TKO Group Holdings Inc (TKO) 2011 Q1 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good morning. My name is Tequila, and I will be your conference operator today. At this time, I would like to welcome everyone to the WWE first quarter 2011 earnings call. All lines have been placed on mute to prevent any background noise.

  • After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr. Michael Weitz, SVP of Investor Relations, you may begin.

  • Michael Weitz - SVP IR

  • Thank you, and good morning, everyone. Welcome to WWE's first quarter 2011 earnings conference call. Joining me for today's discussion are Vince McMahon, our Chairman and CEO, and George Barrios, our CFO.

  • We issued our earnings release earlier this morning and will be referencing a presentation as part of our discussion to clarify our performance and shed light on trends in the business. These and other materials, such as materials, such as quarterly financial and metric schedules 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. These factors are described in our presentation and in our filings with the SEC.

  • Reconciliations for non-GAAP financial information discussed on this call can be found in our earnings release and on our Website.

  • Today, we will review our financial results for the first quarter 2011. And we'll follow this review with a Q&A session.

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

  • Vince McMahon - Chairman & CEO

  • Good morning, everyone. I'd like to make reference, of course, to the somewhat disappointing first quarter. As you recall, though, the revenue from WrestleMania is not figured in this quarter. And speaking of WrestleMania, that revenue from a domestic standpoint is up 30% over last year.

  • Notwithstanding as well, there's an impairment in terms of film performance, although in this quarter, we recorded more revenue than we did a year ago in the same quarter, which is unusual. And I have no idea why there's an actual film impairment. But nonetheless that's [somewhat of] accounting procedure.

  • And we -- there are some challenges here in the first quarter. [Revenue] was essentially flat, although there was decline of about 7% of actual buys, comparable buys. And I believe that this does not reflect, of course, WrestleMania, as I mentioned before, doesn't reflect as well our Raw television ratings as well as SmackDown television ratings, all of which are up, doesn't reflect as well our -- one of our new initiatives with the new WWE, so to speak, the success of a reality show entitled Tough Enough, along with many other opportunities that are coming our way in terms of the new WWE.

  • And let me explain that because there seems to be some misunderstanding. This is not a departure of what it is we do. And it's not a change in focus on what our core product whatsoever. What it is, is a different way of looking at business in terms of our core competency, which we have, whether it's licensing or any other core competency and simply using those competencies in a different way.

  • For argument's sake, in terms of licensing, rather being the licensor all the time, we have the same contacts, same distribution relationships. So, why can't we be a licensee if the right property is there? From a live event standpoint, we do live events, have all over the world. We know all about live event booking. Why not use that? Television production, same thing. Television production is second to none anywhere in the world. There are many television opportunities in terms of production and things of that nature.

  • So, it's not -- there's not a focus away from our core. On the contrary, it's more of an intense focus on our core but using our core competencies to broaden our potential revenue prospects. And that's really what the new WWE is in a nutshell.

  • So, I'm sure going to be a lot of questions. And, George, why don't we just jump in there?

  • George Barrios - CFO

  • Sure. Thanks, Ed. I'd like to start by sharing my perspective of the Company's first quarter results. Several items, especially the timing of WrestleMania and the $2.8 million impairment of our film 12 Rounds impact the comparability of our results on a year-over-year basis.

  • As a reminder, WrestleMania was staged in the second quarter of this year compared to the first quarter last year. The first quarter this year had $1.4 million in marketing cost to promote WrestleMania compared to a $13.1 million profit in the same quarter last year. Schedules outlining these adjustments are shown in our press release and on pages nine and 10 of our Website presentation.

  • Adjusting for these items, our profit contribution declined 2% to $50.9 million as increased film and live event cost more than offset strong growth from our toy and video game licensing.

  • On an adjusted basis, operating income declined 23% from the first quarter last year, reflecting a 16% increase in SG&A cost. Reductions in the prior year to legal and bad debt expenses reduced our total first quarter SG&A expense below its run rate for the remainder of that year.

  • To clarify the trends in our business, I will discuss our performance on an adjusted basis, excluding the impact of WrestleMania and the film impairment, as I've just described. You should also know that changes in foreign exchange rates have a negligible impact on revenue and profits.

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

  • Starting with our live events, including merchandise sales at these events, revenue was essentially flat to the prior year on an adjusted basis. Our live events in North America generated a 4% increase in revenue due to the addition of three events in the region. In North America, the 12% decline in average attendance to 6,400 was offset by a 12% increase in average ticket price to $36.40.

