TKO Group Holdings Inc (TKO) 2013 Q2 法說會逐字稿

Welcome to the WWE 2013 second 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 Investor Relations for WWE. Mr. Weitz, you may begin.

Thank you and welcome, everyone. We welcome you to today's second quarter 2013 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 posted our release and the earnings presentation on our website for your reference at corporate.wwe.com. 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. In today's discussion to the extent that we make any forward-looking statements, the statements are based on management estimates. Actual results may differ due to numerous factors as described in the presentation and in our filings with the SEC. At this time, I'd like to turn the call over to Vince.

Obviously it's of extreme importance, no sense of dwelling on our performance or that is lack of it in terms of the Q2. We're down $9.5 million, which is a little bit more than what we said originally that it could be. Pay-per-view was one of the reasons why we're down a little bit, but there are mixed metrics really in terms of our build to the future and you guys have heard that before. We do know what we're doing by the way. WrestleMania was the highest grossing pay-per-view we've had. It was the second most profitable event. Other achievements which we've garnered here thus far is as we began producing the first installment of the Total Divas Show, which is somewhat of a departure for us. It's a reality show and it's growing our audience because it's on the E! Network, which is predominantly women, which is key to us in terms of the gatekeepers of the entree for young people and again for women from that standpoint as well looking at our brands in a totally different way.

And it's been to quote on the network executives, [Nadia] was a home run. So I'm looking forward to continue being in that business of the reality show business because we think we do it well and we think now, no doubt that we have something under our belt to prove that we do it well. So that broadens our opportunity to do more things like this and other programming as well, which are natural spin-offs on what we do with our core programming of Raw and SmackDown. And speaking of Raw and SmackDown, those television ratings are about the same although we've increased our television audience by about 10% overall, which is a strong indication of growth. We have a couple of things as well. We are going to be doing a Warner Brothers animation, yet another project, and this is one with the Flintstones, Yabba Dabba Doo!. And we've announced as well a partnership with Bridge Direct. One of things we've been lacking in terms of CPG is construction, which is a huge portion of that business and we're very happy to now finally be working in partnership with The Bridge Direct.

Also as well other aspects you should know is our partnership with Kmart, we're launching a John Cena line of clothing this fall. We think that's going to be very profitable for us. We've renewed our Post Fruity Pebbles partnership, which is sort of in and of itself a real big deal but we're leaders in terms of somewhat of a housekeeping seal of approval and speaking of that sponsorship is really opening up for us because everyone is understanding now that WWE is a safe environment to be associated with. We're PG programming although obviously it has a bit of an edge and should be, but it's a safe environment and we I think mentioned before that Kraft was joining us and Doritos is going to be the presenting sponsor of SummerSlam. And there are other things we're going to be announcing shortly that indicate again that good housekeeping seal of approval and everyone understanding that it is a safe environment to be associated with WWE.

From an attendance standpoint, which is one of my key indicators, it's about the same as last quarter. We're over in Australia right now or just finishing up the tour in Australia, which went very well. And notwithstanding live events from a social media standpoint, which again is a key metric for us, we have 176 million social media followers, which is of course a combination of a lot of things. That's up 74% from last year. Just one of the things -- we have a lot of what they call products coming out as well and we're leading not just cutting edge, we're really leading so much of what social media means in terms of programming and the interaction. And when we say the WWE app is the new way of watching television, really is because when you sit in front of your television and almost everyone has their smartphone next to them. And when you're using the WWE app, which of course is a free app and we're about close to 7 million downloads now, and you're watching television; it's not just okay, here are the stats and things of that nature, which other networks try to do. We're doing so much interaction during commercial breaks and things of that nature to make sure no one changes the channel and they stay with the network that we're on. There's programming there. Sometimes it's a continuation of a match, other times it's programming that is compatible that you won't see on television.

