company. We've been waiting now for a few years, working very hard on this, both producing content and holding content. We're not going back and buying back content. We've been holding onto these sports rights. We did deals where we have a right to put the Olympics on discovery+.
We have the right to put a lot of our major sporting events on. We've been preparing for this moment, and we've been preparing for it because we think we're differentiated and we can get to real scale. We could be above the globe with big scale, and if we can get the right distributors working with us, we think with this right proposition, that we could accelerate and have a really unique global scaled IP company. We wouldn't be doing this if we didn't think that's what we could do.
I think also the other thing I'd just add, David, and Gunnar made it, but I just want to make sure it's not lost on anybody because it was in a takeaway box on a slide, but he shared earlier, obviously, the ARPU slides for the U.S., in comparison of traditional business versus new business. I think rightly in the takeaway, you saw a sort of equal level and over time, certainly on the ad-supported product, a high ARPU with discovery+ in the U.S. than in our traditional model, not only U.S. In international, almost from day one, the ARPU is multiples of what our wholesale business look like. I think that also gives us a lot of confidence that, over time, from a revenue generation and an ARPU perspective, this should be a very attractive model as it scales.
Yeah. I think just a final point. As we talk about what the opportunity universe is, we have a product now that can reach smartphones everywhere in the world. We have a very affordable product that has differentiated content that people know. When Oprah went into a rural area of India, and she went and she was visiting and she looked inside of a tent, they were watching Discovery. We have brands that people know, and they couldn't get us before without paying for a big bundle.
It's not in our model, but it's in our heart that there's two, three, four billion smartphones out there where people can consume content, they could buy content. They don't want to pay for a big bundle, they take a look at this huge library and look at all these brands and characters that they know and brands that they're familiar with. In many of these markets, we're less than $5. We have ambition on all of that. Over time, I think we're going to make real progress with those smartphone users.
Okay, great. Thanks so much. Let's move on to John Hodulik. Please.
Great. Thank you. Just a couple of quick ones. First, anything you can tell us on engagement on the 5 million subs you guys have largely in the U.K., or any more specifics on the ad load for the ad-supported product? Lastly, obviously, it looks like you guys expect the rest of the world to be a much bigger opportunity. You got deals with Telecom Italia and Sky. Should we expect to see more deals similarly in other markets? Any details you can give on the economics of those deals now compared to what you guys are doing with Verizon?
J.B.?
Yeah. As David sort of alluded to earlier, we absolutely have a strong and robust pipeline of similar deals à la Verizon, à la Telecom Italia, à la Sky, that we are actively working on now. David alluded to, we hope to have more news, and we'll be putting out, obviously, updates to you all in the weeks and months to come. Rest assured that we think that is not only a really important way for us to scale quickly but also scale efficiently. We have a very robust pipeline of partners that we're in negotiation and closing on deals that we will come back to you with more details on. We see those economics as net-net positive, for two or three different reasons.
Number one, as we talked about, ARPU of the product over time, particularly internationally, is much more attractive than even our wholesale model. Secondarily, as Gunnar has made the point, it taps into a whole new customer base that we don't have access to today. I think those two variables for us make us very confident that these partnerships are going to really help us scale fast and efficiently and bring some new incremental economics into the model.
There's an experience we had a few years ago. This really goes to the earlier point of we're an IP company. How do we deploy that on different platforms? We decided to take our female content off of Sky Italia a few years ago because the penetration was, at that time, about 18% or 20%. We thought we had some great content in local language. We bought a free-to-air channel, and instead of running it like a traditional free-to-air channel with news and sports and entertainment, we just bought it, we call like a stick, and we put our library of content, of female content on there. We called it Real Time. Within a month, it was the number one channel for women in Italy.
For several years, we used our existing library to support this free-to-air channel with great margin and great free cash flow. It was profitable very quickly because it was new to the whole audience in Italy that hadn't seen it. That's kind of a traditional way that we innovated, and we did that with free-to-air channels across Europe. There's a lot of people that haven't seen our content. We're creating this so that people that have seen it, if this is so good and so much, and so much more, and you get the sports and the local that they're going to want to buy it. There are loads of people that haven't seen it, that this is going to be really new to them, and for $5 or less, it's going to be a wow when they compare it to buying pay TV for $40.
