90 Minutes of Wrestlenomics Radio talking through the results!
Host Chris Harrington w/ Fightful.com's Brandon Howard.
WWE 2016 Results
Prediction is operating income of 70M / OIBDA of $100M for 2017
· 2016: $12.6M / = 858,310 Buys?
· 2015: $20.6M / = 1,403,000 buys = $14.68 ASP
· 2014: $45.2M / = 2,292,000 buys = $19.72 ASP
· 2013: $82.5M / $34.1M OIBDA (41%) = 3,858,000 buys = $21.38 ASP
· 2012: $83.6M / $46.0M Profit Contribution = 4,023,000 buys = $20.78 ASP
· 2011: $78.3M / $40.7M Profit Contribution = 3,842,100 buys = $20.38 ASP
· 2010: $70.2M / $39.8M Profit Contribution = 3,631,100 buys = $19.33 ASP
Another drop of $8m in PPV this year.
· 2016: $168.3m
· 2015: $138.8m
· 2014: $69.5m
Competition include subscription digital services from Amazon, CBS, ESPN, HBO, MLB, Hulu, Netflix, NFL Network, Nickelodeon, Showtime, YouTube and many others. WWE Network now has 4x hours (7,000 hours) compared to Feb 2014 launch.
Network Segment (PPV+VOD+WWE NETWORK)
· 2016: $180.9m / OIBDA: $43.0M (23.7% OIBDA) = 32.3% OIBDA if you exclude 15.4m cost
· 2015: $159.4m / OIBDA: $49.5M (31.0% OIBDA)
· 2014: $115.0m / OIBDA: -$1.8M (n/a OIBDA %)
· 2013: $86.3m / OIBDA: $27.9M (32.3% OIBDA)
· 2012: $87.7m / OIBDA: $41.3M (47.1% OIBDA)
Network segment took on $15.4m of “Certain shared costs and expenses between Network and TV segments” in 2016.
· 2016: 241.7m / OIBDA: 119.8m (49.5%) = 43% OIBDA if you include 15.4m cost
· 2015: 231.1m / OIBDA: 96.7m (41.8%)
· 2014: 176.6m / OIBDA: 61.9m (35.1%)
· 2013: 163.4m / OIBDA: 56.1m (34.3%)
· 2012: 140.9m / OIBDA: 51.6m (36.6%)
· 2011: 132.6m / OIBDA: 53.2m (40.1%)
We received $17.7 million in non-film related incentives associated with television production activities in 2016, as compared to $6.3 million in 2015. During the year ending December 31, 2017, we anticipate receiving approximately $5 million to $15 million on non-film related incentives.
During 2016, the Company spent $28.0 million to produce non-live event programming for television (Total Divas Season 6, Total Bellas and Total Divas Season 5, and various non-live event programs for WWE Network, including Holy Foley, Camp WWE and Swerved Season 2).
During 2015, the Company spent $36.2 million spent on comparable programming in 2015.
We anticipate spending approximately $10 million to $25 million to produce additional non-live event content during the year ending December 31, 2017.
2016: 13.1 / OIBDA: 5.3m ( 40.4%)
2015: 13.4 / OIBDA: 4.6m ( 34.3%)
2014: 27.3 / OIBDA: 15.0m ( 54.9%)
2013: 24.3/ OIBDA: 8.8m ( 36.2%)
2012: 33.0 / OIBDA: 15.4m ( 46.7%)
2011: 30.4 / OIBDA: 13.7m (45.1%)
2016: released 24 new home video productions domestically and, in the U.S., shipped 1.6 million DVD and Blu-Ray units, including catalog titles released in prior years.
2015: released 28 new home video productions domestically and, in the U.S., shipped 2.1 million DVD and Blu-Ray units shipped in the U.S
Home Entertainment which include revenues generated from the sale of WWE produced content via home entertainment platforms such as DVD and Blu-Ray discs and digital downloads
2016: $26.9 / OIBDA: 4.6m (17%)
2015: $21.5 / OIBDA: 4.4m (20.4%)
2014: $18.2 / OIBDA w/ magazines: 0.3m [2.7 magazine publishing]
2013: $23.0 / OIBDA: 5.5m (23.9%) [5.7 magazine publishing]
2012: $19.7 / OIBDA: 8.2m (41.6%) [6.0 magazine publishing]
2011: $12.5 / OIBDA: 5.3m (42.4%) [7.7m magazine publishing]
The Company receives advertising revenues from YouTube and Facebook based on viewership of our content.
