World Wrestling Entertainment CEO Discusses Q2 2011 Results - Earnings Call Transcript

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World Wrestling Entertainment, Inc. (NYSE:WWE) Q2 2011 Earnings Call August 4, 2011 11:00 AM ET


Michael Weitz - IR

Vince McMahon - Chairman and CEO

George Barrios - CFO


Richard Ingrassia - Roth Capital Partners

Michael Kupinski - Noble Financial

Arvind Bhatia - Sterne Agee

Robert Routh - Phoenix Partners Group

Brad Safalow - PAA Research

Michael Weitz

Good morning, everyone. Welcome to WWE second quarter 2011 earnings conference call. Today we will review our financial results for the second quarter and will follow this review with a Q&A session. Joining me for today's discussion are Vince McMahon, our Chairman and CEO; and George Barrios, our CFO.

We issued our earnings release earlier this morning, and we'll be referencing a presentation as part of our discussion. These and other materials, such as our quarterly trending schedules are available on our corporate website at

Several items, including the timing of WrestleMania and an impairment charge related to our film, That's What I Am, impacted the comparability of our results on a quarter-over-quarter basis. WrestleMania XXVII was staged on April 3 this year and contributed a revenue of $35.9 million, pre-tax profits of $16.7 million and $0.15 of earnings per share to our second quarter 2011 results.

In conjunction with the promotion of this event, $1.4 million in marketing expenses were recognized in the first quarter of 2011. WrestleMania XXVI occurred on March 28, 2010, and contributed revenue of $28.8 million, pre-tax profit of $13.1 million and $0.12 of earnings per share to our first quarter of 2010.

To facilitate an analysis of our financial results on a more comparable basis, we will discuss our performance on an adjusted basis, adding the prior year impact of WrestleMania to our second quarter 2010 results and adding the promotional costs that were recognized earlier this year to our second quarter 2011 results.

In addition, we have also adjusted our second quarter 2011 results to exclude the $3.3 million impairment charge related to our film, That's What I Am.

Schedule outlining these adjustments and reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release and in our website presentation.

Finally, we will be making several forward-looking statements today as part of our discussion. These statements are based on management's estimates. Actual results may differ due to numerous factors. These factors are described in our presentation and in our fillings with the SEC.

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

Vince McMahon

Good morning, everyone. To give you some sort of perspective on our second quarter, as was mentioned there to a certain extent about WrestleMania, we're essentially flat until last year, which is not something we're proud of. It could be worst obviously in this environment, but nonetheless could be a whole heck of a lot better.

Our increased profit launch of the new video game, WWE All Stars, and a strong WrestleMania were more than offset by the absence of our domestic television rights for shows such as NXT and Superstars. Quite frankly, we've been sitting on these rights, waiting for the right opportunity to come along to take advantage of the rights, and we're there now.

In addition to that, we're going to roll out other television programs. For instance, there is an 8 o'clock show that's contemplated to start up shortly, just one hour, and it would be a live show just one hour before Monday Night RAW. That would be significant revenues to company as well again capitalizing on the rights we've been sitting on with NXT and Superstars.

Home video declined about 35% as compared to industry average of about 7%, which we're not proud of, and we think that's due to some of our titles that were not as in demand as we have coming up. We think expected growth with titles such as Randy Orton, and we have Shawn Michaels versus Bret Hart rivalry. We're going to start a new rivalry series. We've had some great ones in the past, and we think this is going to be something our audience is really going to look forward to.

Speaking of WrestleMania, as was mentioned, we did well this year, and I think we'll do even better next year looking forward. A day after of this successful WrestleMania, we announced our main event for the following WrestleMania, which is going to be held in Miami on April 1. So again, we look forward to that

Some of the key metrics, not withstanding that, RAW television ratings continued the favorable trend, up about 3% over last year, which is pretty extraordinary quite frankly compared to other television shows that are on the air. Actually there is no television show that's been on the air as long as we have in terms of number of episodes. We were way ahead of Lassie and Gunsmoke and you name it.

The other aspect of that is to consider not only are we up slightly over last year television ratings, but also the staying power, which I just mentioned, is extremely important in terms of the stability of our overall performance going forward.

