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McMahon started out discussing the “somewhat disappointing†quarter, noting that Wrestlemania was not factored in to this quarter as it was last year at this time. He said that the film division did better than this time last year but due to accounting, it reflected an impairment.
Vince said that PPV was “flat†this quarter compared to last year but television ratings, their new WWE direction and the success of Tough Enough thus far has shown their power.
Vince then there was a misunderstanding of what the new WWE is and went into detail in explaining how they wouldn’t depart from their current product but would use their expertise in television production, live event production and licensing to create new revenue prospects for the company with other acquisitions and projects.
George Barrios said that Wrestlemania was in the second quarter this year, as opposed to last year, where it was in the first quarter, so they dropped in comparison. He said that increased costs in film and live event costs cut into increased revenue from licensing and toys. He noted they had an impairment of several million dollars from WWE Films as well.
Barrios broke down some of the changes in the numbers. They explained the drop in the Elimination Chamber PPV buys being due to their TV partner in the UK broadcasting it as a live event for free, not a PPV event.
Their revenue from toys increased 86% from a year ago due to their partnering with Mattel. Videogame revenue was up over $2 million due to more “favorable†agreements with THQ. They noted that WWE All Star videogame sales are not reflected here but would be in the new quarter.
They took on a loss of $1.5 million on the WWE Studios’ film “The Chaperoneâ€, as they now take on all the costs of marketing and advertising themselves as part of their self-distribution of the film.
They continue to look for potential TV partners for WWE Superstars and WWE NXT as they continue them as internet series domestically.
Barrios said they are being cautious over their short-term business but excited for the long-term possibilities.
Barrios brought up the WWE dividend changes and reiterated what he said at the stockholder’s meeting about how WWE is in a cherry position as the competition for content increases with new emerging platforms. He also mentioned the idea of creating the WWE Network as an alternative product.
They then went into the Q&A Session:
WWE was asked to comment on how MMA has impacted WWE’s PPV business, potential alternatives for the Network. McMahon said that he didn’t see MMA as a direct competition for them outside of the fact that they are also on PPV. He did say that if they are on the night before a WWE PPV, it does have an effect because all of the promotional material on the cable companies is “gobbled up†by the fact there are two events, not because of MMA is taking money from fans choosing one over the other. He said MMA doesn’t hurt them any more than boxing did back in the day.
McMahon said that have received a “very favorable†reception to doing a traditional Network. However, he believes their Network will likely be a hybrid into a traditional network and an alternative, such as Netflix’s streaming on demand. He said they will be very flexible in that regard.
George Barrios noted will have 27,000 hours of library material digitized by the middle of 2010 at a cost of $4 million. They will be looking at a future investment of $4-$5 million into creating new programming. The network will be something that will be ad-based in some areas and subscription based in others. He noted that by owning 100% of their library, they are in a great position. They are looking into all opportunities to use their library for future programming ideas on all platforms, traditional and emerging.
McMahon said will have two new “Live event†television programs that they will be rolling out in the “not too distant future†and that finding a home for them won’t be “a problem.â€
Barrios said there is a “whole world out there†for intellectual property and WWE has created a lot of their own in the last 20 years. He said they can use their infrastructure to acquire assets and put them through the WWE machine.
They were asked about the timing of acquiring new assets given the economy still recovering and whether we are far enough along in that recovery to launch a Network. Barrios said that with the balance sheet and debt capacity that WWE currently has, the real discipline on their end will be making sure they are acquiring something that WWE can add value to it strategically and operationally. Barrios said there is never a good time to do anything but they have to take a chance and maximize the opportunities that exist. Barrios said there is a real opportunity to do that during a time period where there is a “land grab†for programming.
They were asked about adding additional infrastructure to help handle any new acquisitions. Barrios said that there is a real opportunity by not having to duplicate the infrastructure of companies and there is an opportunity by adding value on the top line without having to duplicate the infrastructure.
The next question regarded WWE talent, asking whether there was any traction with the current storylines. Vince said that Rock’s return has brought them greater awareness by having older names “brushing up†with younger talents like Miz and Alberto Del Rio. Vince said talent development is “going very well.†Vince said they were insulted with their talent pool, noting that Edge’s unexpected retirement wouldn’t effect their bottom line because they are doing so well with developing talents. He pointed out that Wrestlemania had talents in main event positions that were never there before. He said you can look at how the ratings are doing for proof of how that is going.
Vince was asked about ticket prices going up. Vince said that they like being the best value for everyone with the lowest ticket prices, especially as the costs of everything else goes up. He intimated they could raise the price of the higher priced tickets but not a wholesale increase overall to the ticket prices.
PPV revenue was asked about. Barrios said they aren’t adding more promotional dollars to the marketing to the events but they continue to get more value by doing promotions with their partners. He said the marketing team gets better by the year at creating new opportunities outside of money-driven marketing materials.
There were no additional questions at that time so they closed up the call and thanked everyone for listening in.
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