On the engagement question, sorry. We don't have any specific metrics we're looking to share today, but certainly, I can tell you, we've been in market probably the longest in the Nordics and in Poland, and obviously across our Eurosport Player product. The impressive thing that makes us feel good is certainly as the product has continued to scale, a lot of times, unfortunately, as you add more people in, you usually see some level of engagement erosion, because you've sort of saturated your most passionate audiences, and you get into a wider, broader base that is less engaged. We've generally seen engagement stay very high, which makes us feel good that we've got a product that is sticky and that people are really enjoying.
Perfect. Thanks, J.B.. Now, I'll go next to Bryan.
Just, we should make that last point, J.B., about sports and entertainment as well as all of our U.S. content, that when we experiment with putting it all together, that the amount of time that people started spending with the product, not only did more people want it, but they were spending more time with it. I think that's.
Yeah. I think, look, one of the things that you've heard us talk about, and I think you've heard when we had the Olympics, for example, back in Pyeongchang in 2018, the great thing about sports is incredibly powerful tool for customer acquisition. We experienced that at all big events, but also obviously no bigger event than the Olympics. The challenge is that people come, and then, once they're done watching the event or watching the couple of events that they liked, if they're not fans of the rest of the sports or they don't want to pay for the off-season, you lose them and you got to reacquire them. That model becomes a challenging model. We've learned that the hard way in the multi-sport OTT space.
By packaging up in the Nordics with our entertainment product, so that if you don't find the sport that you like or it's in the off-season between two seasons, the amount of users who are now finding entertainment content that nurtures them through and the churn improvements we're seeing from those packages is greatly supported by having entertainment and sports together. That's a big part of the reason why we see pulling together the sports offering into discovery+ as incredibly compelling and better for churn and better for the customer at the end of the day from an engagement perspective.
Great. Let's move on now to Bryan Kraft, please.
Good afternoon. Can you hear me okay?
Yes, we can. A little muffled, but go ahead.
Great. First question, two questions. One, will current season content on your TV networks be on discovery+? Is the idea that only past seasons plus the discovery+ originals will be on the service? Secondly, Gunnar, I just want to see if you could help us to understand the long-term margin expectations of 20% a bit better. I was a little surprised that you don't expect them to be higher given you expect ARPU to be similar or better in the U.S. and much higher internationally, and then most of the content's already paid for. If you could just give us any additional color there, that'd be great. Thank you.
Sure. Yeah, let me maybe start with that. Again, keep in mind, this is off of a business case that's driven by assumptions that are based in our experience over the past couple of years. The one big difference here is that in a direct-to-consumer world, we are responsible for subscriber acquisition marketing. That's a cost line item that in the traditional linear world, we don't have. Again, I think if you put it all together, the 20% margin, again, we should be getting better margins, I think, than some of the peers and competitors. We should be getting to a break even faster because of all those factors that you brought up and that we've laid out. We also have to keep in mind that we are building a platform, that we are increasing content spend as a company altogether.
Yes, we're leveraging it across platforms, but it's an increased content spend, and we're also spending for marketing. Again, I feel very confident in that percentage. We will keep you posted as we go along. Hopefully, you're right and there's more opportunity. I don't want to get carried away here. We have a lot of work to do and a lot of subscribers to acquire. Again, that factor, the speed at which we acquire subscribers, ironically, the more successful we are, the more we're going to be spending for marketing. That's a factor that needs to be taken into account as well.
The fluid nature of our content windowing.
Yeah. On the content windowing, listen, the vast majority of our linear content will stay on linear and will only be on discovery+ at a later time after the end of the season, in line with what has been industry practice. Again, for everything else and for some individual productions, we may be experimenting with windowing. As I said earlier, we are very confident. This is what we do. I mean, this is what we have been doing internationally and globally over the years, to find out what's the best way to maximize the value of the content that we invest in. Again, we're investing more, we're going to be spending more for content with this new product in the mix than before.
There are some franchises like, we look at "90 Day Fiancé," discovery+ is going to be the home of the "90 Day Fiancé.
Sure.
It's going to be the whole fan club. There will be over 100 hours of "90 Day Fiancé" that's original and exclusive just on discovery+. We'll be dropping content you'll be watching on a Sunday night, maybe from 8:00 to 9:00 or 9:00 to 10:00 on TLC, and then for the next two hours, there'll be fresh content on discovery+. We are taking some franchises where we can do things that we couldn't do on a traditional platform. We cut down and edit "90 Day Fiancé" in a meaningful way, and so we could do original series where we don't have to cut at all. We could follow the couples around. We've been working for the last year and a half on a lot of original series just for "90 Day Fiancé" to create a "90 Day Fiancé" home on discovery+.
