TKO Group Holdings Inc (TKO) 2009 Q4 法說會逐字稿

Good morning.

My name is Ally, and I will be your conference operator today.

At this time I would like to welcome everyone to the World Wrestling Entertainment fourth-quarter and full-year earnings conference call.

(Operator Instructions).

I would now like to turn the conference over to Mr.

Michael Weitz, Vice President of Investor Relations.

Good morning everyone.

Welcome to World Wrestling Entertainment's 2009 fourth-quarter and full-year earnings conference call.

Joining me for today's discussion are Vince McMahon, our Chairman and CEO; Donna Goldsmith, our COO; and George Barrios, our CFO.

We issued our earnings release earlier this morning and will be referencing a presentation as part of our discussion.

These are available on our corporate website at corporate.WWE.com.

We will be making several forward-looking statements today as part of our discussion.

These statements are based on management's estimates.

Actual results may differ due to numerous factors which are referenced on page one of the presentation.

These risks and uncertainties are discussed in more detail in our filings with the SEC.

Reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release or on our website presentation.

Today we will review our financial results for the fourth quarter, and we will follow this review with a Q&A session.

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

Good morning everyone.

I think I can sum up our performance for the year as good, not great but good.

Over the quarter I thought we concluded a pretty strong year with a solid performance in this last quarter.

It is obscured by some one-time items, bad debt, tax credits, etc., which George or Donna will take you through when you're ready.

We achieved some revenue and profit growth pretty much across our key businesses.

Live events one of the barometers, one of the key barometers, for me at least, in determining the strength of where we are, as well as where we are going to be.

Live events was up considerably, as well as television and pay-per-view.

We delivered pretty much of a 7% increase in adjusted EBITDA.

And again, there is one-time items, which we will go through later on.

A 13% increase in adjusted EBITDA for the full year.

So that is not bad.

We unquestionably fulfilled our commitment to you and to ourselves as far as operation efficiency is concerned.

We reduced our expense base by more than $20 million, that was the commitment.

Quite frankly it came in almost twice that, so we will pat ourselves on the back for that.

We also had a reduction of headcount of approximately 10%.

And we had perhaps more efficient marketing.

We even reduced some of our production television costs without our audience realizing it as far as what is on screen is concerned.

Speaking of audience, we increased our total attendance for the fifth consecutive year, which means again very strong, 2.3 million people.

Our US television audience as well grew by 800,000 viewers to an average of approximately 16 million viewers per week here in the United States across all of our platforms.

RAW, by the way, which is one of our key programs, had its largest weekly increase in average since 2001.

And it is more recently about an 11% increase in household ratings.

That is the against, as you all know, in terms of television, other than the National Football League, just about every show on television -- reoccurring show has lost a great deal of audience, not because of the lack of quality in their shows necessarily, but because there are just lots of things to do out there, many more networks, many more ways to attract your attention, so we're pretty proud of that.

So we have along those lines strengthened our global television platform as well.

We added as well as domestically, we double WGN to our lineup out of Chicago, with a new show we call WWE Superstars.

And when we create a new show it is important to know that we take that new show -- as far as international is concerned, you make it once over here, and then from there you distribute on a global basis, and if you make it once, that is making money.

So we -- as well as international, as far as Mexico is concerned that has been a huge market for us.

The UK continues to be strong.

China, for argument's sake, which is not that much now, down the line we, as well as other USA enterprises, will be working with China a little more efficiently as far as live events, and an expanded broadcasting platform for us.

We are about anywhere from -- we are in about 55% of their free cable TV homes and about 22% of their total free TV households, reaching about 90 million TV households a week.

So that is a start.

It is a really strong start.

Our strategy there is to work, as opposed to a global -- or rather a national platform, it is more of a syndicated platform -- the old syndicated platform back over here, in terms of we do business via provinces and local television, which pretty much keeps us under the radar of a more national scrutiny.

Again national will come with us as we go forward.

