TKO Group Holdings Inc (TKO) 2011 Q3 法說會逐字稿

Welcome to the WWE 2011 third quarter earnings call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to Mr. Michael Weitz, SVP of IR for WWE. Mr. Weitz, you may begin.

Thank you, John, and good morning, everyone. Welcome to our third quarter call. Joining me for today's discussion are Vince McMahon, our Chairman and CEO, and George Barrios, our Chief Financial Officer.

We issued our earnings release earlier this morning and, as is our usual practice, have posted the release, our earnings presentation, and other supporting materials on our Website at corporate.wwe.com. These materials can be referenced in conjunction with the discussion today to clarify our performance and to shed light on the trends in the business.

In our discussion today, we will make several forward-looking statements. These statements are based on management estimates. Actual results may differ due to numerous factors as described in our presentation and our filings with the SEC.

For any non-GAAP financial measures discussed on this call, reconciliations to GAAP measures can be found in our earnings release and in our Website presentation.

Now that we have that exciting information out of the way, it's my privilege to turn the call over to Vince.

Thanks, [Mick]. Good morning, everyone. I'd like to make note of our Q3 adjusted EBITDA growing at about 5% over last year, notwithstanding a $5 million impairment on our films. But, notwithstanding that, we're up about 5%, profits largely attributed to home video and pay per view, offset by an absence of television rights for about two hours and a declined sale of licensed products, especially toys.

But, nonetheless, our event attendance is declining about 6%, a lot less than it has been to about 4,900 on average. Pay per view buys are slightly down as well, about 4%, a lot less than in past. RAW television ratings remain flat to last year, which is good news. And most of our declines in key metrics support our view that we are gradually improving the general status of our overall financial help.

We are -- speaking of which, we are continuing to formulate our plans and continue discussion with multiple partners as far as our network is concerned. We're still confident that we're in a really good place in terms of where we are with the network. We're anticipating some degree of operating expenses attributed to the network, some $4 million to $6 million coming up, particularly in staffing, capital expenditures of about $10 million to $15 million, mostly in equipment and construction for our network.

And we believe that, obviously, we have finally turned the corner on where we are with our network and will soon be making a very big announcement as relates to that. So, that's where generally speaking -- where we are with the quarter this year. And notwithstanding that, again, we're taking advantage, as we always do, with all of our strategic opportunities as well, as I said before, including the launch of the WWE network. No doubt we can achieve meaningful growth as far as that in other aspects of our company [and concern]. George?

Thanks, Vince. I'd like to provide some additional perspective on the Company's third quarter results. The quarter had $5.1 million in impairment charges related to several films. These charges are noncash in nature, are viewed as nonrecurring, and derived in part from forecasts of future performance. To clarify trends in our business, I will discuss our performance on an adjusted basis excluding the impact of these items.

On adjusted basis, operating income increased 3%, and adjusted EBITDA increased 5%, highlighted by increased profits from our home video and pay per view operations. While these results benefited from timing, they also reflected real underlying demand for products. And as such, we view these results as positive developments.

Such developments were nearly offset by lower sales of our licensed products, which experienced declines across all of our major product categories, except video games.

Our key metrics showed mixed results in the quarter. Domestic pay per view buys increased 3%. TV ratings for our flagship RAW program were flat. And average attendance at our North American live events declined 6% from the prior-year quarter.

In general, trends in our metrics show modest improvement and support our views that the business is stabilizing and showing signs of improvement. For more detailed review of our performance in the quarter, let's turn to page six of our presentation, which lists the revenue and profit contribution by business as compared to the prior-year quarter.

Starting with our live events, including merchandise sales at these events, revenue from both domestic and international markets was essentially flat to the prior-year quarter. In North America, a 6% decline in average attendance to 4,900 was offset by the addition of two events in the quarter and by a slight increase in average ticket prices.

In our international markets, a 7% increase in average attendance to 7,200 fans was offset by a comparable decline in average ticket prices. The full-on ticket prices reflected differences in territory mix that were mitigated by favorable changes in foreign exchange rates.

In our pay per view business, revenue increased 16% or $2.2 million from the prior-year quarter, driven by the impact of buys associated with Wrestle Mania, a prior-period event.

