TKO Group Holdings Inc (TKO) 2014 Q3 法說會逐字稿

Hello, and welcome to the webcast entitled WWE Third Quarter Earnings. We have just a few announcements before we begin.

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(Operator instructions)

I will now turn the call over to Michael Weitz, Senior Vice President Financial Planning and Investor Relations. Please go ahead, Michael.

Thank you, and good morning everyone. Welcome to WWE's third quarter 2014 earnings conference call. Leading today's discussion are Vince McMahon, our Chairman and CEO, and George Barrios, our Chief Strategy and Financial Officer.

We issued our earnings release earlier this morning and have posted the release, our earnings presentation and other supporting materials on our website, corporate.wwe.com.

Today's discussion will include forward-looking statements. These forward-looking statements reflect our current views, are based on various assumptions, and are subject to risks and uncertainties disclosed from time to time in our SEC filings. Actual results may differ materially and undue reliance should not be placed on them.

Additionally, the matters we will be discussing today may include non-GAAP financial measures. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website at corporate.wwe.com.

Finally, as a reminder, today's conference is being recorded and a replay will be available on our website later today. At this time it's my privilege to turn the call over to Vince.

Thanks. As many of you know, the results of our quarter exceeded our guidance and analyst expectations. The Network segment, by the way, which does include Pay-per-view revenue, increased by 68%. Our television ratings. Raw is up 2%, SmackDown is up 3%, which is pretty amazing.

Incidentally our SummerSlam, which is one of our major pay-per-views, ranked number one on the Nielsen Twitter TV ratings for that day, and social media activity beat every entertainment program, on broadcast as well as cable, in the week of August 11. That is pretty amazing for a pay-per-view and a special to rank that highly.

On the network itself, we have [731,000] subscribers, which is an increase of 4% from Q2, which means we've had 286,000 gross additions, 71% higher than the Q2 after WrestleMania. We have attracted [971,000] unique subscribers through September 30. The Network as well has achieved a high level of audience engagement. 90% of our subscribers access the network at least once a week and it's just extraordinary in terms of engagement.

By the way, in terms of that engagement, and having gone through the revenue reverse periods, in our approval rating we feel that that's why we've come up with the $9.99 per month, no commitment, cancel anytime, that's obviously like Netflix. So again, based on the renewal periods we've gone through and the engagement, and the approval rating, we're really certain that that's just definitely the way to go.

Other things on the Network as well, on the international platform, as everyone knows, we made the Network available in 170 countries on August 12. There are still some remaining big ones that we're going after, after the first of the year.

As far as the United Kingdom is concerned, we finally are going to make our move on that and the network will be available in November on an OTT basis in the United Kingdom.

Again one of the other things, like Netflix, that we're doing for our subs is that you can, for the month of November, which obviously most of you guys know, Network, Hulu, all that kind of stuff, when you sign up they give you the month for free, or a month for free. We're going to do that as relates to the month of November, which by the way includes one of our Pay-per-view's Survivor series. So that as well is something we're excited about.

We've got new programming, obviously global distribution continuing, simplified pricing. And we also just started, by the way, some limited advertising on the Network, with Pepsi, Mattel, K-Mart and Take-Two.

And that's about the highlights of where we are today. George?

Thanks, Vince. There are several key topics which I would like to review today. These include management discussion of our financial performance, the progress of key strategic initiatives, and our business outlook.

In the third quarter our financial results are past our guidance as well as analyst consensus earnings as we accelerated many of our cost saving initiatives. Specifically, we achieved adjusted OIBDA of approximately $5 million in the quarter, with an average of 723,000 subscribers. This compares to our guidance, which implied an adjusted OIBDA loss of approximately $10 million to $15 million at that level of average subscribers.

The quarter was highlighted by the performance of our Network segment, where revenues increased 68% from the prior year quarter. WWE Network added 31,000 subscribers, representing a 4% increase from June 30th, and reached 731,000 subscribers at quarter end. Subscriber growth reflected the acquisition of 286,000 subscribers, which was 71% above the gross subscriber additions achieved following WrestleMania in the second quarter, that is from April 7th through June 30th, and included a 54% increase in new first-time subscribers. During the first week of April, which included WrestleMania, WWE Network added 182,000 gross subscribers. Through September 30th, WWE Network had attracted approximately 971,000 unique subscribers, with 75% of these subscribers active as of the end of the quarter.