  • Overall, modest domestic growth was offset by a decline in revenue from our international events. Average attendance at these events declined at 26% to 8,400 in the prior-year quarter, due in part to changes in territory mix. Ticket prices at our international events declined approximately 5%.

  • Although our overall live event revenue was essentially flat to the prior year, profit contribution declined 14%, reflecting changes in the mix of venues at which the events were held.

  • Turning to our pay-per-view business, revenue was essentially flat to the prior year on an adjusted basis. A decline in revenue from the comparable events in the quarter was offset by higher revenue from prior period buys. Revenue generated by Royal Rumble and Elimination Chamber decreased 10%, reflecting a 7% decline in comparable buys and the timing of our pay-per-view distribution in the UK. Our television partner in the UK selected one fewer events in the period for distribution via pay-per-view. Instead, that pay-per-view was distributed in the UK as a television special.

  • Revenues from the distribution of our television programming increased by 7% or $2.2 million, led by comparable dollar growth in our domestic and international distribution. Contractual increases from our global television agreements and the impact of a revised contract with a Canadian television partner were partially offset by the absence of rights fees for our NXT.

  • Under the revised contract, we received television rights fees rather than advertising revenue. The change in NXT rights fees occurred as NXT was moved to our wwe.com Website in October 2010. Subsequent to quarter end, we also discontinued the broadcast of our WWE Superstars program on domestic television. We continue to evaluate alternatives to maximize our programming revenue.

  • In our consumer products segment, our licensing revenue increased by 20% or $4 million, primarily due to higher royalties earned by our toy and video game products. Revenue from toys increased 86% from the prior year due to the strength of our partnership with Mattel and increased sales with the continued success of our new toy product line.

  • Revenue from video games increased by approximately $2.2 million, reflecting more favorable economic terms from the extension of our video game licensing agreement. During the quarter, shipments of our SmackDown vs. Raw video game declined 23% to 2.7 million units with declines across almost all game platforms.

  • Recognizing the potential for new video game products, we work with our partner THQ to launch a new game WWE All Stars. Sales of this game, which debuted in March, will be recognized in our second quarter results.

  • Our home video revenue increased 7% or $0.5 million, reflecting a 7% increase in unit shipments and higher sell-through rates that more than offset a reduction in effective prices. Specifically, unit shipments increased 7% to 872,000 units in the quarter, while their average effective price fell 6% to approximately $13, reflecting the impact of ongoing discounts and promotional activity.

  • In our magazine publishing business, revenue decreased 21% to $2.2 million, primarily due to lower newsstand sales while realizing an increase in our average cover price. Newsstand sales of our WWE Magazine fell 28% to approximately 240,000 copies, while the magazine's average cover price increased 5% to $7.32.

  • In our digital media segment, revenue was essentially flat to the prior-year quarter on an adjusted basis. Excluding the impact of WrestleMania, increased sales of online merchandise were offset by lower mobile revenue attributable to the expiration of a wireless contract.

  • Revenue from e-commerce increased 13% or $0.4 million, fueled by significant promotional activity. The number of online orders increased by 35% to approximately 83,000, while average revenue per order fell 15% to $40.59, reflecting the impact of special discount pricing.

  • During the quarter, WWE Studios recognized revenue of $8.6 million compared to $3.4 million in the prior year with the growth in revenue driven by release in our latest film The Chaperone. The growth in revenue also reflected to a lesser extend receipts from our film 12 Rounds. However, revised long-term ultimate projections for this film resulted in a $2.8 million impairment, which contributed to a $5.5 million reduction in overall film profit.

  • Given the non-cash estimate based nature of this charge, we have excluded the impairment of 12 Rounds from our adjusted income and earnings.

  • The remaining decline in film profit was due to lower receipts from our other licensed films and the previously disclosed change in our distribution model for films. Under our self-distribution model, we record a film's advertising and distribution expenses in our results as incurred. As a result, our financial statements reflect a loss of $1.5 million associated with the release of The Chaperone, primarily due to the recognition of advertising costs as incurred.

  • Our overall profit contribution declined by 2% or $1 million on an adjusted basis as the strong performance of our licensing and television distribution was offset by lower results from our films and increased live event costs.

  • Adjusted gross profit margins declined to 42% from 47% in the prior year, almost entirely due to decreases in the profitability of our film products. Excluding our film results from the calculation of adjusted margin shows that the profitability of our non-film businesses declined only 40 basis points and remained just above 46%.

