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World Wrestling Entertainment, Inc. (NYSE:WWE)

Q2 2014 Results Earnings Conference Call

July 31, 2014; 11:00 a.m. ET

Executives

Vince McMahon - Chairman & Chief Executive Officer

George Barrios - Chief Strategy & Financial Officer

Michael Weitz - Senior Vice President, Financial Planning & Investor Relations

Analysts

Laura Martin - Needham

Daniel Moore - CJS Securities

Brad Safalow - PAA Research

Jamie Clement - Sidoti & Company

Kim Opiatowski - Vertical Group

Mike Hickey - Benchmark Company

Operator

Hello and welcome to the webcast entitled WWE, Second Quarter Earnings. We have just a few announcements before we begin.

If you are logged into the webcast, please note that the slides will not advance during the presentation. You will only see the title slide. Please download the full slide presentation via the download presentation button at the bottom of the webcast screen. Also at the bottom of your screen you will find a help icon for technical assistance, a enlarge slide button, and you may ask a question at any time by typing your question into the question box located on the web interface and clicking submit (Operator Instructions).

I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead, Michael.

Michael Weitz

Thank you and good morning everyone. Welcome to WWE’s second quarter 2014 earnings conference call. Leading today’s discussion are Vince McMahon, our Chairman and CEO; and George Barrios, our Chief Strategy and Financial Officer. We issued our earnings release earlier this morning and have posted the release, our earnings presentation and supporting materials on our website at corporate.wwe.com.

Today’s discussion will include forward-looking statements. These forward-looking statements reflect our current views, are based on various assumptions, and are subject to risks and uncertainties disclosed from time-to-time in our SEC filing. Actual results may differ materially and undue reliance should not be placed on them.

Additionally, the matters we will be discussing today may include non-GAAP financial measures. A reconciliation of non-GAAP to GAAP information is set forth in both, our earnings release and in the notes to the presentation, which is available on our website at corporate.wwe.com.

Finally, as a reminder, today’s conference call is being recorded and the replay will be available on our website later today.

At this time, it’s my privilege to turn the call over to Vince.

Vince McMahon

Good morning, everyone. When I look at our business, I always look at the key drivers; it used to be two now there is three; domestic attendance television ratings and of course WWE Network’s subscription.

As far as domestic attendance, it was up to 11% in the quarter and that’s for the fourth quarter in the row and that’s pretty extraordinary when considered that is the most pricely way to enjoy WWE domestic attendance. In addition to that, television ratings are up Raw 5%, SmackDown 3%. SmackDown by the way up 7% in the last eight quarters; and television ratings is up, that maybe even more extraordinary than our domestic attendance being up.

Thirdly would be our 700,000 subscribers in the network, which we consider that to be a very strong base to build on. We have new market initiatives, distribution on new platforms, different payment options coming up, we’ve added compelling programming in addition obviously to the key aspect of the network, which are our monthly pay-per-views.

And by the way, we’re making the network available globally on an OTT basis in 170 countries. That will be making that available on Tuesday, August 12. Some of those countries include Australia, France, Mexico. In the U.K. in October and Germany a little bit later than that, but nonetheless that’s pretty significant for us as a global release on Tuesday, August 12.

By the way in Canada, we just did a 10 year agreement. I don’t know if you guys saw that press release this morning, but a 10-year agreement which is a little bit different and that’s with Rogers Communications in Canada, which is a combination of our core programming, SmackDown, Raw, etcetera in conjunction with the network. So that’s a little bit different form they are doing. The network is much like an HBO model there, but it’s a combined right for both the network and our core programming.

In addition to that, having nothing to do necessarily with the network or domestic attendance or television ratings, we developed plans to improve our 2015 business outlook by some $30 million, which includes a 7% reduction in staffing and efficiencies across all of our operations, perhaps something we should have done some time ago and generally speaking, that’s it from a top line basis. We remain very optimistic about the growth of our company.

Michael Weitz

Thanks Vince. Several key topics which I’d like to review today. These include management discussion of our financial performance and the progress of key strategic initiatives, as well as efforts to reduce our expense base and strengthen our business outlook. For the second quarter our financial results beat our guidance, which targeted a net loss of $15 million to $18 million. The quarter was highlighted by the ongoing ramp of WWE Network to 700,000 subscribers.

