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FINALLY SOMEONE ASKS IF CREATIVE IS THE REASON THE NETWORK ISN’T MORE SUCCESSFUL, THERE IS ONE POSITIVE IN TODAY’S EARNINGS EVEN IF WALL STREET DOESN’T SEE IT, VINCE MCMAHON TALKS ABOUT WWE’S NEW PLANS TO GROW THE NETWORK - WWE THIRD QUARTER EARNINGS PRESENTATION BLOG

By Dave Scherer on 2014-10-30 11:10:43

The call opened up with Michael Weitz talking about the third quarter release, and boy is there a lot to talk about in that filing.  Mike Johnson and I will be doing a show covering the release later today.

Vince spoke first.  He immediately talked about how the Network segment was up 68%.  He said that TV ratings were up and then talked about how great SummerSlam did on social media.  He said that they have 731,000 subscribers, up 4% from last quarter.  He talked about the gross number of subs that they have gotten (of course ignoring those that left).  He said that they have a lot of engagement from people that buy the Network and seemed kind of proud of that.   It would stand to reason that people would use a product that they pay for wouldn’t it?  He talked about how they dropped the commitment to the Network, like Netflix.  He said that new subs in November get the month free, patterning their new policy after Netflix and Hulu.  He said that the initial advertisers on the Network will be Pepsi, Mattel, K Mart and Take 2.

He then turned it over to George Barrios, to break down the numbers.  George talked about how they beat expectations.  He then compared the subscriber numbers to earlier this year, and painted it as a positive.  To me, it comes down to the net number and in expanding worldwide, they gained less than 30,000 subscribers worldwide, meaning they were largely even with their US numbers.  He talked about how 9 times as many people watched Night Of Champions this year on the Network vs. the 85,000 that paid for it last year (which you would expect to be the case after all since it was so much cheaper in 2014).  George expects the numbers to keep growing as “awareness grows” and people embrace new technologies.  George talked about eliminating the commitment to the Network and the free month deal they are doing in November.  He said they are going into the UK next month and plans will be announced later for the remaining countries that they don’t have yet.  I don’t know that I would be overly excited for the rest of the world if over 170 companies could only bring in 28,000 new subscribers.  George then went into the numbers, so I will be back when we get to the Q and A.

George made a point to reference that TV revenue is a huge positive for the company. They won’t see huge jumps in 2014 or 2015 for the new deals they signed in their 7 key markets, but they will go from $130M in 2014 to $235M in 2018 due to escalator clauses. That is a big deal.

Q and A time.

The first asked about cost cutting initiatives being more effective than planned. George wouldn’t get into specifics but said that it has gone better than expected and they will continue to run a streamlined business going forward.

They were asked about feedback that they have received from people that signed up from the Network but didn’t stay with it. George said it’s not the content. They think that 90% people coming once a week on average and 99% coming once a month is a big plus (I don’t get that, people are paying for it, why wouldn’t they use it?). George thinks the Network will grow in value as the Video On Demand library grows. He was asked about how many the new folks were international. He said “about 30,000”. SeekingAlpha.com reported it was 28,000. He was asked about whether they have adjusted their model due to the advertising and he said not yet.

The next caller mentioned that the stock is down today (meaning Wall Street doesn’t like what they have heard). He asked why they haven’t changed guidance. George said that they have contractual revenue growth due to the TV deal, which is a big number.

He was asked if the free subscribers in November will count as subscribers. He said if they pay in December, they will be counted as a paying sub. He was asked about something that George said he wouldn’t answer concerning US vs. International subs. George said it was too soon to do that.

They were asked about the Network deal in Canada. George said he didn’t want to get into specific numbers in Canada. He said right now they are only on Rogers, which only covers 20% in Canada. Rogers that working to expand to the rest of the 80% in Canada. George also talked about how the company also makes equity investments in companies that they can learn from, mostly in technology. They invested in one that, in essence, they walked away from. George added that none of their TV deals were longer than five years.

They were asked again about the penetration in Canada and how it compares to the US. George said that the index is “pretty much dead on”. He said it’s pretty close to the rollout in the US, when you consider that we got WrestleMania here in the US. They were asked what percentage of viewership certain shows and events got. George didn’t want to get into specifics. He said that live (a.k.a PPVs) did really well. Of course. George once again put over the VOD aspect of the Network. People can program for themselves.

He was asked about why people churn, and someone finally said is it due to creative? George said the average monthly churn is in the 8% range. They felt that 4 to 8% was the steady churn level, so they feel it’s OK to be where they are. He said he has read that Netflix had higher churn when they started. He ignored creative altogether and Vince didn’t comment.

As update, the WWE stock is down even more now, $1.16 to $12.11 a share. Wall Street does not like what WWE has told them today. And to make it worse, the market overall is up 125 points.

George said that certain events cost more to present than others (like WrestleMania costs more than say MITB).

That ended the call.

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