Likewise from a live event standpoint, our attendance was down about 3%, which again is down, not up, 19% last year in the same quarter. So it's a good indication of the attendance coming back on a strong basis.

Again, from a WrestleMania standpoint, television, pay-per-view were really good. Generally speaking, however, we got a decline in our revenues. However, I can tell you that our recent pay-per-view aptly entitled Money in the Bank of I might say is up about 20% as projected as well. So it appears as though pay-per-view revenue is on an upswing.

From a film performance standpoint, certainly we were disappointed with our DVD sales, notwithstanding an award-winning release titled That What I Am. It's a little tough to eat those award-wining release sandwiches when in fact they're not successful. And that caused us roughly $3 million impairment charge.

We are confident of our reengineered approached to deliver higher returns with a lower risk. And the way that we're going to do this is sort of an increased emphasis on the genres. That's What I Am is a great movie. But at the same, it really doesn't necessarily play to our television audience. So the genres I think are extremely important, not just good movies.

Likewise, we have a pay-TV window now, which we did not have before. And with the increase on perspective genres, we think that from an international standpoint, we're going to have a lot more appeal as well as distribution that WWE is not doing on their own in international in terms of releases.

Likewise, I think a lower production budget is important for us in terms of the way we've been doing films, and we're about $1 million over-budget really in terms of the way to make money the traditional way of doing these films. But we have come in, by the way, on budget with every film we're ever done or slightly below.

So again, I think it's a reduced distributional risk by going with international rights, but those were set from a distribution standpoint as opposed to WWE doing it. The other aspect of that is a pre-sell approach, which many of you are familiar with, in the film business in terms of what is known as not international rights, but foreign, selling to foreign first and then bringing back a lot less riskier budget for just domestic.

From a content strategy, finally we're rolling out the WWE Network after all these many years. In terms of putting it all together, we have I think the most compelling startup network in the history, which is saying a great deal, because I understand what other networks have started out as, we have an extraordinary leverage with all the content distributors.

And again, we're finally rolling that out. And with meetings coming up actually this week and next, so we're very proud of that. And we think again that's going to be a significant bottomline number to us going forward.

And again notwithstanding that, in terms of the new content that would be developed in the application of some of our more strategic and older content, notwithstanding the newer content, also as I mentioned before, we're able to develop content outside of the network. For instance, there is 8 o' clock live show that we're going to be rolling out, which would not necessarily have anything to do with the WWE Network.

So we are ready to roll this out and very, very excited about doing it. It's extremely well thought out and one that has to work. I don't know how anyone can say no quite frankly.

So pretty much it wraps up the quarter in terms of where we are. So I will turn it over to George.

George Barrios

Thanks, Vince. There are several key topics, which I'd like to review today. These include our second quarter financial performance, our business outlook for the reminder of this year and an update on our approach to the movie business.

I'd would like to start by sharing my perspective of the company's second quarter results, which was highlighted by the strong performance of WrestleMania. On an adjusted basis, WrestleMania contributed an incremental $7.1 million in revenue, $2.2 million in profit and nearly $0.02 in EPS to our second quarter results.

In addition, the launch of our new video game, WWE All Stars, propelled the growth in our licensing business. Changes in foreign exchange rates also had a $1.9 million positive impact on revenue and approximately $800,000 impact on profit.

These positive developments, however, were more than offset by lower-than-anticipated sales of home video and the absence of domestic rights fees for NXT and Superstar programs. As a result, our adjusted profit contribution declined 2% to $55.6 million. On an adjusted basis, our EBITDA was essentially flat to the prior year as the decline in profit contribution was offset by a 4% reduction in the SG&A expenses. That reduction can be attributed almost entirely to the changes in our accrued management incentive compensation and in our accrued reserves for bad debt.

Key operating metrics such as average domestic live event attendance and current period domestic pay-per-view buys declined in the second quarter when evaluated on a comparable basis excluding WrestleMania. But the gap to our prior-year performance continued to diminish. And we believe that while down, our business is steadily improving.

It's important that ratings for our RAW television program were 3% above the prior year. For a more detailed review of our performance in the quarter, let's turn to Page 6 of our presentation, which lists the revenue and profit contribution by business as compared to the prior-year quarter.

