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Operator
Good day and welcome to today's WWE fourth quarter financial earnings teleconference. I would like to turn the program over to Michele Goldstein, Vice President of Financial Planning and Investor Relations. Go ahead, please.
- VP Planning and Investor Relations
Hello and welcome to the World Wrestling Entertainment's year-end conference call. My name is Michele Goldstein. I'm the Vice-President of Planning and Investor Relations here at WWE. With me here today is our CEO Linda McMahon and our CFO Phil Livingston. We issued our earnings release at the close of business yesterday, and will be referencing a presentation as part of this discuss. Both are available on our Investor's Relations website at corporate.wwe.com
As a reminder, we will be making forward-looking statements today based upon management's estimates. Actual results will differ due to numerous factors as called out in page one of the presentation. So the format of today's call will be as follows. We're going to review our operating highlights, fourth quarter results and the outlook for 2005 and follow it up with Q&A. On page 3 of the presentation we have summarized our financial results.
Fourth quarter, revenues of 127 million are up 20% compared to the prior year fourth quarter. EBITDA up 36 million, compared to 16 million. And earnings per share from continuing operations up 30 cents compared to 9 cents last year. I just want to quickly note that there were several unusual items that impacted comparability of both of these periods, and those are called out on the bottom of the page as footnotes.
Those include some legal settlements, as well as a comment about Pay Per View events. So at this time I would like to hand it over to Linda McMahon.
- CEO, Director
Thank you Michelle, good morning, everyone. Let me just give you little bit of a recap of some of the things that we've been doing at WWE, which I think sets the stage a little bit to talk about our operational highlights. If you are looking at the presentation, I'll sort of begin on page 4.
Over the past couple of years, as you've heard me state in different conference calls, and also in road trip presentations and conversations, we undertook really an unprecedented step within our company to divide our brands into our Raw and SmackDown! brands. Raw being the shows that air on Monday nights On Spike TV with one group of talent, and SmackDown! which airs on UPN on Thursday nights with a separate group of talent. So the primary differentiation between the two brands is really the talent roster.
We under undertook this split to compete with our sales to provide additional opportunities for new Pay Per Views, to provide opportunities for us to travel more outside of the United States via international touring. So the brand separation, while we did have some hiccups at first, we understood that we were going to take a couple of steps backwards to move a couple of steps forwards was that we had to change viewing habits for our viewers who were accustomed to watching all of their stars either on Monday night or Thursday night, and now had to re-educate them that there was a certain group of talent to watch on Monday night, and then an additional group to watch on Thursday night.
Which meant new story lines, which meant new followings, and really we had to make everyone aware of that. Also following was how do to then live events follow that pattern? Well live events of course were Raw or SmackDown! and so therefore we dealt with the same issues. I think that we have pretty much stabilized that. We are still dealing a bit with a softness in our domestic live events. But if you will look on page 40, you will see that we did 87 events occurred during this quarter as opposed to 74 events last year. And we clearly upped our international from 12 to 5.
That is a direct result of being able to have the brands split. And it's very important for us on our international touring right now, because our live events on an international basis are clearly more profitable. 165,000 profit contribution on an international event compared to currently approximately 41,500 for a domestic event. So we are looking to grow our international presence, and with a new strategy as we move into '05.
How that's going to to work is this: Instead of simply going into the marketplace on an international basis and touring, and then not returning to the marketplace for a while, we are actually in October in an unprecedented move going to tour both the Raw and the Smack Down! groups. And produce our television from the UK. Just as we are doing here in the United States. We will have satellite tours for the RAW brand, four or five events, we will have satellite tours for the SmackDown! about approximately the same number.
They will culminate in Manchester England it's approximately October 11 and 12 for the television shows. The reason that this strategy is because we will return to the marketplace in six months to repeat this same process. Whereby we're bringing television as well as live events. The goal there is our licensees will be able to have a showcase.
Our fans in the UK will now be part of the television show. Instead of just watching the television show and seeing fans from the United States come, hold their signs, participate in the event, those fans are now going to become part of the show that they are watching in the UK. We expect this to drive, therefore licensing, merchandise sales, better relationships, of course with our retail partners, and producing greater Pay Per View events in those markets as well.
In addition, we will, in between those six-month periods, then travel to the Pacific rim, where we will introduce our television and touring shows. As well, with the same process. And that after we have a couple of these tours under our belt, we will then begin on a regular basis once a quarter to produce television and satellite tours outside the United States. I think this is going to result in very good growth for our international marketplace, and we will see all of those ancillary businesses grow.
Moving a little bit more then into Pay Per View. We had a very good solid Pay Per View year. We had 12 Pay Per View events, and because now of the brand split we are going to add this year. One is coming up actually this Sunday, the Great American Bash. Another one is scheduled for October.
One will be the SmackDown! brand. That's the one coming up this Sunday, and the one in October will be the Raw brand. We had great results this year from WrestleMania 20. Record results.
We delivered approximately 885,000 buys at approximately $50, and I think Hollywood would love to have an opening weekend of one night of over $45 million gross. It was just a phenomenal Pay Per View event. We are looking to really focus on WrestleMania 21, which is going to be held in Los Angeles next near in April, but we'll see if those results are the same.
