World Wrestling Entertainment (WWE) Vincent Kennedy McMahon on Q1 2015 Results - Earnings Call Transcript
World Wrestling Entertainment, Inc. (NYSE:WWE) Q1 2015 Earnings Call April 30, 2015 11:00 AM ET
Executives
Michael Weitz - Senior Vice President, Investor Relations & Financial Planning
Vincent Kennedy McMahon - Chairman & Chief Executive Officer
George A. Barrios - Chief Financial & Strategy Officer
Analysts
Daniel Moore - CJS Securities, Inc.
Laura A. Martin - Needham & Co. LLC
Brandon A. Ross - BTIG LLC
James Clement - Macquarie Capital (USA), Inc.
Brad G. Safalow - PAA Research LLC
Mike Hickey - The Benchmark Co. LLC
Operator
Hello, and welcome to the webcast entitled WWE First 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 your webcast screen. Also at the bottom of your screen, you will find a Help icon for technical assistance, an Enlarge Slide button and you may ask your question at any time by typing your question into the question box located on the Web interface and clicking Submit.
I will now turn the call over to Michael Weitz, Senior Vice President of Financial Planning and Investor Relations. Please go ahead, Michael.
Michael Weitz - Senior Vice President, Investor Relations & Financial Planning
Thank you, and good morning. Welcome to WWE's first quarter 2015 earnings 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 other supporting materials on our website, ir.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 in our SEC filings. 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. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website.
As a reminder, WrestleMania occurred in the first quarter of 2015 versus the second quarter of 2014. Given that WrestleMania occurred in late March this year, we believe the timing impact of WrestleMania is best estimated from the events ticket sales, merchandise sales, pay-per-view revenue, and pay-per-view production costs.
In order to facilitate analysis of our financial results on a comparable year-over-year basis, we have prepared a pro forma statement which identifies this timing impact as shown in both our earnings release and earnings presentation.
Finally, as a reminder, today's conference 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.
Vincent Kennedy McMahon - Chairman & Chief Executive Officer
Good morning, everyone. We're proud to announce that we've delivered record quarterly revenue and strong earnings growth, reflecting our strategy to realize greater value from our content.
Network surpassed, WWE Network surpassed 1.3 million subscribers at the quarter end. And speaking of WrestleMania, as part of that subscription, WrestleMania 31 became the highest grossing live event in our history, which is a milestone for us.
Some other key measures are Total Divas, which is on the E! Network, Season 3 was the most watched season, it's actually E!'s number one show, that's probably largely because the Kardashians were on a hiatus.
Our live event average attendance, which is a very key metric, was up 4%. That excludes WrestleMania. Social media, which is extremely important to our company, reached 484 million followers, that's up 9%. The network has grown audience engagement in addition to subscribers which is extremely important, meaning that those who are subscribing enjoy what it is they are viewing and continue to.
And speaking of that, our new content coming to the network, a lot of excitement around Camp WWE, Swerved, Diva Search, WWE Too Hot for TV, which is currently on, and titles along those lines. So we have a lot of original series yet to debut on our network.
And other – some other key business developments, we announced that SmackDown is going to move from SyFy to USA Network in January. We think that just in and of itself would introduce viewership, just from one network to the other.
We're developing, as some of you know about Tough Enough, which is a new show on USA debuted June 23, I think it is. We have a show before this show in that we are asking for potential videos from those of you, and maybe some of you on the call might want to attempt to be tough enough for it to be in WWE, so any of that, we got over 5,000 video submissions. Some of those are ridiculous and quite humorous and others are interesting.
Many of that – those are some of the key business developments and we've got a lot going in our company these days and all of it is good.
George A. Barrios - Chief Financial & Strategy Officer
Thanks Vince. There's several key topics which I'd like to review today. These include management's discussion of our financial performance, the progress of key strategic initiatives, and our business outlook.
As you know, for some time, we've communicated our global strategy to distribute our content across new platforms and realize much greater value from that content. As we entered 2015, we foresaw significant earnings growth, driven by the expansion of WWE Network, the escalation of television rights fee, and continued innovation across all of our businesses. In the first quarter, our business accomplishments and financial performance reflected the successful execution of this strategy and exceeded our financial commitment.
