Friday, June 30, 2006

WWE Annual Report notes

WWE: Annual Report (FORM 10-K)
Filed 6/29/2006 for period ending 4/30/2006

Talk about establishing ECW as the third brand. Plans to “produce and market a full line of ECW products including television programs, live event tours, pay-per-view events and licensed consumer goods.”

USA: 248 live events – 1.2m fans = $37.34/ticket.
INTL: 52 live events – 475k fans = $69.18/ticket. (+86% more)
25% of that attendance was on Smackdown’s April 2006 Europe tour.

Venue Merchandise (sale at live events of WWE products): up 15% to $14.7m.

Three TV shows they produce: “Monday Night Raw”, “Friday Night Smackdown” and “A.M. Raw.”

RAW + AM RAW = $0.6 million per week in rights fees.
Smackdown = $0.3 million per week in rights fees.
ECW TV is “on a twelve week trial basis.”

Advertising: They don’t sell them in the US. They do sell them in Canada.
Result? -48% in Advertising net revenues (down to $22.6 million)

PPV: 16 PPVs in fiscal 2006 (vs. 14 PPVs in fiscal 2005).
WM22 = 925k buys @ $49.95 (domestic)
RR/Summerslam/Survivor Series = “avg. nearly 340,000 buys”

PPV revenues: $94.8 million = approximately ¼ of total net revenue in FY2006.

WWE LIBRARY: 75,000 hours of content = 25,000+ hours of “previously aired or released as finished product”. Specifically mentions WCW, ECW and AWA.

August 2006: WWE 24/7 On Demand will launch with Comcast.
As of 4/30/06, number of subscribers in North America was approximately 13k.
WWE 24/7 net revenues were $1.1 million in FY2006 (vs. <$0.1m in FY2005).

Smackdown vs. Raw 2006 video game (for PSP and PS2) sold about 2.9m units.

WWE book deal (with Simon and Schuster) = “Journey Into Darkness”, “Heartbreak and Triumph”, “Cheating Death, Stealing Life” and “Tangled Ropes”. Mentions Eddie Guerrero and Shawn Michael’s books being on the New York Times Best-Seller List.

Licensing net revenues, including music, were $32.2 million for FY2006.

WWE released 26 new home video titles = shipped approx. 3.0 million units.
WrestleMania: The Complete Anthology accounted for about $7.2m in gross domestic revenue in this category. Total Home Video net revenues were $42.6 million (up over 50% from FY2005 and FY2004).

Raw & Smackdown magazines each published 13 issues annual. They have been ceased for “one new flagship publication named WWE Magazine”. Magazine publishing net revenues were $11.1 million in FY2006.

WWE.com claims 11.6 million monthly unique users worldwide and average of 343 million page views per month in FY2006. WWE.com net revenues were $9.7m.

WWEShop net revenues were $12.1 million in FY 2006 (over 2.5x FY2005).

See No Evil – released May 19, 2006 (past the end of FY2006 so no revenue mentioned)
The Marine (w/ John Cena) = October 2006 – distributed by FOX
The Condemned (w/ Austin) = will be filming and spending $20m in the next 8 months.

Revenues outside of USA: $97.7 million in FY2006. This now accounts for ¼ of total revenues generated in Fiscal Year 2006.

“We have exclusive contracts with approximately 165 superstars, ranging from developmental contracts to multi-year guaranteed contracts with established Superstars…. Popular Superstars include Triple H, John Cena, Batista, Shawn Michaels, Ric Flair, Undertaker, Rey Mysterio, Booker T, Big Show and Kane…. We continually seek to identify, recruit and develop additional talent for our business. In this regard, we have arrangements with two wrestling developmental camps, Ohio Valley Wrestling and Deep South Wrestling, to allow newly identified talent the opportunity to perform for crowds and refine their skills.”

COMPETITION: “we face competition from professional and college sports as well as from other forms of live, film and televised entrainment and other leisure activities.”

Headcount as of April 2006 = 460 employees “excludes out Superstars, who are independent contractors.”

RISK FACTORS:
• failure to main/renew key agreements (“we are finalizing a new agreement with UPN and its successor, the CW Network, which has announced that Smackdown will continue on Friday Nights”)
• failure to continue to develop creative/entertaining programs leading to a popularity decline
• failure to retain or continue to recruit key performers could lead to a decline in appeal of our storylines (“our success depends, in large part, upon our ability to recruit, train and retain athletic performers who have the physical presence, acting ability and charisma to portray character in on live events and televised programming.”)
• the loss of creative services of VINCENT K MCMAHON
• a decline in general economic conditions (“the demand for entertainment and leisure activities tends to be highly sensitive to the level of consumers’ disposable income”)
• a decline in popularity of our brand of sports entertainment – including as a result of changes in social/political climate (“our programming is created to evoke a passionate response from our fans.”)
• changes in the regulatory atmosphere and related private-sector initiatives (basically if people crack down on what you do on TV)
• inability to adjust to “rapidly changing and increasingly fragmented marketplace”
• uncertainties with international markets (“obtaining visas for our performers, political insatiability, risks involved in foreign travel, local regulation, currency risk”)
• being prohibited from promoting and conducting our live events if we do not comply with applicable regulations (athletic commissions, foreign jurisdictions, licensing for pomroters0
• failure to protect intellectual property rights
• pending material litigation is resolved unfavorable (against World Wildlife Fund – “we strongly dispute that the Fund has suffered any loss or damage, and do not believe they are entitled to restitutionary damages.”) – application is likely to be heard in July 2006.
• inadequate insurance to cover liabilities resulting from accidents of injuries that occur during our physical demanding events (“our performers, as independent contractors, are responsible for marinating their own health, disability and life insurance, we self-insure health coverage for our performers in the event they are injured while performing.”)
• risks if expand into new/complimentary businesses
• conflicts of interest between VKM and other holders of Class A common stock
• if VKM ever sold his shares, it could lower the stock price
• the class A common shares have a relatively small public “Float”

Avg revenue per PPV buy: $14.96.
“Live events revenue decreased primarily due to a lower average ticket price in the current year (down from $74.53 to $69.18) specifically in internationally markets. This decline in revenues was offset, in part, by an increase in average attendance.”

Net Magazine publishing units sold: 4,096,700 units / 26 issues = 157.5k sold/issue.
“Magazine publishing revenues decreased preliminary due to a decline in the newsstand copies sold in fiscal 2006 as compared to the prior year.”

Home video revenues increased due to the “48% increase in gross units sold combined with an approximate $3.70 increase in the per unit sales price of DVDs.”

Average WWEShop revenue per order $53.42 (up from $47.78)

“As of April 30, 2006 – we have approximately $36.1 million in capitalized film production assets.”

Film Libraries: “the cost of film libraries acquired during fiscal 2006 was approximately $881,000.” (this would include Graham’s FL and AWA?)

Vince and Linda McMahon have agreed that starting July 1, 2006 – they will begin “paying for the use of the corporate jet so the company incurs no incremental costs as a result of such use that occurs on or after that date.”

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Libra Litrou said...

This is a neat blog with lots of interesting stuff in it.

Sincerely,

June
Libra Litrou

Libra Litrou said...

Cool blog.

Sincerely,

June
Libra Litrou

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