Starting with our live events, including merchandise sales at these events, our adjusted revenue from both domestic and international markets was essentially flat to the prior year. In North America, the strong performance of WrestleMania was partially offset by a 10% reduction in the number of non-WrestleMania events. The occurrence of six fewer domestic events in the quarter was due to routine changes in our touring schedule.

In addition, average attendance to these events declined 3% to 5,600 fans. In our international market, a 20% decline in average attendance to 6,600 fans, due in part to territory mix, was offset by the favorable impact of contractual guarantees and increasing prices. Average ticket prices rose 11% to over $68 listed by favorable changes in foreign exchange rates.

Turning to our pay-per-view business, adjusted revenue increased 17% or $5 million from the prior-year quarter, driven by the strong performance of WrestleMania. Pay-per-view buys for WrestleMania increased 20% to over $1 million buys worldwide. Revenue from our non-WrestleMania events was essentially flat to the prior-year quarter. For these events, a 9% decline in our domestic current period buys was offset by a comparable increase in international buys.

Such international growth was due primarily because of the distribution of events in the U.K. Our television partner in that country selected two events, Extreme Rules and WWE Capitol Punishment, for distribution via pay-per-view as compared to one event, Over the Limit, in the prior-year quarter.

Revenues from the distribution of our television programming increased by 4% or $1.2 million, primarily due to improved contract terms and contractual increases from our existing programs. In addition, our television rights were favorably impacted by a revised contract with a Canadian distributor. Under the revised contract, we received television rights fees rather than advertising revenue. These factors were partially offset by the absence of domestic rights fees for our NXT and WWE Superstars programs, as referenced earlier.

In April, we discontinued the broadcast of our WWE Superstars program on domestic television, and we continue to evaluate alternative for maximizing our revenue from our original programs.

In our consumer product segment, our licensing revenue increased by 38% or $3.3 million primarily due to the launch of our new video game, WWE All Stars. New game sales more than offset the decline in revenue from our SmackDown versus RAW franchise and contributed to a $4.2 million increase in video game revenue.

During the quarter, shipments of our SmackDown versus RAW video game declined 47% to 196,000 units. Recognizing the potential of this popular title, we are working with our video game licensee, THQ, to develop and launch its successor WWE '12, which is expected to debut in November 2011.

The highly anticipated release marks the most significant overhaul in the game's software in years. Early indications from media and consumers are very promising, citing the major improvement in the game's core gameplay and TV-style presentation.

With regards to our toy licensing, we continue to be pleased with our relationship with Mattel, and revenues related to toys were essentially flat for the prior-year quarter.

Our home video revenue declined 35% or $4 million, reflecting a decrease in unit shipments, lower sell-through rates and a reduction in average effective unit prices. Specifically, the quarter had an 11% decrease in unit shipments to 917,000 units due in part to one fewer release in the period and a significant decline in sell-through rates. Estimated returns increased to 41% of gross retail revenue. In addition, the average effective price of our home video titles fell 6% to approximately $12.50, reflecting the impact of ongoing discounts and promotional activities.

In our magazine publishing business, revenue decreased 36% to $1.6 million, reflecting lower newsstand sales in the current quarter, and our digital media segment adjusted revenues increased 9% to $6.2 million driven by higher sales of merchandize on our e-commerce website, WWEShop. Revenue from e-commerce increased 17% or $0.4 million as online purchases increased 26% to approximately 59,000 orders. This growth was partially offset by an 8% decline in average revenue per order to $46.71.

During the quarter, WWE Studios recognized revenue of $4.3 million compared to $0.7 million in the prior year. The growth in revenue was driven by the release of our latest film, That's What I Am, and by receipts from our movie, 12 Rounds. We've eyed ultimate projections for That's What I Am, which reflects lower actual home video sales than anticipated, resulting in a $3.3 million impairment charge.

Given the non-cash estimate-based nature of this charge, we've excluded it from our adjusted income and earnings. Accordingly, our adjusted losses increased approximately $0.8 million with lower receipts from our previously release licensed film and the change in our distribution model of the film.