Contributing to the subscriber growth during the quarter, the US version of the WWE Network was made available in more than 170 countries beginning August 12th. Between that date and September 30th, WWE Network acquired approximately 30,000 subscribers, representing 12% of gross additions in the period.

During the quarter, the Network live and original programming continued to drive audience engagement. Viewer data shows that on average, close to 90% of subscribers access WWE Network at least once per week, and 99% access WWE Network at least once per month.

Moreover, WWE Network has increased the viewership of WWE's most compelling content. For example, domestic transactions, as measured by domestic network subs, and domestic pay-per-view buys, of our Night of Champions event in September, were nearly 9 times the event's 85,000 domestic pay-per-view buys in the third quarter last year.

Also demonstrating the engaging nature of Network programming, as Vince mentioned, our SummerSlam pay-per-view, which aired live on WWE Network, ranked number one on Nielsen's Twitter TV ratings. SummerSlam achieved the largest social media presence of any series or special during the week of August 11th, beating every program in this Nielsen category on all cable and broadcast networks.

Regarding future subscriber growth, we continue to expect a gradual ramp up over time as consumer awareness grows, and consumers change behavior and adopt new technology. To attract subscribers, as mentioned in our first quarter call, we're executing a five-part strategy that includes high impact customer acquisition and marketing programs, making the network available in new geographies, creating new content, expanding distribution platform, and developing new features.

As part of this strategy, beginning this Saturday, on November 1, we will introduce a new simplified price plan at $9.99 per month with no commitment, meaning subscribers can cancel anytime. And current subscribers will benefit as they are migrated to the new plan in December. The new pricing structure reflects our belief in the broad appeal of WWE Network content, and it's comparable to that of other subscription based content platforms, including Netflix and Google+. Additionally, all new subscribers who register for the WWE Network in November will receive the month of November for free, including the opportunity to watch Survivor series live on Sunday, November 23rd.

Regarding the international expansion of WWE Network, we plan to make the US version of the Network available in the UK, on an over-the-top basis, in November. Therefore, by year end, we'll have achieved network distribution in all of WWE's major markets, except for Italy, Germany, UAE, Japan, India, China, Thailand and Malaysia. Plans for these markets will be communicated at later date.

And importantly, as we expand our reach, we'll leverage the investments already made in the US by utilizing the existing English language US network product, the universal VOD offering, and a common price plan. Over time, we will localize WWE Network as appropriate.

Of course we continue to be excited about other Network developments, the new original series, WWE Rivalries, which examines some of the greatest moments in WWE history, debuted on October 27th.

While providing new live and original content, we also increased our comprehensive video-on-demand library, offering from over 1500 hours at launch to more than 2500.

To enhance our subscribers' viewing experience, we plan to roll out new resume play and watch list features across all of our media platforms by the end of this year.

Finally, WWE Network began including a limited amount of advertising earlier in October with Pepsi, Mattel, K-Mart, Take-Two Interactive, and Pure Talk USA, as the network's initial sponsors.

Overall we believe our five part strategy for attracting subscribers, including simplified pricing with reduced barriers to entry, will facilitate the continued expansion of WWE Network and provide us a global platform for driving growth over the coming years.

To review our performance in the quarter, let's turn to Page 6 of our presentation, which lists the revenue and adjusted OIBDA contribution by business as compared to the prior year quarter.

As shown, adjusted OIBDA in the current year quarter excludes $2.4 million of restructuring charges, comprised primarily of severance, while adjusted OIBDA in the prior year quarter excludes film impairment charges.

There were two fundamental drivers that enabled our results to exceed our guidance. These were the strong performance of our Network segment, and the accelerated execution of various cost saving initiatives. Performance in other areas, such as our licensing, live event and television businesses, was impacted by timing and did not have a material impact on our aggregate year-over-year results.

Network revenues, which primarily include revenue generated by WWE Network and pay-per-view, increased 68% to $26.1 million driven by the ramp up of network subscribers and subscription revenue. WWE Network generated $22.4 million in subscription revenue based on an average of approximately 723,000 subscribers. Pay-per-view contributed $3.7 million in revenue with 294,000 buys for the three events produced during the quarter.

On a trailing 12-month basis, Network segment revenues reached over $104 million, representing their highest level over the past 10 years, and a 21% increase over 2013. We believe this result demonstrates important progress in the execution of our Network strategy.

Given the Network's significant long-term potential, we continue to invest in programming, technology, distribution and marketing. And as a result, Network segment OIBDA declined $5.1 million from the prior year quarter.