We're certainly going to put a focus and press towards that, and we'll be hopeful of those same kind of results. One thing to note in this quarter is that we did have Royal Rumble, which in last year's same quarter was a part of the third quarter, and not reported in the fourth quarter. So that did skew the results a little bit for this fourth quarter. Our television programming we're producing the same number of hours. Nine hours of television every single week.
That's -- it's a fair amount of television for us to produce. We're looking to target a little younger age group by moving two of our late night programs that were two hours on Saturday night, we've now moved one to Sunday on Spike TV. That's at 10:00, and that's now called the WWE Experience. It's hosted by Todd Grisham and our diva, Ivory.
And the median age for this particular program is 28 versus Raw and SmackDown!'s median age of 32. So we are looking to really build in a younger based audience. I think you can see that our ratings have stabilized. That's always a good sign for us. And both our RAW and SmackDown! ratings, we were looking at about 3.9 for rating on Raw and 3.3 rating on SmackDown!.
So we're glad to see our ratings have stabilized over the past year. And as all of you know, television really is the key driver of introducing our product into the marketplace. Our fans are able to follow our story lines through our television programs, identify with their particular stars, have their favorites, buy their merchandise, et cetera. And television also drives, then our Pay Per View sales. On branded merchandise this year, we had an outstanding year, especially in our home video sales.
We were up about $8 million for the quarter for our home video sales. DVD coming very strong into the marketplace now, replacing more of the VHS. WrestleMania 20 sold in at 114,000 units. That went on sale April 27th, and the Monday Night War sold in 118,000 units. That went on sale in February.
Other current releases of our Pay Per View titles are also doing very well. We have been strengthening in order to continue to grow our branded merchandise segment. Really strengthening our relationship with our retailers. In spite of some doors closing last year, which was, you know within K-Mart and KB Toys we have really strengthened our relationship with Wal-Mart.
I think part of that was a result of our Wrestle Mania 20, Road to WrestleMania Tour. We stopped at over 30 Wal-Mart locations. We had about 10,000 consumers that were drawn to those stores. So we continued to do promotions, we can have in store appearances to to drive the sale of our merchandise at our retailers. In addition, on Jakks our toy licensee launched a new product line of past and present superstars that are rich in history.
This is really capitalizing, if you will, on the nostalgia phase I think that you'll see not only in different television programs, not only ours, but also in other toy lines. So we're pleased, also, to announce that we are actually re-signing, if you will, some of the stars from yesteryear to promote and release merchandise items on them as well as our videos. Phil will probably note as well on his presentation that we did have one licensing agent commission of almost $8 million. Which we have been accruing, which we've now taken into income in this quarter.
One other part on that branded merchandise, we did successfully launch our auction site in May, and worked about 40,000 visitors per day. We actually had a Cain autograph mask that sold for about $1,000. That has been our highest item so far, but the auction site is coming from -- the items are collected at our live events.
For instance if Mick Foley hits someone on the head with a chair, and autographs the chair, then we are auctioning that off on our site. And so those items are going very well. So we're pleased to have that new launch. Now I'm glowing to turn it over to Phil a little bit to talk about the actual numbers. Then then we'll come back and talk a little about our launches and our initiatives going forward, which would include our 24/7 SVOD project.
How to monetize our library, et cetera. But let me let him give you the numbers before we go into that, and then we'll answer some questions.
- CFO, Director
Okay thanks Linda and Michelle. Well financially and operationally we ended a really good year with a great quarter. We owe a lot of thanks to our talented employees for their performance during the whole year. It was a terrific year. I'm looking at page 9.
And as you'll see on page nine in Q4 revenue was up 20% over the prior year, reaching $127 million. While 8% of that growth came from having four Pay Per Views versus three in the prior year, we still had higher organic revenue and performance of the period. The two key drivers were the success of WrestleMania 20, and our home video business as Linda discussed.
Our home video business did 11million in revenue in the fourth quarter alone, versus 3 million the prior year. There were some terrific titles and great new distribution fueled especially by the addition of Wal-Mart to our distribution channel. Our Pay Per View business did $43.7 million versus 31.8 last year.
Fourth quarter EBITDA increased much more than revenue. In addition to the earnings impact of the events I already discussed, we had one unusual favorable item in the quarter, that being the reversal of the accrued cost associated with our licensing programs, long standing contractual arrangements between WWE and a licensing agent has been in dispute for a number of years. But based on recent developments in the case it was no longer probable that we will have to pay those costs and therefore we have reversed the accrual.
We have disclosed this and talked about this at length in our 10-Q's over the past year. Also a large one time benefit in the quarter, it will also be reflected in better margins in future periods as a result of lower cost. Any page 11 you'll see our regular attempt to normalize our operating performance.
We adjust for the timing of certain events from quarter to quarter, and show any unusual items. We provide the details of those items so that investors can make their own judgments about the quality of earnings in the period, and the relative performance versus the prior year. You're encouraged to make your own decisions and analysis, but as we see it, normalized EBITDA to 23 million in the quarter up 24%. Full year EBITDA reached 72 million, versus 44 last year, up a terrific 62%.
Page 12 provides additional detail about our margins and SG&A costs. Most of what is here is self-explanatory, but I would note here the point about stock compensation costs, including 1.1 million the quarter as a result of accelerated vesting on last year's restricted stock grants. The company exceeded the 65 million target that was set when those restricted stock grants were made, and thus the stock was fully vested in and the expense was taken.