There's just so much on it and so many things we can do to with our WWE app. And again, I know we're trying to teach the television audience how to watch television all over again, but we're making progress and it is something that the other networks and other shows will attempt to do, but no one can do it like we can. From a strategic standpoint, we're continuing to work with and evaluate our situation with the global markets. We mentioned before about the UK market in terms of renegotiation of our contract. India as well will be very, very big as well as back here in the US, everyone understands in the past that we have been undervalued and that will no longer be the case going forward. Also just to make sure, we have continued our success and guaranteed the flow of our Raw material, which is talent and we've opened a real world-class training facility down in Orlando. We had one months before, but not quite anywhere near to the extent of this. And the educational process and the ability to attract so many more individuals from all over the world in terms of athletes participating in this. So it really bodes well from a talent standpoint going forward. Not today, we're dealing with the talent we have today, but we have called up a number of talents over the last year.

In WrestleMania, I think we had some five or six brand new talents, maybe even more, that have never appeared on WrestleMania before. And it takes a while of course for talent to quote as we say in our business get over in terms of popularity and things of that nature, but we have a plethora of really good talent in our developmental system that we hope to continue to develop and bring up to the main show of Raw and SmackDown. So those are some of the metrics of really what I consider notwithstanding a lousy quarter from a monetary standpoint, those are some of the metrics that really I believe should be considered moreover more than anything else. It speaks to the brand strength and some of these other deals coming up speaks to the transformation of our business in an ongoing upward way. Those pretty much are my remarks. George, you want to take it?

Thanks, Vince. There are several key topics which I'd like to review today. These include management perspective on our financial performance, some additional detail regarding our second quarter results, and a discussion of our business outlook for the remainder of the year. For the second quarter, our financial results as measured by OIBDA declined approximately $9.5 million from the prior year. The decline reflected several factors that were referenced as part of our first quarter 2013 earnings call. These factors included additional investment to produce and market our content as well as the timing of one less pay-per-view event in the quarter. The investments in content production were made to enhance our brand strength.

Demonstrating their efficacy, our premier event WrestleMania became the highest grossing event and the second most profitable event in the Company's history. Our television audience reached 12.6 million viewers and 8.6 million homes in the US representing increases of 10% and 12% respectively from a year ago. And our total social media followers including Facebook, Twitter, and YouTube among others increased 14% over the quarter and now exceed 176 million. Achieving more than 30% growth on these platforms since year-end that significantly elevated our presence in social media. Building the strength of our brands is evidenced in these metrics and taking advantage of that strength is a critical component of our long-term strategy.

To review the key drivers of our performance in the quarter, let's turn to page six of our presentation which lists the revenue and OIBDA contribution by business as compared to the prior year quarter. Revenue increased by about 8% or nearly $11 million. The growth was predominantly due to increased rights fees for our content and increased ticket revenue from WrestleMania. Revenues from our television business increased by 17% or $5.6 million with growth primarily from the production and licensing of new programming such as the third hour of Raw, WWE Main Event, and WWE Saturday Morning Slam. These programs were launched during the latter half of 2012 on the USA Network, ION Television, and the CW Network respectively. Notably a few days ago, we began airing a new production, Total Divas on E!. The series which explores life beyond the ring for seven WWE divas attracted 1.3 million viewers in its Sunday debut, an increase of 63% over the programming that it replaced.

Revenue from our live events, including merchandise sales at these events, increased 15% or $6.2 million in the quarter primarily due to the strong performance of WrestleMania XXIX and the timing of our Fan Axxess events, which are held annually in conjunction with WrestleMania. WrestleMania added $3.6 million in incremental ticket revenue to the current year's quarter based on a 39% increase in average ticket price and a paid attendance that was on par with the prior year quarter. Fan Axxess events added $2.3 million in incremental revenue to the current year quarter as these events occurred in the second quarter 2013 and primarily the first quarter 2012. Excluding WrestleMania, both average attendance and average ticket prices at our events in North America were essentially unchanged from the prior year quarter. Revenue in North America increased from the scheduling of eight additional events in the current year quarter, but this growth was largely offset by a corresponding decline for eight fewer events in international markets. In these international markets, average ticket prices increased 7% to $68.16 and average attendance increased 6% to approximately 6,600 fans from the prior year quarter.

