WANT TO READ MY ARTICLE ABOUT Q1 RESULTS? BLEACHER REPORT.
Mookie's notes
On Thursday, WWE announced, "record quarterly revenue".
First quarter revenue jumped to $176.2M (up more than fifty million over last year's first quarter) and OIBDA came in at $21.0M (highest number in ten quarters). Operating income, which has been negative for five consecutive quarters, finally registered a huge improvement at +$15.1M.
Obviously, the advantage of holding WrestleMania 31 in Q1 2015 (versus WrestleMania 30 in Q2) is that the timing results in a HUGE revenue shift (WWE estimates it at $24.9M).
What's driving WWE's revenue growth?
- TV Rights: the preponderance of new TV deals signed in 2014 have began in Q4 2014 and Q1 2015. We've already seen quarterly TV revenue jump $16M in just 6 months.
Meanwhile, it's interesting to see that ratings for WWE's flagship show (Raw) and SmackDown have been flat/declining. Still, Total Divas continues to be a valuable hit for the company. And with Tough Enough returning to television and SmackDown moving to USA Network at the beginning of next year, clearly NBCU still sees big opportunity in the WWE product.
- WWE Network: With 1.327M paid subscribers as of 3/31/15, WWE generated more $28 million in revenue. Once again, WWE announced that they will be running a "free month for new subscribers", this time in May. And they've promised they are "developing plans for geographic expansion to India, China, Germany, Japan, Italy, Thailand and Malaysia."
Yet, quarterly Churn for the WWE Network is still high (284k in Q1). WWE seems to believe they'll be able to retain more and more subscribers year-round going forward instead of the historical WWE fan model where many tuned out between April and December each year.
Also, international WWE Network subscriptions (which includes Canada) are less than 15% of the total WWE Network number (196,000 of 1,327,000). However, in the past, WWE averaged more like 38% of total WWE PPVs from outside USA/Canada. Does this imply a large portion of WWE fans cannot access the WWE Network (do to lack of availability or reliable broadband access?) or that some 125,000+ fans are accessing the domestic version of the service?
Scattered notes:
Declining Segments:
According to WWE Raw ratings were down
HOW TO UNDERSTAND FINANCIALS
Scattered notes:
WWE Q1 Results
REVENUE OIBDA NET INCOME
Q1’15 $176.2M +$21.0M +$9.8M
Q1’15 w/o WM $151.3M +$21.4M +$10.1M
Q1’14 $125.6M +$12.9M -$8.0M
(This is WWE's accounting. Dave Meltzer indicated that it looks like they weren't assuming that WWE Network swell between January & March in the "pro-forma" on WrestleMania. In reality, WM 31.)
Growing Segments:
·
TV Rights (new deals signed for
Q4’14 & Q1’15; grew to $58.2M)
·
Live Events (WrestleMania,
domestic house show attendance up 4%; grew to $37.5M)
·
WWE Network (new UK market in
January; 3/31/15 = 1.327M paid subscribers; grew to $28.6M)
·
Licensing (Video Game-higher
unit sales, higher royalty rates; downloadable content including the WWE Supercard)/Venue Merch (WM);
residual sales from Q4 activity spill over to Q1
Declining Segments:
·
Home Entertainment (dropped to
down 5.8M versus same quarter last year)
·
Digital Media (loss of WWE
Magazine, no more WWE PPV webcasts; dropped to $4.3M quarter)
·
WWE Studios (only generated
$1.5M in revenue this quarter)
Exceeded Revenue/OIBDA expectations. However, market-opening rise in
stock price to above $15 was quickly reversed and currently stock is hovering
around $13.50 (-6%).
WrestleMania 31:
WM31 was the “highest-grossest event in WWE history”
KPI (Key Performance Indicators) page on Attendance implies that
WM31 attendance was 57,800
·
7,400 NA for 73 events w/ WM
and 6,700 NA for 72 events w/o WM
·
WWE internal calendar from
Annual Bootleg Merchandise Lawsuit listed the Levi Stadium Capacity at 66,060
·
WWE announced the attendance
for WM31 at 76,976
WM31 Revenue was calculated at $24.9M including $15.7M (Live Events)
and $3.3M (Venue Merchandise, broke WM29 record of $2.7M).
PPV Buys: $9.0M
·
WM31 (259,000 buys)
·
Fast Lane 2015 (46,000 buys)
·
Royal Rumble 2015 (145,000
buys)
WWE Network
Revenue: $28.6M
·
1,327,000 paid subscribers as
of 3/31/15; subscribers as of 12/31/14 was 816,000.