Previously the Company's pay-per-view webcasts via WWE.com The role of social media by fans and by us is an increasingly important factor in our brand perception.
4.9m of the increase in 2016 Digital Media came from YouTube. Spend increase of 3.2m for increased staff related and professional services costs to support various technology initiatives.
Live Events (including travel packages)
· 2016: 141.4m / 280 dom events + 64 intl events / 189 NXT events OIBDA: 40.1m (28.4%)
· 2015: 122.4m / 273 dom events + 56 intl events / 120 NXT events OIBDA: 36.1m (29.5%)
· 2014: 108.5m / 264 dom events + 54 intl events / OIBDA 27.0m (24.9%)
· 2013: 111.5m / 256 dom events + 65 intl events / OIBDA 30.1m (27.0%)
· 2012:103.7m / 248 dom events + 66 intl events / OIBDA 26.4m (25.4%)
· 2011: 104.7m / 241 dom events + 80 intl events / OIBDA 26.7m (25.5%)
2016: 189 NXT events = 187,800 paid att. ($37.26 avg ticket) = 994/show ($37k) = $7.0m in revenue
2015: 120 NXT events = 92,500 paid att. ($36.71 avg ticket) = 771/show ($28k) = $3.4m in revenue
· 2016: 24.2m / 9.8m OIBDA (40.5%) = $70k/show
· 2015: 22.4m / 8.9m OIBDA (39.7%) = $68k/show
· 2014: 19.3m / 7.7m OIBDA (39.8%) = $61k/show
· 2013: 19.4m / 7.5m OIBDA (38.7%) =$59k/show
· 2012: 18.8m / 6.7m OIBDA (35.6%) = $60k/show
· 2011: 18.3m / 7.3m OIBDA (39.8%) = $57k/show
2016: 49.1m / 27.4m OIBDA (55.8%)
2015: 48.9m / 28.8m OIBDA (58.9%)
2014: 38.6m / 21.0m OIBDA (54.4%)
2013: 43.6m / 31.1m OIBDA (71.3%)
2012: 46.3m / 32.3m OIBDA (69.7%)
2011: 54.4m / 37.0m OIBDA (68.0%)
The OIBDA margin in the 2013 reflected a $2.0m benefit associated with the recognition of the advance received from THQ. Bankrupcy of THQ and transfer of video game license to Take-Two Interactive on 2014.
The decrease in Licensing OIBDA as a percentage of revenues in 2016 as compared to 2015 was primarily due to increased talent participation expenses driven by product mix.
2016: 34.6m / 771,500 orders ($45) / $7.3m OIBDA 21.0% OIBDA
2015: 27.1m / 590,000 orders ($46) / $5.1m OIBDA 18.9% OIBDA
2014: 20.2m / 426,000 orders ($47) / $3.5m OIBDA 17.3% OIBDA
2013: 15.5m / 320,000 orders ($48) / $2.4m OIBDA 15.5% OIBDA
2012: 14.8m / 307,000 orders ($48) / $2.1m OIBDA 14.2% OIBDA
2011: 15.6m / 330,000 orders ($47) / $1.8m OIBDA 11.5% OIBDA
Added Amazon UK for European customers in 2014
Orders increased primarily due to the impact of additional distribution channels, including in international territories, continued marketing efforts and a broader assortment of products offered. The increase in WWEShop OIBDA as a percentage of revenues in 2016 as compared to 2015 was due to leveraging our fixed costs and improved fulfillment processes.
· 2016: 10.1m / -0.2m OIBDA [includes 3.0m from 2015 films]
· 2015: 7.1m / -1.5m OIBDA [includes 2.5m from 2014 films]
· 2014: 10.9m / 0.5m OIBDA [includes 3.8m from The Call released in 2013]
· 2013: 10.8m / -12.7m OIBDA
· 2012: 7.9m / -5.5m OIBDA
· 2011: 20.9m / -29.4m OIBDA
WWE released five films in 2016 (four on DVD):
· Scooby Doo! & WWE: Curse of the Speed Demon
· Incarnate (theatrical)
We have substantial capitalized film costs.
