Mike and I will be discussing the WWE numbers later today on the We Don’t Need No Stinkin’ Name show but I also wanted to give me thoughts of WWE’s conference call as they happened. I will get more info the numbers later today, these are just quick thoughts.
*The music you have to listen to when on hold is classical. It kind of lulled me to a catatonic state.
*Michael Weitz starts things off. Vince McMahon and George Barrios are there. At least the boss showed up this time!
*Vince takes over the call and says it’s a somewhat disappointing first quarter. He mentioned that WrestleMania is not included this year vs. last and that Mania is up 30% this year vs. last, but business is still not where it should. You have to give Vince this, he never pulls punches when talking about the state of the new business.
*Vince then said that opportunities are coming, enhanced by the “New WWE”. He talked about ratings being up and Tough Enough being successful. He clarified that “the new WWE” doesn’t depart from what they used to do. In essence, he said that they are great at producing live events and TV and they should use that expertise to enhance revenue sources. I totally agree with them on that. Curiously, after explaining the new WWE and what it means, he purposely never mentioned the word “wrestling”, even though he went to great lengths to address the misconception among people that by omitting the word from the name that the company was getting away from its core. It was an amazing job of tap dancing by Vince.
*George Barrios took over and started talking financials. Without the big bang from WrestleMania, which occurred in the first quarter last year, business is obviously down this years, so he talked about things on an adjusted basis. That is fair since Mania is a huge hunk of business and they can’t realistically be expected to compare this year to last without it. So, they took out Mania 2010 out of the equation and compared apples to apples. The Royal Rumble and The Elimination Chamber PPVs were down 10%. That number will change next quarter if Mania does the million buys we have heard they will do, but it’s still troubling since Mania was a one-shot deal and the two events mentioned are more indicative of what the WWE PPV business truly is.
*Toy revenue is up largely due to the partnership with Mattel, which is why they adhere to TV PG folks. The Raw vs. Smackdown game didn’t do so hot, but George said that was the trend overall in videogames. I will have to take his word on that. It’s not my area of expertise. WWE All Stars is their big hope for next quarter. If it works, it will have to buck the industry trend.
*Magazine publishing continued to slide. WWE Magazine sales are down 28%. This is to be expected since magazines die more every day. Digital Media was flat. Ecommerce was up though. The key we kept hearing was discount pricing. You do what you need to do to move product in a sluggish economy.
*The film impairment from 12 Rounds was $2.8M. You could tell at the open that Vince was pissed about it since he said he didn’t understand why it was on the balance sheet. They will still keep doing movies, but I expect them to continue to keep costs in line, as they have recently.
*SG and A expenses were up, which is unusual for the normally tightly run WWE ship. Operating Income and Income before taxes are down about $10M each on an adjusted basis. That is not good folks. They are still cash rich, given what they hold from the past but the dividend that they were paying was chipping that away. They say they want to have that money for acquisitions which is why they have revised the dividend and cut it by 2/3 to the normal shareholders. Honestly, it’s still a solid 4.5% return at this point, which gets up near around 7% if you owned WWE stock in a Roth IRA. And the current dividend should be sustainable on earnings, which is a positive.
*George talked about the different content distribution methods, like NetFlix, and how they are in a perfect position to benefit from them since they own and produce so much content. I agree, they are. It will require proper planning and revenue return to make it work. He talked more about the new WWE initiative, which we have talked about in audio and honestly they are in a good position to take advantage of since they are so adept at production and running events. Barrios expects at least 15% growth. It’s nice to shoot for but when your growth is what it is now, it seems very high to shoot for.
*Question time. Man, that was a pretty brief presentation. I wonder if anyone will ask good questions. Let’s see!
*They were asked about the PPV business declining. What effect does MMA have? And, how serious are they about the new network? Vince says MMA isn’t really a direct competitor other than it’s on PPV. I call BS on that Vince. Vince said that it CAN have an impact when MMA has a PPV on Saturday and they have one on a Sunday. Vince says that t’s not because of MMA folks. It’s because of the PPV advertising that sends people to order MMA shows. I call BS on that too. Vince talked about the network. It could end up being a hybrid, like with NetFlix and Apps. As Stu and I mentioned on audio given that they could run PPVs for much less on the internet than they do on cable/satellite, I could see them venturing there down the road. Vince has always hated that he only gets 40% of the gross and frankly, I agree with him. WWE gets $18 on a $45 PPV right now. On the net, they could charge $20 and still net $18, and increase their buys. With HDMI outputs on laptops and other online viewing devices, people could still watch the shows on a TV. It seems like an obvious move to make when existing PPV contracts expire.
*Vince said there are a lot of opportunities for them as content providers. I agree with him there. Where MMA is concerned, he is wrong. There are at least SOME fans that like both MMA and WWE and if they buy a UFC show, they very well may skip Extreme Rules. PPV advertising has nothing to do with it. George is very bullish on all of the content they own.
*Vince added that they have two new live event television shows rolling out in the new future and it will be easy to find a home for them. He didn’t elaborate on that. HMMM. Are they PPVs? If it’s so easy to find a home for TV shows, why are Superstars and NXT on the net only?
*Next up they were asked to talk about the timing of the new initiatives. George said it’s nice to have a lot of cash because it makes it easier to acquire things that make sense. The network? He said it’s about taking advantage of opportunities. He was kind of generic and vague, but I can’t blame him for the tap dance. Can they make acquisitions on the cheap now since the economy is down (at least in some sectors)? Yes George says. They have looked at things already and turned them down. The lady asking the question followed up again. Honey, George ain’t tipping his hand here! One thing he did say, cutting between the hyperbole, is that they are looking at acquiring things that they can use their existing infrastructure to make the acquisition work. Translation, lump them in with what they have in place now, which is smart. They are not looking at hiring a lot of new people but rather assimilate things into their current infrastructure, in essence reducing costs on them.
*Finally, a talent question! How are the storylines evolving? Vince said they are evolving and Rock gave them awareness when he came back. He mentioned The Miz going from the opener to the main event. Alberto Del Rio was in a main at Mania after not being around last year. So talent is moving along well he says. REALLY? Jeez, that is the saddest part of the call thus far. I mentioned my take on the new talent initiative on the Tuesday hotline. Suffice it to say I am seeing way too much of “the more things change the more the stay the same” in the week after the draft. Vince mentioned Edge’s retirement but said that there are a lot of young guys coming up. Let’s hope he heard his own words and heeds them. Vince actually intimated that TV ratings may be as good as they have ever been. My Booker T Meter went off and told “he did not say that….tell me he did not say that!” He was asked about raising ticket prices. Vince said he likes to be a value proposition and overall, I agree that WWE is. PPVs, not so much but overall they are.
*Are they adding more dollars to promoting PPVs? George said no. It will depend on storylines to sell the shows. I agree with them not doing that. The booking sells the shows and if TV doesn’t do the job, paying for ads won’t do it either. He added that their promotional partners help sell the shows through their exposure with them, which I really don’t see being the case. If people aren’t watching TV shows, seeing a display at K Mart won’t suddenly make them buy a PPV, except for Mania and maybe The Rumble and SummerSlam.
*We are out of questions. They ask if anyone else has one to ask. Honestly, with Vince saying that the new talent initiative is going well, why bother to ask anything?
*Michael Weitz throws it out one more time and when no one buzzing in, the call is over!
*Overall, it was a dull call, save the two new live event shows.