These increases in average ticket price and average attendance were due to changes in territory mix as the prior year quarter included weak attendance at our events in Mexico and our first live event in Brazil, a market with long-term strategic importance to WWE. Partially offsetting the growth from television licensing and live event ticket sales, revenue from our pay-per-view business declined $3.7 million or 9% primarily based on the timing of one less pay-per-view event in the quarter. Our Over The Limit pay-per-view event, which aired in the second quarter 2012, is scheduled to air in October that is in the fourth quarter of 2013. Revenue from the three events in the current quarter declined 3% from the prior year quarter as a combined 13% decline in buys was nearly offset by a 12% increase in the average revenue per buy. The shortfall in revenue from these events however was offset by an increase in buys for prior period events. The rise in revenue per buy was due to an approximate 9% increase in the domestic retail price charged for viewing WrestleMania and to a higher proportion of buys to view our events in high definition, which generally garner a higher retail price.

In our Consumer Products segment, our Home Entertainment revenue declined 9% or $0.7 million reflecting a reduction in estimated sell-through rates and lower revenue from our international licensing activities. Domestic Home Entertainment revenue fell approximately $0.4 million or 6% as a 15% increase in shipments to nearly 1 million units was more than offset by a 13% decline in the average price per unit to $10.59 and a rise in estimated returns to 41% versus 39% of gross revenue. The change in projected returns derived from an increase in catalog shipments over the last 12 months, which historically have been characterized by lower sell-through rates. Revenue from our international Home Entertainment licensing activity declined by $0.3 million due to transition to a new licensee in the EMEA region.

Revenue from the licensing of consumer products was essentially unchanged from the prior year quarter. Royalties from the sale of toy products increased approximately 15% or $0.5 million led by higher sales of action figures in the US with strong domestic retail support. Increased sales of toy products however were offset by a comparable reduction in video game revenue. With the transition to a new video game licensee, shipments of our annual franchise video game declined 65% in the quarter to 77,000 units. Based on available industry data however, global video game retail sales to date have essentially matched prior year sales. In our Digital Media segment, revenue increased 18% or $1.4 million to $9.2 million driven by higher advertising sales across various digital platforms. Supporting this growth in advertising sales, key digital metrics such as unique visitors to the Company's website and mobile app, average monthly paid views, and CPMs increased from the prior year quarter. Our movie business also contributed $1.5 million to the Company's revenue growth.

During the quarter, WWE Studios recognized revenue of $2.1 million as compared to $0.6 million in the prior year quarter reflecting the impact of a current release, No One Lives, and the timing of results generated by our overall portfolio of movies including the impact of The Marine and The Marine 2, which were released in prior periods. Although five movies have been released to date in 2013 including two movies in the current quarter and the successful release of The Call in the first quarter, revenues for these movies will be recognized on a net basis as participation statements are received from our distribution partners rather than upon release as was the case with our self-distributed movies. In general, we do not expect to begin recognizing revenues until four to six months after a film's release. As such, the recognition of revenue related to The Call is not expected until the second half of 2013. While not impacting our second quarter results, the release of The Call is expected to generate domestic box office receipts of $52 million and yield an ultimate profit to WWE of $5.9 million on an equity investment of $1 million. Currently, the movies produced through 2013 under our revised approach to filmed entertainment are expected to generate an internal rate of return of approximately 15%, which exceeds our cost of capital. The level of our future movie investments will be predicated on the evaluation of our portfolio rather than on any single film at the end of 2013.