We want to make sure we walk before we run and do the right things over in China with their unique culture.

It is important for us obviously to be sensitive to the relatively unique cultures of some of our international partners.

Our licensing business with Mattel, it is a brand-new ball game with Mattel for us, which I will talk about a little more detail here in a moment.

Another thing we have done is we have finally resolved our litigation with THQ-Jakks as video games are concerned.

Jakks is out of the question.

It is now just THQ and WWE, with Jakks out of the question.

We have extended our contract, and far more favorable terms than we have in the past.

That is a really good thing for us.

As far as Mattel is concerned, we have had a really, really strong launch.

We are led by the big four of course back over here in the US, Wal-Mart, Target, (technical difficulty) Toys "R" Us, rather.

We -- preliminary retail data unquestionably has us outpacing by a large margin last year.

We have four items in Wal-Mart's top 100, which actually does say quite a bit, because Wal-Mart has a lot of items.

It is something we have never achieved before, just to give it some relevance to WWE.

So we have never achieved that in the past.

So again it speaks to the strength of where we are with Mattel, as well as other aspects with Wal-Mart, etc.

We have also renewed partnerships -- television partnerships, with again a number of individuals and partnerships as far as business as well is concerned.

Which I mention THQ and a new relationship with Mattel.

By the way, the relationship with Mattel and others now, it is not just about selling toys.

It is about a partnership.

It is about relationships which can be leveraged and across-the-board.

We fit Mattel extremely well because they are truly international, as are we.

So being able to combine the resources from an international standpoint really makes a lot of sense, especially given sensitivities in the marketplace.

So they are a true partner with us in terms of marketing, in terms of governmental constraints, things of that nature.

We have never had that before, so that is a really big thing with us.

They are a very strong company, and we really enjoy working with them as well.

So from an overall business outlook just a couple of things of note.

We have a new member of the Board of Directors, Basil DeVito, who has been with WWE on and off for like, I don't know, 25 years or so.

A very knowledgeable individual, and he was accepted by the Board in general unanimously, so we are proud of Basil joining our Board.

Looking ahead, we are unquestionably confident we can achieve our financial objectives with an annual average earnings growth of about 15% to 20% over the 2009 to 2012 period.

And again, that is not -- I mean, that is pretty strong.

It is not huge, but again it shows strength going forward with our Company.

We feel confident that we can manage our cost as well, improve our operating efficiency, as we have demonstrated in the past, actually very shortly in the past.

We are confident of going forward with our television contract renewals, because again, just as ratings have increased over here, and audiences have increased here likewise with a better product, which is something we always strive to do, reinventing yourself, which we unquestionably have done, every year, which is important for entertainment companies.

And again, I mention the strength of of some of our licensing partners, Mattel and others, and working closely together as a partnership.

So we feel that we are unquestionably -- and will outpace our industry peers and create a great deal of shareholder value going forward.

So that is pretty much my comments.

George, I will throw it over to you.

From a financial perspective WWE performed well in the fourth quarter, capping off a strong year for the Company.

In the fourth quarter revenue from a number of our businesses exceeded or matched the prior year, including strong growth in revenue and profits from our live events and television distribution.

Our bottom-line results for the fourth quarter of both 2009 and 2008; however, include certain items which we would characterize as unusual or one-time in nature.

Specifically, the fourth quarter 2009 included a $6.4 million increase in bad debt reserves associated with the write-down of a receivable due from a prior business partner.

In addition, the quarter included $5.8 million of tax credits related to our television and digital media production, which were recognized as a reduction of expense in these areas.

The fourth quarter 2008 included the recognition of a $6.4 million advance related to a multiyear book publishing contract.

To clarify the trends in our business I will discuss our performance on an adjusted basis, excluding the impact of these one-time items.

For further discussion, please refer to the website presentation or our earnings release, both of which include supplementary schedules outlining these items and their impact on our financial results.

On an adjusted basis our profit contribution was essentially flat to the fourth quarter last year.