Our distribution partners reported 6,500 additional buys in the period for Wrestle Mania, which have a higher retail price than our other events. These buys contributed approximately $2.2 million in incremental revenue to the quarter. Buys for the three comparable events in the period, however, declined 4%, reflecting a 3% increase in domestic buys that was more than offset by a 14% decline in international buys, primarily in Mexico and Italy.

Revenues from the distribution of our television programming increased by 9% or $2.9 million, primarily due to improved deal terms and escalators built into our existing contracts. In addition, our television rights were favorably impacted by a revised contract with a Canadian distributor.

Under this revised contract, we received television rights fees rather than advertising revenue. These factors were partially offset by the absence of domestic rights fees for our NXT and WWE Superstars programs, as discussed in our second quarter call. Our decision not to place these programs is strategic in nature and related to optimizing the long-term value of our content.

In our consumer products segment, home video revenue increased 15% or $1.1 million, driven by an adjustment to our allowance for returns and an increase in revenue per unit, partially offset by a reduction in shipments.

The reduction in allowance for returns to 21% of gross revenue compared to 43% in the prior year quarter reflects and adjustment for better than expected sell-through rates for title release in prior quarters.

Average prices increased 4% to $13.18 due to the timing of promotional activity and a reduction in manufacturers' discounts. Partially offsetting these factors, gross shipments declined 17% to 686,000 units, as we made adjustments to effectively manage our catalog inventory at retail.

Turning to our licensing business, revenue decreased 17% or $1.8 million, reflecting lower sales across almost all of our major product categories. During the quarter, the most significant declines were generated by toys, collectables, and apparel products.

Revenues related to toys declined 24% or $0.9 million, reflecting a challenging retail environment for certain toy products, including action figures. Revenues related to collectables declined 90% or approximately $0.7 million due to a tough comparison to a very successful product launch in the prior year.

Revenue from our video games, however, increased by $1.1 million, primarily due to the launch of our new video game WWE All Stars, which contributed to a 5% increase in total video games shipped to 396,000.

These new game sales more than offset the decline in revenue from our SmackDown vs. Raw franchise. During the quarter, shipments of our SmackDown vs. Raw video games declined 59% to 135,000 units.

Recognizing the potential of this popular title, we are working with our video game licensee THQ to develop and launch its successor, WWE 12, which is expected to debut later this month. As we remarked last quarter, the release marked a significant overhaul. And, again, software and early indications from media and consumers are very promising.

In our magazine publishing business, revenue decreased 27% to $0.7 million, reflecting lower newsstand sales in the current quarter.

In our digital media segment, revenue increased 1% to $6.9 million. Higher sales of merchandise on our e-commerce Website, WWEShop, were nearly offset by lower sales in mobile content.

Revenue from e-commerce increased 14% or $0.4 million. And online purchases increased 15% to approximately 16,000 orders, while average revenue per order increased 2% to $46.94.

During the quarter, WWE Studios recognized revenue of $3.7 million compared to $7.6 million in the prior year. This decline was driven by the relative performance of our current film releases compared to the prior-year quarter release. Film profit on an unadjusted basis declined $5.5 million from the prior-year quarter due to the performance of recent leases, Inside Out, Knucklehead, and The Chaperone.

Lower home video sales than anticipated contributed to revised ultimate expectations, which resulted in impairment charge of $5.1 million associated with these films. Excluding the charge for these films, adjusted film profit declined $0.4 million due to lower receipts form our licensed films and the previously disclosed change in our distribution model for films.

Overall, our adjusted profit contribution increased by 3% or $1.3 million. Increased profits from home video and pay per view businesses were only partially offset by the decline in licensing and the absence of domestic rights fees for NXT and WWE Superstars programs. Based on these changes in product mix, adjusted gross profit margins increased to 45% from 44%.

For the quarter, SG&A expenses were essentially flat to the prior-year quarter as increases in salary, severance, and benefits costs, as well as higher legal and professional fees, were offset by a reduction in accrued management incentive compensation. The increase in professional fees was due in part to the anticipated launch of the network in 2012.

Page nine of our presentation compares the quarter-over-quarter results and provides a summary of changes by business. As shown, adjusted operating income increased 3% to $21 million, driven by the increase in our adjusted profit.