For the first quarter, our financial results surpassed our guidance and analyst consensus earnings based on strong business performance and continued cost savings. Specifically, we achieved adjusted OIBDA of $21 million with an average of 927,000 WWE Network-based subscribers. This compares to our guidance, which implied an OIBDA range of $3 million to $ 8 million at that subscriber level.
This strong performance was primarily driven by higher than expected pay-per-view buys, video game sales and WrestleMania attendance revenues as well as the timing of certain expenses. Quarter was highlighted by the performance of our Network segment where revenue more than doubled from the prior year quarter. During the quarter, WWE Network added 511,000 subscribers, representing a 63% increase from December 31 and reached 1.3 million subscribers at quarter end. Through March 31, WWE Network has attracted nearly 1.8 million subscribers with 74% of these subscribers active as of that date.
Subscriber growth reflected the acquisition of 795,000 subscribers, which was 13% above the gross subscriber additions in the comparable prior-year period, that is, from the Network's February 24 launch through WrestleMania 30 on April 6, 2014.
Subscriber growth was driven by the iconic contraction of WrestleMania, continued international expansion and the success of our free trial promotion in February. At quarter end, WWE Network had approximately 196,000 international subscribers, representing about 15% of our paid subscriber base.
Importantly, the Network's live and original programming continued to drive audience engagements. Viewer data shows that close to 94% of total subscribers access WWE Network at least once per month.
Additionally, WWE Network subscribers watch 53 hours of content per household over the quarter.
As shown on pages 12 and 13 of our presentation, this puts WWE Network among Netflix and the top cable and broadcast networks in terms of viewer hours per household.
Additionally, WrestleMania 31 was viewed in 1.6 million homes, more homes than ever before. These metrics reinforce our view regarding the potential of WWE Network.
We recently announced exciting ways in which we are expanding the Network's compelling original contents. In addition to our premium monthly live pay-per-view event, new programming for the Network will feature brand-new original series such as Camp WWE, Swerved, WWE Too Hot for TV and Diva Search.
Overall, we believe our strategy for attracting subscribers will facilitate the expansion of WWE Network and provide a global platform for driving growth. Consistent with our other subscription-based businesses and our past practice, we do not intend to provide an update on current subscriber levels on this call. Our next planned update will be on our second quarter earnings call.
To review our performance in the quarter, let's turn to page five of our presentation, which lists the revenue and OIBDA contribution by business as compared to the prior year quarter. As shown, revenue increased throughout our businesses, generating overall growth of 40% to $176 million, importantly, the highest quarterly revenue in WWE history. Changes in foreign exchange rates did not have material impact on either our reported revenue or profit.
As referenced earlier, the timing of WrestleMania had an impact on reported growth. This impact can be estimated from WrestleMania's direct contribution to ticket sales, merchandise sales, pay-per-view revenue and production cost. In aggregate, these items increased revenue by $24.9 million and reduced OIBDA and net income by $0.4 million and $0.3 million respectively.
As a reminder, historically, the economic value of WrestleMania occurred in a single period. With the evolution to a subscription-based platform, the value of WrestleMania and frankly all our content is reflected in the acquisition and retention of subscribers over longer periods of time.
On a pro forma basis, the quarter generated revenue growth of 20% and OIBDA growth of $28.6 million, growth that we would describe is very solid under any measure. As reported, OIBDA increased $28.2 million, driven by the escalation of television right fee, higher profits from live events, the expansion of WWE Network and increased video game sales.
Profits from the licensing of television content increased $15 million based on a 43% or $17.6 million increase in revenue. The growth in revenue and profits was predominantly due to the renegotiation of key domestic and international distribution agreements, the largest of which became effective in the fourth quarter of 2014 and the first quarter of 2015.
Additionally, the increase in revenue reflected a production and monetization of a third season of Total Divas, which had 10 episodes in the quarter as compared to three episodes of the second season in the prior year quarter. As Vince mentioned, the third season of Total Divas proved to be the most watched season of that show and consistently delivered the most viewers of any program on the Network.
Live events profits increased $13.8 million based on a $17.6 million or 81% increase in revenue. The growth in revenue and profits was primarily due to the timing of WrestleMania and stronger performance of our other live events in North America. WrestleMania generated $15.7 million in live event revenue and that then became the highest grossing event in WWE history. Excluding the impact of WrestleMania, revenue growth reflected a 7% increase in the average ticket price to nearly $45 and a 4% increase in average attendance to 6,700 fans.