Increased profits from our live and televised event segment was offset by the decline in our home video business.

Adjusted EBITDA increased 7% over the prior-year quarter, based on a $1.2 million reduction in SG&A expenses coming from various expense categories.

For a more detailed review of our performance in the quarter, let's turn to page 6 of our presentation, which identifies the adjusted revenue and adjusted profit contribution by business unit as compared to the prior year.

Starting with our live events, including merchandise sales at these events, revenue increased $4.8 million or 17% from the prior year.

The growth was led by an increase in the number of domestic events, as well as favorable changes in foreign exchange rates.

In North America the addition of 10 events more than offset a 4% decrease in average attendance to 6,600, and a 7% decline in average ticket prices to $35.48.

Our international performance reflected a 17% increase in effective ticket pricing that benefited from changes in foreign exchange rates, and a 2% rise in average attendance to 8,500.

Turning to our pay-per-view business, revenue increased 3% to $16.3 million from the fourth quarter last year, reflecting a 14% increase in international buys and a benefit from foreign exchange.

These factors more than offset a decline in our domestic pay-per-view buys.

Overall pay-per-view buys increased slightly over the fourth quarter last year.

As noted in previous calls, we continue to work on stabilizing and improving our pay-per-view performance.

It is important to us that three of our four pay-per-view events produced in the quarter demonstrated growth in buys over the prior-year, both domestically and internationally.

In order to promote our events more effectively we have reduced the number of pay-per-view events in 2010 from 14 to 13 events.

In addition, we have increased the price of our non-WrestleMania events from $39.95 to $44.95.

Revenues from the distribution of our television programming increased by 10% or $2.8 million due to higher rights fees from our global television contracts, and the addition of our new WWE Superstars television show.

The new program debuted on WGN America on April 16, 2009.

In our Consumer Products segment our licensing revenue on an adjusted basis declined slightly with lower domestic sales of toy products.

As Vince mentioned, our new launch with Mattel has been very positive.

Based on a preliminary sample of retail sales data, we believe that WWE toy sales to date are outpacing the prior year.

Our home video revenue declined 31% or $4.6 million as a 6% increase in DVD shipments to 940,000 units was offset by the impact of continued incentive programs and promotional offers.

These practices resulted in an effective 14% reduction in our DVD pricing.

Although DVD shipments declined 14% for the full year, this was the second consecutive quarter that demonstrated year-over-year growth in unit shipments.

We are hopeful that this is an indication that the adverse trends observed in the early part of 2009 will improve in the 2010 year.

As a reminder, consistent with our efforts to develop strong business partners, we transitioned our home video distribution to Vivendi Entertainment in September of 2009.

In our magazine publishing business revenue remained relatively flat, as increased news stand sales were offset by lower advertising and subscription performance.

Notably reductions in editorial distribution costs contributed to increases in both magazine profit and margins.

In our digital media segment revenue declined 3% to $10.6 million, led by a decline in our WWEShop e-commerce business.

This business saw an 8% decline in the average revenue per order to about $53.

In contrast, the number of online purchases increased 3% to 123,000 orders.

Online advertising was essentially flat for the fourth quarter last year.

In our film business, WWE Studios recognized revenue of $0.2 million primarily from our direct-to-dvd film, Behind Enemy Lines - Colombia, which was released in January of 2009.

This compared to $5 million in the prior-year quarter primarily from our feature film, The Marine.

Earlier this year we released our fourth feature film, 12 Rounds.

And during the fourth quarter we released the direct-to-dvd film, The Marine 2.

We do not participate in revenues generated by these films until their distribution costs are recouped by our partners.

As such, we have not recorded revenues for either 12 Rounds or The Marine 2.

As of the quarter end we had an approximately $37 million in capitalized film production costs on our balance sheet associated with 12 Rounds, our direct-to-video releases, and the initial films that are being produced under our new distribution model.

