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WWE Investor Update – Vince McMahon disappointed with NBCU deal

We are on the WWE investor conference call. The call is being hosted by Vince McMahon George Barrios and will be starting shortly. We will update this page throughout the call with the latest updates.

Michael Weitz, SVP Financial Planning & Investor Relations, starts the call and introduces Vince McMahon.

Vince is actually in London. He said that they tried to give a degree of transparency and maybe “we gave too much information or not enough.” He said they were a little disappointed in the NBCU deal and they nearly doubled their prior deals combined (including international). He said that it’s not what they wanted domestically and not what their research showed.

He says that the core business (live TV, ratings) is rock solid.

He says that they feel bullish on their business model and they are trying to clearly communicate more transparency.

George Barrios on now. Barrios said that they invested $40 million in staffing including the WWE Network, digital, and social media.

Barrios noted that they are currently in discussions for their TV in India. He noted that they are undervalued in their biggest markets, based on their research.

Barrios talked about the network and said that they estimate that the company estimates, on a global basis, to require 1.3 million to 1.4 million subscribers to offset complete cannibalization of the company pay per view and SVOD business. The previous number was 1.25 million.

If they get to the 2.5M subscribers then they will generate an extra 100M in OIBDA.

 

Question and Answer session

Barrios was asked if the launch of the network hurt their TV deal. Vince answered and said that he thinks it had a negative impact but they wanted to launch the network at the strongest point of the year (before WrestleMania) so if they didn’t launch in February then they would have to launch next year.

Barrios said that the TV deals will be less than 5 years.

Someone asked if the dividend is safe or not going forward. Barrios said that if they’re successful with the network strategy then the dividend should be safe. Barrios was asked if they would consider selling their over-the-top content to AT&T and DirecTV. Vince said that the are “wide open” to that and that there will be many opportunities that will open up.

Someone asked about the subscriber levels. Vince had trouble (as did I) hearing the question. Vince asked Barrios if he could hear it and if he could answer. Sounds like Barrios dropped off the call. You could hear Vince say “aw sh*t.” There were technical difficulties so there was a pause for a couple of minutes.

On the personnel side, they were asked about the turnover in leadership. Barrios said that they’re really comfortable with the management team and he said that they’re not going to get into specifics. They were asked about their current subscriber count, Barrios said that the next subscriber numbers will be available on the next call. He was asked if the majority of the network growth would have been before WrestleMania. Barrios said that he wouldn’t make assumptions and it depends on the global subscribers too. He said, concerning the “ramp rate”, that there are not a lot of other benchmarks to compare to. He was also asked about the demographics and if that would impact the subscriber count since the demo might not have the discretionary income. Barrios said that the demo didn’t have an impact on 3 of the 4 markets for their TV deal side.

Next person also had technical issues. This person asked about the $30 million in costs and how much would be recurring and not recurring. Barrios said it would be recurring but a big chunk of it is discretionary. The caller asked if those expenses would be for countries like France and Germany. Barrios said that those costs don’t include for localizing.

Barrios was asked about the “steady state” terminology that they’ve been using for the network. He was asked why total spending is higher at “steady state” than the “ramp up” stage. Barrios said that part of it is the complexities of the subscription business model. He said that they’ve taken the approach that they “may need” those costs at a steady state but they may decide its not necessary. Barrios was asked about Friday’s problem with the stock. He was asked if they are spending more money than they thought they were from months ago on the network. Barrios said that it’s changed somewhat.

Barrios was asked about his confidence about the costs that they laid out today. He said that they’re getting their “sea legs” in and understanding the costs associated and said that every day they’re learning alot and in 12-18 months they’ll be more confident. He said that people want certainty but he can’t give it given the nature of the business model. Barrios was asked about what they need to see in 12-24 months to know they’re successful. Barrios talked about the “ramp rate” again. He said that if you’re not seeing consistent growth over time then it’s time to reevaluate but it’s a “we need to see it, we need to live it” time of thing.

Barrios was asked if the holiday season was a good time to add subscribers. Barrios said that every day is a good time. He said that what he doesn’t want to do is give the impression that they have an insight that they don’t have but in a year or two perhaps they would know. That’s a fair answer actually.

They were taking questions from repeat callers.

Apparently the call is over now.

Short summary: There were no real answers on a bunch of things but Vince McMahon did say that they were not thrilled with the NBCU deal. No news on network numbers today either. I’m not sure this will make investors happy.


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