Unallocated SG&A expenses increased to $32.2 million from $26.4 million in the prior year quarter. As defined, these expenses include sales, marketing, and talent development costs, which have not been allocated to specific lines of business. The rise in unallocated SG&A during the quarter was driven by increases in compensation and benefit expense of $2.4 million, talent development costs of $1 million, marketing expenses of $1 million, as well as higher consulting and professional fees. The increases in these expenses were primarily to support our content related initiatives, including the potential launch of a WWE network. Operating income before depreciation and amortization or OIBDA declined $9.5 million from the prior year quarter. As mentioned earlier, the decline in our results is predominantly from several factors; additional investment to produce and market our content including staff related costs, the timing of our pay-per-view events, and lower profits from WrestleMania. Shown on page six of our presentation, these factors resulted in a $9.7 million reduction in pay-per-view profits from the prior year quarter that more than offset both the expansion in rights fees from the licensing of new television programs and the increase in live event ticket sales. Net income declined $6.7 million to $5.2 million reflecting the decline in our OIBDA results, increased depreciation, and a higher effective tax rate. The change in depreciation derived from our investment in assets to support the creation and distribution of new content including through a potential network. Our effective tax rate was 38% compared to 36% in the prior year quarter.

Page 13 of the presentation contains our balance sheet, which remained strong. On June 30, we held more than $120 million in cash and investments with no long-term debt. Page 16 shows our free cash flow. Through the first six months of the year, we used approximately $7 million in free cash flow compared to generating about $27 million in the prior year period. The $34 million decline was driven by an approximate $19 million reduction in operating performance, an $11 million increase in the annual payout of management incentive compensation with the return to a more normalized level of management compensation in 2012, and changes in working capital associated with our international live event tours and pay-per-view events. Partially offsetting that decline, capital expenditures decreased by approximately $4 million from a higher level investment spending in the prior year quarter to support our content initiatives.

We continue to believe that these content investments will yield significant returns. Given the duration and magnitude of investments that we're making in our business, we believe it's important to reiterate our rationale for these investments. As indicated in our last earnings call and in our published business outlook, we believe we have the potential to double or triple our 2012 OIBDA results by 2015. The primary drivers of this growth include the potential launch of a WWE network, the renegotiation of our four largest content agreements in the US and international markets, and the execution of our digital strategy developing digital products such as gamification in mobile gaming. Regarding a potential network in the US, our market research and analysis indicate the potential for a meaningful subscriber base and a significant economic opportunity. As in the US, we believe that a network and other distribution models also represent a sizable opportunity in international markets.

The renewal of key content agreements is another primary source of future earnings growth. Over the next 18 months, we expect to renegotiate our four largest television agreements in the US, the UK, and India. Benchmarking our rights fees for the fees paid for other original scripted series and for the fees paid for sports programming indicates that our license agreements have significant upside potential. Recently announced content agreements only strengthen our view. These recent deals such as NASCAR with NBC Sports, the Rose Bowl and US Open with ESPN, the NFL with Verizon, and Green Awards with Netflix reinforce our view that the proliferation of distribution alternatives is driving up the value of content especially compelling content with broad appeal. Our confidence that we can realize much greater value from our intellectual property through a network and the renewal of these content agreements is based on the tremendous global appeal of our brands and the rising value of content. In order to achieve our targeted growth, it's critical that we maintain investments in key areas of talent development, content creation, and marketing.

Based on our earnings performance over the first half of the year, we have refined our 2013 guidance. We expect that our full-year 2013 OIBDA performance, excluding any film impairment charges, will fall within the lower end of the range previously communicated, which was plus or minus 10% from our 2012 OIBDA results of $63 million. In addition, as shown on page ten of our website presentation, we've refined our outlook for net income. As we execute on our growth strategy, we'll measure our performance against several key milestones over the next 18 months. These include making progress on our TV rights renewals, completing a network distribution agreement, developing digital products, and improving the performance of our movie portfolio. While our results in the near term may be challenged, we're committed to establishing a firm platform for meaningful unprecedented earnings growth.

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

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

Thank you. We will now begin the question-and-answer session. (Operator Instructions). Daniel Moore, CJS Securities.

