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WWE REVEALS THEIR NETWORK MODEL, THE FUTURE OF PPVS WHEN THE NETWORK LAUNCHES, WHETHER THEY WILL KEEP THE CHANNEL PG AND LOTS MORE: COMPLETE WWE EARNINGS CALL COVERAGE

By Mike Johnson on 2013-02-28 11:05:36
WWE held their quarterly earnings conference call this morning with Vince McMahon, George Barrios and Michael Weitz on the call.

Vince noted that they were way up with digital media and TV rights and had increases on home video and PPV revenues. He said their TV footprint grew and praised their social media growth. He said they had the #2 action figure line in the United States. Vince said it was a really good quarter.

Vince said that their Rolling Stones PPV has started to lead to many other opportunities, which he didn't name at this time. He mentioned their partnership with Susan G. Komen to raise money for breast cancer research and with the National Guard. He said they were excited about their new videogame deal with Take Two.

Vince broke down their increased TV programming with the third hour of Raw, Main Event, Saturday Morning Slam and their Hulu Plus deal. He said 2013 will be flat in terms TV growth (likely because they are holding out for the WWE Network) and noted they would have increases in talent development and creative teams. The fourth quarter reflected the jump from 4 hours a week to 6 1/2 hours of programming a week.

George Barrios noted their core business did very well, especially when you take out their Network expenditures and WWE Studios losses. He said that they improved their home video business and worked at PPV and talent development growths. He said they improved the licensing and marketing of their brands. Barrios said they increased the TV audience by 12% with the expansions and elevated social media by doubling their followers on Facebook and Twitter.

PPV revenue was up 4% in the last quarter although they produced one fewer PPV in comparison a year ago thanks to higher HD broadcast PPV prices.

Live events were down this quarter, partially because they held 8 less international dates compared to the year before. Plus, a year ago, they were really hot in Mexico and that was not the case this time around.

WWE Studios had a small revenue this quarter but in the end they broke even. That was a big leap from this time last year, where they had lost millions with the Studios. They feel the change-over with their new strategy is going to really push the Studio in the right direction in 2013.

They took on more staffing costs, partially due to their plans to expand long-term into the WWE Network.

Barrios reviewed all the material they released in this morning's press release.

Barrios pushed the idea that the company owning and monetizing their own content for the WWE Network, etc. is their best asset. There is a belief that content value will rise 5-14% a year in the future. He said they are uniquely positioned as they have a mix of story and character driven content as well as live sports-esque programming.

Barrios described the WWE Network as a "premium network", so it's going to be a paid subscription channel. He said that model would be the best approach for the network, which he described as a "domestic" network. They estimated they would eventually have 2-4 million subscribers. The Network would feature all PPVs except Wrestlemania and the PPVs would also be offered via their traditional means for non-subscribers.

They will be buying a new corporate jet and will be selling off the current one.

They then went into the Q&A Session of the call.

They were asked about their distribution deals. Deals for Raw and Smackdown in the United States, The UK and India will be renegotiated over the next few years. They aren't looking to bring those in-house for the Network. Vince McMahon said that it's important to have their entities out there so they can promote and bring interest to their other products, such as the Network.

They were asked to estimate the launch of the WWE Network. Barrios said they are getting out of the prognostication business but are working hard and feeling good. They are optimistic but "they are getting out of pushing dates."

The Cannibalization of PPV revenue by the Network was asked about. They noted Wrestlemania represents more than half of their PPV earnings, so they are only looking at losing a portion of that. They look at the network as a way to get viewers to subscribe to them when they couldn't afford a big monthly PPV bill.

They were asked about videogame future. They admitted they were behind the curve on some of the platforms the WWE audience would be on, specifically social media. They were happy with the games released through THQ but Take Two really impressed them with their plans to brand and come up with different platforms. They said their deal is structurally a little different as the THQ deal and financially it will be the same as long as the games sell.

Barrios noted that THQ going bankrupt cost the company $4-$5 million. Their next quarter earnings will show game revenue as flat because they received an advance royalty from Take Two but they lost money on the THQ bankruptcy with lost expected revenue and royalties.

They were asked if the Network would be all PG all the time or if they have the option to push the envelope. Vince McMahon said they have the ability to do that depending on the time it airs. He noted their films and home videos are not always PG rated. He said they can repurpose the Attitude era material. Vince said the Network can be all things in terms of re-monetized material and new programming.

They were asked about the WWE Studios and their economic involvement as the new films perform. Vince said they would all depend on the initial box office performance. He said the two new releases "Dead Man Calling" and "The Call" are very important to see where the Studios stand and how their new strategy will work out. They said they weren't going to give out any domestic box office targets. They will be partner distributed so they will account for them on the net basis, meaning the money they receive down the line, not the initial revenue at the box office.

They were asked how the Network could change the PPV model. They didn't want to get into their specific PPV rights when it comes to the Network. They'll have more details down the line as they get closer to the Network. He said overseas is different depending on the market.

The $40 million television rights fees should be their nominal fees going forward.

They were asked about the "steady state" for the Network and what the parameters for the Network subscriptions will be. They said they need "up to about a million" subscribers to at least break even. They can't give numbers because it will all depend on how many move over from the PPVs to the Networks. Barrios said that once you launch a system and you use the system's reach as a denominator, you will have a pretty good idea of where you will be. They have four different scenarios based on the data they have. They believe that at full distribution, they could reach 3-4 millions. It depends on how quickly they get carried by systems and then how quickly they reach subscribers. They expect it will be on a system by system basis. They feel that within 6-12 months of the launch per system, they should have a good idea of how the model is working.

That was it for the call.