As a reminder, following the broadcast of WrestleMania on April 6, we reported that WWE Network had attracted more than 667,000 subscribers in just 42 days. From April 6 through June 30, we generated 161,000 gross subscriber additions, which net of churn resulted in approximately 33,000 net subscriber additions.

Viewer data indicates that on average 91% of subscribers access the network at least once per week and use 2.5 devices to access the networks content. Importantly, a recent subscriber survey indicates that approximately 90% of our total network subscribers are either extremely or somewhat satisfied with the network. These responded and sited the remarkable depth of programming, including our pay-per-view event and historic archive content as a significant source of their engagement. We are very pleased with the performance of WWE network.

Regarding future subscriber growth, we expect the gradual ramp up over time as consumer awareness grows and consumers change behavior and adopt new technology. To attract subscribers, as mentioned in our first quarter call, we’re executing a five part strategy that includes making the network available in new geographies, creating new content, expanding distribution platforms, developing new features and executing high impact customer acquisitions and marketing programs.

As part of this strategy, we recently announced a new 10 year partnership with Rogers Communications, a leading media enterprise in Canada. The partnership facilitates the launch of WWE Network through traditional pay-TV distribution versus stand alone OTC distribution. Rogers will make the network available as a premium channel through its own cable systems with the preview beginning August 12 and thereafter through other Canadian pay-TV providers outside Rogers footprint. The partnership will also renew its Rogers license of our Raw and SmackDown television programs and grants Rogers distribution rights to the company’s pay-per-views.

Both WWE Network in Canada will be distributed under a different model than in that U.S. and elsewhere, the programming and content offering will be the same, as the U.S. product consistent with our broader plan to make the existing network offering available worldwide.

As recently announced, the U.S. version of WWE Network will be made available starting August 12 on an over the top basis in over 170 countries and territories. These include Australian, New Zealand, Hong Kong, Singapore, Mexico, Spain, Nordic countries and others. The network is excepted to be live in the U.K. by October 2014. In essence, this represents distribution in all of WWE’s major market, except for Italy, UAE, Germany, Japan, India, China, Thailand and Malaysia. Plans for these markets will be communicated at a later date.

Importantly, as we expand our reach we will leverage the investments already made in the U.S. by utilizing the existing English language U.S. network product with a single fee, a universal VOD offerings in common plans and pricing. Over time we’ll localize WWE Network as appropriate.

Since WrestleMania, we primarily relied on promoting the network on Raw and SmackDown television programs. In conjunctions with our SummerSlam pay-per-view in August, which in one of our most popular events, we plan to step up the level of third party advertising in order to continue driving awareness and subscriber acquisitions.

Of course, we continue to be excited about the new original content coming through the network, which includes Monday Night War and WWE Rivalries, the newest edition to WWEs program line up, both of which provide a documentary-style look at the greatest moment in WWE history. We are launching WWE Network on several smart TV and Blu-ray platforms and we plan to deliver new features such as resume play capability later this year.

The recent performance of WrestleMania, which yielded 424,000 North American pay-per-view buys and 690,000 global buys during the quarter, demonstrates a meaningful base of potential subscribers that may be converted to the network. Our five-part strategy for attracting subscribers including our strategic partnership in Canada and making the existing network available worldwide, will facilities the expansion of WWE Network and provide a global platform for driving growth over the coming years.

To review the key drivers of our performance in the quarter, let’s turn to page six of our presentation, which lists the revenue and OIBDA contribution by business as compared to the prior year quarter.

Total revenues increased by $4 million based on the increased monetization of our content. Revenue from WWE network and increased television rights more than offset lower revenue from our pay-per-view home entertainment and digital media businesses.

Network revenues, which include revenue generated by WWE Network, pay-per-view, and video on demand increased 13% to $43.3 million, as the ramp-up of network subscribers and subscription revenue more than offset the decline in pay-per-view revenue. WWE Network generated $19.4 million in subscription revenue, based on an average of approximately 665,000 subscribers and a price of $9.99 per month.

The $19.4 million in network subscription revenue was partially offset by the $13.2 million decline in pay-per-view revenue. Pay-per-view revenue declined 36% to $23.8 million, driven by an overall 32% decline in buys and a 6% decline in revenue per buy. There were four pay-per-view events in a current year quarter as compared to three events in the prior year quarter, so on a comparable basis pay-per-view buys declined approximately 41%, reflecting the availability of our pay-per-view events on WWE Network in the U.S. and weaker performance in some international markets. The decline in revenue per buy reflected a change in the mix of buys with a higher proportion of buys from international market, 43% as compared to 33% in the prior year quarter.