The first project to be distributed under this new model is expected to be released in the third quarter of 2010.

Now let's look at the overall results across all of our business units.

As I indicated earlier, our adjusted profit contribution was essentially flat for the fourth quarter last year.

Increased profit from our live and televised event segment were offset by the decline in our home video business.

Page 15 of our presentation compares the quarter-over-quarter results and provides a summary of changes by business.

Adjusted operating income increased 9%, and adjusted EBITDA increased 7% over the prior-year quarter, driven by a $1.2 million reduction in our SG&A expenses.

SG&A expenses declined 4% to $28.2 million as reductions in various expenses exceeded the increase in accrued management incentive compensation during the quarter.

Net income was $11.2 million compared to $13.6 million in the prior-year quarter, reflecting the increase in bad debt reserves.

The effective tax rate was 36% compared to 38% in the fourth quarter last year.

For the full year on an adjusted basis operating income and EBITDA increased 13%, while revenue declined 9%.

Revenue reflected the ongoing challenges to our consumer products business and difficult trends in our video game, toy licensing and home-video businesses.

The increased earnings reflected improved operating efficiencies, led by significant reductions in marketing and television production expenses.

Adjusted EBITDA margins improved from 16% to 20%.

Entering the year we communicated clear goals for improving our profitability.

These results demonstrate how we have fulfilled that commitment, reducing our expense base by considerably more than the $20 million goal, while the earnings release in our website presentations identify and demonstrate the impact of various items which impact comparability over the full year periods.

In 2009 these included $8.3 million in cash credits associated with our television and digital media production, $7.4 million in bad debt reserves related to a receivable due from a prior business partner, and a $2.2 million restructuring charge associated with our 10% staff reductions in January 2009.

In addition to these items, changes in foreign exchange rates reduced full-year profit contribution by approximately $3 million.

Page 16 of the presentation contains our balance sheet, which remains strong.

On December 31 we held $230 million in cash and investments, with virtually no debt.

Page 22 shows our free cash flow.

For the full year we generated approximately $110 million of free cash flow, compared to nearly $10 million in the prior year.

The increase was driven by favorable changes in working capital, including a $13.2 million advance from a business partner and an $11 million federal tax refund.

Capital expenditures were $5.4 million for the current year, as compared to $26.3 million in the prior year, which included an approximate $9.5 million investment in high-definition broadcasting equipment, and $3.9 million with respect to our planned media center initiative.

Our strong cash flow demonstrates that the Company's business model remains strong.

As we begin the new year our mission remains unchanged.

That is to create value by capitalizing on our growth opportunities and maintaining our focus on productivity.

We are confident that we can achieve meaningful earnings growth which averages 15% to 20% over the 2009 to 2012 period.

As shown on page 17 of our presentation, this range remains relevant across alternative earning measures, including net income, EBITDA, and adjusted EBITDA.

In our last earnings call I outlined some of the key elements of our business model, which reinforces our confidence in delivering on these estimates.

These include an assumption of modest revenue growth, the status of our television contracts, and the strength of our new partner Mattel.

In addition, we have enhanced our business model by affirming relationships with industry-leading partners such as Mattel, Vivendi and THQ.

We believe with their expertise and commitment to WWE, we can develop innovative products and further extend the reach of our distribution.

As such, they increase our faith in realizing our goals.

Further, the performance of key metrics in the fourth quarter provides evidence that we are making progress in stabilizing our pay-per-view, licensing and home-video businesses, and perhaps gaining some topline momentum.

We are well-positioned to drive greater profit as revenue growth returns.

That concludes this portion of our call.

I will now turn it back to Michael.

Ally, we are ready now.

Please open the line for questions.

(Operator Instructions).

Richard Ingrassia.

No fault of yours, obviously, but a more aggressive effort to sell toys and other products overseas is overdue.

So I expect there is a lot of latent demand there.

I know you don't give guidance, but maybe some order of magnitude of the impact you think Mattel would have on that line.

