Thursday, October 30, 2014

What we learned during the Q3 results from WWE...

Here's my "brief" synopsis of what we learned during today's Q3 results and Conference Call:
by Chris Harrington (; @mookieghana on Twitter

1. WWE will be launching in the U.K. using over-the-top technology in November. WWE Network is still unavailable in Italy, Germany, UAE, Japan, India, Thailand, Malaysia. Plans for those countries are yet to be announced.

2. WWE is abandoning the 6-month commitment model starting 11/1. Current subscribers will be "migrated" to the non-commitment model starting in December. For what it's worth, the $12.99 no-commitment model had attracted 23,000 subscribers by quarter end.

3. WWE is offering a free month to new subscribers for November. "We know sampling will be a big part of this business,” Mr. Barrios told the WSJ.

4. WWE received $50M in partial pre-payment in October from a recently completed TV Rights deal. (Could be Canada or India.) WWE also took a "$4.0 million impairment of an equity investment" this quarter. It's unknown what exactly this was candidates could include Phunware, Tout or even something like Marvel Ventures. Barrios hinted it was a technology-related investment when asked by an analyst.

5. WWE ended the quarter with 731,000 paid subscribers to the WWE Network (703,000 U.S. and 28,000 International) as of September 30, 2014. That 28,000 number does include the Rogers Canada subscribers.

6. WWE Network Advertising (which began 10/13 with Pepsi, Mattel, K-Mart, Take-Two Interactive and Pure Talk USA) isn't expected to generate enough meaningful revenue that WWE was going to adjust their overall economic model.

7. Since launch, WWE has attracted approximately 971,000 unique subscribers. However, only 75.2% remain as of September 30.

  • 2/24 to 3/31 (+519k, lost -24k) - these have hit 6-month renewal
  • 4/01 to 4/06 (+182k, lost -10k) - these will hit 6-month renewal first week of October.
  • 4/07 to 6/30 (+167k, lost -134k) - these will hit 6-month renewal in Q4
  • 7/01 to 9/30 (+286k, lost -255k)

8. WWE has finalized their TV distribution agreements in US, India, Canada, Mexico and UAE along with previous deals in UK and Thailand. This brings the company through about 2018 on "Key TV Contracts" for revenue estimates. Expect these seven distribution agreements will raise WWE TV Rights from ~$130M (2014) to ~$235M (2018).

9. WWE's new narrative is that the WWE Network is pushing "domestic transactions". Basically, they're promoting B-level PPVs are getting far more viewers with the $9.99/month WWE Network than they were when they were stand-alone, high-priced PPV offerings.

10. Misc Numbers: Raw (+2%) and SmackDown (+3%) TV ratings are up. Social Media is now over 420 million followers. North American attendance is down 7% (5100 fans) and event sponsorship revenue has dropped. International attendance is up 15% (7700 fans) but WWE ran 8 less int'l shows than last year. Licensing is up because of a "higher effective royalty rate" with the Video Game. WWE Studios only lost $0.4M this quarter (versus $7.4M last year when you include the Film Impairment charges in 2013). Corporate & Other costs have gone up $7.6M because of severance/restructuring charges ($2.1M) and talent development, brand marketing and expansion of WWE international infrastructure. "Charge of $1.8 million to write down certain assets associated with the Company's gamification initiative."

There was a lot of talk about churn and questions about specific markets (i.e. how is Canada doing?) but WWE wouldn't get into very clear numbers. They remain convinced that the OIBDA outlook for 2015 is on track.

I'm sure at least one list-bait site will want to turn this into a ten-page slideshow so I went ahead and made it easy for ya.

1 comment:

Anonymous said...

The WWE Network continues to be nothing but an unmitigated disaster. They have to average 1,000,000 subscribers during 2015 just to generate OIBDA in the same range that they did in 2011-2012.

Had they not launched the network and just generated flat PPV revenue with the TV rights bump the company would be very profitable in 2015 and would not have had to even slash 7% of the workforce. If they had cut expenses they would have been crazy profitable.

But the network has set them back significantly causing them to have to slash expenses and also work like the devil to promote the network just to have OIBDA in the range of the last few years

Increasing TV rights revenue significantly, cutting 7% of the workforce, and if they are lucky getting to 1 million avg subscribers in 2015 will just get them back to OIBDA levels from 2011 and 2012. So even though they pitched the network as a way to grow it has in reality been a weight that has dragged them down despite the great tv rev increase and cost reductions.

One cannot look at the network as anything other than a failure.