Television revenues increased 13% or $5.1 million, primarily due to second season production and monetization of Total Divas, with no comparable program in the prior year quarter. As a remainder, the first season of Total Divas debuted in the third quarter of 2013. The growth in television revenues also benefited to a lesser extent from contractual increases for our existing programs.

Revenue from our digital media segment declined $2.2 million, primarily due to the lower monetization of our webcast pay-per-view events on wwe.com, as these events also were available in the U.S. on our network. Additionally, the decline reflected lower advertising revenue. Key digital metrics such as unique visitors to the company’s website and mobile app increased from the prior year quarter.

Home entertainment revenues declined $1.7 million to $5.4 million, reflecting a 40% decline in unit shipments, which was partially offset by an increase in the average price of our DVD and Blue-Ray titles. The decline in unit shipments derived from reduced shipments of our catalog title, which are typically characterized by lower prices and profit margins in new releases.

As a result, new releases comprised approximately 70% of total units shipped as compared to 45% in the prior year quarter. Stemming from this change in product mix, the average price of our Home Entertainment titles increased 27% to $13.49. Live event revenues declined 3% or $1.3 million, primarily due to the stadium configuration for WrestleMania, which resulted in lower attendance for that event. WrestleMania was sold out in both the current and prior year.

Increases in average attendance and ticket prices for our other events in North America essentially offset the impact of staging 11 fewer events in the region. Generating an average attendance of 7,000 fans, the quarter marked the highest average attendance over the past four years and as Vince mentioned, the fourth consecutive quarter that generated a year-over-year increase.

Excluding WrestleMania, average attendance increased 13% to 6,000 fans and the average ticket price increased 7% to more than $44, predominantly due to changes in venue mix.

Ticket revenue from our international live events increased less than $1 million, as an 11% increase in the average ticket price was essentially offset by an 8% decline in attendance to 6,100 fans. The changes in average attendance and effective ticket prices were predominantly due to the changes in territory mix.

Revenue from our consumer products division declined less than $1 million from the prior year quarter, as lower revenues from our licensing business was nearly offset by increased merchandise sales on our e-commerce website, WWEShop.

Licensing revenues declined $1.2 million from the prior year quarter, primarily due to the lower sales and effective pricing of our franchise video game. As a remainder, we transitioned to a new video game license fee, Take-Two Interactive at the start of 2013, which led to changes in our licensing agreement. These changes included staggered royalty rates that increased with higher levels of cumulative videogame sale. Based on sales to-date the royalty rate in the quarter surpassed the rate that prevailed in the second quarter last year, but remained lower on a year-to-date basis.

Our forecast for the full year contemplates that pricing pressures could dampen video game revenue on a year-over-year basis, thereby potentially impacting overall royalty rates for the full year. Prices are impacted in-part by the mix of game platforms, as our franchise video game was not released on PlayStation or Xbox One.

While turning to the decline in licensing e-commerce revenue generated by WWEShop increased by $1 million. Online Merchandise sales increased 29% to more than 81,000 orders, with increased use of our mobile platform and a new distribution model utilizing Amazon in the U.K.

Revenues from our movie business, WWE Studios declined $0.4 million from the prior year quarter, due to the timing of results from the company’s portfolio movies. Revenue recognized in the current year quarter was primarily associated with our 2013 slate of releases. WWE Studio’s movie portfolio generated a loss of $0.2 million as compared to a loss of $0.4 million in the prior year quarter.

Recent movies such as Scooby-Doo! WrestleMania Mystery, Oculus and Road to Paloma released in March, April and July of this year respectively, have delivered performance that are essentially in line with our expectations. The company’s movie releases since last 2012 are currently expected to generate an internal rate of return or IRR of over 15%, exceeding WWE’s cost of capital.

Corporate and other expenses increased $8.4 million to $42 million from the prior year quarter. As defined, these expenses include certain sales, marketing and talent development costs, which have not been allocated to specific lines of business. The increase in corporate and other expense during the quarter included a $2.3 million increase in salary and benefit costs, and increased marketing expense to support key contact and brand initiatives, including strengthening our international infrastructure, talent development and brand marketing. Overall company salary and investor cost increased $4.7 million with a 10% increase in headcount.

