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Complete Coverage From WWE Business Outlook Conference Call

WWE held a conference call with investors on Monday to go over the recent decline of WWE's stock price, which resulted in Vince McMahonreportedly 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.

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