Network revenues, which include revenue generated by WWE Network and pay-per-view, increased 104% to $37.6 million, driven by the ramp-up of Network subscribers. WWE Network generated $28.6 million in subscription revenue, based on an average of approximately 927,000 paid subscribers. Pay-per-view contributed $9 million in revenue with 505,000 buys as three events were produced during the quarter.
WrestleMania accounted for $4.9 million of this revenue, with 259,000 pay-per-view buys. Network segment OIBDA increased $2.1 million, a significant growth in subscription revenue, was partially offset by WrestleMania-related production costs.
Licensing profits increased $1.7 million with an 18% increase in revenue, primarily due to higher video game sales and effective royalty rates. Estimated unit sales of our franchise game, WWE 2K15 increased by approximately 30% in North America and Europe.
Additionally, the increase in licensing revenue and profit benefited from higher sales of downloadable consent associated with our franchise game WWE 2K14, and our branded game, WWE SuperCard.
Reduced profits from Home Entertainment and WWE Studios partially offset our overall OIBDA growth. The reduction in Home Entertainment reflected the broader challenges in the DVD industry.
Corporate and other expenses were essentially unchanged from the prior year quarter and performance in other areas did not have a material impact in aggregate on our results. OIBDA increased $28.2 million from the prior year quarter, driven as described earlier by the escalation of television rights fees, higher profit from live events, the expansion of WWE Network and increased video game sales.
Net income increased $17.8 million, reflecting the increase in our OIBDA results and a reduction in our effective tax rate to 32% from 36% in the prior year quarter. The rate in the current year quarter reflects an increased deduction for domestic production activities.
Page 17 of the presentation contains our balance sheet. As of March 31, 2015, the company held approximately $114 million in cost – cash and short-term investment and currently estimates debt capacity under the company's revolving credit facility to be approximately $161 million.
Page 18 shows our free cash flow. And in the first quarter, we generated $9 million of free cash flow, representing a $22 million increase from the prior year quarter. The growth was driven primarily by the company's improved operating performance.
Looking back over the quarter, we continued to pursue innovative new ways to grow our business. We announced compelling new network programming including eight original series. We developed and implemented a new business model for the network that facilitated distribution in the Middle East and North Africa, completed a third series of Total Divas, developed Tough Enough for its return to USA Network, and announced the move of SmackDown to USA Network early next year. And these are just a few of the examples.
As we continue to innovate, our key brand measures remain strong. As we look ahead, we're working to leverage our entrepreneurial spirit and brand strength to drive sustained earnings growth. For the remainder of 2015, we continue to expect year-over-year adjusted OIBDA growth from most of our businesses, with the most significant increases driven by the performance of WWE Network, the escalation of our television rights fees, and continued innovation across our businesses.
As stated previously, the level of network subscribers is a critical determinant of our financial performance in any given period. Given the lack of visibility regarding the rate of subscriber adoption, our presentation provides ranges of adjusted OIBDA at different average paid subscriber levels for the second quarter 2015. Ranges of financial performance are shown on an adjusted basis, excluding non-recurring items, which would be unknown at this time.
The table shown on page 14 of our presentation outlines potential outcome to the range of 1 million to 1.3 million average paid subscribers in the second quarter. Although all the numbers in this range exceed the average subscribers achieved in the first quarter this year, the OIBDA levels associated with these averages are lower than our first quarter result. The primary factors for this sequential decline are the seasonality inherent in our licensing business, higher television production costs, and timing of certain other expenses.
You should know that the outcome specified by our second quarter guidance table would generate anywhere from $15 million to $25 million of year-over-year OIBDA growth in the second quarter. Our full-year 2015 business outlook at various subscriber levels can be found in our fourth quarter 2014 earnings materials.
As discussed previously, the expansion of WWE Network subscribers has significantly raised the company's earning profile. Importantly, we believe we're executing well, innovating faster than ever and managing the key drivers that can drive significant economic returns over the long term.
That concludes this portion of our call. And I'll now turn it back to Michael.