Are we talking 10%, 25%, 50% or more?

It is Donna Goldsmith here.

I think that Mattel is going to make improvements across-the-board.

Let me explain that.

It is not only in terms of the amount of product that you're going to see on shelves and the quality of that product, but it is also the distribution of that product relative to international and domestic.

Because their reach and their relationship so overpower any other toy company out there, they are simply number one.

That, coupled with a better financial contract for us, means that we are going to see tremendous growth.

And, no, we don't give guidance, as you said.

But we are looking at numbers that are going to exceed previous year's numbers for sure.

Better sales and a better cut.

You got it.

The bad debt reserve I assume is related to Genius Products.

Can you give us a status on the potential turnaround in the video line in 2010 with Vivendi's help now?

We feel good on a couple of fronts.

First of all, when you start looking at 2010 versus '09 the comps obviously have gotten a lot easier, just because home-video revenue was down about 45% through the first six months last year.

So, number one, the comps are easier.

Then you touched on Vivendi.

Genius had been a good partner for us, helped us grow that business.

Vivendi, we feel is a terrific partner who is going to build on that.

So we are cautiously optimistic about the DVD business in 2010.

The other thing that I would add on that front relative to Vivendi is, again, the situation is similar to Mattel.

That they have such great reach in distribution, and they are connected to every single retailer out there that Genius did a really good job of getting us into, for example, Wal-Mart.

But Vivendi has that much more reach in distribution and connections.

So I feel really good about going into 2010.

The other thing is the rental market is doing well now, which is something new.

We had been doing a very, very good effort as far as sales numbers go on sell-through product, but rental is going to give us another opportunity that is new.

Do you think that Vivendi will allow you to collapse some third-party partnerships into one, especially internationally?

We will still be going with different partners on the international front.

It is better to reach out locally we have found.

In Australia, for example, we have a partner called [Shock] that is so connected, similar to how Vivendi is here.

There the reach and distribution are greater when we go local.

Got it.

One last question and then, as always, I guess I will ask the $1.44 per share question.

What is your current sentiment toward the dividend payout at existing levels?

And a related question, CapEx plans for this year?

We will continue to work with the Board every top quarter to review the dividend policy and the capital structure writ large.

As far as CapEx, steady-state CapEx will be in the range that we typically guide to, $6 million to $8 million we foresee.

In addition, we have talked about the media center before, and the media center is still a project that is viewed with strategic import to the Company and our ability to execute.

What we said is our plan is to launch that project when we have got visibility around the economy.

And while visibility is still improving right now, it is not quite there yet.

Got it.

Thank you.

Marla Backer.

I wanted to follow-up on some of the conversations that you started in the prepared remarks on pay-per-view market.

It looks like there were some positives tracking in the fourth quarter.

But I am a little concerned about the price increase that you are talking about, because in light of the economy it doesn't -- it seems like it is a little aggressive.

And I recall that you had implemented a price increase, I guess, at this point it is about two or three years ago.

If I recall correctly, there was a short-term negative impact on total revenue, which then disappeared as consumers got a little bit more used to the new prices.

Is that what you are expecting here or you willing to be flexible if it turns out that this is, in fact, too aggressive a price increase?

Let me answer it in a couple of ways for you.

And it is Donna.

First, I would like to tell you that we had recently a Royal Rumble event, which was a terrific event.

It took place in Atlanta.

And relative to the numbers, we have already seen a very strong response, even with the price increase.

So we feel really good about coming right out of the gate with that.

The other thing that I wanted to add that is very important to note is that we have made a reduction on our pay-per-views from 14 to 13 events.

And we think that that was the right decision for us relative to not only on the content front, as well as on the dollars and cents front.

As far as the price increase goes, we made the last price increase in 2006.

As you probably know, WrestleMania has been $5 more in the past than the other pay per views, but we feel pretty good going into the new year that we made the right decision.

And we don't see so far -- of course it is just one month -- a downside yet.