Adjusted net income, as referenced on page 11, decreased approximately 1% to $14.1 million, primarily due to the realization of foreign exchange losses of $0.4 million in the current quarter compared to realized foreign exchange gains of $0.9 million in the prior-year quarter.

Page 12 of the presentation contains our balance sheet, which remains strong. On September 30th, we held nearly $180 million in cash and investments with virtually no debt.

Page 16 shows our free cash flow. On a year-to-date basis, we generated $37.3 million in free cash flow, including $4.8 million in the current quarter.

Through the first nine months of the year, our free cash flow increased approximately $14 million from the prior year, driven primarily by the timing of our feature film production activities.

Over the next six months, we expect to release the remaining three film products that were produced under our self-distribution model. We continue to closely monitor the performance of our film business and to make adjustments to improve our future performance.

Some recent changes to our approach, include increasing emphasis on genres with greater paid TV and international appeal, using coproductions to reduce our equity investment per film, and selling the international distribution rights prior to the completion of our film project.

Our goals for the film business remain unchanged to grow the WWE brand or delivering economic returns that exceed our cost of capital.

Turning to our year-to-date financial results, operating income declined 26% or $17.7 million due to approximately $11.2 million in film impairment charges and the absence of more than $9 million in domestic rights fees for our NXT and WWE Superstars program.

Looking ahead, we've made important progress on our strategic content-related initiatives, specifically the 2012 launch of the WWE network. That progress comprises continued discussions with potential partners, further development of our creative plans, and in-depth organizational staff, system, and process planning.

Our evaluation of the network shows that it can significantly accelerate our earnings growth. Even before consideration of some of the longer-term and second-order benefits, these would include the development of new product and distribution opportunities, especially in terms of our global TV distribution, and more broadly increased demand for all our products based on added television exposure.

The anticipated launch of the WWE network in 2012 is expected to impact our near-term results. We expect our fourth quarter 2011 results will reflect $4 million to $6 million in startup operating expenses and $10 million to $15 million in capital expenditures for equipment and construction.

This investment will provide space for additional staff and production equipment and allow for a redesign of an enhanced interactive Website to support a full range of network programs.

Further, as we evaluate our network alternatives, in 2011, we do not expect to license or replace the domestic television license fees, which we received in Q4 2010 from our WWE Superstars or NXT programs.

We're hopeful about the positive impact that our talent development and creative initiatives can have on our live event and pay per view businesses. However, we also expect that the challenging retail environment will continue to adversely impact our licensing business in the fourth quarter.

We remain cautious about our short-term business outlook and very optimistic about our long-term prospects. In executing our long-term strategy, we remain highly focused on developing new content and pursuing additional forms of distribution, such as the WWE network. Our discussion with numerous stakeholders reinforces our view that we can transform our business and create meaningful value for shareholders.

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

Thank you, George. John, we're ready now. Please open the line for questions.

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question comes from Marla Backer from Hudson Square. Please go ahead.

Thank you. Few different questions. First, on the network, are you on -- are you where you expected to be in terms of how close you are to actually launching the network? And if you're looking for partial announcing (inaudible) announcing part of it, are you on your projected schedule?

Yes, we are, Marla, very much so, almost at an accelerated rate quite frankly. We seem to have [get] the -- an optimum time actually for the interaction of a new network of our kind. So, we [still raise] an excellent point at this time.

And in terms of launching a new network, you've obviously seen as we have some of the different metrics on other broadcasters or other cable companies that have launched or rebranded networks and with very varying success. Does that give you pause in terms of your plans to go forward with this?

It only enhances it, Marla. When you think about this product being totally different than anything else that's out there -- and let's take I suppose one of the notorious ones would be the Oprah network -- .

-- Yes -- .

-- Which is a measurable failure on all counts.

Yes.

Because you have a brand like Oprah, and it doesn't take a genius to figure out that, okay, why don't we have Oprah do what she does best on her very own network? That's the one thing that doesn't happen.