I think it's important for investors to know, and I think the incentive works in a big way. The accelerated vesting targets on the new stock grants that were made this year by our board of direct is $100 million of EBITDA. A good and achievable goal in the long of term. The balance sheet remains strong with $273 million in cash, and very little debt.
Our cash flow statement, on page 15, boils down to a pretty simple story for the year. We generated $62 million in cash from operations, and used that cash to pay off a $20 million lease on our corporate jet, pay $30 million back to shareholders in the form of dividends and share repurchases, and spent about $10 million on capex and film libraries. That left our cash in about the same position as it was last year at this time.
During the quarter, our board approved an increase in our quarterly dividends of six cents per share, up 50% from the prior prior rate of 4 cents a share. I will remind everybody that our stated policy is to try to pay out about 40% of our projected cash flow in the form of dividends. Now let's turn the to the important issue of our outlook for fiscal '05. And I've had many calls from investors over the last night and this morning about our press release and our outlook for '05.
I think for a company of size and uniqueness, it's important for us to provide additional information to allow investors to assess our earnings outlook. Part of the this is information about our key drivers in our business and how that translates into financial performance. For fiscal '05, we're projecting about the same level of key driver performance as we experienced in fiscal '04. TV ratings, Pay Per View buys, and live events attendance are all expected to be pretty steady year-over-year.
This translates into guidance for total revenue of 345 to 365 million. Operating income of 48 million to 53 million, and EPS of 46 to 50 cents a share. Now, many of you are new to the WWE story and haven't been following us and so I want to give a little more depth here. And we'll provide a little more information this year.
We're also providing our budgeted EBITDA, and we're very much EBITDA oriented in our processes here. Budgeted EBITDA of 66 million, and we're providing the EBITDA level of which management is paid target bonuses. That target is 68 million. While the guidance we give indicates slightly lower profitability than we achieved '04, we'll be striving to beat that guidance as we did in last year. In fiscal '04 was an effective management tool that set a conservative budget, and incent the team to deliver higher results.
I really want to remind investors that last year at this time we gave EBITDA guidance of $40 to $45 million. And ended up delivering $72 million of normalized EBITDA. We hope to do the same thing in fiscal '05. Be don't warned want to overpromise and underdeliver. That's not our style. Maybe we set the bar a little too low this year, but we really don't know yet. And we'll update the guidance every quarter as we did last year.
And we remain bullish about our growth prospects. There's no big message here on the guidance and people should not read -- this is the style we used last year. It worked very effectively, and it's a combination of internal management and external communication. But we remain bullish about our growth prospects. Our international strategy is increasing the number of live events abroad, improving our foreign TV distribution agreements. And is starting to produce TV shows outside of North America to drive licensing and branded merchandise, is positive and we remain bullish about it.
And the other legs of our growth strategy is exploiting our video library, and producing a number of feature films also present substantial opportunities on the upside. So with that, we'll turn it to Linda. Do you have any more comments you want to add before we open it up for questions?
- CEO, Director
I just think I'd to comment now on a couple of our initiatives. You did reference monetizing the library.
In March of this year we introduced our 24/7 SVOD initiative. That the ability for us to turn the 75,000 hours of library that we have into a subscription video model to utilize that library more for more DVD's, to be released. I think we've proven with the Ric Flair video that we released this year that has sold over 114,000 units at this particular time that there is a clear value in that library. Though Ric Flair is a current superstar for us, our acquisition of the WCW library then made a full career history possible with Ric Flair. And then I think next week Ric Flair's book comes out, his biography comes out.
So we've capitalized on utilizing the library, as well as in driving that through other merchandise streams. The SVOD is clearly is going to give us the opportunity to reintroduce as I mentioned before some of the superstars of old. The Chief Jay Strongbows, the Bruno Sammartinos, Pat Patterson, and others, who will come back and do ins and outs on these programs. This is classic footage that has not been really ever seen in this particular format. We not only have our WWE library, but we did acquire WCW's, ECW's, AWA, and there are probably a couple that we have targeted that we will bring in for this utilization. But very exciting abut about this new business opportunity to reach out to our fans on on a nostalgic level, because we've jealously guarded this library. And now we have the opportunity to roll it out.
We are in the process now of meeting with MSO's. We've hired the staff that has developed this business plan. That is now what we are calling cleaning all of the footage. So that all the rights are preserved in that footage. providing the right metadata to the cable systems. And once this footage is cleaned and ready to go for SVOD, it is also then ready for our own internet subscription model. The internet also will grow into having more revenue opportunities not only just in advertising growth now, but also with fantasy games, with interactive television components, all of which we expect to roll out the Fall of this year.
So those are pretty exciting initiatives for us relative to our films. As I have discussed, we do have a film office in L.A. Our approach to film production is very conservative. We have two films that are currently in the preliminary stages of production.
As a matter of fact, the President of our WWE Films Office is in Australia as we speak scouting for sites to produce the two movies that will be in production before the end of this calendar year. And verbal agreements with studio pickups are in place, and we will announce those when the final contracts are signed. So we're very excited about these two projects. Conservative budgets of the total for the two movies of about $20 million to $22 million, and that it will be on the basis of we don't go forward with production until we have studio green light. So that's we the way we are moving.