We think that is the number one most compelling product on television in the non-fiction space. For us on Sunday and Monday night, it's on for two or three hours. Some of those hours, we get a four or five with number one show on all of television. Some weeks we're number one on all of television when sports wasn't in. When we talked to people, they said they want more. They want it to be more real. They want to see more of the outtakes. They want to see more of the uncut. That's an area where we're saying, "Let's take a huge piece of that universe, and let's make that '90 Day' the place where if you really want to see '90 Day,' you got to go to discovery+.
Good. Great. Thanks. Let's go next to Alexia Quadrani, please.
Thank you. Just a question for Dave and a question for Gunnar. David, you mentioned such a tremendous library of content there, I think 35,000 episodes. I'm curious how much you guys are able to customize that library to help the consumer stay engaged because of technology, maybe to kind of present the right content from the right person, create top 10 lists. I'm trying to see how you can manage such a vast library to maximize the effectiveness the right way. Just on, Gunnar, just a follow-up on your question about spending or losses in 2021. It's probably too early really to comment on how much that might fall off a little bit or get a little bit better in 2022 at this stage of the game, but curious if there's any color in that, meaning is there any kind of one-time-ish cost.
Yeah.
In that number next year that would naturally disappear the following year?
Yeah. Let me maybe start there quickly. Alexia, you're right. It's too early to say, but let me just say, I wouldn't be sitting here guiding to a peak investment year for next year if I didn't have a lot of confidence just from what we're seeing across the portfolio that we are. Again, keep in mind, we're already looking at 5.2 million paying subscribers that are already sort of covering some of the fixed costs. We're expecting, obviously, significant subscriber growth. On the basis of that the nature of this business is you're spending upfront subscriber acquisition marketing, and then you start leveraging that subscriber base as the base scales up. I'm very confident, but I'm certainly not in a position right now to quantify that any further. David?
On the-
On the product itself. We couldn't be more excited about the day that you guys get to play with it. We've had it for the last three months, and we've been playing with it. The product itself is really compelling. I think one of it is that Avi Saxena and his team built a great product. We have Karen Leever that has been working with our Go product for the last couple of years. We know what people like, how they like it, how they like it organized. More than that, we have a real advantage versus most of the other platforms in that we have multiple ways, but easy ways to curate. When people see our brands, those are like portals, just like Disney, where you want to go to play around with Marvel, you go through that Marvel portal.
For people that like HG or Food, you can go by brand. You can go if you love Oprah, if you love Chip and Joanna Gaines. You can go by character, you can go by brand. We also have as the more that you use the product, the more it's going to create content for you that's consistent with what you have watched and what you would like. We have the algorithms. We also within a few weeks of launching, we'll have you create your own channels. You can just pick off, "Here are my top five shows that I love on HG and Food and cooking and Lifetime." That becomes a channel that you really don't have to do anything with. You could be cooking, and you've created your own customized channel. J.B., you could add to that. I think curation's a big advantage for us.
I think that's exactly right. Curation, I think personalization we clearly recognize is a massive priority for us. In a service with this much volume and this much breadth that we want to be able to serve up the most personalized experience to every individual user. As David said, there's sort of curation at the brand and genre level, which already unlike bigger broadcast brands or more generic entertainment brands where you get a mix of everything, so people don't really know what it is. Most of our brands have a very defined lane. Those brands mean something. People can curate by brand, people can curate by genre, find content that way.
We've obviously invested a lot in a artificial intelligence-based recommendation engine that as the user base grows and the engine obviously will need several weeks and months to develop more and more based on actual user data and patterns. It will actually begin to develop on its own recommendations that fill out exactly what individual users. If you like this, a lot of people also like this. Then as David said, we also will be rolling out shortly after launch an ability to sort of essentially curate your own channel and create a sort of playlist, a video playlist, if you will for what you like.
We also know that this is one thing that is unique about our content is that linear, as much as we understand linear viewership is in decline. At the end of the day, people still love, as David referred to earlier, turning on our channels and watching it because they get super served the stuff that they love. People will be able to do that in a kind of quasi-linear fashion, playlist fashion, and curate it. The recommendation engine can surface stuff that they love, and they can watch it for as long as they want.