Operating income before depreciation and amortization or OIBDA declined $29.5 million due to the ramp up of WWE Network, investment across WWE to support key contact and brand initiatives and profit declines from some of our non-network businesses. The ramp up of WWE Network accounted for a $15.5 million reduction in OIBDA as the growth in subscribes and subscription revenue was more than offset by the loss of pay-per-view revenue and increased programming customer service and marketing costs.

Investment in WWE’s content and brand initiatives resulted in an $8.4 million increase in corporate and another expenses as I described earlier. In addition, the overall decrease in OIBDA reflected the decline in revenue from other WWE businesses as we previously discussed.

Net income declined $19.7 million, reflecting the decline in our OIBDA results. Our effective tax rate was 36% compared to 38% in the prior year quarter.

Page 13 of the presentation contains our balance sheet. As of June 30, 2014, the company held $79 million in cash and short term investments and currently estimates debt capacity under the company’s revolving credit facility to be approximately $120 million.

Page 14 shows our free cash flow. Through the first six months of the year we used approximately $11 million. The use of cash was driven by the company’s operating loss to date in 2014, as well as spending to produce feature films.

During the quarter we completed a comprehensive evaluation of the company’s operations, which identified opportunities to improve efficiency across all of our businesses. These measures include a 7% reduction in current staffing levels. Based on these efficiencies we are increasing our OIBDA outlook as compared to the outlook presented in our May 15 release, by approximately $10 million for 2014 and by $30 million for 2015.

In conjunction with the implementation of these measures, we anticipate recording a one-time pre-tax restructuring charge of approximately $4.5 million in the third quarter of 2014 comprised of severance and other costs.

As stated previously, the level of network subscribers is a critical determinant of our financial performance. Given the lack of visibility regarding the rate of subscriber adoption, our presentation provides ranges of the company’s overall financial performance at different levels of subscribers for 2014 and 2015. Ranges of financial performance are shown on an adjusted basis, excluding one-time items such as the above mentioned restructuring charge, of which $2 million impacted OIBDA on a non-adjusted basis.

Page 10 provides ranges of adjusted OIBDA at different subscriber levels for the third quarter 2014, as well as for the full year 2014 and 2015. As an example, if WWE Network achieved a 12 month average of 650,000 subscribers for 2014, this translates to an estimated overall 2014 adjusted OIBDA loss for the company, ranging from $35 million to $25 million. The $10 million improvement in this range as compared to that range specified in our May 15 outlook release is derived from the afore mentioned expense reduction.

Regarding 2015, you should note that each level of subscriber performance, we have increased our 2015 OIBDA outlook by $30 million as compare to our May 15 outlook release. As shown, the expansion of WWE Network subscribers could significantly raise the company’s earnings profile.

Looking further ahead, we believe that successful execution of our WWE Network strategy can drive long term growth and generate economic returns that better reflect our tremendous global appeal and brand strength.

That concludes this portion of our call, and I’ll now turn it back to Michael.

Michael Weitz

Thank you, George. Casey we are ready now. Please open the lines for questions.

Question-and-Answer Session

Operator

Thank you (Operator Instruction). We'll take our first question from Laura Martin with Needham.

Laura Martin - Needham

Hi there. Great numbers and thanks for all the disclosure. A couple of things; so Vince, I’ m very interested in this pricing, these pricing directives that looks like you are going to go to. Do you think that the reason that we haven’t gotten more robust over the top growth is because we need more pricing options to go month-to-month or what’s your thought there about the role that pricing is playing and the growth of the over the top sub basis?

Vince McMahon

Well, that’s one aspect of it. I mean as we grow and learn and what have you, we’ll be presenting as described in our release. Perhaps those are initiatives as well as other payment options. We want to make sure that we grow the network, but that’s just one of the aspects of the growing the network. There is so many more.

Laura Martin - Needham

Okay, and I’m also surprised. Last time we were on this call we were talking about like seven English speaking offshore markets in the next 12 months and then we opened the press release today and now we are gonging to be in a 170 markets. Could you talk about what changed your focus to go global so much more rapidly and what the economics are of launching 170 countries versus the seven countries that we were kind of in May?

Vince McMahon

What we are going to do here is that in terms of English, which of course that’s the second language for everyone pretty much all over the world. It allows us to determine information from local markets and that we will be in the future with some of these markets, obviously catering to on a local basis. This is the English version at English prices.