During 2016, the Company spent $6.6 million on feature film production activities, compared to $3.8 million in 2015. In 2016, we received $1.0 million in incentives related to feature film productions, as compared to $2.4 million in 2015. We anticipate spending between $10 million and $35 million on feature film production during the year ending December 31, 2017.
During the years ended December 31, 2016, 2015 and 2014, we recorded aggregate impairment charges of $0.8 million, $0.5 million, and $1.5 million, respectively, related to several of our feature films.
As of December 31, 2016, we had $27.1 million (net of accumulated amortization and impairment charges) in capitalized film production costs, which includes 32 released films, six films completed but not yet released, three films in production, and one film in development. No assurance can be given that additional unfavorable changes to revenue and cost estimates will not occur, which, in turn, may result in additional impairment charges that might materially affect our results of operations and financial condition.
We currently record revenues from our licensed products and WWE Studios film distribution revenues after receiving statements from the licensee and/or film distributor. Under the new revenue recognition rules, revenues will be recorded based on best estimates available in the period of sales or usage.
Corporate & Other
· 2016: -178.7m OIBDA (4.2m Rev) = 24.5% of Revenue
· 2015: -172.1m OIBDA (3.2m Rev) = 26.1% of Revenue
· 2014: -151.4m OIBDA (3.0m Rev) = 27.9% of Revenue
· 2013: -127.3m OIBDA (2.9m Rev) = 25.1% of Revenue
· 2012: -116.4m OIBDA (2.3m Rev) = 24.0% of Revenue
· 2011: -103.4m OIBDA (2.4m Rev) = 21.4% of REvenue
Corporate and Other expenses increased by $14.7 million, or 9%, in 2016 as compared to 2015. This increase is primarily due to increases in professional fees of $4.7 million in support of company-wide strategic initiatives, staff related costs of $3.7 million due to increased headcount, talent related costs of $2.6 million in support of talent development and investments of $1.6 million in global branding.
Cultural norms and regulatory frameworks vary in the markets in which we operate and our products' nonconformance to local norms or applicable law, regulations or licensing requirements could interrupt our operations or affect our sales, viewership and success in the markets.
Approximately 185 Superstars under exclusive contracts.. highly trained and motivated independent contractors.
Our NXT division, which continues to grow in popularity, features developmental talent training to become WWE Superstars. NXT has produced approximately 90% of our current active main roster stars, such as Kevin Owens, Charlotte Flair, American Alpha, Alexa Bliss, and Sami Zayn. NXT has now evolved into our third brand after Raw and SmackDown and has transitioned into a global touring brand broadcasting live specials on WWE Network throughout the year. In 2016, we focused on recruiting international talent, resulting in approximately 40% of our developmental talent coming from outside the U.S., including China, Japan, Australia, Ireland, Scotland and Poland.
While we believe that we have a loyal fan base, the entertainment industry is highly competitive and subject to fluctuations in popularity, which are not easy to predict. For our live, television, WWE Network, pay-per-view and movie audiences, we face competition from professional and college sports, other live, filmed, televised and streamed entertainment, and other leisure activities. We compete with entertainment companies, professional and college sports leagues and other makers of branded apparel and merchandise.
The demand for entertainment and leisure activities tends to be highly sensitive to the level of consumers’ disposable income.
During the year ended December 31, 2016, we invested $1,000,000 in a fantasy sports content provider, $1,000,000 in a subscription-based sports media company and $250,000 in a virtual reality platform operator. During the year ended December 31, 2015, we invested $515,000 in a live event touring business and $400,000 in Series F Preferred Stock of a software application developer.
We could incur substantial liability in the event of accidents or injuries occurring during our physically demanding events.