We think these are going to be good action adventures one. An action adventure and one's a horror movie. And we look forward to that production. So I think that with those initiative we're happy to answer your questions.
- CFO, Director
Operator, do you to open the line to questions?
Operator
Yes, sir. At this time, if you would like to ask a question or make a comment you may press star and 1 on your touch-tone phone. Once again to ask a question or make a comment, please press star and 1 on your touch-tone. To withdraw your question or comment at any time you may press the pound sign. We'll pause for one moment while participants register for questions. Thank you. At this time, I would like to question from Robert Bruce at [Texas Lycroder]. Go ahead please.
- Analyst
Yeah good morning, a few quick questions. Obviously, you know, fiscal 2004, the numbers came in better than expected, everything looks like it's an uptick with the exception of live event attendance, which it looks like you're looking to rectify that going forward. In terms of your guidance, I think you've explained you would rather set the bar low rather than overpromise and underdeliver. But still in terms of the company's capitalization and other issues, I'm wondering if you could give us a little bit of a sense as to, I mean right now you're sitting on approximately $272 million in cash and short term investments with no debt. Which makes your cost of capital equal to your cost of equity. Which obviously reduces the net present value of the company. I'm wondering I know you pay a dividend already, you just increased it 50%. But it looks like you have a lot of room to go if you were so if you were so inclined in terms of either a one time dividend or an increase in the regular dividend to kind of give back some of that cash to existing shareholders. If management can't find another place to put it where it can generate that return on equity that people are looking for. I'm wondering if you could comment a little bit on that? And second, obviously we've seen it with Lyon's gate we've seen it MGM that the home video revolution is really taking off on the DVD side. You have a very unique library that is minable and seems to be doing well. I wondering if you could give us a little bit more of an update in terms of how many total titles have out in the marketplace out at the moment? How many titles you think you could have out on the DVD format by the end of the year? And given the growth that we've seen in Q4, how big of a potential contributor to overall operating income could the home video opportunity be for you going forward? Given the number of libraries that you currently own and those that you're probably looking at?
- CEO, Director
Robert, let me address the second part of your question, then I'll let Phil address the first part. Relative to how many titles we have in the marketplace at the current time, you know, I really couldn't take a total guess. But let me tell you what we are doing on a current basis. And that obviously is we released a video of all of our Pay Per View events. We will have approximately -- which will be 14 for this year.
We'll have approximately 6 bios, and another 2, 3, or 4, you know, that are, you know, like the best tag team matches, that sort of thing. Those are those specific titles. We are reducing slightly the number of videos we're releasing this year only because we believe we can go a better job promoting and marketing maybe 4 to 6, maybe 8 fewer titles than we did last year. And that the results will be as good or better, but, you know, we took down our budget number a bit, because just to account for the sheer economics that we had reduced the titles. But we think that with the right marketing and promotion we will continue to drive through those sales.
As we introduce more of our product via SVOD, there will be a concerted effort to have, you know, a marketing plan that will launch new merchandise products with our, you know, stars of yesteryear that will also give us the ability to release DVD titles that we don't have a projected number in this upcoming fiscal year of those, other than the ones I've already mentioned. So on a going forward basis, we release probably 20 titles. That will be kind of a rough number on an average basis. We've been doing this now a few years. The library that the catalog, if you will, that is in the UK has been quite extensive, but was reduced with the Worldwide Fund For Nature.
We had to take some of those titles out. So we've had some issues that we've lad to take titles out, clean them up, and re-release them. So we're in the process of doing all of that. And we're very bullish on our home video and DVD market.
- CFO, Director
I would just add to kind of echo Linda's comment about focusing our promo- what we really found over the past six months months --how powerful-well we kind of always knew our promotional engine was. But we really focuses it on home video this past year. And Vince feels like that we ought to focus on a slightly smaller number of titles that we'd do an even better job at home video. Turn the promotional machine onto a slightly smaller number of new releases. So that's our strategy there. But we're super bullish on the home video business in total, and kind of in conjunction with the SVOD product and all, it's a great monetization of the library.
On your question of cash and special dividends, Robert, I think you should look at our track record for the past year as you know we implemented a dividend as soon as the tax law changed on a dividend tax treatment of dividends. We've increased our dividend after we had a -- after the year turned out better, even generated more free cash flow than we expected. Last year we increased it quickly.
And the other -- and the other thing we did this past year, we did buy back $20 million of stock where we were it opportunistically appeared to us. And we would definitely be in that mode again if the opportunity presented itself. And the main thing I want to tell you, also this past year, I paid down every piece of debt that I could find around here. Whether it was a lease, or a debt that was outstanding. I paid off off all the debt that I could possibly pay off without prepayment penalties of any substance.
So we're at a point where we have to continue to be rational. I think the thing I want to tell you is, we'll be rational if our cash begins too to file pile up now that we've used it to the extent we can. We'll be rational, and the idea of a special dividend is an idea that has been kicked around and thought about, And we would be open to it if that was the most rational use of our cash. We obviously don't need too big of a cash hoard.
So that would be my answer to your question. Operator do you want to open it to the next question?
Operator
At this time I would like to take a question from Eduardo Bush from [Zimmerman Partners]. Go ahead.
- Analyst
There hello, guys, and congratulations on a great quarter.
- CFO, Director
Thank you.