Michael Weitz - Senior Vice President, Investor Relations & Financial Planning
Thank you, George. Operator, I think we're ready for the Q&A part now. Please open up for questions.
Question-and-Answer Session
Operator
Thank you. And our first question comes from Daniel Moore with CJS.
Daniel Moore - CJS Securities, Inc.
Good morning.
Vincent Kennedy McMahon - Chairman & Chief Executive Officer
Good morning, Dan.
Daniel Moore - CJS Securities, Inc.
First, Vince, thank you for the invitation to participate in Tough Enough. I think I'm going to get back to you on that one.
George A. Barrios - Chief Financial & Strategy Officer
I know you, Dan.
Daniel Moore - CJS Securities, Inc.
Just focusing on – Q1 obviously is very strong relative to your guidance. What were some of the biggest areas of out-performance? Was there some timing of costs and/or revenue that's kind of shifted between Q1 and Q2 relative to your initial budget or was it just simply better, stronger growth, revenue and cost containment?
George A. Barrios - Chief Financial & Strategy Officer
Yeah, I mean as I said in the prepared remarks, pay-per-view revenue was significantly ahead of what we had expected. The video game outperformed. WrestleMania live event revenues, as Vince mentioned, setting a record, obviously we expected really, really good results, but exceeded our expectations. And then there was some timing on the cost side, Dan, where we delayed some planned expenses and will come back into Q2 and beyond, which then gives some of the timing impact on Q2 for the sequential decline.
Daniel Moore - CJS Securities, Inc.
Absolutely. And then you gave – you started – you gave kind of the buckets of the delta between OBIDA despite the higher level of average subscribers, likely to be the case in Q2. You mentioned seasonality in TV licensing. Maybe just remind us how the seasonality and the profitability works in that business on a go-forward basis.
George A. Barrios - Chief Financial & Strategy Officer
Yeah, no, it was seasonality in the consumer products licensing business, so – as you know, our revenue recognition in Q1 reflects actual holiday sales in Q4, so we received payments from our licensees in Q1, that's when we recognized revenue. So if you look at last year, for example, there was an $8 or $9 million sequential decline between Q1 and Q2 in the licensing business, and so that's just part of our – the business model.
Daniel Moore - CJS Securities, Inc.
Okay. And you talked about, obviously as part of your sort of five pillars growth, a, expanding distribution platforms, maybe just talk about any examples you might have of those opportunities that we've not yet tapped as we think about going forward?
George A. Barrios - Chief Financial & Strategy Officer
Sure. I mean what I think is important now that we launched, as you remember, on – the majority of the core platforms, the gaming consoles, and maybe the streaming boxes like AppleTV and Roku, iOS, Android, but we continue to add. So since launch, we've added Fire TV. We've added some of the smart CE devices, for example from Samsung, and so we'll continue to add that. Android TV obviously is something that's on our roadmap that we're looking at, Chromecast, on smart CE devices, you could launch with the manufacturer, but you have to develop for different model years because they don't all use the same software. So we reached a point where we've got to really evaluate the long tail of these platforms and decide whether it makes sense to develop on them because each level of development is obviously time and money. But we still think there's a few platforms we want to be on, and so we're closely watching things like Android TV and Chromecast.
Daniel Moore - CJS Securities, Inc.
And then obviously adding content, increasing compelling content on the network like Seth Green and Jerry Springer and the expanded Diva shows, how much in terms of sort of fixed investment do you expect to add this year?
George A. Barrios - Chief Financial & Strategy Officer
Yeah, I mean what we said on Q4 and we still feel the same way is that when you look at the total cost back to the network in 2014, we expect it to be right around the same as this year. So last year was about $115 million or so, total cost all in across all the major components. And I think we'll be within plus or minus 10% of that this year.
Daniel Moore - CJS Securities, Inc.
Got it. And lastly, any consideration or increased consideration to either adding or expanding advertising model around the network at this stage?
George A. Barrios - Chief Financial & Strategy Officer
Yeah. We're going to keep working that. I don't think it's material – it will be material in 2015. We had a great integration, as you know, at Wrestlemania with Paramount in the Terminator movie. So I think there's a lot of cool things we can do. We're going to continue to evolve that. But from a pure financial performance, I wouldn't expect any real financial, material financial upside in 2015.