So, in terms of the introduction of a network, Oprah as an example, you're saying, okay, let's take Oprah. But, let's don't -- let's not -- whatever we do, don't use her at what she does best. Let's just try and take an Oprah name and try and brand that in a big roundabout way, which obviously from a common sense standpoint doesn't make sense.

Here, we're the opposite of that. We know what our WWE attributes are. So, we have the opportunity to enhance all of that and bring further viewers, lapsed viewers and as well as current viewers and new viewers from a younger age set from two to 11 into the network, which will be extraordinarily successful because we're getting the audience what they want, not what they don't want.

Okay. A couple of questions now on other parts of the business. Toy revenue, although small, it still was a pretty steep decline year over year on a percentage basis. And at about this point last year, there was so much enthusiasm because of the new Mattel relationship and how creative the Mattel management was being vis-a-vis the product. Are you [sure] it's entirely attributable to the retail environment or the economy? It seems like an awfully steep decline to just assume it's all economic related.

Yes, the data that we looked at, Marla, first on a year-to-date basis, our toy business continues to be up. So, we feel great about our partnership with Mattel. In the quarter, the data that we've looked at, external data on the business in general showed that some categories -- and action figures was one of them -- actually were hit a little bit harder than other toy categories.

So, we don't see anything in the data that says we're underperforming the categories in which we're participating. We're not happy about the results. We're going to continue to work with Mattel to make sure that we're branding the products as well as possible in the short term as well as looking at new products into the future. But, we don't see anything particularly alarming vis-a-vis the current market conditions and for that particular category.

And my last question is on WWE Studios. Now, given what seems to be continuing pressure on home entertainment and DVD sales, does it still make sense? I know your strategy had shifted from the original strategy of launching theatrical films, which would then progress into ancillary [windows]. I think then you shifted to launching lower-budget direct-to-DVD films.

Well, given how that market is -- has remained under pressure for several quarters now and doesn't look likely to turnaround in the near term or ever, does that -- your strategy with WWE Studios still make sense in terms of your overall initiatives, especially given how much energy and investment you will be required to utilize for the new network?

It will, as we've noted earlier, it -- there is an adjustment. And there is an ongoing adjustment and evaluation into this category.

But, that doesn't mean that you're backing away from future releases.

It doesn't mean we're not.

Thank you.

Our next question comes from Jamie Clement from Sidoti. Please go ahead.

Vince, George, Michael, good morning.

Hi, Jamie.

Good morning, Jamie.

George, the numbers that you gave with respect to the fourth quarter in terms of some of the incremental startup costs with respect to the network, both from a P&L standpoint and from a CapEx standpoint, first on the P&L, are those costs that you would expect to be with you on a quarterly basis through, let's say, 2012, or does that number come down? Does that number go up? What -- how should we think about that?

Jamie, a broad answer, and then I'll get maybe a little bit more specific on that is, at some time here in the future, when the time is right, we're going to give a fuller kind of exposition of how we view the network business model, both individually and also collectively across the WWE current businesses. And we'll address questions like the one that you just put forth with the cost structures and so on. So, I don't want to get into that -- into too much of that right now because there's still some moving forward.

On the $4 million to $6 million, I think it's fair to say that some of those costs will be part of an ongoing basis. But, we're not -- I'm not prepared to say how much, for example, our SG&A costs are going to increase in 2012 because of the network.

Okay. And then the other -- just another -- I guess it's actually related. Your media production center, which I guess is, gosh -- I don't know. What, has it been three or four years since you originally kind of talked about replacing that? And then I think the implication was, if you went down the road of starting the network, which you are, you were going to need a new one. However, from what I understand, over the last couple years, you've actually done a fair amount of investment in that -- in the pre -- in the existing facility.

So, is the existing facility going to have to be scrapped, or have you been able to do enough on a piecemeal basis to kind of get it to the point where it will be functional to be able to support the additional needs of the network?

I'll answer it somewhat indirectly. But, I think it gets to the core question. For the launch, we will do it in a way that kind of fits with our current infrastructure, some additional space in the area where we operate today. Over the long term, we still believe the media center is part of kind of our infrastructure. So, we're not quote-unquote scrapping it. And some of the costs, frankly, that we're bearing today are just accelerating it, especially on the equipment side.