So again, it allows us to get into some of these markets a lot quicker than we have before and learn a lot more about the individual market. So that when we go back in, assuming we would go back in and offer an in-language version, we’ll have a lot more detail.

George Barrios

And more on the economic element of it as Vince mentioned, because we’re not increasing the fixed cost to launch. Obviously leverage is pretty well, so it will be driven by subscriber acquisition.

Laura Martin - Needham

Okay, that’s not more marketing expenses when you go into that. That’s more – do you have tell people…

Vince McMahon

There will be some, but relative to a multi-feed model, significantly less. So the marking will be the one that you’d say there is an increase, but significantly less in doing multiple feeds.

Laura Martin - Needham

Okay, very helpful. Thanks guys. Great numbers, thanks.

Operator

Thank you. We’ll take our next question from Daniel Moore with CJS Securities.

Daniel Moore - CJS Securities

Thank you for taking the questions. Maybe just help us understand a little bit more about the churn in the subscriber base of about 128,000 subs, given the initial six month commitment had not yet expired. How does that compare to your internal expectations and what were the kind of the key drivers?

Vince McMahon

Yes Dan, I’ll take those, the second part first. As you know, any subscription business is going to have churn. By our estimates subscription video services can be anywhere between 4% and 8% a month, which is a pretty significant turn over. So that’s part of managing the business and it’s something that we anticipated in the business model.

To the element, obviously at this point there is no renewal churn, because that wouldn’t start until August 24. So it really is a payment billing driven element of churn. We’ve got some assumptions on the renewal side and so we think that overall if our assumptions hold true on the renewal side, it will stick within the business model that we’ve kind of developed, but that will be determined, we’ll see here in a few weeks.

Daniel Moore - CJS Securities

Have you changed the payment methodologies that you’ll accept to address those?

Vince McMahon

Yes, we are working on some things at this point, but we haven’t implemented them yet.

Daniel Moore - CJS Securities

Okay, and I don’t want to beat the dead horse, but one more on the – just how it trended over the quarter. Obviously given its a payment issue, it probably had a good chunk that within a month or so you kind of figured out weren’t going to re-up or pay for the second month. I’m wondering if it slipped. How that’s kind of trended over the three months that you have?

George Barrios

Yes, I’m not going to get into the daily churn number, but your sub position is right. It obviously is going to – it will be lumpy driven by the lumpiness in the acquisition.

Daniel Moore - CJS Securities

Okay, and one more and I’ll jump back in queue. On the cost reduction, what was the catalyst that drove the decision and typically I wouldn’t see $30 million of cost savings from just $4.5 million of severance. So outside of headcount, what are some of the other major buckets of cost savings that you expect to achieve.

George Barrios

Yes, on the first one, I think like Vince mentioned, I mean it’s part of the planning process. You take a look around the organization. I think over the last few years we leaned towards speed and effectiveness of the implementation of our initiatives and this year we lean towards driving some efficiency. I mean when you’ve grown as much as we have over the last three years, your eyes light open that you’re probably introducing some inefficiency to get duplication of effort and things like that and you just get smarter and you learn. So that’s really what drove it.

As far as the allocation of the line items, we are going to avoid kind of giving line item guidance of where the savings will be, but we feel really comfortable we’ll be able to achieve them.

Daniel Moore - CJS Securities

But the lion’s share is headcount?

George Barrios

Like I said, I don’t want to give line item guidance; it’s throughout. As you know there’s a lot of partnership in our model. So it kind of is throughout the operations.

Daniel Moore - CJS Securities

Okay. I’ll jump back in queue. Thanks.

Operator

Thank you. We’ll take our next question from Brad Safalow with PAA Research.

Brad Safalow – PAA Research

Thanks for taking my questions. Just the first question, it sounds like your telling us what we think is probably true on churn. That you witnessed the highest level of churn post WrestleMania and then maybe had some normalization of that post, let’s say if we got into May. Is that fair to say?

George Barrios

Yes, I mean I think the best way to think about it and then when I can start giving daily numbers, it’s the churn happened alongside the billing cycle and so the billing cycle is a 30 day billing cycle. So depending on when you acquired those subs, it’s going to be timed around the billing cycle, so generally you’re right.

Brad Safalow – PAA Research

Right. So that’s about true on a gross subscriber basis, but we’re all thinking of percentage churn. So I guess the question is the percentage churn now is appreciably lower now that we’re past the WrestleMania cycle.