Daniel Moore - CJS Securities, Inc.
Thank you guys.
Operator
Thank you. Our next question comes from Laura Martin with Needham.
Laura A. Martin - Needham & Co. LLC
Hi. Couple for Vince and a housekeeping for George. Vince, let's see yours first. The first thing I'm really interested in learning from you is pricing strategy. So for a long time, you always distinguished between the different priorities of content on your pay-per-view platform and now we've gone to $10 a month regardless or whether that month has WrestleMania or whether that month has sort of a secondary kind of content piece.
And I get that the industry leader is Netflix, but 99% of their content really doesn't change month to month, yours really does. So my question is, given the numbers we have now to WrestleManias, do you feel any inclination to go back to more of a tiered pricing structure based on what content is in a particular month and if not, why not? And let's just start with that one.
Vincent Kennedy McMahon - Chairman & Chief Executive Officer
Laura, I think we're looking at all this. You will have a starting point and we have, that's not to say we can't change pricing on, if it were WrestleMania or SummerSlam or things of that nature, we could change that pricing. We're trying to look for more consistency than anything else and trying to keep the viewer interested all year long as opposed to just cherry picking and things of that nature, in and out. But again, we're looking at all of this financial information in terms of how we want to adapt. And we're a very adaptive company. We're very flexible – we can move very quickly. But at this juncture, we're not pricing our pay-per-views differently. It's not to say that we won't in the future, Laura.
Laura A. Martin - Needham & Co. LLC
Okay. Excellent. And then Vince, the other thing I thought I was very interested in your prepared remarks, you talked about, you said social media had 484 million like social media interactions, and you said that was very important. And I just would be really interested in learning how many – you're the best businessman of anyone I've covered. Tell me those words, very important to you, how does that pull into the economics of all of those social media interactions in your mind?
Vincent Kennedy McMahon - Chairman & Chief Executive Officer
Well, it's a land grab out there. And it's important to grab as much as out as you can now because again, they will stay with you going forward. Social media is a part of all program, maybe television or what have you. And it's extremely important because it engages the audience in so many different ways. And we have the flexibility to be able to attract audiences from every form of show business, every form of sports integrated into what we do. We're sort of a hub and the only hub that really can accommodate all these different forms of entertainment. So going forward, what we've done in the past has been, I would say, decent to good, maybe even a little bit better than good. But going forward, social media, you have to marry that with everything that we have, and it's important to do that. It's not just about a television rating, a simple television rating. Advertisers are not interested in just a simple television rating. It's the – reaching out before engagement is extremely important so that our programming and everything that we do can be engaging. So it's not just an experience, it's one that is immersive and it's so important for us to do that. I think that other people will attempt to catch on down the line.
Laura A. Martin - Needham & Co. LLC
Very helpful. And just last one for George on housekeeping, so it looks like you – I think you said you did 259,000 pay-per-view. You had announced the 1.3 million subs streaming, so that gets 1.559 million. And then I thought you said in your prepared remarks, there was 1.6 million viewers of WrestleMania, so I'm missing like 40,000. Did I do the math....
George A. Barrios - Chief Financial & Strategy Officer
No, yes, 1.327 million is the number actually of the network subs, plus the 259,000, plus there is a roughly 15,000 or so pay-per-view buys in Canada that are not, that are covered in a different type economic model. We don't recognize them as pay-per-view revenue. So if you add all that, you're right around 1.6 million.
Laura A. Martin - Needham & Co. LLC
Okay. That's perfect. And average revenue on that 259,000 pay-per-view to you is about $30 per buy, right?
George A. Barrios - Chief Financial & Strategy Officer
Yeah. It's a little bit less, the ARPUs are a little bit less now because of the mix. So, we – that 259,000 was weighted towards international, about 60%-40% or so, which is different than it used to be. So the ARPU is down a little bit.
Laura A. Martin - Needham & Co. LLC
Okay, cool. Thank you very much. Very helpful. Thanks guys.
Operator
Thank you. Your next question comes from Brandon Ross with BTIG.
Brandon A. Ross - BTIG LLC
Good morning, thanks for taking the question. One of the good things about owning your own network is that you have solid data on your subscribers. Can you speak to the demographics of the current subscriber base on the network and compare that to your overall fan base both in terms of age and income? As streaming becomes more widespread to older and less faulty demos, do you expect that to be a big tailwind for you guys?