Overall, our adjusted profit contribution declined by 2% or $1.2 million, increased profits from the launch of our new video game, WWE All Starts, and $2.2 million in incremental profits from WrestleMania were offset by the impact of lower home video sales and the absence of domestic rights fees from our NXT and WWE Superstars programs. Adjusted gross profit margins declined to 39% from 42% due to increased revenue from our film segment without a corresponding increase in Profit and increased investment in our WrestleMania pay-per-view.

For the quarter, adjusted SG&A expenses decreased 4% to $29 million due to reductions in accrued management incentive compensation and in our accrued reserve for bad debt. These adjustments more than offset increases in marketing and salary expenses.

Page 9 of our presentation compares the quarter-over-quarter results and provides a summary of changes by business. As shown, adjusted operating income declined 2% to $22.9 million, driven by the reduction in our adjusted profit. Adjusted net income, as referenced on Page 11, increased approximately 3% to $15.5 million primarily based on lower realized losses from foreign exchange transactions as reported in other expenses.

Page 12 of the presentation contains our balance sheet which remained strong. On June 30, we held nearly $185 million in cash and investments with virtually no debt. Page 16 shows our free cash flow. On a year-to-date basis, we generated $32.5 million in free cash flow, including $7.8 million in the current quarter. Through the first six months of the year, our free cash flow increased approximately $10 million from the prior year, driven by the timing of our feature film production activities and by changes in our tax position.

In the current period, we spent $18.3 million less on feature film production and received a $9 million federal tax refund. The positive impact of cash flow from these factors, however, was partially offset by lower operating results and a timing of $7.5 million advance from a license fee which was received in the first quarter of 2010.

Our cash flow demonstrates how we've slowed our investment in films over the first half of the year, consistent with statements we made in the previous earnings call. After evaluating our approach and making some meaningful changes, we are planning to invest an additional $10 million to $15 million over the remainder of this year in our films business. To be clear, we have not been pleased with the rate of return that we have achieved from this business.

We have made a net investment of nearly $120 million to produce a slate of about 15 films, which has generated a loss since inception. And though expected to surpass breakeven by a small margin, we're well below our internal hurdle rate. However, we believe there are compelling reasons for WWE to participate in the movie business. These include taking advantage of our core competencies, which are creating original content, smart and efficient marketing and global distribution in traditional and emerging channel.

Our film product can extend the reach of our superstars to new audiences well beyond our core fans. Further, film projects optimize our account utilization by enabling our superstars to participate in films with WWE. And finally, producing a diverse portfolio builds a library that can generate value across our global platform in perpetuity.

We are confident that we can execute certain changes to approach the film that will increase our upside potential and decrease both our performance and distribution risks. Key elements of the vision include increasing emphasis on genres with greater pay-TV and international feel, using co-productions to reduce our equity investments per film and pre-selling international distribution rights prior to completion of a particular film project. Based on these changes, we believe we can generate returns that exceed our cost of capital.

Looking ahead, we remain conscious about our short-term business outlook and optimistic about our long-term prospects. In addressing this transition in our talent base, we believe we've made important progress. The continued success of our talent development and creative initiatives will be a key determinant of our live event pay-per-view and overall performance over the remainder of this year.

Other critical factors include the decisions we make regarding our original programs and our efficacy in improving our home video sales. And executing our long-terms strategy, we remain highly focused on developing new content and pursuing additional forms of distribution such as WWE Network. Our discussion with numerous stakeholders reinforces our view that we can transform our business and create meaningful value for our shareholders.

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

Michael Weitz

Thank you, George. We're ready now. Please open the line for questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from the line of Richard Ingrassia from Roth Capital Partners.

Richard Ingrassia - Roth Capital Partners

Vince, obviously the Rock gave you a nice pop at WrestleMania XXVII. How much more can you be involved over the next 12 months? And is there an opportunity down the road to continue to bring back popular retired stars to try to drive audiences to the new product?

Vince McMahon

One of the keys you hit on was to bring back some of these established stars from years ago to capture what we call our lapsed to reintroduce them to our current stars, reintroduce them to invigorate traditional titles, Monday Night RAW, things of that nature. We do have multiple pay-per-views lined up with Rock, not just the next WrestleMania.