  • For the quarter, adjusted SG&A expenses increased 16% to $29.9 million, reflecting increases in severance costs and legal expenses. In addition, prior-year collections and reserved amounts previously deemed uncollectible reversed bad debt expense in the first quarter last year. As a result, SG&A expenses in the first quarter last year were well below established run rate.

  • Page eight of our presentation compares the quarter-over-quarter results and provides a summary of changes by business. As shown, adjusted operating income declined 23% to $17.4 million, driven by the increase in SG&A expense.

  • Similarly, adjusted net income, as referenced on page 10, declined 24% to $11.2 million, reflecting the decrease in operating income and a rise in our effective tax rate to 37% as compared to a 33% rate in the prior-year quarter. The unusually low rate in the prior-year period was primarily due to the recognition of previously unrecognized tax benefits in accordance with [1048].

  • Page 11 of the presentation contains our balance sheet, which remains strong. On March 31st, we held $186 million in cash and investments with virtually no debt.

  • Page 12 shows our free cash flow. For the quarter, we generated approximately $25 million of free cash flow compared to about $38 million in the prior-year quarter. The decrease was driven primarily by the decline in operating performance. Other factors had a significant but offsetting impact on free cash flow.

  • In the current quarter, we spent $10.1 million less on feature film production and received a $9 million federal tax refund. However, the favorable impact of these items was offset by the absence of approximately $9.1 million in TV production incentives and $7.5 million received as an advance from a licensee in the prior-year quarter.

  • Looking ahead, we are cautious about our short-term business outlook and very optimistic about our long-term prospects. In the short term, our year-over-year performance will be impacted by our decisions regarding NXT and WWE Superstars programs as we evaluate alternatives to maximize our programming revenue.

  • In addition, we continue to face economic headwinds and continue to manage the transition in our talent base. We expect these factors will flatten our second quarter profit contribution when compared to the prior year on a comparable basis. That is excluding WrestleMania. As our management team endeavors to strengthen our performance over the remainder of the year, we expect a more limited effect from these factors.

  • As we manage the Company, our overarching objective is to drive and maximize shareholder value. This requires striking the right balance between returning capital to shareholders and investing in our future.

  • Last week, consistent with this objective, we announced a revised dividend policy. Beginning in June of 2011, WWE's quarterly dividend will be adjusted to $0.12 per share of common stock held by the Company's shareholders. All class A and class B shareholders will receive dividends in the same per-share amount. As a result, this change eliminates our unique dual-payment structure.

  • The rationale for this change was primarily to align our dividend payout with our current level of earnings and cash flow. Indeed, the revised dividend was set based on target payout ratios and liquidity levels. Compared to cash flow and earnings, which average $50 million over the past three years, our revised dividend represents a payout of approximately 70%.

  • Although the resulting payout ratio falls significantly below the 160% average over the past three years, the revised dividend will continue to return significant cash to our shareholders.

  • Based on the May 4th stock price, it provides a yield of 4.5%, representing a roughly 150% premium to the S&P 500. Further, our Board will continue to review the Company's dividend policy on an ongoing basis, including the appropriateness of one-time returns of capital.

  • In addition to providing a healthy return to investors, aligning our payout with our current cash flow and earnings significantly enhances our financial flexibility. Specifically, it protects the Company in the context of a volatile global economy, provides sufficient liquidity for our operations, facilitates investment in our current businesses, and enables us to take advantage of important strategic opportunities, all while returning cash to our shareholders.

  • These opportunities exist because the consumption of media is changing dramatically. With the evolution of technology, new distribution channels are emerging, such as Netflix, YouTube, iPad applications, just to name a few. As competition for content intensifies, we believe that WWE, as a content creator and owner, is in an ideal strategic position.

  • The new WWE initiative, which we've announced, encompasses various tactics to maximize the value of our content and to generate additional value based on our core competencies. These include things such as leveraging our strengths, for example, in TV production or licensing to offer new products and services to other business. They also include the possibility of acquiring new assets and exploiting new forms of distribution, such as the WWE Network or over-the-top distribution that does not involve a network operator.

  • You should note that we've developed a prudent systematic approach to acquisitions. This approach is defined by a distinct set of objectives, valuation measures, and financial criteria. Our objective is to find targets close to our knitting where we can add value, leverage economies of scale, and realize overhead cost synergies where possible.

  • Our valuation criteria includes things such as strategic brand and cultural fit, ease of replicability, integration risk, geographic coverage, and financial strength. Our strong balance sheet, existing debt capacity, and ability to generate significant operating cash flow provide the capital required to make these investments.