Our corporate and other expenses increased $7.6 million, to $36.4 million, including a $2.1 million restructuring charge comprised of severance and related costs. And as a reminder, corporate and other expenses include corporate G&A costs, as well as sales, marketing, and talent development costs which cannot be allocated to specific lines of business.

Including the impact of restructuring, the $5.5 million increase primarily supported the enhancement of our international infrastructure, our talent development efforts, and brand marketing.

As I mentioned earlier, results in other areas, such as our licensing, live event and TV businesses, was impacted by timing and didn't have a material impact in aggregate on our results.

Licensing revenue increased $4.3 million from the prior year quarter, primarily due to a higher effective royalty rate for our franchise video game. As a reminder, we transitioned to a new video game license fee and royalty structure at the start of 2013. During the quarter our licensing business generated a $2.6 million increase in OIBDA as the growth in revenue was partially offset by increased marketing costs.

The 2015 version of our franchise video game was released on select game platforms a few days ago, with the release on PlayStation 4 and Xbox One, the next generation, planned for November 18th.

Live event profits declined $1.7 million primarily due to the staging of fewer events in international markets, which are typically characterized by higher pricing and margins than domestic events. While the quarter had fewer such events, the average attendance at our international events increased 15% to nearly 7,700 fans. And average ticket prices increased 28% to nearly $93.

In North America, an average in the number of events was offset by?-- an increase in the number of events was offset by 7% decline in average attendance, to 5,100 fans, and a 5% decline in average ticket prices, to about $45. As a reminder, our North American live event attendance is up 1% year-over-year on a year-to-date basis.

Revenue from the licensing of television content declined $2.6 million with five fewer episodes of Total Divas and one fewer week of Raw than in the prior year quarter. OIBDA from the production of licensing of television content was essentially unchanged from the prior year quarter, as a decline in revenue was offset by reduced production costs.

As shown on Page 4 of our presentation, net income declined $8.3 million reflecting the declines I just discussed in OIBDA, (technical difficulty) [$0.2] million in total pretax restructuring expenses, and a $4 million impairment of an equity investment. Our effective tax rate was 45% compared to 27% in the prior year quarter, as a recognition of FIN48 releases resulted in tax benefit that increased the effective tax rate in the current year quarter and decreased the effective tax rate in the prior year quarter.

Page 17 of the presentation contains our balance sheet. As of September 30th, 2014, the company held approximately $69 million in cash and short-term investments, and currently estimates debt capacity, under the company's revolving credit facility, to be approximately $150 million.

Page 18 shows our free cash flow. Through the first nine months of the year, we used approximately $14 million (technical difficulty). This use of cash was driven by the company's operating loss to date as well as spending to produce feature films.

Importantly, in October of this year, the company received a $50 million advance payment associated with the recently finalized and executed television distribution agreement. The payment is not included in the cash balances or cash flow that I just referenced, but it will be reflected in our fourth quarter financial statement as deferred income. The advance will then be recognized as revenue is earned over the term of that agreement.

Now looking forward. As stated previously, the level of Network subscribers is a critical determinant of financial performance. And given the lack of visibility regarding the rate of subscriber adoption, our presentation provides ranges of the company's overall expected financial performance at different levels of subscribers for 2014 and 2015. Ranges of financial performance are shown on an adjusted basis, including one-time items, such as the aforementioned restructuring charge.

Page 13 provides the ranges of adjusted OIBDA at different subscriber levels for the fourth quarter 2014, as well as for the full year 2014 and 2015. As an example, if WWE Network achieves a 12-month average of 575,000 subscribers for 2014, this translates to an estimated overall 2014 adjusted OIBDA loss for the company ranging from $23 million to $18 million.

Regarding 2014, you should note that at each level of subscriber performance, we have increased our 2014 OIBDA outlook by approximately $15 million to $20 million as compared to the outlook we gave on our second quarter earnings release. The change reflects the estimated impact of our cost saving initiatives. As shown, the expansion of WWE Network subscribers could significantly raise the company's earnings profile.

Looking further ahead, we believe that the successful expansion of WWE Network will realize the increasing value from our global television distribution agreement can drive meaningful long-term growth. Regarding our global TV distribution, in the third quarter of 2014, we finalized television agreements in the US, India, Canada, Mexico and UAE.