We feel really good about it.

Then lastly the other thing on pay-per-view front I will tell you from the fourth quarter is that I think -- and George you can correct me if I'm wrong -- three out of our four pay-per-views, the numbers were very, very strong.

So we feel really good as far as the trends go.

Yes, three -- as Donna mentioned, three out of four pay-per-views, both domestically and internationally, the buys were up.

Coincidently there are three pay-per-views that we rebranded.

As we have talked about before, one of our strategies around energizing that business is to make sure that the creative, as well as the marketing, is top-notch.

And those three that were up were ones that had gotten rebranded.

So for example, Tables, Ladders and Chairs, Hell in a Cell, Bragging Rights were three new pay-per-views.

So we think that is -- it is hard to measure, but we think that is part of it, in addition to great creative and storylines.

It sounds good.

On the DVD front, so rental was clearly -- presents an opportunity for you guys.

Has Vivendi gotten any kind of distribution with some of the digital rental venues, including Redbox and other kiosks?

That is the question at the moment.

We actually have a meeting with Redbox this week.

So we're definitely talking to the right people.

We speak to Netflix as well.

Vivendi is connected to all of them.

When we send our partners in to speak to any retailers, including Redbox and Netflix or a Wal-Mart, or Best Buy for that matter, we go with them.

Because it is so important that we can talk to the WWE message and the power of the brand.

And as much as our partner is terrific, and it is indeed a partner, it is part of our family, it helps all of us if we go in and talk the talk.

And we have so many assets to address when we go in there.

So we feel really good about our relationships at retail.

And we are going to pursue the rental business further, I should say.

My last question, I recently read that you had been involved in a promotion with Kmart.

So two questions on that front.

A., can you give us any more color on how it went, number one?

And number two, should we expect additional retailer promotional activity going forward on an exclusive basis from time to time with different retailers?

We love our retail partners.

It is so important to us that, again, there is a relationship -- the family that is Kmart and Wal-Mart and Toys "R" Us and Tesco in the United Kingdom, for example.

We have relationships globally with the partners, the retail partners that drive our product sales.

And so then again, not only do our partners go in -- our licensing partners, but we make sure that we are in these retailers on a regular basis to talk about future promotional opportunities and how to drive the business, because that works for the license partner, and obviously that is a success for WWE as well.

So, yes, Kmart promotion, we are still getting the results, but early indications is that it went very well.

And we will continue to do that.

Michael Kupinski.

You guys have actually done a great job in managing your expenses.

And I was just wondering in this last quarter, obviously there is a little of a it was a little bit muddy in terms of the SG&A expenses.

But it looks like from continuing operations, and excluding some of those extraordinary items, it was at $28.2 million.

I was just wondering, is that a good run rate for the upcoming quarters?

And do you think there is more behind the SG&A that you can actually cut as you go through 2010?

Yes, just talking about SG&A, when we started the year we said we would take the $20 million out of a roughly $450 million cost base, and said it would be pro rata across SG&A and the direct costs.

That is roughly 5%.

When you normalize the incentive comp line, which falls -- all of it falls in SG&A, last year we were below target, this year significantly above target.

If you normalize for that, we reduced SG&A expenses roughly 8% year-over-year.

So we exceeded -- like in the other areas of the business, we exceeded our target.

I think the run rate for the year -- and there will be quarter by quarter -- it will be a little lumpy because of the timing of WrestleMania this year falling in the first quarter versus the second quarter last year.

But I think if you look at an average of $32 million roughly that would be a pretty good run rate.

I know that -- correct me if I'm wrong, but I thought that you had an event in South America that kind of was pushed out into the first quarter.

I was just wondering about that a little bit.

Then maybe you can just talk a little bit about your business development plans in South America.

I know that Mexico is an extremely -- you usually get very strong attendance and it is extremely strong.

But I was just wondering, outside of Mexico, if you can just talk a little bit about your business development plans in South America?