- Analyst
Just a little, could you give us a little more detail in terms of how the compensation works? I think just specifically, is management compensating for beating the outlook set at the beginning of the year? Or is this kind of a rolling target, or how would that work?
- CFO, Director
We actually -- you know we gave our -- we gave this year for the first time the EBITDA target that management gets target bonuses at. And last year, you know, last year we -- we gave guidance of $40 million to $45 million. And frankly, the bonus target was $49 million, it was higher, the budget was a little bit less than that. The target is set a little higher than the budget is and you see that here in what we've told you. The budgeted EBITDA is $66 million, and the target for target payout is $68 million this year.
And if we exceed the target, which we did this past year, we get higher payouts above the target. So the management is incented to deliver performance above the target. So I think -- I think that should answer your question.
- CEO, Director
Yeah, I think just to add to that, the -- you know, the bonuses and the compensation are looked at in two ways. One, the company must achieve its goal that it set if was describing. But there is a second component to that which is a performance by the individual. And so there's a split rating for individual performance, as well as company performance, and I think that serves us very well in evaluating our management team.
- CFO, Director
And I would just add on to you. I think it was an important part of what happened of the tremendous success we had this past year. Management hadn't been paid bonuses in a couple of years, hadn't achieved bonuses in a couple of years. And we set an achievable target, and we tracked it, and put up thermometers around the building. And as we progressed through the year, you know, we delivered well over that, because they saw that they were going to get rewarded for performance.
So I think, you know, and one of the things I don't think many investors have picked up on in here is that the 72 million that we delivered this year has a substantial amount of bonus payment for management compared to none last year. You know, if you just normalize for that fact, we covered a lot of bonuses on top of just the core business generated even more profitability when you -- when you think about this year versus last year.
- Analyst
So just a quick follow-up. So now once you beat the 68 target that you have, do you get compensated also above that target, or is it just like a one-step binary kind of issue?
- CFO, Director
No, those a sliding scale above it.
- Analyst
Okay.
- CFO, Director
Yep.
- Analyst
Okay. Thank you very much.
- CFO, Director
All right thank you. Good question. Next question operator. Next question comes from James [Clinit] from Sidoti. Go ahead, please.
- Analyst
Morning gentlemen. Question for you I know that if the past you guys have been hesitant to discuss developments of story lines and that sort of thing. I notice that you guys lost three pretty big name superstars shortly after WrestleMania 20. And that it appears, I don't have the exact numbers, but it appears on your website on one of your growth driver publications, that it looks as if May's Pay Per View event was pretty substantially off where you were last year. First of the all, is that accurate? And second of all, I was just looking at the card of matches there is, and I assume that's a SmackDown! event, that some of the guys that were in main events kind of hadn't really been there much before. And since Pay Per View buys are such an important driver of your business, have you guys considered shifting more Pay Per View events to a mix of Raw and SmackDown! matches, that kind of think?
- CEO, Director
Actually, we still maintain, you know -- the answer is no we're not at this particular point considering more of them as a mix. We have retained four that were part of our original 12 that are the mix. And only in WrestleMania do the stars from each brand potentially complete against one another. But what we did find with the split of the brand was that our Pay Per View buys, you know, four last year. Really held on an individual brand presentation as compared to the year before when they were co-presentations.
So we think we've got a good track record going to continue to grow and build the individual brands. But again, we're still testing it. And by adding one Raw and one SmackDown! this year, again we're testing to see whether or not we're going to increase total buys. If any of the buys will be cannibalized. But that's part of our testing. We are also adding the two new Pay Per View events this year will be seen in the UK.
You know be they are carrying them live as Pay Per View events. So that's additional revenue that we have not had before. Not only are these new events, but they're going to be carried in the UK obviously for the first time as well. So I think all of those things bode well. But Pay Per View is something that we watch very carefully.
I don't know if you happened to watch Raw last night, but one of the stars who is not on a regular basis, the Rock came back for an appearance last night. It was a lot of fun. We were in his home town of Miami, and the Rock will be in and out. Rock Lesner, one of our stars who left is working on an NFL career, and Stone Cold is busy working in the movie world you know if you keep an eye on him.
So the answer to your question is we continue to drive our story lines, create those interesting story lines, building new stars on the SmackDown! story line with John Layfield Bradshaw and Eddie Guerrero. That is a budding feud, you know, for our, you know, last SmackDown! Pay Per View, and one that will continue to grow over the course of the year. These story lines do build as they gain momentum over the course of the year.
- Analyst
Thanks very much. And congratulations.
- CEO, Director
Thank you very much.
- CFO, Director
James, I want to answer your question too about Judgment Day, the first Pay Per View which we've posted on the website. And it is true that compared to last year, it's down from last year's performance. But it's important to understand that that last year's event was a Raw Pay Per View event. And this year's event was a SmackDown! Pay Per View event, which tend to deliver a lower result. So I think you've got to understand that in thinking about it as well.
- Analyst
If I could ask a follow-up question to that. Is there a similar event in the next couple of months that was a SmackDown! event last year that's going to be a RAW event this year?
- CFO, Director
Yes, there is actually. It's Vengeance. Vengeance was a SmackDown! last year, and it's a Raw event this year.
- Analyst
Okay. Very good. Thank you very much.
Operator
We'll take our next question from Mike Wallace, UBS.