George Barrios

The absolute numbers are going to be lower, because of the big acquisition. The percentages, we need some more data points before we have kind of a real pure view, but our view is that the percentages are somewhat stable, but the gross numbers are going to be higher just because of the lumpiness in the acquisition.

Brad Safalow – PAA Research

Okay, and then just a question on 2015. The $30 million variance relative to what you communicated in May, how much of that is, where you cut cost versus we’re actually going to spend less than that. The $30 million to $40 million bucket you talked about, that was the combination of production, talent development, international expansion and a few other things.

George Barrios

Yes, I think you will see elements of both, but when you compare our 2015 expenses to where we think we’ll end up in ’14, there will be, what I described as a pretty significant decline in overall expenses, mid to upper single digits.

Brad Safalow – PAA Research

Okay, and then in your guidance for ’15 or really for ’14 and ’15, when we look at the network subs implied there, are you assuming that all of those subs will be what I call a traditional, at a $10 price point or is there some sort of mix assumption around how many people might come in month-to-month.

George Barrios

Yes, it’s a great question. We don’t have enough insight yet to have that kind of product mix view, so at this point we’re assuming an ARPU that mimics the $9.99 price point.

Brad Safalow – PAA Research

Okay. And then there’s a lot of concern about what churn might be as we get to the end of August and then into the three to four month window, where maybe your called to action and the pay-per-view slate is not as strong as Royal Rumble, WrestleMania or the SummerSlam. What are you guys planning on doing to perhaps change that?

George Barrios

I think it comes down to being really creative on the marketing side; having great attractions on the pay-per-view; continuing to deliver some of both the new content that we talked about, as well as expanding the VOD offering and then also driving awareness. We are not going to talk about numbers, but we do a lot of work on trying to understand what the current awareness is and we think that there’s opportunity just to increase the awareness.

Brad Safalow – PAA Research

Okay, I’ll jump back in queue.

Operator

Thank you. We’ll take our next question from Jamie Clement with Sidoti & Company.

Jamie Clement – Sidoti & Company

Good morning gentlemen.

George Barrios

Hey Jamie.

Jamie Clement – Sidoti & Company

A couple of questions about consumer products. The pretty strong increase versus the prior six months in a gross revenue per DVD shift. I know you talked about the mix between new releases versus catalogue, but was that, refresh my memory, WrestleMania 30, does that carry a premium price compared to some of the other new titles that you put out. So in other words, in the back half of this year, would we potentially see a drop of $1 or $2?

George Barrios

Yes, so it’s almost all mix. So the element of the one DVD that you mentioned, WrestleMania, is not what’s driving it. It’s really the mix of catalog and new releases. We are certainly not seeing improving pricing at retail. Again, it’s a mix issue, so I don’t want to give guidance. I don’t know what the mix will be in the third and fourth quarter.

Jamie Clement – Sidoti & Company

Oh no, I was simply asking a question of -- I mean is WrestleMania, is the average take on your WrestleMania DVDs, are they typically higher than your normal new releases?

George Barrios

Not materially Jamie.

Jamie Clement – Sidoti & Company

Not materially, okay, that is very fair. So just to clarify, the 170 new markets, they are going to be seeing what we’re seeing here in United States, right. I mean it’s basically identical, is what it sounds like, right?

George Barrios

That’s right.

Jamie Clement – Sidoti & Company

Okay. So in terms of customer service, that sort of thing, that just feeds in to what you’ve already built?

George Barrios

That’s right, the infrastructure we have should support it.

Jamie Clement – Sidoti & Company

Okay. And last question, I don’t know if you had enough time to evaluate this, but as you look, I don’t know. Is any trend you have noticed as to when subscribers are subscribing? In other words, do you notice a big pop on Monday nights during or after RAW when it’s discussed or is it turned into a situation where it’s maybe Friday, Saturday, Sunday of a pay-per-view weekend where you really see the pop up?

George Barrios

There is certainly a somewhat of a center of gravity around the pay-per-view.

Jamie Clement – Sidoti & Company

That would make sense. I mean would that have been consistent with your expectations heading into all of this?

George Barrios

Yes.

Jamie Clement – Sidoti & Company

Great, thank you for your time.

Operator

Thank you. We’ll take our next question from Kim Opiatowski with Vertical Group.