Mexico is a very important market for us.

Our pay-per-view numbers there have been very strong right out of the gate.

We have two very solid partners on the television front.

We have TV Azteca and Televisa, which is almost like having CBS and NBC as your partners.

Competitors are both carrying our programming, which is just terrific because our distribution is so broad then.

Relative to other countries in South America, we hope to see some of the same.

We are working to get television coverage in Brazil, for example.

We have television coverage in some of the other markets.

In Chile, I know we have television coverage.

So that is an opportunity for us.

We are, along with our people based in the United Kingdom who sell television for us, we are working to expand to that market.

So it is opportunistic.

So needless to say that is still developmental, if you want to look at it that way.

You're really not planning any live events or that sort of thing outside of Mexico at this point?

We are looking at the live events.

We look at our television coverage.

We look at the ratings we get.

We look at the consumer goods business there, but it is still opportunistic.

Yes, it is still a new market -- a relatively new market for us.

Just to be clear, we have always toured outside of Mexico and Latin America.

In fact, our folks just took off on a tour that will hit South America.

I think Ecuador.

Yes, exactly.

So we will continue to do that.

I think the real opportunity will come in some of the ancillary businesses, especially in the consumer products business.

As the TV in the ratings improve and the platforms improve, we see a lot of upside there.

The only other thing I wanted to add to what George said is that one of Mattel's strongest markets outside the United States is South America.

So they are very excited to partner with us and grow that business for us.

That's good to know.

Also, I was just wondering if you can give us any updates on your explanation for a possible cable network, where you might stand with that?

Where are you in terms of the prospects of doing a cable network, any partner relationships?

Anything that you might be able to add some color on that.

We've been doing a great deal of due diligence on that.

This is Vince.

And right now we are continuing along the lines of a formula in which we will be soon presenting, soon taking the next step in terms of our network.

We think there is tremendous opportunity out there for us.

And quite frankly, if things happen as we hope they will happen, it will be a really big game changer, quite frankly, for WWE.

There is huge opportunity, not only as it relates to domestically with our own network, but internationally as well.

So we are pursuing that abnd taking the next steps.

Vince, can you talk a little bit about would there be any disruption with any of your current TV partners that you have -- your current broadcast partners if you decided to move forward with something like that?

Are the agreements that you have with your current television partners incorporate the prospect of having a cable network?

First of all, we are unique in that what is good for WWE is good for all of our television partners, as far promotion and things of that nature.

We are a little bit different.

We promote -- you promote sci-fi on MyNet, or USA will promote MyNet.

So there are -- with things like that in which we are set up a little differently.

Obviously we would be promoting our other network as well.

Much like the NFL does, you will see during the Super Bowl they will mention their own network and things of that nature and programming that is on their network.

So we are set up very differently that way.

But to answer the specific question, our strategy would be one of maintaining broadcast -- as broad cablecast, broadcast as you possibly can have.

So therefore, the strategy would be one of keeping RAW hopefully on USA Net for many years to come.

And finding a good, strong home be it MyNet or others, as it relates to SmackDown.

So when you have those two broadcast platforms they then can promote our own network.

So we don't see any interruption, at least for those two brands of RAW and/or SmackDown.

The new network could obviously tie-in and be adjacent to some of those shows and what have you.

And quite frankly, our own network in terms of programming can enhance RAW, can enhance SmackDown.

So it really would be a win-win for our television partners all across-the-board, as well as us.

Vince, finally, do you have a timetable for when you would like to have something in place in terms of the cable network?

We move pretty quickly.

I would hope that a year and a half from now we would be up and running.

Great.

Thank you very much.

Jamie Clement.

A couple of questions.

First, operationally do you feel you need the new media center before you are operational from a cable network standpoint, or are the two totally separate?

We have always felt -- obviously, we announced the media center long before we talked about the opportunity for the network.

That is the core of what we do.

We have sweated that asset for 20 years.

More than sweated it in my opinion, and we are now looking for the next 20 years.

