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WWE Q1 RESULTS: Updated WWE Network Report Card - several new details on first Network biz results, future prospects, comments from McMahon, Barrios, more



May 1, 2014 - 10:54:15 AM

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By James Caldwell, PWTorch assistant editor







WWE Network Notes from Conference Call



Most of WWE's First Quarter 2014 conference call focused on the Network launch and future prospects.



- WWE financial executive George Barrios framed the Network launch date of February 24 as a "significant pivot" in WWE's business model.



Because WWE believes the Network could become their leading revenue source over time, especially by "taking it global," the Network is viewed internally as a "platform for long-term growth, if successful."



- WWE is still targeting one million domestic subscribers by the end of the year. Over time, they expect the subscriber base to reach 2-3 million domestic, which WWE CEO Vince McMahon called a "conservative" figure.



WWE believes the "international opportunity" is about 500,000 subscribers based on where they plan to launch later this year and into 2015.



- Barrios did not rule out the possibility of partnering with another company on the Network. "We would consider anything if it makes business sense," Barrios said. "But, a high value is placed on the Network." In other words, it would have to be a very, very good partnership deal for WWE to consider bringing in a Network partner.



- The Network will be rolling out on Amazon devices soon, and smart TVs will follow. Barrios issued a No Comment on how revenue is shared with major hosts, such as Apple for Apple TV devices and eventually Amazon.



Network Report Card from the Press Release



- Subscribers: WWE reported 495,000 subscribers on April 1 when the first quarter concluded. By April 7 - the day after WrestleMania - WWE had 667,000 subscribers. Of the initially reported 667k subscribers, 172k (35 percent) came during WrestleMania Week.



During the conference call, Barrios issued a No Comment when asked how many of the initial subscribers have an automatic renewal built into their subscription versus how many have a six-month subscription and could cancel in August, which would affect the total number of subscribers. Also of note, WWE said they will disclose an updated subscriber count each quarter.



- Revenue: WWE reported initial Network Revenue of $4.4 million based on 495k subscribers at the end of the quarter.



The figure appears to be based on a portion of the month of February when the Network launched and a full month of March revenue.



If WWE were to hit its break-even point of 1.0 million subscribers, WWE would be adding about $10 million per month or $30 million per quarter to total revenue, which would place the Network #2 behind TV Rights Revenue.



In their financial reporting, WWE is essentially comparing new Network and old PPV Revenue side-by-side. The declining PPV segment generated $13.8 million in Q1-2014. WWE is essentially looking to double that figure on a quarterly basis if they hit the Network's break-even point.



- Profit: WWE reported a Network operating loss of $3.6 million to generate the initial $4.4 million in revenue. This included start-up costs for marketing, operations, customer service, etc.



WWE also noted the Network category was impacted by a 10 percent reduction in PPV Revenue, as WWE lumped together Network and PPV Revenue for reporting purposes.



During the quarterly conference call, Barrios noted WWE is lumping together Network and PPV production costs because they see the two operations tied together, especially with the Network cannibalizing PPV revenue.



- Comments: WWE CEO Vince McMahon and financial executive George Barrios discussed the first portion of Network business. Included was McMahon taking the "nearly 400,000" domestic WrestleMania PPV buys and believing those individuals willing to spend $60-70 on WM30 instead of subscribing to the Network will be turned into Network subscribers at a high-rate.



"With almost 670,000 WWE Network subscribers in the U.S. and nearly 400,000 domestic pay-per-view buying homes for WrestleMania 30, we are confident that we will reach our goal of 1 million subscribers by the end of 2014,” McMahon said in the earnings release.



“As we launched WWE Network, we invested in marketing, programming, and customer service. Although our earnings declined in the quarter, our performance surpassed our guidance, which targeted a range of Net loss from $12 million to $15 million,” said Barrios.



- What's Next: WWE is planning to continuously roll out new Network programming and launch new marketing campaigns in an effort to generate subscriptions.



"To drive WWE Network subscriber growth, we are highly focused on further developing our programming, expanding distribution platforms, and executing customer acquisition campaigns," said McMahon. "The expansion of WWE Network in the U.S. and international markets will provide a platform for long-term growth over the coming years."



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