George A. Barrios - Chief Financial & Strategy Officer
Yeah, I mean, if you start with – I'll use the U.S. just because obviously this goes around the world. The demos in the U.S. from an age standpoint, that tends to mimic the age of the population which, as you know, Brandon, that is because we're a multigenerational viewing content, that's the way people view our content.
So about 40% or so of our viewers – programs are under the age of 34. To your question around the network, yeah, it skews younger. The network right now is skewing younger. As far as income, I want to stay away from that because it's a little bit harder to get back data on the network, but it definitely is skewing younger. And Vince's point about social media and the land grab, that's also part of the strategy. As you know, millennials and younger, YouTube and other social platforms are key ways that they consume content so that's critically important as we move forward.
Brandon A. Ross - BTIG LLC
Thanks for taking the question.
Operator
We'll move next to Jamie Clement with Macquarie.
James Clement - Macquarie Capital (USA), Inc.
Good morning.
George A. Barrios - Chief Financial & Strategy Officer
Hi, Jamie.
James Clement - Macquarie Capital (USA), Inc.
George, two questions, first on television and then the second on guidance. First quarter, you were up almost $18 million year-over-year in television revenue, more like maybe $15 million if you kind of pick the middle of 2014 when you announced the new rights fee deals. I've been under the impression that you're going to get less of a bump from 2014 to 2015 from the new rights fee deal. Can you talk us through these numbers a little bit? Like in other words, I mean, on an annualized basis, I mean, you're maybe winding up $60 million year-over-year. Is that part of that $105 million between 2014 and 2018? Are you getting more of it upfront than we thought like, can you talk us through some of that?
George A. Barrios - Chief Financial & Strategy Officer
Yeah. So, as you know, we said 2018 revenues for those seven major deals should be around $100 million greater than 2014 which you mentioned. We haven't really given an explicit breakout on how that goes year-to-year. We have said that usually that first year has a little bit bigger bump. It's not completely linear. So general question on those seven contracts, in the first quarter, when we do licensed shows like Divas, they have a – the revenue impact is greater than the profit impact. So the margin on producing a show like Divas is much smaller than the margin of an escalating contract which is close to 100%.
James Clement - Macquarie Capital (USA), Inc.
Right.
George A. Barrios - Chief Financial & Strategy Officer
And so in the quarter we also had seven more shows as Divas. So that in and of itself drives a revenue variance of $5 million or so, but doesn't translate the same way to OBIDA as the increases in the rights fees.
James Clement - Macquarie Capital (USA), Inc.
Should this be – for modeling purposes, should this be a number that you did kind of expect to see Q2, Q3, Q4? Is there other seasonality or timing stuff that we kind of need to be aware of?
George A. Barrios - Chief Financial & Strategy Officer
It will depend. So we're not going to get into line item guidance. That's why we gave the OIBDA table. But it will depend on when we do licensed shows. So, for example, we'll be doing Tough Enough in June, not a Q2 event. Divas will be in July, so that's a Q3 event. So right now we don't have that a Diva-like bump on a year-over-year basis. So that said, we move very quickly and we're very flexible. So it's hard for me to give guidance on exactly when things like that will manifest themselves.
James Clement - Macquarie Capital (USA), Inc.
Understood. And moving onto guidance, I would have thought that with the heavy expenses of WrestleMania that are presumably captured in Q1, with more subs in your cable bit, the corresponding OIBDA numbers would have been higher without the WrestleMania cost. I mean is really the offset, the incremental pay-per-view buys that you get in Q1 versus Q2 that kind of offsets those cost, is that the right way to think about it or are you being conservative?
George A. Barrios - Chief Financial & Strategy Officer
No, that's a little bit. It's really more the items I mentioned in the remarks. So our licensing business sequentially last year declined by $8 million to $9 million, so there's seasonality there and we expect a decline in Q2, so that's a big chunk of the Q1 to Q2. The second is we'll do our live event tour internationally, including television internationally. So the costs are a little bit higher, so that's also...
James Clement - Macquarie Capital (USA), Inc.
Okay.