Good morning. Can you estimate; if you said this in your prepared remarks, George, I apologize; your OIBDA impact during the quarter of the shift in timing from Over The Limit from Q2 to Q4 this year?

It's about a $3 million revenue impact and about a $2 million OIBDA impact.

Perfect. And you obviously touched on the potential WWE network, maybe update us on your thinking about going the route with traditional carriers, with cable satellite carriers versus perhaps going over-the-top and how that's evolving?

All these options are open to us and that's really a nice situation to be in. Again, we talk about the rights fees coming up, that could very well be tied to a WWE network in a traditional sense. In addition to that, of course, there is over-the-top and other options as well. So we're poised no matter which way we go in a very, very good fashion.

Okay. I'll try one more and then jump back in queue. Taking out or adjusting for WrestleMania and notwithstanding this quarter, average ticket prices continue to increase, attendance down a little bit over the last several quarters or years. Maybe just walk us through the decision process on pricing and do you think you may run risk of pricing certain number of fans out of the market if ticket price inflation continues?

Yes. I mean we're essentially flat year-to-date on the attendance and to your point, Dan, we're up a little bit on the average yield and I think that's the concept, this average yield that we're getting per ticket. So if you actually drilled down and looked at the ticket pricing at the events themselves and where the seats are, what you'd find is that our lower priced seats have remained essentially unchanged. What's driving the higher ticket prices is actually at the premium seating level and there we have had no impact on sell-through. So we don't think it's an elasticity issue on the price versus the attendance.

Very helpful, I'll jump back in queue.

Richard Ingrassia, Roth Capital Partners.

Thanks. Good morning, everybody, and congrats in finally ending the drought there in feature films with The Call. Obviously, the change in the model was the way to go, but I really don't want to ask about that. I think I'd rather ask Vince to maybe step back for a moment and talk about what the Company has learned in general over the past few years in terms of selecting such projects, investing, and then marketing them.

As it relates to film?

Yes.

Well, we've tried a number of models and we finally found the correct model and it's a model in which we were engaging in partnerships whereby our risk is a lot less. It's also Michael Luisi, it's a change of management as Michael Luisi who has extensive background in terms of film is heading this up. It's a far more selective process and one in which again we are partnering with major distributors and studios. The selection process is one that best fits what we do and our audience to bring that audience to these films as a basis not that it's just WWE fans coming to the theater, it's not. Again, we need to broaden our footprint in everything that we do and so it's making money for us now. In addition to that, it's broadening the WWE brand in a far vast more way than we have in the past.

As far as applying talent, I mean clearly as a headliner Cena has worked, but really it appears better to have talent more in secondary roles, supporting roles.

It does at the moment. Not the idea although John obviously can carry a feature film and in a smaller way, some of our other talents have well; Mizz, Randy Orton, things of that nature. So on a smaller scale in terms of direct to DVD, some of our talents can star and be the star. In terms of larger theatrical releases, it's important that again we have a supporting role, hopefully a very large supporting role as our talents develop the skills that are necessary to headline a major theatrical release.

Okay. Thanks, Vince. And a question on TV. If the USA and the Syfy contracts are at the end of next year, when do you expect to begin negotiating those new ones? And given all the carriage disputes these days and some of the ridiculous rates being paid for some pretty low-rated live sports, how do you possibly come away from those deals with anything less than double what you're getting paid today?

I don't know, I think you answered the question. I have no idea how we're going to double. But again, I think our content is far more compelling than any one particular sport really that is available because there's nothing available. This is the last great franchise if you look at it from a sports standpoint and I think that sports networks will look at WWE in terms of the entertainment value that it brings to their sports networks. You can't deny the numbers, my God they're huge. So to have that in terms of the sports folio different than what we've had in the past, it opens up far greater revenue opportunities for us. So, you're right in terms of lesser sports getting a huge rights fees. We're poised more than anything, more than any shareholders out there, certainly from a conglomerate standpoint to garner what we would hope to be double or who knows.