Okay. Right. Yes, no, that's what I was getting at because I know that you've already -- you have been investing already for awhile.

Yes.

Yes. Is your expectation, George, that, as the network gets up and running, is that -- would that be like kind of a separate line item from a separate business line item such as consumer products that you would be able to break out revenue and profit separately? Or, I mean, it seems like it would have a lot of crossover with some of your other businesses. And that might not be so easy to do. I'm just kind of curious for your thoughts about how you'd end up breaking that out.

Well, as you know, the segment reporting is one of the key issues with a new business. So, actually, on the financial reporting side, myself and the Audit Committee have actually started talking about that issue. I think -- we don't know where we'll end up.

Okay.

But, I'd be surprised if there wasn't at least some segment reporting around the network, although you rightfully point out that there will be places where it cuts across. And my guess is that there may be some pro forma elements in the way we do segments. But, it's still to be determined.

Okay. That's all very fair. Thanks very much for your time.

Yes.

Our next question comes from Rich Ingrassia from Roth Capital Partners. Please go ahead.

Thanks. Good morning. This is Koji for Rich. I just had a few quick questions. International attendance is up. Can you maybe give a little further color on what specific regions are doing especially well?

Yes, we've had some successful tours in the third quarter. Mexico actually did very well for us attendance wise. But, to keep in mind both domestically and internationally kind of a quarter-over-quarter comparison is always difficult. Our touring schedule is kind of an 18- to 24-month touring schedule. So, we're not in the same territories. Sometimes within those territories, we're not in the same venues.

So, I'd describe it, the international attendance, as holding on, doing well. But, I wouldn't put too much into the specific third quarter comps.

Great. With the Rock returning to the ring at Survivors Series, can you give any color on early indications on how attendance is shaping up for that event?

It sold out in 90 minutes.

I guess following up on that earlier toy license question, do you have any plans for any special holiday products geared up specifically towards Wrestle Mania?

We don't get into specific product announcements. But, what we do is we make sure we take advantage of what we're doing and showing and so on. So, stay tuned.

Okay. Great. Thanks, guys.

And our next question comes from Michael Kupinski from Noble Financial. Please go ahead.

Thanks for taking the questions. Just going back to the network, I know that you had explored several models in terms of pursuing a network. I was just wondering if there's any updates in terms of what you can talk about of how you are pursuing a network at this point, whether it's a partnership arrangement with a distributor or what are you kind of focusing in on at this point?

There is no partnership. It's solely owned by WWE (inaudible).

Okay. And in terms of the -- just kind of looking at the expenses in the quarter, the cost of revenues were a little higher than I expected. Can you talk about some variances that were in the quarter, anything in particular in terms of gearing up for the network, or any extraordinary costs that might've been in there?

Well, on an unadjusted basis, obviously, the film amortization impairment around that is in those numbers. So, that's a significant part on an unadjusted basis. On an adjusted basis, we did have those gearing up costs starting in the quarter. And we probably had about $1 million or so directionally.

Okay. And then how much -- and it might be in the numbers here, and I haven't had a chance to go through all of those in detail. But, how much was the noncash compensation in the quarter, and versus prior year, what was the variance?

The adjustment in the accrual?

Yes.

About $2 million.

$2 million? And in terms of looking at the SG&A expense, are we to kind of look at something closer in the $30 million, $32 million? What do you anticipate in the fourth quarter?

I think our core business SG&A is in that $28 million to $30 million in the quarter. When I talked about the $4 million to $6 million for the network, how much of that actually impacts SG&A is something we're not prepared to give visibility on.

Okay. And so, where would the, let's say, $4 million to $6 million, where -- would it fall in the cost of revenues or some of it fall in SG&A? Is that what you're saying?

Well, that's my point. Yes, some of it will be in cost of revenue. Some of it will be in SG&A. And just, we're not ready to give that kind of view at this point.

Okay. Okay. That's all I have. Thanks.

Our next question comes from [Brad Safilo] from [PA Research]. Please go ahead.

Hi, thanks for taking my questions. First question really was surrounding the creative -- there were some signs I would say over the course of the summer of an uptick, some momentum, particularly heading into the Money in the Bank pay per view, which comped up nicely. And then subsequently, the two other pay per views in the quarter I think comped down. And attendance for -- domestic attendance was down.