With the completion of these agreements, as well as agreements previously completed in the UK and Thailand, management has much greater clarity about the timing and magnitude of TV rights revenue through 2018. Final terms for our key agreements include annual escalators that yield a higher rate of growth from a (inaudible) 2014, 2015 base.

You should note that the average annual value of the company's new content agreements is consistent with our prior disclosure, and that these agreements will yield a significant increase in TV rights revenue in 2015 versus 2014. And most importantly, our 2015 guidance for the company as a whole remains unchanged.

The company's seven key television agreements, which I just referenced, account for television revenue that is expected to increase from approximately $130 million in 2014, to approximately $235 million in 2018. As such, over the four-year period, from 2014 to 2018, these key television distribution deals provide over $100 million of contractual revenue growth, which as always is subject to (inaudible) risk.

As a reference point, using trailing 12 months, over the last 4 years, WWE as a whole has experienced approximately $40 million in revenue growth. So these seven agreements represents 2.5 times that level over the next 4 years.

Managing the expansion of WWE Network and increasing the value of our TV agreements has the potential to drive significant economic returns. WWE Network continues to be the single greatest opportunity to transform our business model, and we remain very optimistic at our potential long-term growth.

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

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

Certainly. (Operator Instructions) Daniel Moore, CJS Securities.

Good morning. Thanks for taking the question. The SG&A, George, fell about $10 million sequentially. Maybe you could just walk us through. Obviously you know you've laid out the cost cutting initiatives, but walk us through the biggest differences and how should be think about SG&A on a quarterly basis and a run rate going forward?

Yes, I'm not going to get into the weeds, Dan. But as I mentioned in the script, a lot of the initiatives that we put in place just happened a lot quicker than we anticipated, so we executed better than even we had anticipated. That's number one.

Number two, as you know, over the last several years our effectiveness has been on executing the strategy and speed, and that was purposeful. And when you do that you knowingly kind of put efficiency a little bit behind those two other items, effectiveness and speed. I think now that we've got the execution of the Network behind us, we're a little bit more balanced, and I think you feel that then throughout the entire organization. And even though we identified a lot of cost savings, I think people get [smart], creative and you identify a little bit more, all of that added to the change in the quarter.

As far as moving forward, I think if you looked at it on a adjusted basis, not including the severance that we talked about, I think where we're at, you know with some range of motion, is what you'll see moving forward in terms of the corporate other.

Very helpful. And now that we're kind of six months plus removed from the launch of the Network, you know feedback that you've gotten from those that have signed up and have disconnected, is the content not as compelling or is it fatigue, or do you think a big chunk of folks signed up maybe without the intention of staying on? Just trying to get a sense of what you've been able to glean to try to improve and maintain churn rates as we go forward.

Yes. No, look I'll tell you, as far as the content, I mean Vince mentioned that we think that 90% coming once a week on average, and 99% coming once a month, and the fact that you know we used to call our pay-per-view events?-- there used to be a big disparity between how many people bought WrestleMania and how many people bought Night of Champions, and that disparity no longer really exists. So on the engagement side, we're thrilled.

Look, I think, you know if you follow subscription businesses, churn is part of the game. I mean that's something that's always going to exist and it's a lot of work on the tactical side on managing that, and to your point, continue to deliver great content. But yes, we certainly feel the engagement is terrific.

And one of the really, as you know, valuable things about the service is it grows in value over time because a VOD library, which drives the majority of consumption that's not live on the Network, grows in value as we add content to it. So yes, we couldn't be happier.

Are you willing to share how many of the 280,000 plus gross adds in the quarter were domestic versus international?

Yes, I mentioned that about 12% of them were international, so about 30,000 of the 286,000 were gross adds. And you know as a reminder, because of the strategy we undertook, which is just to make the US product available without localizing, you know we view it kind of as a, quote unquote, soft launch as you will. So our feeling's always been the ramp rate would be a little bit slower than it was in the US because of that approach, so we knew that.

I missed that number. Thank you again. One more and I'll jump back in queue. You mentioned some of the initial advertisers, you know obviously ancillary revenue streams like that has always been an interesting part of the long-term opportunity around the Network. It launched a little earlier than we would have thought. Is there meaningful revenue from advertising [baked] into your 2015 or with the guidance range, and you know or are we just sort of in the early testing phases over the next year or two?

Yes, I don't want to get into too much detail on that, but I would say at this point we haven't adjusted the overall economic model based on the advertising.

Okay. Thanks for the color. I'll jump back in queue.