So we need to do it regardless.

But, George, from a timing perspective, like do you feel that you all need to really move up the timing of the media center to get that squared away and operational before you would go live with your own network?

Operationally we are really pushing the envelope at that facility.

And it is the core of what we do.

The people who are there are the core of what we do.

So we think we are pushing it.

We have said because of the unique economic circumstances that we found ourselves at the end of 2008 and 2009 that the prudent thing to do was to delay it until we have gotten a little more visibility.

We still feel that same way.

Obviously, as Vince mentioned, if we do move forward with the network that has some operational and logistical impact on that media center, and we are going to deal with those as we move forward.

But to answer your question on the specific -- yes, we need that regardless of it, and we need to do it sooner rather than later, but we want the visibility to improve.

Okay, fair enough.

Than just changing gears.

The pay-per-view results during the quarter, obviously you mentioned you were up in 75% of of them.

Survivor Series though historically that has been a very good event for you guys.

Did you guys shift maybe your marketing mix around to promote some of the newer branded ones, because it was just -- it was a little unusual to see up in three and then the big name one actually be down.

We think that Survivor Series is obsolete.

And as far as our time was concerned, if something worked many, many years ago in terms of -- from a creative standpoint, various teams competing, that really is not advantageous as the consumer now looks at what actually they are buying.

It is such a broad -- Survivor Series, yes, many years ago was one of the original four pay-per-views, But it is outlasted its usage.

And we need to -- that is one of the things in terms of rebranding this year going forward -- that will be rebranded.

No longer will we have that title, Survivor Series.

Okay, very fair.

Thank you very much.

Luke Shagets.

Most of my questions have been answered, but can you talk a little bit more about the new deal with THQ?

I know you said that it is under better terms, but are you actually expecting growth in the video game next year and going forward?

Then forgive me if you have already said this, but what can we assume in terms of tax rate in fiscal '10?

I will touch on one of the things on THQ, because we didn't mention it on the script, but SVR and SmackDown versus RAW, which had been down in units for the first couple of quarters, improved in the third quarter, and essentially was flat in the fourth quarter.

So to the overall question about moving forward, on the -- with that title, I think the comps get a little easier again, like a lot of parts of our business, in the first half of 2010.

And we are seeing some of that reflect itself in the fourth quarter trend.

Let me take the tax piece.

I think Donna is going to touch on THQ.

For the most part we are statutory taxpayers, so I think it is always good to be in the 36% to 37% range as a target.

Relative to our business with THQ on a go forward basis, we do have a deal with them.

It is an eight-year deal, which is a nice long-term deal, at considerably better terms for us again.

And because we are finally out of this litigation, it gives both parties the ability to sit down and really talk about how to grow this business long term.

So as George said, yes, SmackDown versus RAW was flat this year.

Well, let's not forget that we were able to lift any downside by Legends of WrestleMania, which came out this year as well.

And that is just -- the reason I mention that is that we are going to look at the kind of games that we can release in addition to SmackDown versus RAW.

So it may be in Legends of WrestleMania.

It may be a youth game.

These are the things that we are looking at in addition to online games.

There are certain markets where they don't do -- they don't do the games on the hardware.

So in China and Korea we are talking to THQ about doing an online video game in 2010.

And then taking that game besides China and Korea and expanding to other Asian markets.

So the brand extensions are going to be very important as we go forward.

And George is just sending -- you know, he is reminding me that SmackDown versus RAW was down in 2009.

It was flat in the fourth quarter.

But Legends of WrestleMania helped picked up any of that decrease there.

Thank you, George.

I hope that answers your question.

Definitely.

Thank you.

There are no further questions at this time.

Well, thank you very much for participating in the call.

We truly appreciate your interest in the business and your support.

If you have any questions, please don't hesitate to call me, Michael Weitz, at 203-352-8642.

Thank you very much.

Thank you guys.

Thank you for participating in today's conference call.

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