  • Based on trends in the media industry, we believe that we have meaningful opportunities to drive value. By executing on our new WWE initiatives, including acquisitions, we're targeting growth that meets or exceeds our previous goal, namely 15% to 20% average earnings growth over the 2010 to 2013 period.

  • That concludes this portion of our call. And I'll now turn it back to Michael.

  • Michael Weitz - SVP IR

  • Thank you, George. Operator, we're ready now. Please open the lines for questions.

  • Operator

  • (Operator Instructions). Your first question comes from the line of Robert Routh.

  • Robert Routh - Analyst

  • Yes, hi, this is Robert, Phoenix Partners. Two quick questions. First, given the results you see in the pay-per-view, obviously, the environment's changing quickly because of all these over-the-top services and on-demand stuff. Can you comment a little bit about how MMA and that has impacted you guys? Are you not really seeing that?

  • And then you talked a little bit acquisitions or maybe building a network, which I think would make a ton of sense. I'm just curious as to how serious about that you think you are. What kind of platform would you be leaning more towards, be it broadcast, cable network, or something like [GuyMTV's] doing, which is basically Internet based? I mean, or are you evaluating all those alternatives?

  • Vince McMahon - Chairman & CEO

  • Well, this is Vince responding to your question, Robert. As far as MMA is concerned, we don't really, from a strategic standpoint, see MMA as a direct competition to us, other than the fact that it is on pay-per-view, like any other attraction. It is a live attraction.

  • And where we find that where there is somewhat of an influence would be if they are right next to -- if we have a pay-per-view generally on a Sunday night, if they're on the preceding Saturday night, the night before, that can have an impact, not necessarily because the crossover of the purchaser, but because the way that all of the promotional material in the cable system is the eaten alive there by two obviously [exhibitors] as opposed to one. So MMA in and of itself does not hurt the WWE any more than boxing did in the past. And quite frankly, that's their competition is boxing.

  • From the network standpoint, we have received a very favorable reception as far as presentations to the traditional way of doing a network, although as you mentioned, I'm not so sure that ours is not going to be somewhat of a hybrid, whether it's involving Netflix or apps or just what it is, because the opportunity here to derive revenue from so many different directions is amazing. It is great at this moment to be an owner and a creator of your own content. There's all sorts of opportunities. And again, I think our network is in all likelihood going to be some sort of a flexible hybrid of what is known now as a network.

  • George Barrios - CFO

  • I think the only thing I'd add to that, Robert, regarding the seriousness, last year, we talked about investing roughly $4 million in capital to digitize a significant portion of our library, our 110,000-hour library, by the middle of this year. We'll have 27,000 program hours digitized. And in our K, we'll also talk about looking forward an investment to take now that digitized library and begin creating new programming and also investing roughly $4 million or $5 million to do. So I think those are a couple of proof points on the seriousness.

  • Robert Routh - Analyst

  • Okay. Great. And just one follow up to that. Obviously, with the situation with Netflix and with stars, they give them screening rights, and all these over-the-top providers that don't have content are begging for it. And Amazon just came out with something. They're getting high prices, as you guys know. And obviously, you guys own your library. And you own all the rights to it. And I don't think the balance sheet reflects its true fair value because of accounting rules.

  • I'm just curious if you could comment a little bit on the opportunities in addition to your own network to monetize parts of your library that you may not view as strategic or as core to what you want to do by selling those digital streaming rights to any of these over-the-top providers. Have you explored that? And if so, any senses to what you possibly could get in terms of a licensing fee for that? So, think it'd be fairly large, given what you have.

  • George Barrios - CFO

  • Yes, I think and we've mentioned in the script about evaluating best ways to optimize our content really get to that, both new original programming as well as our library. So, if you look at those things as the raw materials, the outlets are many. And as Vince mentioned, I think there's a very good chance it'll be a hybrid, things that look like a traditional network as well as other services, maybe subscription based, ad revenue based, license based, that allow us to monetize it.

  • So, the short answer is we think there's a really good opportunity into the future. The exact manifestation of that, I think that's still to be determined. But, we're pretty bullish about -- and you hit on it. We own our entire library, 100% of the rights. That's a fairly unique place to be in. And we look forward to making use of that.

  • Vince McMahon - Chairman & CEO

  • We have, as far as programming's concerned, two new live event television programs, which we'll be rolling out in the not-too-distant future. And finding a home for those is going to be very, very easy.

