Complete Coverage From WWE Business Outlook Conference Call

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WWE held a conference call with investors on Monday to go over the recent decline of WWE's stock price, which resulted in Vince McMahon reportedly losing $340 million. I was on the call on behalf of and compiled the following notes:

  • Michael Weitz opened the call by reading a prepared statement to open the conference call. He announced Vince McMahon.
  • Vince McMahon thanks the listeners for tuning in. He mentions that he is in London for Raw, so he apologizes for any audio problems. He said he tried - he isn't sure as to whether he failed - to provide transparency in regards to WWE Network. He says WWE has always prided itself on being transparent, which is why this call is taking place. He said he was disappointed in the NBCU deal but, when you look at worldwide TV deals, WWE nearly doubled their deals. It's less than what he wanted, but still a good deal.
  • He calls WWE Network the most important initiative in the company. WWE has invested significantly in it and has seen significant growth in it. Ratings and live event attendance are solid. He says WWE is blazing a new trail, and wants to be entirely transparent with this new business model. He then hands the call over to George Barrios.
  • George Barrios recaps the timeline of the creation of WWE Network. Their business analysis had come to the conclusion that their content was undervalued. He goes over how their worldwide deals will result in a significant increase in revenue. The global expansion of WWE Network will be a profitable step. If their goal of 1.3-1.4 million worldwide WWE Network subscribers is reached by 2015, it would generate approximately $40 million, which would be equal to the company's pay-per-view business in 2012. If WWE Network were to surpass 2 million subscribers by 2015, the company would see income in the range of $125-$200 million. Additional company investments include increasing international presence, costs related to the WWE Performance Center, and other costs.
  • He reiterates that having reached nearly 670,000 WWE Network subscribers around WrestleMania season, they foresee a steady increase over the rest of the year. He outlines WWE's 5-part strategy to gain subscribers: creating new compelling content, opening the Network globally, expanding the distribution platforms, developing new features, and developing high-impact marketing campaigns.

He then turned the call over to a Q&A session with investors:

  • A caller asked about how WWE had previously said that the launch of the WWE Network would not negatively affect television deals. Vince says that the Network certainly affected the deals negatively. He said that if he had waited until the television deals were completed, however, he would have had to wait another year to launch the Network, as the goal was to release the Network around the strongest part of the year, WrestleMania season. He called it a "chicken or the egg" situation.
  • A caller asked if investors should assume the dividend is safe. Barrios says that if WWE is successful with its business strategy, they have support to protect the dividend. It just requires successful execution over the next 12 months. Vince says that over-the-top content is the future, and we will likely be seeing more and more of it as time goes on.
  • There were connection problems, so the call was put on hold while fixes were being made.
  • A caller asked about the leadership of the Network, and why it saw a high rate of turnover. Barrios says that WWE is comfortable with the Network team right now, and they weren't going to go into specifics as to why specific people were let go. He then asked about the current WWE Network subscriber rate. Barrios said that WWE had previously announced that they would announce subscriber numbers quarterly, so they will be sticking to that. Regarding the strength of the Network, Barrios said that WWE would be financially solid even if the Network were to not be successful.
  • A caller asked about television demographics, and posited that the current rate of subscribers on WWE Network may be due to a large amount of viewers not having significant disposable income. Barrios said that the WWE Universe is diverse enough that such concerns were not an issue.
  • Barrios said that WWE's worldwide investments will result in steady WWE subscriber growth.
  • Barrios said that the business model that WWE is moving to is one that they have historically never used. He says that WWE knows where it is on the timeline of the WWE Network, and adding additional costs to the Network is not something they feel they need to do at this time, although it is an option to consider in the future.
  • In terms of where WWE sees itself a year from now, Barrios projects WWE Network to be in "steady state," but he reiterates that WWE is still learning from this new business model. He expects WWE to have costs in check within 18 months, but in the interest of transparency, he can't promise that with absolute certainly. He says WWE at its core are promoters and marketers, and while he doesn't want to "let the cat out of the bag," but we will see greater focus on marketing in the future. WWE will measure the effectiveness of its WWE Network marketing through consistent growth, as opposed to a set threshold.
  • A caller notes that WrestleMania season is likely where WWE will see much of its subscriber growth, but asks whether the holiday season is also expected to be especially profitable, given that many WWE watchers may "have to ask Mom and Dad for the Network." Barrios says that every hour of every day is a good time to be looking for subscribers, not just a certain season. He says he doesn't want to give the impression that he has insight that WWE doesn't have at this time. In a year or two, he may be able to look back and say when a certain season is particularly effective, but at this time, it would be conjecture.

Barrios thanked everyone for listening to the call, and hoped that the call shed light on any concerns.

Bored? Why not check out my short comedy film? It's in contention for a Hollywood screening, and it only needs more views in order to win. Thanks for checking it out!

  • David

    Sorry but that short film was boring as hell. Keep in the wrestling business.

    • Disagree. Film = epic…. On multiple levels

      • Nathen

        I agree with David. Epic kind of over values it a little, don’t you think?