That's how we got our tagline. "Stream what you love."
With that, let's go to the next question. Kannan Venkateshwar, please.
Thank you. Just a couple from me. First is on the deals that you have with Verizon and other wholesale carriers globally. During the promotional period when Sky offers this for free or when Verizon essentially bundles it with their unlimited plans, is the structure of pricing from your perspective different from when the promotion runs out? In other words, the net ARPU that you realize in the first year, will it be very different from what you see potentially in the future years? Secondly, on the advertising front, the ARPU that you flagged, Gunnar, the $4 per sub, that actually seems pretty ambitious, relative to what others like CBS, for instance, have laid out for All Access. Just wanted to get some context around how much of that is pricing and how much of that is volume. Thanks.
Yeah. Let me maybe start there right away. I think, as I said initially in my presentation, this needs to be seen against the backdrop of the incredible value of our content brands from an advertising perspective. We're enjoying a lot of interest. As you would imagine, we've also pitched this product in the last upfront, and we're in active discussions with a lot of advertisers. You've seen our launch partners, et cetera. I think we're bringing something to the table here that's incredibly valuable. Again, from the perspective of the mechanics of these $4, it's a lower ad load, much less clutter from a consumer perspective, but a much more engaging and in parts interactive experience, which allows us to get 3x and more CPMs that we're getting in linear.
One of the other elements there is there's a number of advertisers that We saw this in the upfront where we played much tougher because our share was up and our viewership was stronger and we had so much original content. There are a lot of advertisers that they need to be in home or they need to be in food and cooking. They're not just buying great impressions and great length of view. If you're a Home Depot or a Lowe's, you need to be There are a lot of businesses that have made businesses by primarily promoting themselves on home or food or on MotorTrend. This isn't true for all of our channels, but for DIY and Home and for a number of them, we have the unique advantage of having advertisers that feel they need to be, and they build their business on being there.
On your question on our distribution deals, again, we can't go into any of the details of those deals. A couple of points to lay out. Number one, what's super important for us is access to data, of course. That's a big prerequisite for all of these deals. Number two, on the pricing side, I just want to point out we're getting paid by our partners for this product, both in the promotional period and obviously then by the consumer afterwards. I think as a general statement, without going into the details of individual deals here, you should always assume that we're striking deals that would lead to a slightly lower ARPU for that promotional period because the partner obviously needs to be compensated in a way.
If you look at that through the lens of our financial model, again, as I laid out earlier, we're saving subscriber acquisition costs and we're getting a lot more scale. From that perspective, we're trading off a little bit of a top-line potential on a per-sub basis for larger and more accelerated subscriber base growth and a better margin profile.
We're also getting paid in the case of a lot of these partnerships. For instance, here in the U.S., we need to charge a certain amount of money. Otherwise, we would go back to our major distributors in the U.S. and they would say, "Okay, I get that rate." We're getting paid real value for every subscriber. When somebody is offering it to all their subscribers for free, we're getting paid for every subscriber that gets it.
Let's see if we can get a few more in. John Janedis, please. Next.
Great. Thank you.
Yeah.
Two quick ones for me. One is, Gunnar, when you talk about the three expense buckets and the fixed versus variable components, I assume content's by far the largest. Can you help us think about order of magnitude between content tech and marketing in the first couple of years? Maybe a related advertising question or CPM question. Last month, you guys talked a bit about relative CPMs versus broadcast. When you talk about the CPM premium today, how does the 3x price premium to linear compare to other competing offerings? What differentiates the One Graph product from what else is in the marketplace today? Thanks.
Let me start with the model. You're absolutely right. Content is by far the largest category. Number two, based on our models, would be marketing. Again, that's the one that might be a lot more or a lot less depending on pace and success of our rollout. Again, technology is material, but a lot of it has already been expensed because we have been at this for a while. In terms of the OneGraph product, it's hard for me to compare that with other products in the market because we just don't know. What we do know is that there is a ton of demand. What people want is unduplicated cross-platform reach. Our OneGraph product uses the, was it Lightlink technology, to match data that we have with other data sets, and that way identify individuals across platforms.