Mike Hickey, Benchmark Company.

Hey guys, thanks for taking my questions. Just as it relates to 2015 (technical difficulty) you've got prices going down. And it looks like your [TVCs] for 2015 at least are getting you to the same place but starting at a lower basis it sounds like. So, but you're holding your adjusted OIBDA guidance the same. Could you just sort of walk us through why that is?

Yes, I think there's a lot of ins and outs, Mike, that I don't want to really get into. But you know, depending on how many shows we produce off the network and off our kind of standard agreement, things like Diva, that will drive the topline in that particular segment. So it's a lot of ins and outs. I think the headline is you know we do not give segment revenue or (inaudible) guidance, we just give overall company guidance, and our guidance hasn't changed. Again, some specifics have changed around different items, but our overall guidance hasn't changed.

And as I mentioned, probably the most?-- you know from our perspective?-- the most important thing is that we've got contractual revenue growth of $105 million on seven agreements over the next four years. We think that's a fundamental change in the kind of financial underpinning to the company.

Fair enough. For your sort of incentive for the Network for new additions, giving the month of November for free, does that mean that those signups would be counted as paying subscribers at the end of December?

Yes, so well it depends on how many of those convert into December obviously, but we will disclose, at the end of December, what the then paying subs at the end of the period were. Does that help?

Okay. Kind of, I mean if I sign up in November, I wouldn't be a new sub. But assuming I was, I'd obviously get that month for free and then I would assume to be paying at least one month, that would be December. Is that right or am I looking at it wrong?

Well if you come in in November and you stay with us, then you'd be there in December, and then you would be a paying subscriber.

Okay.

Does that help?

I think so. Thank you. Last one from me, and I'm sure you're sensitive to this. But can you sort of give us any color on what you guys are thinking about in terms of an overall subscriber count by the end of the year? And then thinking about 2015, I realize it's still early days here, but how should be think about balancing domestic and international subs as we go to forecast an average sub for that time period? Thank you.

Yes, Mike, unfortunately what you just said, I think you answered your own question, as you laid it out. You know we're not comfortable getting into that level of granularity. And the reason we're not comfortable is just it's very early days. I'm sure for people on the phone, and certainly for us here, it seems like the Network's been around for a long time, but we're in month eight, so at this point we'd like to get out of making predictions at too granular a level.

I got it. Thank you. Best of luck.

Thanks, Mike.

Robert Routh, National Alliance Capital Markets.

Yes, thank you. Thanks for taking my questions. First, as far as the equity impairment of $4 million during the quarter, could you give us any sense as to what that was related to? And then a more interesting topic is, given when you launched the WWE Network and then you signed that deal with Rogers in Canada, using a totally different structure, I wonder if you could give us any update as to how well that's going and how we should look at that vis-a-vis the regular US launch.

Yes. So first on the equity investment. You know from time to time, as we've discussed, we'll make investments in businesses that we think strategically fit for us, we think there's good financial return, and really important, where we think that we can help drive the underlying performance, and therefore benefit in the increased value in the equity, and where we think we can also learn. Sometimes it's technology, sometimes it's?-- well a lot of it is technology quite frankly. So that's our general backdrop to equity investment.

I don't want to get into specifically which one the impairment is for, for a variety of reasons. But what I will say, that it was driven really by a structural change in ownership, so it's more around the funding came around WWE decided not to participate, which drove down the overall?-- our overall ownership. So that's what drove down the value on the balance sheet.

Regarding your more interesting question, Rogers in Canada. We don't want to get into specific subscribers at the country level, but what we will say is that right now, as you'll recall, we are partnering with Rogers, and Rogers is our distributor of the Network in Canada. And they are currently working through getting distribution on other [NVBD] platforms, or [BD] platforms as they're described in Canada. Right now we're only on Rogers, which roughly has about 20% penetration, so we've got another 80% to cover in Canada, so we're excited about that growth.

Okay, great. So it's just too soon to say, as far as that goes. And then just one more, if I may. You mentioned the $50 million in cash that you received that's obviously not on the balance sheet as of the end of last quarter but will be next, which was a prepayment for certain rights. Could you give us any sense of the term of that contract, and is that the total payment for that deal, or is that just a partial? Just so we know how to model that going forward.

Yes. No, it's a partial, it's not a total. And it's?-- we've said before, that there are four major agreements. So I talked about today seven agreements under contract, but the four major ones, which were the US, India, the UK and Thailand. We didn't get into specific terms (inaudible) but we said none of them was longer than five years.