Richard Ingrassia - Roth Capital Partners

UFC says it's looking to start a cable network. Do you really care?

Vince McMahon

No, frankly I think they fell on their butt recently, trying to do network with NBCU Comcast. I don't know if it makes any sense for them. I can't speak to that, but it makes a great deal of sense for us. Again, they're totally different than we are. We are in the entertainment business, which gives us formal leverage as far as networks are concerned.

Again, I mentioned that this is the most compelling rollout of network in my view in history, notwithstanding the new entertainment and the new programs that would be a part of this as well as taking advantage of what I call our title footage, which has been seen only once anywhere.

There is tremendous value. And with our new programming as well, whether or not we can take the entire network and transplant that to other international nations, I am not certain that we can transplant the entire network. And quite frankly, we might be able to. But aside from that, if we can't, all this new programming that we're going to be doing that's associated with the network also are going to be available. So it's eating by the slice as well. It opens up tremendous opportunities for us with our WB Network, notwithstanding the amount of income we're going to make domestically. We think from an international standpoint, it's going to be huge.

I did mention we've been sitting on these rights, NXT and Superstars, and we're now ready to capitalize on those as well as our new 8 o'clock live show which we think is going to have tremendous interest and revenue to the company.

Richard Ingrassia - Roth Capital Partners

I don't know if it's a question for you or for George, but Mattel sounded pretty fired up on their call about product sales opportunities at SummerSlam and also obviously looking ahead to XXVIII. Any early indications on your side for attendance and pay-per-view at SummerSlam?

Vince McMahon

We think we're going to do extremely well in SummerSlam. Likewise, to give you some idea of indication for next year's WrestleMania, we have what's known as our travel packages, which we go way out and in front in which we offer the service for not just tickets for the actual pay-per-view, but also tickets to the night before which is Hall of Fame and tickets to the Monday Night RAW following that, sort of an overall service. And that sold out in two days normally, notwithstanding the potential of not selling out, for instance, last year. It would take us months. So we think that's a really, really strong indication of the demand for this year's WrestleMania.

Richard Ingrassia - Roth Capital Partners

Just two quick questions for George and I'll get off here. Gross margin breakdown, you don't have to give specifics, but obviously you took a hit on films there. But to your minds, was it low for any particular one-time reason in any other segment?

George Barrios

I think if you look at the gross margins specifically, it's a business mix issue. So you have some revenue increase, roughly $4 million, $5 million in the film business. But even excluding the impairment, you're talking about a year-over-year decline of about $3 million in profits. If you back that all out, you essentially have flat gross margins.

Richard Ingrassia - Roth Capital Partners

And then the last one is just on the Walmart retail exclusive. Any margin benefit that you can realize there?

George Barrios

Are you talking specifically about the film business?

Richard Ingrassia - Roth Capital Partners


George Barrios

Part of the company's DNA is to keep moving forward and keep learning and keep tweaking. In the self-distribution model, one of the things that we feel real good about has been the DVDs at Walmart and then post the exclusive period, just broadly at retail. So we feel really good about and that doesn't need a lot of tweaking. So there has been some margin expansion there for us. We're going to continue to look that moving forward.

Vince McMahon

And our overall relationship with Walmart continues to get better and better. It's really good now. Our core competencies fit there extremely well.


Our next question comes from Michael Kupinski from Noble Financial.

Michael Kupinski - Noble Financial

I just had a couple of quick questions. On your international revenues, can you help me understand the economics of the international venues? In particular, in this quarter, you stated that the weak attendance was offset by minimum revenue guarantees. Certainly risk in your international revenues going forward by the prospect of your international partners maybe not making as much money as they would like to on some of these events? Can you just kind of frame that for me, what the outlook might be?

George Barrios

For the most part, Michael, our international touring mimics our domestic touring in terms of the commercial arrangements. We're taking the risk on the ticket sales and then on the production cost. In some markets and usually in newer markets that we first penetrate, we'll go in and do what we call a flat deal and we refer to that in the Qs and our Ks. And those essentially are guaranteed amounts with some revenue share over and above.