  • Robert Routh - Analyst

  • Okay. Great. I guess one last question, you did mention looking at acquisitions or things like that. Obviously, the WWE change or the branding change makes sense in terms of being able to do things that make sense with the core business. I'm just curious as to -- can you give us any kind of sense as to what things other than a network would make sense? Are you looking at the health and wellness companies, into nutritional supplement, any sense as to what you think could make sense, given the strength of your brand and the ability to license and leverage it across other businesses?

  • George Barrios - CFO

  • Vince mentioned how we were thinking about the new WWE. And I think like people traditionally do, you start with your core competencies. And for us, we're great marketers. We're great content creators. And we're great distributors. And we distribute among licensing channel, pay-per view channel, TV channel, live event channel, home entertainment channel.

  • So, for us, things that we could take, whether it's some good IP, and push it through those core competencies make a lot of sense. And I think there's just a whole world out there of that type of IP. While I don't think you'd characterize WWE as very large company, what we have developed over the last 20 years is a decent amount of scale. And so we think there's the opportunity to create value in some of the non-sexy ways, which is utilizing our infrastructure, so being able to acquire assets and not needing the redundancy of the infrastructure that currently exists in those assets. So, we think there's value opportunities there, so.

  • Robert Routh - Analyst

  • Great. Thank you very much.

  • Vince McMahon - Chairman & CEO

  • Thanks, Robert.

  • Operator

  • Your next question comes from the line of Marla Backer.

  • Marla Backer - Analyst

  • Thank you. Can you talk a little bit about I guess the timing of some of these initiatives? And I'm not asking for a timeline as to when you think you'll launch. I mean now. We're coming off of a weak economy. We're somewhere along the lines of a recovery. Are you thinking that maybe you will be able to find things at attractive prices on the M&A front because of where we are in the recovery cycle?

  • And then on the flip side, in terms of launching the network, however you choose to launch it, are we far enough along in the recovery that you think you will be able to reap the best value at this point in time?

  • George Barrios - CFO

  • From our perspective, the fact that we've got the balance sheet that we do and the debt capacity that we do, and obviously those two things are related, I think that's certainly a competitive advantage in terms of making a transaction happen because there's a lot of players that don't have those advantages.

  • I think the real discipline on our end is making sure that you're buying something where you can add value, both strategically and then operationally. But, certainly, the strong balance sheet and where the world is today, I think that puts us in a position of strength.

  • And as far as the network, I'm not sure that there's ever a good time to do anything. So, I think what you want to do is optimize yourself, take the opportunities when they're in front of you. You can always find reasons to not do something.

  • I think there's opportunities for us to take that film library, which as Robert mentioned before, because of accounting rules, I don't think it is -- the value's really reflected on the balance sheet, and really match the opportunity that exists with our ability to execution.

  • I just think there's a real opportunity to do that. I mean, there's -- it might not be too much hyperbole to say that there's a land grab for content going on right now. And I think we're well positioned to take advantage of that.

  • Marla Backer - Analyst

  • No, that makes a lot of sense. But, I guess also just drilling down a little bit more, what I was trying to get at in the first part of my question is, where are the multiples right now and in historical context? Are we looking at multiples that have come in and are kind of compressed because of where we are in the economy? Or are you thinking you'll get things a little bit on the cheap relative to where you could have purchased them, had you been out there looking a couple of years back? And have you actually seen anything right now that gives you a sense of where pricing is?

  • George Barrios - CFO

  • Yes, if you just look at the map, S&P 500's compressed about 25%, 30% over the last three years. So, relative basis, yes, things are much more purple today than they were three years ago. And I think that plays -- that matches up well with the strength of the balance sheet.

  • And to answer your question, yes, we have looked at things. I mentioned the constructs that we're using to evaluate acquisitions. And we've had some things come our way, where we said not a good fit and moved on, so.

  • Marla Backer - Analyst

  • Okay. And when you've looked at these things and said not a good fit, are you also thinking that this will involve some additional internal infrastructure to integrate and support whatever it is you acquire?

  • George Barrios - CFO

  • I think if you look at our back end today, if you look at corporate SG&A, it's probably around 10% to 12% from a headcount perspective, just to give you a feel for that in the Company. When we've been out looking and you look at smaller scale companies, that ratio can be anywhere between 25% and 40%. So, we think there's a real opportunity to create value by not having to duplicate the infrastructure.