We hold numerous live events each year. This schedule exposes our performers and our employees who are involved in the production of those events to the risk of travel and performance-related accidents, the consequences of which are not fully covered by insurance. The physical nature of our events exposes our performers to the risk of serious injury or death. Although our performers, as independent contractors, are responsible for maintaining their own health, disability and life insurance, we self-insure medical costs for our performers for injuries that they incur while performing. We also self-insure a substantial portion of any other liability that we could incur relating to such injuries. Liability to us resulting from any death or serious injury sustained by one of our performers while performing, to the extent not covered by our insurance, could adversely affect our business, financial condition and operating results. As noted below, we are the defendant in litigation claiming that professional wrestling as currently and historically performed by us has resulted in significant injuries to our performers including, but not limited to, chronic traumatic encephalopathy or "CTE".
We could incur substantial liabilities if litigation is resolved unfavorably.
The Company has been named as a defendant in lawsuits alleging, among other things, that performers received traumatic brain injuries while performing for the Company and may have CTE. One such suit also alleges that the Company misclassified its talent as independent contractors rather than employees. The Company strongly disputes the merit of this type of case and moved to dismiss the lawsuits, which were consolidated for most purposes. Several of the claims have been dismissed, and the Company has moved to dismiss or for summary judgment on all remaining claims. If our current dispositive motions are not granted, or if any dismissals are reversed on appeal (once an appeal can be taken), the Company plans to continue to defend itself vigorously (including, if necessary, opposing class certification in the two cases filed as putative class actions). The Company’s insurance coverage for these cases is unclear. The Company has also been named in a suit that alleges class action status and alleges claims for breach of contract, among other things, relating to WWE’s alleged failure to pay royalties for streaming video on WWE Network. The Company believes all these claims are without merit and intends to continue to defend itself vigorously. In the ordinary course of business we become subject to various other complaints and litigation matters.
By its nature, the outcome of litigation is difficult to assess and quantify, and its continuing defense is costly. Any adverse judgment or settlement could have a material adverse impact on our financial condition or results of operations.
Servicing our debt will require a significant amount of cash, and we could have insufficient cash flow from operations or lack of access to sources of financing to meet these obligations and/or our other liquidity needs.
Our total consolidated debt, including the $200.0 million aggregate principal amount of 3.375% convertible senior notes due 2023 that the Company issued in a private offering in December 2016 (the "Notes"), is significant. In January 2017, pursuant to the exercise of an over-allotment option, an additional $15.0 million aggregate principal amount of the Notes was issued. We also have availability under our $100.0 million revolving credit facility (the "Revolving Credit Facility"). Through certain of our subsidiaries, the Company also has in place a films financing credit facility secured by certain of our films, a term loan secured by the Company’s jet and a real estate mortgage in the principal amount of $23.0 million secured by the related real estate (the “Asset-Backed Facilities”).
We believe we have sufficient liquidity for at least the next twelve months for our needs (including the payment of our dividend). However, our ability to make scheduled principal and interest payments on the Notes and under the Revolving Credit Facility, the Asset-Backed Facilities and any other indebtedness that may be outstanding at the time will depend on our future performance, which is subject to economic, financial, competitive and other factors beyond our control, including the items described elsewhere in these Risk Factors. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and provide for all our other uses of cash including capital and operating expenditures and paying our dividend. If we are unable to generate sufficient cash flow, we could be required to adopt one or more alternatives which, assuming they are, in fact, available, could be onerous, dilutive or otherwise affect our operations and/or the market price of our Common Stock. Such alternatives could include, for example, substantially reducing our cost structure, selling assets, reducing or eliminating our dividend, obtaining additional equity capital and/or refinancing/replacing the indebtedness. We may not be able to engage in any of these activities on desirable terms or at all due to our then existing financial condition, market conditions, regulatory matters or contractual obligations (including, for example, any restrictions under our Revolving Credit Facility or other credit agreement or debt instruments that may exist at that time). Any failure to make a required payment under our indebtedness may constitute a default under that indebtedness and under other indebtedness due to cross-default provisions and could trigger acceleration clauses causing the obligations to become immediately due and payable. The occurrence of one or more of these risks could materially and adversely affect our financial condition and operating results.
Class B Shares
There were 7,725 holders of record of Class A common stock and three holders of record of Class B common stock on February 7, 2017. Vincent K. McMahon, Chairman of the Board of Directors and Chief Executive Officer, controls a substantial majority of the voting power of the issued and outstanding shares of our common stock, and as a result, can effectively exercise control over our affairs.