We don't tend to that continuously in the same market after we've established ourselves and we just move back to the traditional model. And so that's the nature of the business. We had a couple of both this quarter. To answer your question directly, we're not concerned about that international poses some unique risks in terms of our attendance. We had a great Latin American tour in the first quarter, specifically in Mexico. And we continue to see international a nice area for growth for us.

Vince McMahon

And we've made some changes from a leadership standpoint to international, which we think is going to benefit the company greatly.

Michael Kupinski - Noble Financial

And your average ticket prices for domestic significantly rose year-over-year, even if you factor in WrestleMania. Can you talk about the dynamics of what's going on with the domestic ticket prices right now?

George Barrios

Well, we mentioned it before. Pricing, especially in some of our more matured businesses, is part of our efficiency quadrant. We've focused real hard on looking at pricing and cost and so on. In the live event business, a way to raise the average selling price of the ticket is to look at the elasticity of each of the different ticket price levels. And we're almost inelastic at the high price seats. So we've moved those up a little bit, and that's driven the average ticket price up. And we know it has not resulted in any decline in attendance as we can look at the attendance by ticket price charge. So we feel very good about that.

Michael Kupinski - Noble Financial

Obviously, average ticket price is depending on different pricing levels. Can you give us an idea of how much you've raised the prices in the quarter?

George Barrios

It depends. It wasn't just in the quarter. I mean we have been doing it for a while. We've continued to tweak it. The highest priced ticket will be anywhere depending on the market between 5% and 15%.

Michael Kupinski - Noble Financial

And I would imagine that then we should be modeling that into the subsequent quarters. Year-over-year, as you head into the third quarter, what would be the percentage increase then?

George Barrios

It's a little bit hard to gage. But I will say that as we begin to comp what we were doing last year, as we started that last year, the year-over-year impact will get smaller and smaller.


Our next question comes from Arvind Bhatia from Sterne Agee.

Arvind Bhatia - Sterne Agee

Two questions, first one on the consumer product side. Given some of your commentary on the video games and toys, et cetera, what would be a good expectation for the full year in that particular line, both revenue and then profit contribution? And second question is on the film business. The $10 million to $15 million I think is the investment I heard you talk about for the balance of the year. Help us understand going forward, let's say 2012, is that a good run rate, or just how should we be thinking of that, and what kind of RIO are you planning for that would be satisfactory?

George Barrios

I think the back half of the year investment reflects pro rata for what we would be looking to do on a full-year basis going forward. But obviously that depends on a lot of things.

Capital if fungible. We've got a lot of opportunities. Vince talked at length about the network. So we'll evaluate that on an ongoing basis. You heard us talk about for the back half of the year is probably a good proxy for what we think we need to do in that business.

As you know, it's a portfolio of businesses, or if you are going to be in it, you have to produce enough of products to drive your expected returns to high enough level. You can't kind of do one or two of those. So feel you have to deploy a meaningful amount of capital to be in the business.

To your fist question, we don't give guidance on specific businesses. We talked about the fact that we're happy with Mattel. We were flat in the second quarter, up in the first quarter. As you know, we report on a lag based on when we receive statements from our licensees. So we had the Christmas holiday in Q1 of this year. So we'll get the Christmas sales this year in Q1 of 2012.

I think if you look at what we have done year-to-date in those businesses, I think that's a fairly decent proxy from a year-over-year basis when we think going forward. But we don't give specific guidance.

Arvind Bhatia - Sterne Agee

Any commentary on satisfactory ROI in the film business?

George Barrios

On an average expected return risk adjusted, and it is a risky business, we think we have to shoot in the mid to upper teens is got to be our target. Obviously given that we're heavily equity weighted on the cost of capital, we're in the 9% to 10% range. So to exceed that on a risk-adjusted basis, we want to shoot for the mid-teens.


Our next question comes from Robert Routh from Phoenix Partners Group.

Robert Routh - Phoenix Partners Group

When you talk about the library and obviously you guys have a huge library with a ton of footage, and I don't think many investors are aware of the actual size and how many hours you have, could you kind of go over quickly of just how many hours of footage you have, how big the library is, and then what rights you do have? Do you have all rights, analog, digital, home video, streaming or have any of them been sold off?

Could you give us a sense as to what the difference is, just ballpark, between the book value of that library and what probably a fair value would be for that library if you were to sell it? Not that I think you will, but just kind of a hidden asset.

