The call opened with Michael Weitz welcoming everyone and saying that they hope everyone on the East Coast weathered the storm well. Vince McMahon and George Barrios were also present on the call.
Vince welcomed everyone. He said the quarter was not where they wanted it to be. He said that home video and licensing were down a slight bit. The latter was due to the lack of a second video game. They had a reduced cost of the movie business and they were about where they expected to be. He said social media is through the roof.
Live event is up 6% domestic. International was up about 17%.
PPV buys were up 13% in this quarter.
Vince said ratings were good. Well, what else is he going to say?
Expenses were up due to Network expenses, the loss of WWE All-Star video game and payment of management incentives.
They remained the top shows on USA and SyFy and have added 2/12 additional hours of TV. He said the new hour of Raw is doing "extremely well." Wow, really? He said Saturday Morning Slam is the top kid's show across all networks in its time slot. He said they were continuing their expansion with Hulu Plus and added the Ion Network for Main Event. He said it was the number one show on Ion. Saturday Morning Slam did a 50% jump from what was previously on the CW Network in its timeslot.
Vince plugged the Scooby Doo and ABC Family Christmas movie deals and mentioned the completion of their Susan G. Komen partnership "which gave us a different audience and gave us a way to promote the WWE name in a different way."
He said they renewed their National Guard sponsorship and promoted the Rolling Stone PPV distribution, noting it was something different for them.
Vince pushed the Brawlin' Buddies from Mattel, saying he thought they were going to be doing well for the Holidays. He said Christmas, then corrected himself and said holidays.
Vince said in a few weeks, their Mobile App is going to be interactive in a way that no other television in history will be. He said they have phenomenal growth and feel confident with their content and distribution. He sounded really excited about that.
Vince announced the Network would be a premium subscription model and very interactive. He said they have confirmed they will distribute the network as a paid subscription channel through traditional means and more details would be announced as they were available. So, there was the Network announcement I suppose.
George Barrios, the company's CFO, began reviewing the points of the WWE Quarter Earnings.
Licensing was down, mostly due to the loss of sales of a second WWE videogame, WWE All-Stars, which will not return. He said royalties on the videogames are down 32% but said mobile and online material are showing growth.
Their Brawlin' Buddies toys have been recognized as one of the top toys of the holiday season.
Home video revenue was down 23% due to lower price adjustments and returns on unsold material. The lower priced Superstar Collection series contributed to lower revenue, but that series has been mothballed so they won't have that happen again.
Magazine publishing continued to decline. They have re-engineered it so its profitable.
Digital revenue continued to do well, partially because of the Youtube channel.
E-Commerce sales were down 16% due to the online volume of sales dropping but the actual amount of money per order was up.
WWE Studios revenue was up due to the release of No Holds Barred, Barricade and The Day. No Holds Barred made $300,000 in its DVD release. The Day did not record any revenue this quarter. They plugged all of their WWE Studios deals to work with partners to co-produce and distribute their films and plugged the upcoming films. No mention of Leprechaun 2!
They referred to the Scooby Doo film as "Scooby Doo at Wrestlemania."
Their balance sheet remains strong. No long term debt and $150 million in investments and cash.
They continue to believe their content will show returns under any distribution format.
They expect modest growth but that will be offset by the cost of the WWENetwork and management incentives. They expect their 2012 results will be below their 2011 results due to the money spent to launch the network, build its headquarters, develop material for the network and staffing it.
They have conducted research on the size of their fan base. 1/2 the households in the U.S. has a "level of affinity" for WWE. They claimed 12 million are diehard, hardcore fans. 24 million are casual fans. 23 million homes are lapsed fans who have some interest in returning for some form of content, including archival material. They expect to see similar research as they extend their research globally None of those numbers explain the current ratings viewership being so low.
They are excited for all their business streams, especially the Network. They feel the premium subscription model is the best way to distribute the network and continue to negotiate with cable and satellite distributors. They don't feel they can discuss potential launch dates while negotiating.
They claimed that the WWE brand remains one of the strongest brands worldwide. They have tremendous confidence they can continue to create compelling, new content and distribute it via traditional and digital platforms.
At this point, they went to a Q&A segment of the call.
Vince was asked about what thinking has been done to prevent PPV buys and other revenue streams from being cannibalized on the Network. Vince said they would not cannibalize PPV revenue. He said they have business models for it that includes PPV and without. He called it an "add on" to their current product. He was asked whether it would be a HBO like model that would include PPVs and said "it depends."
Vince was asked about WWE material on USA and SyFy. He said the Smackdown deal would be coming up for re-negotiation first and painted it as the company needing to have placement on major networks to help promote the other endeavors and outlets the company has.
Vince said they have to have a blended mix of programming that would appeal from casual to hardcore fans.
They were asked what the driver for the current attendance is and how quickly the numbers can ramp up or have limitations. McMahon said it was due to a "better product" and the different ways they are reaching people, such as social media and new TV series. He was asked what sort of growth they are expecting. He said he didn't want to speculate but "it will be good."
They were asked about the performance of films in this quarter. George Barrios said each release was unique. They had small expectations for No Holds Barred and it exceeded that. The Day won't be recorded until the participation comes in down the line. Barricade was impaired in the last quarter but it performed where they expected it to be.
They were asked about what sort of increase they will be with all the new series and the Raw third hour addition. Hulu Plus revenue will go to the digital media revenues. He said that the two additional hours has made them really happy with the economic side. He said they are really happy with the creative and the economic side.
They were asked if they needed to capture all the fans mentioned for the Network to be successful. McMahon said they don't need to capture "all that much" of the audience for it to be successful.. He said that if they only capture the hardcore fans, they can be successful but the older, lapsed audience has indicated what they want to see. He said they can reach a large percentage of them but their revenue would not be relying on the lapsed fans.
They were asked how much would be required financially to launch the Network. Barrios said they have 80-90% of the Network right now in terms of their infrastructure done. The next variable will be the launch date and then it will be marketing, which they are not going to talk about.
That was it as they had no additional questions.
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