    • CJ Blaze

      The video is pretty cool actually

    • Jesse Sherwood

      Don’t be a lemon… Be a ROSEBUD!!!!

  • BrooksOglesby

    The call’s currently having connection problems, so the caller on with Vince just got cut off. Vince repeatedly tried to make contact with the caller (unsuccessfully), before saying “Sh*t…” under his breath. Even corporate Vince is entertaining.

  • david

    Depending on how everything goes I can definitely see them adding in commercials to the network at some point in some limited fashion. For example during Wrestlemania they could make a ton of money by selling some limited 30 second spots. Do I like that? No. And adding in full commercials like regular tv will cause a backlash. But potentially that is an untapped revenue stream that they could consider.

    • BrooksOglesby

      Totally. WWE already has a history of thinly-veiled commercials at WrestleMania (the Santino and Mick Foley Deadliest Catch segment at WrestleMania 28 comes to mind), so I could definitely see it.

    • EricDraven

      There were commercial spots when it was strictly ppv, just not a whole lot. To expect a completely commercial free broadcast at a much cheaper rate with so much more content included is absurd. If ya want to keep the subscription price below $20, you’ll have to accept that they will need to increase the revenue stream with commercials.

  • BrooksOglesby

    If there’s one thing you can take away from this call, it’s that WWE wants you to understand that they’re learning. “This is a new, big step for us, we’re blazing a trail, and we want to be transparent with you” was the theme of the call. It was certainly a measure to save face with investors in the wake of bad news, but if you were expecting groveling from WWE, you’ll be disappointed.

  • Moose

    I could be completely off base here, but it seems today’s culture is an “instant gratification” culture. With questions being answered instantly via an internet search and video on demand with Netflix, Hulu, and now WWE Network, people are accustomed to getting what they want instantly. Perhaps this is the case with wanting an instant success with the Network? Those wanting the instant success being investors and the WWE itself. I don’t think we should expect a company that has been successful in one area (with decades of experience) to be instantly successful in another that is a new venture. The success or failure of the Network shouldn’t be graded in a short time frame.

    • David Jr.

      I agree completely. It’s like in sports if you’re not Mike Trout, then you must be terrible and you don’t deserve to be playing that sport. Oh if a movie doesn’t make 100 million dollars it’s first weekend, we’re calling it a bomb.

    • Snap

      Totally, it’s quite apparent in practically every aspect of, at least, the entertainment world. TV shows, particularly on networks, are not allowed to grow organically and are often cancelled within mere weeks of their debut for failing to achieve the expected rating out of the gate.

      With WWE, just look at how quickly Tensai was reworked and repackaged or even Mordecai. Because the characters weren’t instant hits with the audience, WWE essentially lost all faith in them. Vince is certainly right that they shot themselves in the foot where there TV deals were concerned in their timing for launching the WWE Network, but it seems like it should have been a no-brainer to prioritize guaranteed revenue with the TV deals before taking the risk with the network. It still may not have resulted in the exact deal they wanted, but I don’t think it would have resulted in an outcome which puts the investors in a panic.

      Even though WWE may not be willing to admit it, I believe there is a lot of merit in the comment that WrestleMania season is where the potential growth will most likely occur. For far too long, that has really been the only time WWE steps up their game to provide compelling programming so it begs the question of if WWE only gives a damn when it involves WrestleMania, why should their audience? The issue here is they not only have to adapt their business models with the “over-the-top” content, but how they actually put together and put on their shows. With non-subscribers, all they have to decide whether they want the WWE Network is RAW and SmackDown, especially as they are using the PPVs are selling points for the network. If people aren’t impressed with the content WWE is putting out which is building to those PPVs (or “special events”) then there’s really no reason to expect them to buy those PPVs, let alone commit to a six month subscription to the network.

      So, really, WWE needs to give a damn at every part of the year and put the effort in to make sure people would be getting the most value for their investment, whether it is monetary in terms of the WWE Network or time wise with RAW and SmackDown. The nostalgia of the classic material can only go so far, especially if content has a relatively short shelf life and people cannot access what it is they want to watch when they want to watch it.

    • Knowhere

      It doesn’t help releasing on the WORLD wide web, but leaving the other 195(ish)

      country’s out. Not that they even told you that, while promoting on Raw/Smackdown, oh no, you had to wait until trying to register, to find this out.

  • Bob’s Diner

    I might be the only one, but I feel they didn’t really do much to make people feel better about things. I still don’t think they are being transparent about the new TV deal or offering any answers on how to get more subscribers for the network. In fact, they seem to be still touting that 667,000 as a great number

    • j vomkrieg

      Well, considering the Network hasn’t gone global i’d say it’s actually not that bad. If anything, i think that 1 million subscribers immediately was overly optimistic. Once the UK, Europe, Australia etc are added to the network, i can see them getting to the million point.

      • Bob’s Diner

        But that’s kinda the point, isn’t it? One million worldwide really isn’t as good as they hoped – pretty sure that was their goal in the US alone. Like you said, they were overly optimistic and today they didn’t seem to be admitting that at all.

  • Knowhere

    “Chicken or Egg”: Egg There were things on the planet that laid eggs long before the chicken evolved.