Kim Opiatowski - Vertical Group

Thank you for taking my questions. I had one question with regards to the new partnership that you signed with Rogers Communication. It sounds very exciting. Why did you choose to go this route in Canada? It seems to be a bit of a step away from what we’re doing here in the U.S. and how are the economics going to work there?

Vince McMahon

First bother Canadian, they tend to look at things a little differently and it’s an overall mix. I don’t know that we’re going to have that anywhere else. We know we might when someone combines our core television rights with network revenue. It’s interesting though that we have the flexibility to be able to do that as it relates to the network, but I don’t know that’s necessarily going to happen anywhere else in the world. It could when you combine the two.

Kim Opiatowski - Vertical Group

Okay, and how will the economics be different from the OTC network here in U.S.?

George Barrios

Yes, I don’t want to get into this specific deal terms. Obviously we’re happy with the deal, which is why we entered into it, but the deal will have a component associated with our licensing of our core programming to Rogers and then also have a component around the network, but I don’t want to get into talking about the deal terms.

Vince McMahon

It’s basically an offer that we couldn’t turn down.

Kim Opiatowski - Vertical Group

Okay, thank you very much Vince and Michael. I’ll jump back in.

Operator

Thank you. (Operator Instruction). We’ll go next to Daniel Moore with CJS Securities.

Daniel Moore - CJS Securities

Thank you again. Just want to drill down a little on the new guidance in terms of OIBDA ranges at various subscriber ranges. Previously you had assumed 100% cannibalization from the pay-per-view business. Obviously with the Rogers deal and we are still seeing some pay-per-view business entail for that for a period of time. Is there a pay-per-view revenue included in the guidance as we think about ‘15?

George Barrios

No.

Daniel Moore - CJS Securities

Okay, so that’s full cannibalization still.

George Barrios

Yes.

Daniel Moore - CJS Securities

Okay, and just on that $20…

George Barrios

I think Dan, just to a finer point, of all the countries I mentioned there’s cannibalization, I mentioned the list of countries that were not going, so there maybe some there, but it would be diminimus. I mean obviously those countries don’t represent a significant portion of pay-per-view revenue.

Daniel Moore - CJS Securities

Okay, and then the $20 per month, sort of the new rate, I assume there will be a different price come April or whenever WrestleMania falls or have you kind of thought through that at this point?

George Barrios

As Vince mentioned, it’s one of the things we are looking at, different price points. Well, we don’t want to comment beyond that at this point.

Daniel Moore - CJS Securities

Okay. Thanks again.

George Barrios

Thanks Dan.

Operator

Thank you. We’ll take our next question from Mike Hickey with the Benchmark Company.

Mike Hickey - Benchmark Company

Hey guys, great quarter. Thanks for taking my questions. Just curious at your new pricing schematic. I guess first just on your ongoing subscriber base. Can you give us what percentage are set up for automatic renewal versus having to do it manually?

George Barrios

No, we are not going to give that number out.

Mike Hickey - Benchmark Company

Okay, and then if you’re a new subscriber on this plan and you sign up for the six months, now does that mean you now have $60 upfront or you are still billed $10 per month.

George Barrios

So if you sign up for six months commitment, you essentially have two options; you can get monthly billing recurring $9.99 or you can do one upfront payment. And we know for a fact that some people, some consumers prefer to do the upfront payment, they don’t like the recurring billing, which is why we introduced that.

Mike Hickey - Benchmark Company

Okay, got it. And then I mean, do you guys worry about kind of loosing that ongoing subscriber $10 a month or turning them into a one purchase for just $20 per month. Does that give you any concern or maybe some back where I think this is more of a win than a potential risk.

George Barrios

Yes, obviously a lot of thinking on that and we think, I mean as Vince mentioned, a lot of this is what we’ll learn and we’ll see how thing work, but we thought $19.99 was the right balance of giving people a change to have a smaller entry point, but still managing the economics. But we will certainly learn.

Vince McMahon

And there might be other payment options in the future too. We just are looking at all of it.

Mike Hickey - Benchmark Company

Okay, and are you guys still targeting 1 million domestic subs by year end of have you revised that?

George Barrios

Well, what we’ve always said Mike as you know is that if we had 1 million by year end, we’d absolutely be thrilled. That would be incredible, and we would feel the same way.