George Barrios

On the first one of those, I agree with you. I thinks it's probably one of the most undervalued asset the company has. We've got roughly 100,000 hours of footage. Last year, we digitized roughly 30,000 hours of what we call master program footage, about 25% of that in HD. And that's the core of our monetization strategy moving forward and core of the network programming strategy as well.

Even though for us the library is not something that you just show what we've shown before, it's about taking that and making it really compelling by introducing current superstars and bringing that up and also utilizing, Vince mentioned, the interactivity that we have. And a lot of people sometimes don't know that we've got about 35 million Facebook fans today. And we view the WWE Network as a great way to engage with our fans in a variety of ways.

So the library as a whole we think has tremendous asset value. The book value is in the single-digit millions, and we thinks it's got significantly more value than that.

Vince McMahon

And likewise, we do own all of our rights. And that's one of the advantages that we have with current programming as well as past programming.

Robert Routh - Phoenix Partners Group

Obviously given the low share count that you have in the book value, it seems like investors are clearly missing that there is a hidden asset there if you were to monetize it. It does not reflect in the share price.

Given that you mentioned your cost of capital and given where the stock price is and the dividend yield that you have now, is there any price at which you'd consider going private or if a larger entity was interested in partnering with you, similar to Liberty Media, Berkshire Hathaway style, you run your own show, but being part of a larger organization? Is there any level where you'd consider doing that?

Vince McMahon



(Operator Instructions) And our next question comes from Brad Safalow from PAA Research.

Brad Safalow - PAA Research

Some of the third-party data that we track suggests that there has been a pretty material shift in terms of the popularity of the Creative really in the last couple of months. It sounds like most recent pay-per-view somewhat reflects that. We can obviously track the ratings on a weekly basis. But are you seeing that in your attendance as well, and do you think that the momentum you have on the Creative currently will flow through for SummerSlam and the other pay-per-view that you have upcoming?

Vince McMahon

Yes, we do. Again, it's always a mix of talent and their stories. It's important to build strong characters. And then if you build strong characters and put them in a compelling antagonist/protagonist storyline, then it flows through all sources of income, live attendance, pay-per-view, you name it. We are happy that we have somewhat of a new slat, which always happens quite frankly. And again, it speaks to the longevity of the brand. So it's important that you have new creative programming. And we think we are at a plate of take off on many things like that.

Brad Safalow - PAA Research

And then I want to make sure I understand exactly what you're saying about NXT and Superstars. Is this a third quarter event where you're going to get some rights fees or is that a fourth quarter event?

George Barrios

I think we're going to evaluate. What we've said all along is we know the value of our programming. There is a lot of moving parts going on, including the networks, some other content deals we're working on. We're platform-agnostic, but not economics-agnostic. So our goal is to maximize our production capacity in our original programming. And something will happen we believe in the third or fourth quarter this year on that.

Brad Safalow - PAA Research

And then just in terms of your actual network timing, it sounds like you guys have finalized your go-to-market strategy and now you're going to have a sequence of meetings. The actual launch of the network, has the timing changed, your expectations surrounding that at all?

George Barrios

Well, I think the last time we were public was on the first quarter call. And at that point, we said we were going to launch between 12 and 18 months. And I think internally we feel that's the right timeline and that hasn't changed.

Brad Safalow - PAA Research

And then there've been some reports in the press, Vince, that you recently met with Dana White, the President of UFC. Can you comment on the purpose of that meeting and whether you would consider partnering with them at all in a network?

Vince McMahon

Absolutely not. Again, there is no partnering with them in any conceivable way. If it's contemplated, I don't think it will work. Again, we are in the entertainment business. They're in the sports business. There was a meeting and the meeting quite frankly was more social than anything else in comparison to what guys are doing with pay-per-view and some other things we do have in common; what are they doing; more of a social meeting than anything else.


We have no further questions at this time. So I'll now turn it back to you, Mr. Weitz.

Michael Weitz

Thank you. I appreciate everybody participating in the call today. If you have any questions, please do not hesitate to call us or contact us. You can reach me, Michael Weitz, at 203-352-8642. Thank you.

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