Can you comment on whether or not this kind of reality-based creative will continue with the Company and if that's what you think will be a driver of an upswing in the creative in terms of driving actual metrics? Or, did something else happen in the quarter that explains why maybe some of the, let's say, buzz building around the brand stalled?

I'm not too sure I followed your question. It's a little bit convoluted. Let me just say, from a creative standpoint, we like where we are from a creative standpoint. And we think that there is buzz around the brand, a great deal of buzz around the brand. And we will continue developing [count] as we always have through the years and getting hotter as they go forward.

Okay. Put a finer point on it, I mean, it does seem like the creative has been improving. You obviously have been doing this for many decades now. How long is -- it's a big boat. You've got to shift it. How long will that take to manifest itself in the actual metrics you report in terms of attendance and pay per view buys and things of that nature in your expectation?

I'm always very optimistic in terms of the creative and have been, obviously, for 50 years or whatever it's been. So, I'm just as optimistic if not more so now as I've ever been.

Okay. And then just shifting gears, you mentioned the change in the relaunch to the WWE video game. I guess preorders activity I think has been stronger, by some estimates more than 50%. Overall, when I think of your relationship with THQ -- and they also announced yesterday that they plan to launch a Facebook-based game for the WWE.

Can you comment at all on how you're thinking about that in terms of growth opportunities for both the quarter and really next year?

Generally, we talk about this all the time. The core of the Company is taking its IP and monetizing it 360 degrees. And it's been doing that for a long, long time. And the platforms change, but the approach is pretty consistent. So, it's just another platform. And then we'll see how consumers react to it. But, what we know is, if platforms do well, our brand does well within those platforms.

Okay. Fair enough. And then you guys have talked in the past separate to the network initiative just about obtaining more distribution deals for your content. Can you provide an update on that in terms of either timing or expectation of timing?

We've done some things. There was something recently announced around YouTube and a content deal there. So, we'll continue to explore it. We like where we are as owners of IP, a significant library. And we think there continues to be a land grab for content. And content that can attract eyeballs is very, very valuable. So, we feel good about where we're at.

There's more of a demand for our content than ever before. Let's just put it that way.

Okay. A final question on the network, understand that you have to be sensitive to reaching specific benchmarks before you give the investment community details. Can you at least give us some sense of timing as to when you might actually provide more detail on a potential partner and what the economics might look like because, obviously, from where we sit, we know you're spending money and don't have a clear understanding of potential return and kind of evolution in terms of timing of that return.

Yes, I mean, I think it's the same, what I told Jamie. We hope to, when the time is right, give a fuller exposition on both the network and dependent business model and how -- the way we see it connecting to the current business. At this point, we'd be guessing if I put a date.

Okay. I mean, is it -- just broadly speaking, it's a six-month window? I mean, you have talked about launching in '12. So, I assume it's sometime in the next few quarters you might -- .

-- I'd say the under on six months.

Okay.

It's (inaudible).

Okay. Thank you. I'll turn it over.

Our next question is from Robert Routh from Phoenix Partners. Please go ahead.

Yes, good morning. Two quick questions. Talking about the network you're about to start, when it comes to your library, which is obviously a hidden asset that you have, could you give us an update as to how many hours you have in that library, how many titles, and also, what is on the books, which I'm sure (inaudible) would be worth if you were ever to sell -- of course, you're never going to do. But, just how many hours do you currently have? And then what rights do you have tied to your library?

We have about 100,000 hours. We've digitized roughly 30,000. That was a project we launched a couple of years ago. And then the -- our first quarter Q, we announced that we were now investing in turning that digitized library into programs. So, that -- we see that 30,000 hours as providing the first and pretty significant programming into the funnel that'll eventually be the network.

And as you pointed out, it's on the (inaudible) de minimus amount, single-digit millions. So, I agree. It's the most underutilized probably and undervalued asset that we have.

Okay. Great. And as far as that library, you do have all rights to everything, from analog, digital, streaming. They're all owned by the Company, none of them being carved out yet?

We are very I think unique as an IP owner. We have just about 100% of all the rights. And so, we just license certain windows out to certain partners. But, yes, we own 100% of the rights for the most part.