What's really important here is that for the first time with discovery+, We're able to get access to first-party consumer data at scale, which will help us increase our match rate, so we can use this OneGraph product in a much more effective way, and therefore, get much better results for our advertisers and, obviously, the ability to charge higher prices. Again, part of it is theory, but part of it is practice because we're in discussions with advertisers. We've got very fruitful discussions. We're getting a lot of input. Again, Jon Steinlauf has been in the market domestically here in this year's upfront and has been selling against this product, and we're seeing a lot of very excited interest.
The only other thing I'd add on the OneGraph product, Gunnar, as you said, is I think it's the combination of the technology and the data that allow true sort of cross-platform solution for advertisers, but also allow them to have much better attribution and ROI metrics on the back end for their own measurements. The combination of that, plus the endemic ownership of categories and our customer groups that are uniquely identifiable by the fact that they're home renovation watchers or food watchers that powerful combination of those two is really what drives not only the uniqueness of the technology, but that with our audience demographic and profile of our brands is where we see a lot of power and a lot of value for advertisers and marketers.
Great. Thanks, J.B. Okay, let's go to, I guess, our last question. Michael Morris, please.
Hi. Thank you, guys. Good afternoon. A couple questions. First, you've been able to offset some of these incremental investments you've made over the past couple of years with some efficiency savings. I know some has been related to integrating Scripps. As you look forward, how do you think about any additional opportunities for savings with your more traditional businesses as somewhat of an offset to the investments you're making in these next gen products? Second, my question is really about why you would anticipate that a bundled subscriber would also sign up for discovery+ as you kind of anticipate in some cases.
I understand there's going to be additional programming, but it does feel like the majority of the product and the effectiveness of the product is available on the Go apps. Do you anticipate any change to the Go apps that makes discovery+ more clearly stand out? Or is there sort of an inherent conflict there in bolstering that product at the proper level of investment if there's more opportunity, better financial opportunity if you kind of migrate those subscribers to discovery+? Thanks.
Thanks, Mike. The traditional product and the Go product is, think of it as effectively a live product. The entire library is not there. You can't go back and look at the last five seasons of, or go back and watch MythBusters or see the last couple of seasons of Gold Rush. Whether you're watching the traditional, the live channel or Go, it's essentially a live service. One, we have our entire library. Two, we have 50 originals, very high quality original product, where we have the entire natural history library of the BBC. We've added in a big documentary section, so it's non-fiction and general entertainment documentaries. It's going to be a pretty compelling environment for someone that likes food. It's more than just now than being able to see without commercials.
There's going to be a lot more there, and they're going to be able to binge and as J.B. said, create their own show lists, and they can be watching. They can do the Food, HG show list, they can do the natural history list, the crime list, and create their own channels. It may be that there's a family that has it, but there's two kids that are saying, "It looks great in the living room, but I don't have to watch what they schedule. I can schedule anything I want." We're going to have all kinds of binge lists. It really feels like an SVOD service versus a live service. I'm going to pass to Gunnar on the cost savings.
One point that I wanted to make is this crazy experiment that we've all gone through because of the pandemic has revealed a lot to all of us. It's revealed a lot about ourselves. We were able to build this whole product both technically and produce more than 1,000 hours of original content, tons of content just for discovery+, all virtually from home. So we've gotten a lot more efficient. We've been able to produce content for a lot less money. We also learned that in some cases, we used to have 14 people in a control room. Now, because of necessity, we needed to do it with nobody. Before we would have a whole team that would build for us to have a video conference. Now we do it ourselves, and we hit a button. There's 100 examples of that.
We, like everybody else, every other major company, have a reveal from this experiment, which is we could be much more efficient in areas that we thought we were incredibly efficient. We could do things a lot differently that could allow us to be much more productive. People can work differently. We need a lot less real estate because people want to work from home maybe two days a week. Our real estate footprint, we think, is going to go down 35%, 40%. Not everybody's going to have a desk anymore.
People don't want it. They want to work from home one or two days a week. We already have virtual offices in Europe, and they like those better than coming into an office and going to there. There's all kinds of costs that we've learned from this grand experiment. We've been very careful during this pandemic because of the challenges that everyone is facing. Coming out of this
We have very concrete plans of restructuring the company in ways that provide more effectiveness, more efficiency. How do we spend more money on growth? How do we spend less money and more, more, more money toward, you know, this is our future. This is the most important product since I've gotten here. If we can achieve this goal, hand-in-hand with Verizon, hand-in-hand with Sky, together with the big mobile and broadband distributors across Europe and Latin America, ourselves working with Amazon, working with Roku, if we could take this great IP package that we have and that we've pulled together, and all this original, and get above the globe to real scale, we're a very different company. That's what we think we are, and that's what we're going to work to do, and we're going to effect a lot of cost savings in order to make that happen.