- Analyst
Hi, a couple of questions. First, when is the Raw TV contract up? And what were the ratings when that was originally signed? And, you know, assuming the ratings are below, do you think that's going to be an issue in renewing that contract when it's up? The second for the video on demand, when do you think that's starts to kick in? Do we see revenues this year, or is it kind of a rounding error and we really see the impact next year? And third, what are your thoughts on acquisitions?
- CEO, Director
Let's talk about first the Raw contract. That will expire September, '05. That contract was under an agreement with Viacom that began in 1999. So we're in the last year of a five year deal. When we first entered into that contract, our ratings were approximately a 6, and that was coming off of USA Network. Where we had been for 17 years. So I think you had to look at the tiering problem -- or not problem, but clearly it was different when you were coming onto what was then the Nashville Network, which evolved to the National Network, and now is Spike.
We are in our negotiations with Spike. There is clear interest on both our parts to continue our distribution there. And those negotiations will be continuing on over the next, you know, several weeks and a few months. So it's good to report that both sides are interested in continuing that relationship. And while our ratings may be down, and if you look at it drastically, okay wow, you're down at averaging about 3.9 from a 6.
We are still in a week in and week out basis in the top 10 of all cable regularly scheduled programming. And most often under regularly scheduled program, the one, two, or three program. So we're delivering I believe for Spike, we're delivering for our advertisers. And we think all of that is very good moving forward. Relative to our SVOD launch, we really expect -- we're waiting to sign our first deal.
If our revenues come in, I don't expect see them before September or October and I'll let Phil jump in on that. But we're making the investment in it this year. Revenues are expected to be around 2 million, but then we'd actually have a net loss considering start-up operations etc. for this particular fiscal year. Am I correct on that?
- CFO, Director
Yeah. You should revenue Mike in this year for sure.
- CEO, Director
Go ahead.
- CFO, Director
Well, I was just going to say I don't Mike, I don't see we done have any acquisitions in our pipe. But I don't see us doing any acquisitions in the near term. Do you have any thoughts on that?
- CEO, Director
Clearly not in this fiscal or the near term. Our focus is continuing our organic growth growth. We think that our strategic plan for our international growth and development is really going to deliver very good results for us this year. And we're certainly going to be focusing on that. We always want to drive our ratings.
As a matter of fact we have a lot going on now relative to Raw. Our diva search, and what this actually is modeled on is like American Idol or America's Top Model. We are in the process of having different casting calls, one in L.A., one in Chicago, one in New York. Chicago's was last week. We featured that last night on our Wall programming. I believe there were 8 to 10 finalists.
New York is happening this week or next week. And L.A. is like week after. All of that then will boil down to 10 finalists. We'll have a special on Spike. And then as we move into a 9 or 10 week promotion on Raw, we'll be voting off one those contestants each week down and end of September, three finalists. And on that particular show, we will select our diva winner.
The winner will receive a $250,000 contract plus an appearance fee for WWE, will be involved in our story lines and we're very excited about that . There will be an 800 call in for votes, as well as on the internet. And I think all of that is geared to generate viewership and brand extension. And so we're moving to do those kinds of things. We'll also have our own presidential election, which would be on Raw and SmackDown!
Starting right around election time. And that would be the election of a new, WWE overall President for television purposes. And then after the election we'll move into a similar kind of voteoff on SmackDown!, which will be a toughen up segment, toughen up type segment that will air in SmackDown! again to develop our new stars. So we think all of those are good innovations for our television product. And as the question arose earlier about driving towards Pay Per Views, I think increasing viewership then helps drive our story lines. And we are creating new stars with our divas and a new star under the toughen up segment to expand that base as well.
- Analyst
Okay. I'll make sure I cast my vote for all of those things. Just back to the Raw contract again. So should we not assume that since the ratings are down a new contract would be at less advantageous terms?
- CEO, Director
I would not assume that
- Analyst
Okay.
- CEO, Director
I would not assume that, because I believe that we are delivering. We continue to deliver the audiences I believe, that Spike is looking for. We've been a cornerstone in their development of this network. We've gotten great feedback of the success that we have had for them in being able to launch new programs off our show.
And as a matter of fact not last night, but week before, our program ran about 23, 24 minutes overtime because we put in a 6 to 8-minute segment at the request of Spike which led into their reality based program coming on after us. So we work very closely with Spike to do special promotions for them. Quarter before last, they were looking for a special, and they were really wanted to help drive some of their ratings, their they're constantly vying with other cable networks to be in the top 5. And we allowed them to run, you know within one of our specials again at no additional cost. Which did give them a good rating point. So we have a very good partnership. It's not just providing programming.
- Analyst
Okay. Thank you very much.
- CEO, Director
Thank you.
- CFO, Director
Thank you. Operator, next question?
Operator
Take our next question from Cliff Greenberg, Bearing Capital. Go ahead.
- Analyst
Yeah hi guys. Could you please review again the success of the international live events and your plans this year, as far as how many international live events you're going to add? And what the additional merchandising and television licensing opportunity there is internationally, also?
- CFO, Director
I think was it 41 versus32 is that right? Or 41 versus 30.
- VP Planning and Investor Relations
41 versus 32.