George A. Barrios - Chief Financial & Strategy Officer
...a seasonal element and then some of the costs that we delayed in Q1 we moved into Q2, so those are really the three big drivers of the sequential decline.
James Clement - Macquarie Capital (USA), Inc.
Okay, very good. I'll get back in queue. Thank you.
Operator
Thank you. Our next question comes from Brad Safalow with PAA.
Brad G. Safalow - PAA Research LLC
Thanks for taking my questions. I just wanted to delve in a little bit on the churn side. I guess churn in the first quarter is maybe higher than some people might have expected given you have your most popular content, or you did, you had WrestleMania, you had the Royal Rumble. What have you learned incrementally about the sources of churn at this point?
George A. Barrios - Chief Financial & Strategy Officer
I don't know that we've learnt anything, Brad, about the sources of churn. I think what we're working on is the different types of marketing messages, the different types of content that we can provide to minimize. I think as Vince mentioned, we've trained for a long, long time our audience to come in and out and pick and choose events. I think we've done a pretty good job of breaking that for a big chunk of people, but I think we'll still have to keep working on it. I think the way we get there is the combination of really compelling content. I don't know if you've seen the first episode of Too Hot for TV, Love Hurts. Pretty good. I think if you look at it, you'd say, yeah, I get what he means by that. But we've got to keep doing that kind of compelling content that drives the stickiness of the subscriber. And then on the other end we'll get better and better on the retention as well as reactivation of inactive subscribers. So it's less about the source; it's more about content, messaging, sort of stuff.
Brad G. Safalow - PAA Research LLC
Okay. Looking at it another way, what percentage of subs from year's WrestleMania are still active?
George A. Barrios - Chief Financial & Strategy Officer
Yes. We haven't published that data.
Brad G. Safalow - PAA Research LLC
Okay. Then separately on the network, any updates on the geographic expansion?
George A. Barrios - Chief Financial & Strategy Officer
Yes, as we mentioned, we knocked off the UK, we broadened the Canada, we did the Middle East and North Africa, and so there's not a lot of countries left. I mean some big ones obviously and ones that are important to us and we continue to work on those. Obviously China, India, Germany, Italy and like we've done with the other countries, as we said before, we continue working on those and then we'll have some – when deals get done or launch points get set.
Brad G. Safalow - PAA Research LLC
Any countries that will be launched in your expectation this year, you don't have to say them, just of those (34:11)?
George A. Barrios - Chief Financial & Strategy Officer
Yes. It's a good question. It's hard to tell. These things can move pretty quick. So my guess is for the all the countries that are left here over the next 12 to 18 months we'll have announced our plans. Is it possible that something happens this year? It's possible.
Brad G. Safalow - PAA Research LLC
Okay. And I'm going to keep asking this question until you guys are done with this project, but I know you're working on getting better data on your consumer base across your various platforms. Do you have any sense, at this point, in the overlap between your network subscriber base, your YouTube sub base, those who have purchased something through WWE.com, those who attend your events, this large consumer ecosystem and really what should be a fairly synergistic CRM effort on your part?
George A. Barrios - Chief Financial & Strategy Officer
It is. Yes, I know you'd ask it. I'm not going to give you all the details, but yes, everyday we're mapping up more and more information. I think the journey for us, like a lot of media companies, is the unique identifier of IDs across all those platforms or algorithms to make judgments, right, because as an example, our YouTube – we're the number one sports channel on YouTube. We'll do 4 billion to 5 billion views this year on that platform. But we don't have the unique ID to match with a network subscriber, right. So we don't get that information from YouTube. So the way people are dealing with that is building algorithms where you kind of classify groups of viewership behavior that hopefully gets you enough information to do some of the CRM that you're talking about. But you're absolutely right. We know more today than we've ever known. It's manifesting itself in the day-to-day and there's still lot more work for us to do there.
Brad G. Safalow - PAA Research LLC
All right. I'll turn it over. Thank you.
Operator
We'll move next to Mike Hickey with Benchmark Co.
Mike Hickey - The Benchmark Co. LLC
Hey, guys. Thanks. A great quarter.
George A. Barrios - Chief Financial & Strategy Officer
Thanks, Mike.