Okay. Thanks. A quick question for George too. Just obviously attendance and sales were very strong at WrestleMania, but where exactly -- if you can be more specific where the incremental costs were that drove profits out of there?

Out of WrestleMania specifically, Rich?

Yes.

Production costs in New York were significantly higher than we've seen before. On the talent side, we invested a little bit more. Those are the big drivers, a little bit on the marketing.

For the venue and then I mean was it paying The Rock or more than that?

We don't want to get into specifics on who or what on the talent side, but we invested more on the talent side, the production cost because it's New York and was in New York metropolitan area so it's a little bit more expensive. And just to be clear because it can get a little bit confusing, WrestleMania is a total event, all-in, pay-per-view (inaudible) was down about $1 million, second most profitable lever. So we're real happy with the profitability. When you start parsing out the profitability of the pay-per-view versus the live event, which frankly is some level of allocation that we make using our best judgment, the pay-per-view is down pretty significantly and the live event is up pretty significantly, which is why you saw within the pay-per-view segment the profitability take a big hit. But the event overall, which is the way we manage it, was about $1 million down year-over-year. So we did about [$17.9 million] now and we did about [$19 million] last year.

Got it. Okay, thanks.

Jamie Clement, Sidoti.

Gentlemen, thanks for taking my call. Good morning.

Good morning

With respect to video games, with the change in licensee, would you expect shipments to return to more normal levels in the coming quarters?

We're really excited about the partnership with Take-Two both from a technical standpoint on the gaming side, on the creative standpoint, passion for the brand so we're excited.

Do we have to wait for a new version of the game? I'm just curious as to what your expectations sort of for the third and fourth quarter are?

Well, certainly over the next 12 months, the impetus will increase from Take-Two, but they've had their hands on this game and we're excited by what we're seeing and next year should be even better and the year after that even better.

Okay. And George, to clarify your guidance, obviously excluding film impairments, but you should be getting a film gain from The Call as you mentioned, right. So is the positive included in your guidance there?

Yes.

That is. Okay. And then last question, and Vince, I don't know if this question maybe should be directed towards you. I noticed that spending creeped up a little bit more this quarter than perhaps we have seen the trend to be. Does that signal in any way that perhaps you could be closer perhaps to an announcement, that the announcement could be coming sooner rather than later, and that that spending isn't perhaps evidence of that or am I totally off base there?

Not necessarily off base. I think every quarter we have these calls, we get closer and closer. So we're making investments that are necessary to bring that to fruition as soon as possible.

Fair enough. And just the last question, follow-up to one of the previous questions. How tied are the ones backed on negotiations to the discussions around the potential network? Like in other words, are those decisions that could be made in separate rooms or do those decisions that have to be made in the same room and if so, why?

They're separate discussions, Jamie.

Okay. Very good. Thank you.

Brad Safalow, PAA Research.

Thanks for taking my questions. Just first going back to the allocation of profits between live events and pay-per-view, even if I combine the two for the quarter, I think we've done about $6 million. I'm just trying to figure out what is kind of a recurring cost versus what was unique about WrestleMania being in New York, something to do with talent. Can you help us just aggregate the decline in pay-per-view profitability maybe a little bit more?

The pay-per-view segment or WrestleMania specifically?

The pay-per-view segment, obviously you had to drop out of one event.

Yes. The WrestleMania pay-per-view was down primarily for the reasons I mentioned; production cost, higher investment on the talent side, and then we moved the one event. So that in essence was the decline in pay-per-view profits that you saw in the quarter. When you look at WrestleMania overall and take all its components and we mentioned Fan Axxess, the live event, the pay-per-view; WrestleMania as an all-in event was down about $1 million.

Okay. And so for next year with the event in New Orleans, presumably you'll have some benefit in terms of production costs?