- CFO, Director
41 versus 32. Our current plan is to go to 41 international live events versus 32. And a major strategy here within the company is the international markets are clearly strong in demand for TV rights fees, and the whole works. And I think an important thing we talked a lot about on the road to you, the Pay Per View market is becoming more and more enabled around the world, too. So we're sewing greater opportunities for Pay Per View around the world, too. But we're adding lots of the additional events, nine additional events. And we're going to do TV from the UK in October. We're going to do Raw and SmackDown! from the UK in October, which will drive and we'll coordinate all kinds of premium TV distributors..
We'll bring in licensees, and we'll create a bunch of events around that excitement as well. So that's important, too. Linda talked about the fact that Sky is going to air. One of the key things that is going on next is WrestleMania.
Wrestle Mania has been part of a special, part of a tiered package that Sky has sold in the UK in the past, and this year WrestleMania will be a Pay Per View event for the first time for the company. And we'll split those revenues with Sky. I -- that will be a substantial opportunity, I think, for -- for the company and for Sky. So I hope that answers -- does that answer your question? It's an important area for us.
- Analyst
Yes, thank you.
- CFO, Director
Okay. Thank you. Next question, operator?
Operator
Next question comes from Mario [Saveli] go ahead. Go ahead.
- CFO, Director
Hello Mario.
- Analyst
Yeah, hi, how you doing.
- CFO, Director
Pretty good.
- Analyst
Good. I'm wondering Wal-Mart, are they an advertiser yet on Raw and SmackDown!?
- CEO, Director
They're not an advertiser, but have clearly stepped up carrying now our home videos, our magazines. That's an increase over last year as a matter of fact. They're now representing about 15%, I think, of our distribution business for home video. Home video for sure. I'm not quite certain on magazines at this point. We were really pleased.
We got a toe in the water with Wal-Mart by producing a reduced price DVD for them. And the sell through rate was about 90%, which really got their attention. And now they have now come on board now to order pretty much a full complement. And also ordering some of our DVD's that are not currently in the marketplace. So they have kind of a very different strategy. But we are very pleased with our relationship with Wal-Mart.
- Analyst
And the store visits, was that new, or is that something you have done each WrestleMania?
- CEO, Director
No, this was new. For this WrestleMania. The road to WrestleMania tour with Wal-Marts. And we I think went to about 30 different Wal-Marts across the country. And attracted about 10,000 potential customers for them with those tours.
- Analyst
So there is certainly gain potentially for advertising at one point, I would guess?
- CEO, Director
They are. But they're very -- even with co-op advertising, that's not something that Wal-Mart is really into at this particular point. But we would welcome them with open arms in advertising.
- CFO, Director
Get on their conference call for us, Mario, okay?
- Analyst
I'll try. The diva special, is that going to find its way out to some time of event on TV?
- CFO, Director
You mean the diva search?
- Analyst
Yeah, the diva search, sorry.
- CEO, Director
Actually, the diva search will have a special which will air July 15th at 10:00 on Spike. And as we go to each of these casting sessions, we are shooting, you know, on video all of those sections. You know, the ins and outs. The girls who won the girls who didn't. We will have great footage then for a DVD, as well.
- Analyst
Okay. And lastly on the two films. You mentioned 20 to 22 million. Was that each or the total budget for both?
- CEO, Director
That's the total budget. That's the total budget for both.
- Analyst
And that would probably entail World Westing funding a portion of that?
- CEO, Director
It is our goal at this point to fund all of that.
- Analyst
Okay.
- CEO, Director
Now, we -- which is why our formula is in our process is very particular. We don't move forward with production unless we had a studio pickup with a commitment from the studio for PNA and theater distribution. So we have those commitments and we are moving forward.
- Analyst
Okay. And then I'm sort of wondering how you might play it strategically. Do you sort of -- are you looking to take someone that's a big draw? Or do you want to use this as a platform to promote new talent? Will it be multiple wrestlers in each one? Just wondering what are your thoughts on that
- CEO, Director
No, and these will not be wrestling movies, per se. This will be taking one of our superstars that will be featured in the particular movie. We don't anticipate maybe there would be another star, but we don't anticipate a host of our wrestling superstars within a particular movie.
It will be, you know, as I said, an action/adventure is one. And the other is a horror movie. And that is the lower budgeted movies of the two. It's a horror movie and it's a la Texas Chainsaw Massacre. That kind of wort of demographic that it would appeal to. So it does give us an opportunity for our superstars to be in yet another medium. And it will also give us the opportunity to draft, if you will, some of the co-stars if they're interested or if that were to pan out over the course of the time into WWE. But the goal is to really give another medium for our superstars. Something that we're familiar with doing story telling, production etc. Just in a different format.
- Analyst
So I guess it would be something to the way the Rock is promoted. You would promote the name the Rock, but in the movie, he could play any type of character, I guess. Right?
- CEO, Director
Absolutely. It's in the intellectual property of portraying someone else.
- Analyst
Okay great thank you.
- CFO, Director
Thank you Mario. Operator do you have another question?
Operator
Yes we do. We have Dennis McAlpine with McAlpine and Associates. Go ahead.
- Analyst
Thank you. Good morning. A couple of things. Can you comment as to who the studio is that's picking up the BNA and doing the distribution?
- CEO, Director
Dennis, I could, but I would rather not at this particular point. They're major studios, and I would really rather wait until I have it all inked.
- Analyst
You say major studios? Does that mean there are different ones for each movie?