Mike Hickey - The Benchmark Co. LLC
Thanks for taking my questions. This is sort of an outlier but curious back on the social media, I know your Facebook presence for the Network continues to drive pretty good engagement, from what I can tell 5.2 million likes. I'm curious how you guys see a relationship there between social media engagement in terms of likes for your network or your potential network's total addressable market. It seems on the surface here that if I like the Network, to engage with the content online that would theoretically be a potential subscriber. But any insight there you could provide would be helpful.
George A. Barrios - Chief Financial & Strategy Officer
Yes. Look, I'll go back to – I know you asked a very precise question on the number of likes on the Facebook network page and you referenced the number. I think Vince's point about – Laura asked the question, why you think it's so important. Well, we think it's really, really important because it's a way to engage and activate our consumers around the world in probably the most effective way possible because that's the way people are spending their time.
So social for us around all our businesses and for the network massive opportunity. I'll say, I think we're just scratching the surface on utilizing that platform to drive – specifically your question to drive subscriber growth. We're doing things on there. We're doing good things, but I think we're just scratching the surface.
Mike Hickey - The Benchmark Co. LLC
Yes. Fair enough. We just saw Cablevision do a deal up here with Hulu. I think it's the first with that as they sort of target cord cutters specifically. I know you have your deal already with Rogers, but curious how you view the opportunity to get connected with, working with cable providers for a similar distribution deal for your network. And I had a follow-up, one more follow-up thanks?
George A. Barrios - Chief Financial & Strategy Officer
Yes, it's interesting, 14 months ago when we launched WWE Network we were kind of outliers in going directly to consumers and it's interesting how much the world has changed in the last 14 or 15 months. So yes, the Hulu deal with Cablevision is interesting. I believe Netflix has a similar deal with them. So we talk to everyone and if we think it's the right thing to do, we'll make a commercial transaction. And we've been very flexible. I mean, you mentioned Rogers, so the model in Canada is different than the model in most other places around the world. The model in the Middle East and North Africa is probably more similar to the Canadian model. So we're very comfortable having "WWE Network" take different forms if it makes sense.
Mike Hickey - The Benchmark Co. LLC
Thank you. Last question for me guys. Thinking about international growth opportunity for the Network and maybe focusing on the East or I guess China here, curious how you view the potential working with call it a strategic regional partner for product distribution, like a Tencent per se, could complement your efforts I guess at driving that international growth which appears on the surface to be huge for you guys?
George A. Barrios - Chief Financial & Strategy Officer
Yes, obviously our strategy in China over the last seven years or so has mimicked our strategy around the world, which is establish a TV presence and that becomes the beachhead that then allows you to expand. Obviously, China is a unique country. The regulatory framework and so on means you go at a slow pace. I would say over the last, I don't know, 12 to 18 months there has been a fairly sizeable pivot in both the digital presence in China and also how those big players, you mentioned Tencent, but there are others, how they are viewing original content, including original western content and there is a bunch of examples that have popped up over the last six months to 12 months. So what I'd say about China is that we are currently really, really looking at revaluating our approach and seeing if there is a way for us to move a little quicker maybe in slightly different way.
Mike Hickey - The Benchmark Co. LLC
All right. Thanks, guys. Best of luck.
Operator
We move to Jamie Clement with Macquarie.
James Clement - Macquarie Capital (USA), Inc.
Hey, George, a follow up, with the three-month samples technologically do you have a way of presenting people from – for example, just turning off April and signing up for free in May, or is that just part of the game and that's going to happen and fall through the cracks here and there and it's something you can live with.
George A. Barrios - Chief Financial & Strategy Officer
Yes. So, obviously as you saw in the release, we've extended our month free promotion into May. And then to your question, yes, there are ways that we can manage it. Obviously they're never perfect, so you live with some of that kind of leakage that you were mentioning. But there are tools that you use to try to manage that.
James Clement - Macquarie Capital (USA), Inc.
Okay. Very good. Thank you.
Operator
At this time we have no further questions. Mr. Weitz, I'd like to turn the call back to you for any additional or closing remark.
Michael Weitz - Senior Vice President, Investor Relations & Financial Planning
Well, thank you very much. We appreciate all of investors and analysts listening to the call today. Please contact us if you have any questions. Thank you.
Operator
This does conclude today's presentation. We thank you for your participation.