Yes. Remember the average ticket price in New York, which drove the big ticket sales number, were up about 40% year-over-year because it's New York, I don't think New Orleans is New York. So I don't want to start talking about WrestleMania XXX profitability, but I think there will be puts and takes.

Okay. And then on the OIBDA, wwe.com, I mean structurally inherently that should be a very high incremental margin business, can you explain what's going on there?

I'm not sure I understood the question, Brad.

You had nice growth in terms of revenue at wwe.com, which I understand also include some of these other digital distribution arrangements, but your OIBDA was actually down year-over-year.

No, I got it. It's a similar theme as when we talk about television production. I mean if you think of our operation, we have a significant investment to produce television video in terms of graphics works, production, creative; also in the Digital Media we have similar investments. So you've seen a big growth there on the social media side, on the app development side, on the business development side. So that's the growth that you're seeing on the staffing there that's compressing the OIBDA.

Are you at a point now where incremental revenues here will be at kind of a 50%, 60% incremental margin, which is more consistent with Digital Media businesses generally?

Well, I think with Digital Media you're really looking at a few different things. You're looking at the advertising which has really high variable margins, you're looking at the licensing of the content which has pretty high variable margins depending on how much we're increasing our cost to produce that content so for example for Yahoo! or YouTube, or the original content we give them. And then the third business you have in there is the e-commerce business, which obviously has more traditional retail margin. So you can combine them all and get a margin for Digital Media, but if you have to look at each of them separately. The variable margins as we sign license deals and some of them will be high, some will be on the advertising. But we have a pretty -- we've increased the fixed costs and the staffing pretty significantly over the last 12 months for the Company as a whole and Digital Media specifically.

Okay, that's helpful. And then can you talk about what the spend was in the quarter from both an OpEx and CapEx perspective on the performance center and then what will be kind of the run rate spend there? I've heard that you guys are considering having 80 to 100 individuals in terms of talent development at any given time down there. Can you explain what that will be perspectively?

We don't go into individual CapEx projects, but obviously the spending happened predominantly in the first half of the year for the performance center and the OpEx is up a bit, but not materially to our financials from where we've been. Actually by moving locations, we moved from the Tampa area to the Orlando area; even though we have more square footage, the cost per square foot is actually significantly lower so it mitigated the extra space. So I wouldn't describe them as kind of material impacts to the financials. And we have traditionally had anywhere between 50 to 100 development talent, which obviously is the pipeline for the future; but again, the shift in those numbers or the range of those numbers aren't material to the financial statements.

Okay. And then the last question I had was on some of the comments, Vince, that you made about your television rights fees and what you feel would be an appropriate mark-to-market as far as at least doubling. I just want to be clear that you guys are going to be held to that standard. Based on the contracts in play here, we're talking about $75 million to $100 million of incremental EBITDA if you did in fact double your television rights fee so I just want to make sure that I understand what you're saying is that's what you're playing for here?

I'll allow you to put a hammerlock on me if we don't.

Fair enough. I'll turn it over.

Daniel Moore, CJS Securities.

I'm just enjoying the hammerlock comment. The corporate unallocated expense was up to a little over $32 million, is that a reasonable run rate to think about going forward or are there maybe some one-times in there?

There's quite a few one-times. I think $30 million plus or minus is a good expectation.

Got it. And I know you've kind of stopped breaking this out, but could you give us a sense how much investment spend for the network was in the quarter?

At this point, we describe it as spend on content related initiatives, but our OpEx right now if you were back to the network-centric definition, I would say about roughly $3 million a quarter. We've been there for a bit.

Got it. And lastly just housekeeping, tax rate was up a little bit, what are your expectations? What should we think about for the remainder of the year?

Discrete items and FIN 48 releases are hard to gauge and we put it in the guidance page in the presentation, but 34% to 37% is probably a good range to talk.

I will refer to that. Thank you.

Go ahead, John.

(Operator Instructions)

Thank you, everyone. We appreciate you listening to the call today. If you have any questions, please don't hesitate to contact us. Thank you.