Mike Hickey - Benchmark Company

Okay, and the last one from me. Obviously it’s some big growth here in attendance. I think those are a bit of a surprise and I think initially people had concerns that maybe the network would actually cannibalize attendance, in a sense that I was surprised you had a form to actually view the content. But do you see any key reason why you think this is going hire events and if you think it will continue to turn positive through the remainder of the year.

George Barrios

I think people are excited about the attraction.

Mike Hickey - Benchmark Company

Okay. Thanks guys.

Operator

Thank you. We’ll take our next question from Jamie Clement with Sidoti.

Jamie Clement – Sidoti

Hi, just one final question gentlemen. Does Rogers have the right for this agreement and even the technological capability of being able to embed any advertising into the network stream?

George Barrios

So on this traditional distribution, we are still working through that with them. We didn’t mention it, but our plan is to eventually offer an authenticated version of the app in Canada. So you have kind of the similar looking feel as you would have here and that advertising capability will be built into that.

Jamie Clement – Sidoti

Okay, great. Thank you very much.

Operator

Thank you. We’ll take our next question from Brad Safalow with PAA Research.

Brad Safalow – PAA Research

Thanks. Just a couple of follow-ups. One, what is the status of the TV rights negotiation in India.

George Barrios

We are still working through the deal with our partner. Obviously we’ve agreed to terms where we’re working through the final point.

Brad Safalow – PAA Research

Okay. So is that something you actually will communicate kind of what you have in the past or suggested on the mark-to-market.

George Barrios

That we would communicate when the deal is signed.

Brad Safalow – PAA Research

Well, you obviously always communicate with the deal signed, but give us a sense of like how much the increase was.

George Barrios

Yes we never talk about that. We’ve already communicated kind of the total increase of our major deal. So that will probably be the extent of it. We don’t get into the individual deals that we are in.

Brad Safalow – PAA Research

Okay. And then just as a reminder, for TV rights internationally, how many of those are up for renewal in the next 12 to 18 months.

George Barrios

Yes, that’s something else Brad that we don’t give guidance on, other than the four major ones, because of the unique point in time when they were all up fairly tight, but...

Brad Safalow – PAA Research

Okay. And then just to be clear on the Rogers deal, the subs that are acquired via Rogers, will they be counted in the network number.

George Barrios

They will.

Brad Safalow – PAA Research

Okay. And then prior to this global rollout of the network, how many of those countries previously did not have access to pay-per-view events or did not have access to live pay-per-view events.

George Barrios

Well, given the scale, I mean in essence we’re opening up the network. So a lot of those countries don’t have pay-per-view, because their infrastructure doesn’t exist in the county. So there may be an IP infrastructure, but not necessarily a digital multi channel infrastructure. So it’s a lot of them.

Brad Safalow – PAA Research

Okay. And can you give us a sense from a pure viewership percentage, not ratings point, but just like normal number of viewers, what are you top 10 countries in terms of viewership of Raw and Smack Down outside of the U.S.

George Barrios

That’s really, really hard, because ratings data is much more difficult to obtain internationally. But in a lot of ways the marks we talked a lot about are the ones where we have a lot of great viewership; Canada, the U.K., India, South Africa, Mexico, the places where we talk about us having an opportunity.

The other element is, depending on the market in some cases we’ve chosen to have a little bit narrower distribution, so all of that comes into play. But generally the big markets we talk about are where we have a big center of gravity on viewership.

Brad Safalow – PAA Research

Okay, and then for Italy, Germany, Japan, India, China, Thailand and Malaysia, is that a 12 to 18 month window where you think will have the network available for distribution or it could be beyond that.

George Barrios

Look, my guess is you’ll start seeing things in ‘15 and ’16 for those countries as we finalize our plans.

Brad Safalow – PAA Research

Okay, and last question, what are you expectations surrounding cash spend on TV and Film for action assets this year or for the rest of the year.

George Barrios

Yes, we haven’t given guidance other than on the pure film side, where we said generally we thought we’d be at around $20 million. So the capitalized TV assets we haven’t given guidance on that, just the films.

Brad Safalow – PAA Research

Okay, thanks. I’ll turn it over.

Operator

Thank you. Ladies and gentlemen, it appears there are no further questions at this time. Michael Weitz, I’ll turn the conference back over to you for any additional or closing remarks.

Michael Weitz

Thank you Casey and thank you everyone. We appreciate you listening to the call today. If you have any questions, do not hesitate to contact me, Michael Weitz or Laura Keenan at 203-352-8600. Thank you.

Operator

Thank you. Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect.

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