- CEO, Director
That is correct, that's two separate studios .
- Analyst
On the Spike contract as I remember, that was originally with Viacom, and there was a lot of other things involved, rather than just the coverage or carriage on Spike. Can you talk about what your goals are going forward on the renewal as to what you want for other things other than just carriage?
- CEO, Director
Well the way we've broke them out at this point, we negotiated a UPN, as you recall this January, did a pickup on their two-year option for renewal. That was part of the original Viacom deal. Spike we're negotiating separately. Simon and Sheuster we have negotiated separately. Under the strategic alliance agreement that we signed in 1999 we had the opportunity to reach out to Simon and Sheuster .
We had an opportunity to reach out to their theme parks. We had an opportunity to reach out to theaters which we have done in Canada. Famous Player theaters airs our product via Pay Per View. And all of those negotiations now are going on in a separate way. And would not continue under a strategic alliance agreement. I think that set the pace for us. We were able to capitalize on that. And now as we have proven, our success with each of those divisions,they've moving on independently. So we aren't negotiating a new strategic alliance with Viacom, we are negotiating the individual people.
- Analyst
Thank you. And on the Pay Per View, can you talk about what the buys were for the first one in June? And what your expectations are for the second? Particularly whether you expect the SmackDown! which I think is the second one, to do better than the May episode did. And whether you're expecting the same thing in October?
- CFO, Director
We don't talk about individual expectations. You see in our guidance there for the year, we give the total buys expected for the year. But we don't talk about individual Pay Per Views. They do swing, Dennis, as you know, some go up, some go down. It's just kind of it would be too much of a -- I mean, comparing it to last year and understanding what happened versus last year is I think about the best we can do for you on an individual basis.
- Analyst
Thank you.
- CFO, Director
Okay. Operator, any more maybe one last question? We're about two minutes before the hour.
Operator
Do have one last question from [Brett Grillcoff] from [Noyce Partners]. Go ahead.
- Analyst
Regarding the cash and the rational use of cash, we've been sitting with a ton of cash for years, everyday we're generating free cash. Our stock is trading at 7.5 or 8 times cash flow with the group trading substantially more than that. So the question is, what -- do what do you mean by rational? It would seem that a buyback here would be the best use of cash.
- CFO, Director
The problem with buyback we've had is that for a lot of institutional investors the float in our stock is so small that we can't. And we did just did a secondary with the hopes we could expand. We did in our average daily trading went from 25,000 shares to about 100,00 shares. So we like we've gotten, and we did get a whole bunch of bigger institutions that are now able to get into the stock and get out of the stock as they need to because of the flow side. So to the extent that we do large buybacks one of the factors has been the daily volume in the stock. And there's still even at 100,000 shares it's like a million three at $13 of daily of volume. It's still prohibitive for many funds. And therefore it kind of limits efficient pricing of our stock.
So I think every year for the last few years we've bought $20 million or so in back in buy back. And last year we bought a block back at nine cause it was clearly an opportunity and a bargain and we ask snatched it up on behalf of all of the shareholders. So we'll think about it. Special dividends is a possibility too. And kind of a cross the board tender, that's an idea. So we're open. And we won't want to keep piling up the cash.
- Analyst
Well, this shareholder really doesn't think that's the issue of float, institutional ownership et cetera, et cetera, matters. Because it's obviously not working right now. But just another thought with all due respect, you know, I walked out of the road show thinking very highly of the company. I still do, given your comments on the trends of business, things sound great. So I -- and given your guidance last year, and you -- you know beat it to say the least. With all due respect, I don't even understand A one why you're providing guidance, or B is it a game for you guys to say at the end of the year that you smoked through the guidance? If you only hit in guidance, I would consider that a very poor year. And usually companies don't give bonuses for having a down year. So I'm not even sure why you would be -- it's especially after an offering I think everybody came out of the meeting feeling great and that you'd have a substantially up year. And if I'm hearing what you're saying, you do, too. So I'm not clear, it's certainly hurting us today, and I'm not short term guy, why give guidance? I understand setting the bar low. But how about being realistic?
- CFO, Director
We set guidance, because we don't have a lot of coverage on our stock. And if you take a look at the fact that we've provided weekly key drivers on our website. If you look at our MD&A in our 10-Q, there's there's a lot detailed information. In our size of the company with the number of people that are covering it, we're trying to be investor friendly. And provide a lot of information. And it worked last year. And we'll wrap it up after this. After my answer here. But it has been been a good posture for us to provide a lot of detail for investors so that they can get to know our unique business and understand it. And I still am of the opinion that the guidance is helpful for all investors to understand our business.
- Analyst
No, I applaud you, you give great detailed guidance. But it seems to me on your cash flow estimates that, or even the top line for that matter, that you're setting the bar extremely low. I applaud all of the detailed information you give. But if you're going to come in last year with a 45 number and come in with a 72 suggests that you're setting it abnormally low. So, you know, and the short run, it hurts credibility. I don't own the stock for the short run, but nonetheless, you see the reaction today. So for whatever it's worth.
- CFO, Director
I appreciate your comments. And I I think I acknowledged some of those same of those same points in our comments to the crowd. So anyways I think with that we'll wrap it up. We're at at an hour, and we appreciate everybody's participation in the call, and hope you'll join us again and stay in touch. Thank you.