WWE held a conference call this morning to discuss their earnings for the first quarter of 2012. Vince McMahon and George Barrios, the company CFO, were on the call.
Vince McMahon welcomed everyone and noted that they were up 19% from this time last year, but it wasn't "as rosy" as it appears. He said that their key metrics, live events and TV, were up.
He said live events are his barometer in interest and they've increased profits. He said said that some of this was due to expansion into U.A.E. for the first time, their first event in Russia. They have an upcoming event in China. He also noted that although it's not reflected in this quarter, they broke records for Wrestlemania.
Vince said TV ratings are holding up very well and their social media presence is extraordinary. He said that they are permeating in every form of social media and it shows incredible growth and interest. He said that some feel that they are on the cutting edge of that and he supposed they are, but they are also just cutting the surface of that. He mentioned the Youtube channel.
He said that home entertainment revenue was up, which he called something of a surprise. He noted they have changed their films strategy, discussing their new studio partners and have a great slate of films with a reduced amount of investment. He said from his standpoint, they are going to get more than they expected.
They are making key hires for content development and implementation for the WWE Network. He said negotiations for the Network are still ongoing.
George Barrios ran down the highlights of their earnings. He said that film impairments and network operating costs did adjust some of their earnings -
Live event revenue was up due to WWE AXXESS and the U.A.E. tour. AXXESS was worth $1.4 millioin in ticket events. $1.3 million was made internationally, led by U.A.E events. The average ticket prices increased both international and ticket prices. They noted a Central American tour hurt the live event revenue as it was staged in an area with lower economic earnings.
The PPV revenue was up, partially due to HD revenue. Domestic buys remained unchanged.
TV rights were up due to some global licensing going up. They noted that Superstars was being held off (no mention of NXT)
Toys were down internationally as were videogames overall.
Home entertainment was up 14% due to older titles sold. However, there was a decrease in pricing for discounted titles and there were less titles releases.
Magazine revenue was down 36%
Digital media revenue was up over a million dollars, mostly due to the Youtube channel rights.
Merchandise sales via their WWEShop.com site was unchanged. Sales volume was down 20%.
WWE Studios made $4.8 million due to the performances of their movies. Bending the Rules made "lower than anticipated" home video receipts. The Studios lost $1 million in the current quarter. They had a number of other impairments this quarter for previous releases, including "12 Rounds." The Studios absolutely pulled them down. If you remove the films from the equation, they were up.
They have spent $2.1 million this quarter in development of the network.
Their balance sheet remains strong with no debt and over $130 million in cash and assets.
As they develop the Network, they expect 2012 earnings to be in line with 2011 earning, plus or minus 10%. Their forecast of the year has been unchanged. They expect to spend $10 million to expand their production in terms of the Network.
They believe that by focusing on their content distribution, they can greatly raise their earnings. Their metrics for social media shows 40% increase on Facebook and 47% on Twitter. The WWE brand remains one of the strongest commercial brands worldwide and there is a need for original content worldwide.
They then took questions from callers.
Vince was asked what went right this year vs. the last few years for Wrestlemania. Vince said it was a better execution all the way around. He noted the promotion of the main event a year prior and there was a broader base due to Rock coming back, which allowed them to spotlight on newer talents. He said they had Undertaker vs. HHH for the long-term fans and there was something for everyone. It was must better executed than "years past."
George Barrios was asked about the $10 million costs for Network and programming. Their costs will ramp upward as the year progresses. The pace of staffing and the marketing expenses of the network will increase costs as they move forward.
They were asked about the Network timeline and whether there were any speedbumps holding them up. Vince said that they are continue to develop strategy going forward. They haven't decided which strategies will work best for them and any hold-ups are on WWE's side, not the distributors. Vince said they have traditional and new models they have discussed and they have to determine what would be best.
Vince was asked what sort of opportunities they would have and what would happen with a partner. Vince said that they want to own it 100% and have control over what's going on the network as well as not be restricted. They know how to tier their product better than anyone.
Vince was asked what the timeline is going to be in terms of announcements of distribution partners. Vince said that he believed in about three months, possibly considerably left.
Vince was asked about potential subscribers. Vince said it would depend on what direction and they go in and it's more about the bottom line, not the subscribers. He said that they are looking at overall profitability. He was asked if there was a certain number of subscribers they needed to launch. Barrios jumped in and said they weren't going to talk about specific subscriber numbers.
They were asked about how many hours of the library have been digitized and available for the network. Barris said they have about 100,000 thousand hours, 30,000 digitized, which would be used as the core for the network and other programming. They have invested several million in making new shows from those 30,000 hours.
They were asked if there would be a buy-back of the stock with the cash in hand. Barrios said that they looked into it and decided to focus on dividends for shareholders would be. He said buybacks wouldn't be part of their strategy right now.
They were asked about the film slate going forward and were asked about expenditures for the remainder of the quarters. Barrios said they have put aside $15-$25 million aside for that and are working on how to develop and spend that money as they develop new projects in their slate.
They were asked how the Youtube partnership works. Barrios said that they did around a billion views in 2011 and made advertisement money off of those. However, now Google is going after original content and Google pays them a licensing fee for the content.
They were asked about the distribution of Superstars and NXT. They are being monetized internationally and they hope to place those shows "on traditional networks" very soon.