Yeah. No, listen, you're right. Going back to early 2018 when we closed the Scripps acquisition, we're well over $1 billion now in terms of cost savings. Clearly, as I said, that's not the pace that I'm looking at here, but I'm very confident that we're going to continue this low to mid-single-digit efficiency gains quarter after quarter here. I will say this, I've done a lot of cost work in my career. I've never seen anything.
Some years at McKinsey.
Yes. I've never seen anything like the Discovery team. From a CFO perspective, it almost feels like kicking in an open door sometimes. The entire company is fully rallying behind this transformation. Everybody is so excited about us coming out with this product here today, and everybody understands we need to work hard every day. People are coming in on weekends, and people are looking for opportunities. There's so much stuff that we still have on the list. Some ideas that came up initially, but we put on the back burner. Some initiatives that required system changes, and sort of longer term technology projects to be in place to now be able to go after the savings opportunities. Again, the entire company is very focused on making this transition work, and there's a lot more to come.
J.B., why don't you address this issue outside the U.S., because this is an important one. That somebody goes ahead and they're watching our free-to-air channels, and they also have cable, or they have cable. What is attractive about our product and why would some of those people or members of those families? Is it sports? Is it the library? Is it more local original? Just from a European, Latin America, Asia perspective.
Yeah. Well, I think, speaking from fact and then the track record that we have, we alluded to this point earlier in the conversation, where of the 5.2 million subscribers, the majority obviously come from what will be the discovery+ rebranded and relaunched product. The bulk of those subs have been acquired, essentially on pre-premiere windows, earlier windows than broadcast, no ads in some cases, mobility and better access on all devices in other cases. Some elements of no advertising. The sort of core of it, and that's before even going into investing in more original content, more goodness, more product feature sets like the playlist and things like that make the experience significantly better. That's the success we've seen off of what I'd call table stakes elements.
We think when you add onto that then an incredible lineup of original content, offshoots of franchises that are known and proven and loved franchises on air that will be saying, "If you want more of this, go to discovery+," for those super fans who can't get enough, and doing more originals on discovery+. The exclusive licensing of BBC content. You get all your favorite nonfiction content in one place in the U.S. with all the A&E Lifetime History content.
To us, it's not an either/or. By the way, you get all that for the price of barely a venti latte a month. The value is unbelievable. For us, it's not about, clearly very appealing to the non-cable households, but even for the cable households, as an add-on product for the super fans and people who love our brands, we don't see that as a big stretch.
Okay. Thank you for sitting through our presentation. We really appreciate it. We've worked real hard for a long time. We're super excited about bringing discovery+ to you. I think you can see that with the creative, the brand work, all of our talent is behind it. They're excited about us embracing the future. Our board is fully supportive and couldn't be more excited about this step forward. We've been waiting to take this step with our global IP, and I've been saying for a long time, we're going above the globe. That's what discovery+ is. We love the affirmation of Verizon. We love their energy, their excitement. We love their research for how we're going to nourish their audience and how much they're going to love it.
We love the support of these distributors, and we appreciate all your good questions and we're looking forward to this journey. It's going to be in some ways new, but in many ways, we've had a lot more experience than anybody else in this market. We've been doing this for many years. The good news is that we've learned a lot. We've learned from what hasn't worked. We've learned from a lot of green shoots, and we've had some things that have worked really well in some markets. We in the team sitting around last night talking about this, we've learned a lot. We've taken everything we've learned to create the product that we think the viewers themselves have led us to.
This aggregated product that will fully nourish them, that's missing in the market. We're one of one. We're going to be pushing this. Hopefully, it's going to be rolling downhill. We're going to push it and make sure that it accelerates, and we're really going to keep you posted every quarter. Thank you for your time. You'll be seeing, starting tonight, you'll be seeing a lot of discovery+ everywhere in America. We're already all over the U.K., soon it'll be something that people recognize and understand everywhere in the world. Thank you so much for your time.
Thank you.
Thank you.