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George Barrios welcomed everyone to the call and introduced Vince McMahon. Vince said he hopes to give “a great deal of clarity†and said he is on a cell from London. He said that they announced their new deal with NBC Universal and gave additional details on the Network. He said that perhaps they failed by giving so much transparency and they hope to clear up any misconceptions.
Vince said that they were “somewhat disappointed†with the NBCU deal but they “nearly doubled†their overall TV deals. They hit their marks internationally but not domestically based on what research showed them. He said that it’s not what they wanted but they were overall happy.
Vince said they have invested greatly in the Network and their core business is “rock solid.†He said they are blazing new trails and with that comes some uncertainty. He said they are trying to more “clearly communicate†the impact of all these changes on their business model.
Barrios began explaining the WWE Network and said they spent $75 million on creation of the Network as well as $40 million on staffing to create television and digital content. He said that their research provided support that led to their estimates over their new TV deals and in three of the four markets, they were correct (The United States being the exception to the rule) and they believe it will average about $200 million.
Barrios then broke down the business models for the Network, where they will cannibalize their PPV business and how with 2.5 million subscribers, they can actually bring in more than their old PPV model.
Regarding their subscriber numbers, Barrios said they continue to grow subscribers as they become more accustomed to the streaming content, as the Network expands internationally to new markets and as they market the product and create new product.
Here we go with the Q&A session:
They were asked about the operating expense for the Network if it’s at 1.5M subscribers. Barrios said that would be around $49 million. They went into different potential costs. I won’t lie, they lost me.
They were asked how the Network rollout hurt their TV negotiations. Vince said it was a fair question and it had some negative feedback to the TV deals, but they were in a “chicken and the egg†situation where if it wasn’t launched when it was, they would have to wait a year for the Wrestlemania season, which would be their best time to launch.
None of the new TV deals are longer than five years. Some may be shorter.
They were asked about the dividend’s future and whether it was safe going forward. Barrios said that if they are successful executing the Network strategy, they will feel comfortable maintaining the dividend. Barrios said that they are sticking to what they said in the press release.
The AT&T-DirecTV deal was mentioned and whether the Network has had any discussions about whether their Over the Top programming could be brought to traditional distributors. Vince said that OTT is the future and there will be a lot of potential possibilities in the future. Vince said it won’t be “their way or the highway.â€
They were asked what gives them confidence on their projected subscriber levels. It appears the caller and George Barrios disappeared at that point. The operator is trying to get them back. Stay tuned!
They finally got everything back in order. They were asked about the “high-end†turnover of the Network personnel. Barrios said they weren’t going to get into specifics but they are very happy with the management team and with their relationship with MLBAM in rolling it out.
They were asked about today’s subscriber count. Barrios said they are going to stick to giving those numbers out quarterly so those numbers will be released on the next call.
They were asked what happens if the Network underperforms their expectations. My Internet connection went down, so head over to Dave’s blog for what I may have missed. This call is cursed!
Barrios said they have an idea of what the next 18 months will be for the Network but every day “they are learning a lot†and every day “we have new learnings.†He said he wishes he could give them certainty, but “we can’t.â€
They were asked what else they have to help drive subscriber growth. Barrios said at their core, WWE are marketers and promoters and they have a lot of their team working on things. He noted they just announced Tough Enough. He said in a subscription business, it’s not one thing but all sorts of things for different segments. They are just in the beginning of this business.
They were asked if the holiday season was a good time to add subscribers. Barrios said he sees every waking day as a good time to add subscribers. He said that he doesn't want to pretend they have an insight they don't have. In a year or two, they will be able to look back and see what the ramp of subscribers were and how things worked.
Barrios thanked everyone for being on the call and for their questions. He said that their purpose was to bring clarity and said he hopes it helps the entire community.
And No, Brad Safalow of PAA Research didn’t get his promised hammerlock!
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