·
795,000 “gross additions” (new
subscribers plus “win-backs”)
·
Q1’15 Churn was 284,000
subscribers (Q4’14=-251K, Q3’14=-255K, Q2’14=-144K)
·
Remaining marketplaces: India,
China, Germany, Japan, Italy, Thailand and Malaysia.
·
Possible new Distribution
devices? ChromeCast & Android TV.
·
196,000 international
subscribers (15% of total) which is below historic non-North America PPV buys
average (38%)
·
“All new subscribers who
register for the network in May will receive the network for free in that
month, including WWE Payback live on
Sunday, May 17”
·
Will continue to add 1,000
hours to “robust video-on-demand library” including the new programming.
Barrios specifically called out the new Springer “Love Hurts” episode as
example of new programming initiative.
·
77% of the 201,000 “trial
subscribers” from February became paying subscribers in March. (Might include
some of the UK/Ireland fans who signed up in January?)
·
94% of total subscribers access
WWE Network
Strategy:
·
Programming: 8 brand new
original shows (“compelling special programming and “short form content”)
·
Promotions (Free May)
·
Features/Distribution (“improve
user experience and content discovery across devices”, “continuing to expand
distribution platforms”)
·
New Geographies
(India/China/Germany/Japan/Italy/Thailand/Malaysia)
OIBDA on Network
segment (PPV+WWE Network) was still -$1.5M despite the 1.33M paid subscribers.
To compare, Q2
2012 (with WM29) generated $18.9M in OIBDA for that segment.
Lots of factoids
about “WWE Network engagement vs. broadcast and cable networks” showing WWE has
“53.43 viewing hours per Household” which exceeds HBO (36.3), Disney (39.4) and
ties with TeleMundo (53.2). Netflix was
the market leader at 167.1.
Viewing Hours per Household was
“Cumulative hours of network content watched across network households divided
by the number of viewing households” whatever that really means.
SOCIAL MEDIA
WWE had 1.6 billion total views in Q1’15 on YouTube and 333 million
Social Media Followers on Facebook along with 107 million Twitter followers.
Meanwhile, the
Digital Media segment brought in $4.3M.
Still a huge
push for WWE as they feel right now is a “land-grab” and they view engagement
as key to reaching the younger generation as well as evidence to show
advertisers why WWE is important beyond TV ratings.
TELEVISION
WWE Television
Rights swelled to $58.2M during first quarter of 2015. That’s up nearly $16M
since before the new deals started at the end of last year.
·
SmackDown is moving USA Network
during Q1 2016.
·
Tough Enough is starting on USA
Network in June
·
Vince said Total Divas was #1 show on E! since the Kardashians were on hiatus
According to WWE Raw ratings were down
·
RAW ratings were down 5% this
quarter (3.5 versus 3.7 for Q1 2014)
·
SmackDown ratings were down 7%
(2.2 versus 2.3 for Q1 2014).
OTHER ISSUES
Barrios didn’t give his India pitch. Did talk briefly about China in
the Q&A.
No mention of TapouT partnership, though that deal doesn’t start
until 2016.
No surprise that Home Entertainment has been down (shipped 620,000
units in Q1 2015 versus 1,087,000 units in Q1 2014). Top recent seller was Slam
City (116k, Nov.) & Best of Sting (84k, Sept).
No real
discussion about WWE Studios. The segment was unprofitable this quarter
(-$400k) as usual.
First time net
income has been positive since Q3 2013.
Net Income in Q1/Q2 2012 was higher than this quarter. $176M in Revenue
was a quarterly record.
HOW TO UNDERSTAND FINANCIALS
1 comment:
I neglected to finish my comment on WM31 profitability. Here's what Dave Meltzer wrote on the F4W board: "WWE just told me that when evaluating Mania, they didn't include Network numbers in the value.
In other words, the growth in network subscribers is listed as something that would have happened even if Mania didn't happen, which of course isn't true. So Wall Street sees that even without Mania they'd have made $10 million this quarter, so it's a sustainable profit level, even though that's not entirely the case unless they lose no network subscribers.
For Mania, they figured PPV buys, ticket sales and whatever other revenue there was minus expenses and it was a loss of $400,000. Really, it may have made the difference between 1.0 million and 1.3 million in subscribers which would be about $2.6 million, so it's true profit was probably $2.2 million and the WWE Network's true losses were $2.6 million more than is listed."
http://theboard.f4wonline.com/viewtopic.php?p=5552651#p5552651
Also, I was on Wrestling Observer Live with Bryan Alvarez and Mike Sempervive talking Q1 results. That show is available at http://media001.f4wonline.com/dmdocuments/043015wol.mp3
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