  • And we've been doing a lot of work on the back end, again, things that aren't sexy. But, on the systems side, for example, we're automating what in some cases were manual processes. That also gives us the ability to scale up without adding infrastructure and hopefully even eliminating some of the existing infrastructure. And obviously, it's got to -- that has to be a good fit in terms of what the business is. But, we -- I believe there's an opportunity to do that, to not just add value on the top line but also add value on eliminating duplication of infrastructure.

  • Marla Backer - Analyst

  • Thank you.

  • Operator

  • Your next question comes from the line of Michael Kupinski.

  • Michael Kupinski - Analyst

  • Thanks for taking the question. My questions are more about the talent. It seems like obviously you brought back The Rock and may have gotten some boost in -- some interest in the audience levels because of that. But, obviously, it could've had some disruptive developments because of trying to develop storylines with your existing talent and so forth.

  • I was just wondering if you can just give me your view of how you feel the storylines are evolving and whether or not you're getting traction with the audience at this point.

  • Vince McMahon - Chairman & CEO

  • Yes, I think we are getting a lot of traction now. Rock coming back gives us more of an awareness than anything else, broader awareness of a group of our I guess individuals that were a bit older and now are attracted back to the brand, which then allows them to have the opportunity to brush up against some of our newer performers, such as The Miz, who was in a main event at this year's WrestleMania. The year before, he was in a preliminary match. I think it was the opening match.

  • In addition to that, Alberto Del Rio is a character, who found himself in a main event at WrestleMania and wasn't anywhere around the previous year. So, talent development is going very well. And I believe that -- as a matter of fact, we just had another one of our stalwarts in terms of performers -- his name, his character name was Edge. And unfortunately, Edge's career is over due to medical reasons. And that happened almost overnight. That -- we're insulated now from something along those lines. And his retirement, early retirement, quite frankly, is not going to impact our grosses and/or bottom line for that matter.

  • In terms of the talent pools, our talent pool is strengthening everyday with new performers. And at the same time, people like The Rock can bring back some of the older ones to sample the product and to sample our storylines and things of that nature, which have gotten better and better as the time goes on. The television product is a result of the -- you can look at the ratings and see, is very, very good if not better than it's ever been.

  • Michael Kupinski - Analyst

  • And in terms of -- it looks like you've seen at least somewhat stabilization in ticket prices domestically. Do you anticipate that you can see some improvement in ticket prices going forward as a result of The Rock and so forth?

  • Vince McMahon - Chairman & CEO

  • I think you look at it on an individual basis. And we are. It's not just a wholesale price increase. I think that from a ringside standpoint, there's money there to be made. But, in terms of the lower ticket prices, I think it's important for us to be the best value in entertainment, which is one of the things we call ourselves. And we are.

  • The live event ticket prices on everything is extraordinary these days, not just ticket prices, but everything to go along with it, if there's a parking increase or increase for food cost, or merchandizing cost or whatever for whatever event. We have tremendous value. And again, sometimes there'll be a restructuring of our prices in terms of more of this level, less of the whatever. But, there's not going to be a wholesale increase.

  • Michael Kupinski - Analyst

  • Okay. And just following up on the earlier question on pay-per-view, it seems like you -- and tell me if I'm wrong. But, it seems like you're adding more promotional dollars behind the pay-per-view events. Is that right? And I was just wondering if you had any changes in your strategy in terms of developing pay-per-view revenue.

  • George Barrios - CFO

  • We're not adding more promotional dollars at large. I think it'll depend, again, on the storyline and where we think there's the biggest -- the most use for the squeeze on where we allocate it. But in total, we're not adding more promotional dollars.

  • We continue, though, to get more promotional value by working with our partners. I mean, that's something that at least since I've been here in the last three years, every year, we get -- our marketing team gets better and better and better at utilizing non-cash assets and working with our partners. So, you may get the feel of that additional promotional value. But, it's not necessarily a cash investment on our part.

  • Michael Kupinski - Analyst

  • Thank you.

  • George Barrios - CFO

  • Sure.

  • Operator

  • (Operator Instructions).

  • Michael Weitz - SVP IR

  • Do we have any more questions in the queue?

  • Operator

  • There are no further questions at this time.

  • Michael Weitz - SVP IR

  • Thank you, everyone. We appreciate you listening to the call today. If you have any questions, please do not hesitate to contact me, Michael Weitz, at 203-352-8642. Thank you.

  • Vince McMahon - Chairman & CEO

  • Thank you.

  • George Barrios - CFO

  • Thanks.

  • Operator

  • This does conclude today's conference call. You may now disconnect.