Okay. Great. Thank you very much.

(Operator Instructions) Brad Safalow, PAA Research.

Hi, thanks for taking my questions. Just a follow-up on Canada. I know it's early. You know you have limited distribution, but can you even speak to how the penetration within let's say the Rogers sub base compares to the viewership there and how that looks relative to the US? You know comparing?--

I think when you look at WWE metrics, in the US and Canada, it really we index pretty much dead on, so you know, other than obviously adjusting for the population. And I'd say kind of the ramp rate of the Network, again adjusted for the penetration, feels not too dissimilar to what we saw in the US. Obviously the US having the added benefit of our premiere event as a center of gravity, but you know we haven't?-- I guess another way to put it, just Canada looks like we kind of expected, again based on the adjustments I talked about.

Okay. And can you guys speak to at all the viewership for some of the Network specific events, like percentage of sub base that watches something like Monday Night Wars or NXT Takeover, or something along that, to give us an idea of the?-- beyond what you cited as the 90% engagement once a week?

Yes. No, I don't want to get into specific programs right now. What I will say is, you know we have a linear 24/7 feed. Obviously anything that's live and anchored by what used to be called our pay-per-view events, is by far the best performing, so live works, not a surprise. And then the second thing we've seen is that for all other programming, including new programming, VODs, you know again not surprising given the success of Netflix and Hulu, is the way people like to watch it. So I don't want to get into specific programs, but that's what we've seen.

The other element, we've talked about this before, is that the Network, because of that huge VOD library, really allows us to program to a broad fan base because depending on what you want to go see, it's there. So if you want to go see some of those older things that when you were a kid and relive that, you can. If you like WWE Countdown, and maybe you're a more active fan, it's there as well. So you really see that the subscriber base can kind of program it for themselves, which we think is pretty cool.

Okay. And internally, how do you guys reconcile the high churn rate and the high engagement level? I mean as outsiders, we can think of why people churn and often we hear anecdotally it relates to creative or I'm not interested in this pay-per-view event. But it seems like the vast majority of the sub base is somehow watching content every month, which would suggest you should have a lower churn rate. So how do you guys reconcile that?

Well if you looked at through September 30th, the average monthly churn is about, you know sits in the mid to high 8%. And what we said all along is that at steady state, and again now we're talking about a launch period where you usually have an overinflated churn percentage because you're still growing the base, the denominator, we thought that, you know looking at other subscription business, that 4% to 8% a month, which equals 0.5% to 100% of subscriber base a year, was the steady state churn level. Again, not based on anything we know specifically about our model, but just looking at other subscription businesses.

So for us, being only eight months in, the churn actually doesn't look all that bad, given what I just said. I mean you know some of the estimates that I've seen, again it's not public but that at least I've seen bandied about, is that early on Netflix's churn, when they went Xbox, could have been at times in the low teens. So I think you have to take it with a little bit of a grain of salt that A, we're at launch, and B, if you are in subscription, there's going to be churn. And there's a lot of tactics that we'll get better at and managing it I think in the future.

Okay. And then just from a?-- I know some of this is reporting math, but you did generate positive OIBDA from the Network segment on a 723,000 average sub base plus 295,000 pay-per-view buys. Is that something that you know you think you can achieve at these subscriber levels? And with that, I know there's a variance every quarter with the type of events you do, the talent involved, your cost structure changes on the margin, but how should we think about what you achieved in the third quarter and the sustainability of that prospectively with a stable sub base, or a growing sub base from here?

Yes, and I think you kind of answered your own question, [Rob]. It will depend on the programming right now is the biggest variable. So when you do a WrestleMania pay-per-view it's a significantly higher cost than our other major live events on the Network, so that will impact it. As well as when we do original shows that don't utilize our library as much, you know if we were to do something like Divas on the Network, for example, that has a higher cost base. So that will be probably the bigger swing item.

The other element that changes from period to period would be the marketing dollars. You know that's not linear as well. So it's a longwinded way of saying I wouldn't use the quarter as a proxy for every quarter.

Okay, but I mean obviously you've narrowed the gap considerably relative to what you're experiencing.

Absolutely.

I'll turn it over and get back in queue.

Angela, do we have anyone else in queue?

Not at this time. I will now turn the call back over to management for closing remarks.

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

Ladies and gentlemen, this concludes today's conference. We thank you for your participation. You may now disconnect.