Wow. Great. Okay. Then one last question. Given your current talent roster now and the development of new talent and stars, how many stars do you currently have in your talent pool?

Well, it depends on what you call the talent pool in terms of whether or not we include our FCW category.

Yes, we have a total of about 150 people roughly under contract. And about two-thirds of those or about 100 are, as Vince mentioned, in the development category. The rest are what we would term our main roster.

Okay. And out of that number, because obviously you guys have some talent that people don't know about. And eventually they become like John Cena, the Rock. They become very big, important generators of revenue for you guys. Approximately -- don't let me put a number on it. But, out of the names of the talent that people don't know, what do you see in terms of the next Rock? I mean, do you have a few prospects on the roster that eventually we're going to see that have never been seen before, or you don't want to divulge that?

We think probably about anywhere from 99% to 100% of all of our development accounts will be the equivalent of the Rock.

We're very optimistic.

Yes, we're optimistic.

Great. No, fair enough. (inaudible) because people know top 10, 20 names, and they don't realize how big your talent pool roster is. Thank you very much.

You bet.

Thanks, Rob.

Our next question comes from Dan Kilmurray from UBS. Please go ahead.

HI, guys. Thanks for taking the question. George, when you went through some of the fourth quarter costs, at the end of it, you talked about certain television rights that will not be licensed again. Could -- at least if I -- I thought I heard you correctly. Could you talk about what revenue lines will be impacted by your pulling back TV rights and/or what you're thinking about in terms of your existing shows that are running on other networks?

So, I mentioned in the script through the third quarter the absence of those two hours for most of the year, one of the shows ran through the first quarter, have impacted us by about $9 million. I'm not going to give an exact number, but I think you can do a little bit of math of what that means then for the fourth quarter in and of itself. And it'll impact the TV revenue line, television line.

As far as our other shows, I mean, if you look at year to date, our -- that line even without the domestic licensing of those two shows is still up. And that gets to essentially -- we grow that business by, number one, contractual escalators that are built into our agreements; two, when we renew agreements, either domestically or internationally, and if we deliver numbers, those renewals tend to be positive economic events for us, and they usually are; and then three, when we add new countries or new programming agreements internationally especially.

So, that's what drives that line. In this case, the absence of those two hours in '11 for most of '11 is a pretty significant economic event for us. But, as I mentioned before, we know there's a lot of demand for those two hours. We held back because, given all the other discussions we were having, we thought repeatedly it made sense when we thought about it from a long-term perspective.

Okay. And at least -- I know you're reluctant to give too much information about the network launch. But, in the context of the shows you do have running, should we -- and have contracted, should we assume that the network is going to be incremental and the existing shows that are running now will remain in place for at least the next -- the duration of their existing contracts?

Yes, that's important for us to have some of our core programming on a broader-based network and (inaudible) the network. I mean, I think it'd be silly to turn our back on rights fees, substantial rights fees as well as the broad-based exposure that we have on the networks that we're currently involved in. If you continue that at some juncture, especially on elevated basis, then the network itself would benefit from that exposure and cross promotion because we believe that what is good for WWE is good for all of our partners, much like the NFL model. And it's been proven with WWE.

Got it. Thank you very much.

Our next question comes from Marla Backer from Hudson Square. Please go ahead.

Thanks. I had a follow up. Actually, it's relevant to the question that you just answered. First of all, can you remind us about the RAW distribution agreement? How long does that last?

Yes, what we said around RAW was that the agreement was a five-year agreement through 2014. I believe it's over 2014.

Okay. And given that you own the rights to your content, would you be able to repurpose that content on the network after some specified period of time?

We're having a lot of discussions right now about windowing. And if you follow the entertainment industry, which I know you do, it's a big topic of discussion. So -- .

-- The answer is yes.

There you go.

Okay. Thanks for cutting to the chase. Thank you.

You bet.

I'll now turn it back to Mr. Weitz for closing remarks.

Well, thanks, everyone, for participating today. We very much appreciate your support and interest in the Company. If you have any questions, don't hesitate to call -- contact me, Michael Weitz at 203-352-8642. Thanks very much, everyone.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.