TKO Group Holdings Inc (TKO) 2014 Q4 法說會逐字稿

Hello and welcome to the webcast entitled WWE fourth-quarter earnings. We have just a few announcements before we begin. If you are logged into the webcast, please note that the slides will not advance during the presentation. You will only see the title slide. Please download the full slide presentation via the download presentation button at the bottom of the webcast screen. Also, at the bottom of your screen you will find help icon for technical assistance, an enlarge slides button, and you may ask a question at any time by typing your question into the question box located on the web interface and clicking submit.

(Operator Instructions)

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

Thank you and good morning, everyone. Welcome to WWE's fourth 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 we 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 the notes in this presentation which is available, as I mentioned, on our website at corporate.wwe.com. Finally, as a reminder, today's conference is being recorded in the replay will be available our website later today. At this time, it's my privilege to turn the call over to Vince.

Thanks, Michael. Good morning, everyone. Results for the quarter exceeded the latest guidance and the analyst expectations. The network segment revenue increase by 64%. Our key brand metrics remain strong. Television ratings for the year are up 2% for Raw, 3% for SmackDown which is pretty extraordinary. Social media reached 454 million followers as of January 31. That's up 85% from the previous quarter of the previous year.

Our YouTube content reached 3.9 billion video views, up 80% over the prior year's quarter and thus put us as the number one sports channel in all of YouTube, surpassing the NBA and everyone else. Our WWE app has reached approximately 6.6 million downloads. Our second screen averages during Monday Night Raw is approximately 300,000. And all of that of course is in support of our network and every other initiative that we have, and speaking of the network we surpassed the 1 million subscriber mark in January. Subscriber increase was about 37% from the previous quarter. This is due to a November free for new subscriber promotion to launch in the United Kingdom and of course successful Royal Rumble pay-per-view of that.

We're trying this again as far as free to new subscribers in February. We would appreciate, I would think, something similar, perhaps smaller in number than what we did in November but, nonetheless, it will be successful nonetheless.

Along with the network we continue international distribution we launched in the United Kingdom and Ireland is as we stated it would on January 19. In Canada, Rogers leading the way here, just about as clear the entire nation will no doubt buy WrestleMania. And speaking to the hybrid form of what we have here in the United States in terms of the WWE Network, Canada, as you know, is a premium linear channel and we've reached the same agreement with OSN which is in the Middle East, generally speaking. That will be launching before WrestleMania as well.

Our engagement, in terms of our WWE Network audience, remains very high at 90%, indicating they are satisfied or better. And we have new content of course always coming out to the network. Always the monthly pay-per-views as well as specials and animation, talk shows, et cetera. And no doubt the network is our biggest long-term growth driver of course supported by all of this extraordinary digital and social media following, and that's the name of the tune. George.

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

For the fourth quarter, our financial results surpassed our guidance as well as analysts consensus earnings as we accelerated many of our cost-saving initiatives. We achieved adjusted OIBDA of $5.1 million with an average of 721,000 WWE Network subscribers. This compares to our guidance which implied an adjusted OIBDA loss at that level of average subscribers. The quarter was highlighted by the performance of our network segment where revenues increased 64% from the prior-year quarter, reflecting our belief in the broad appeal of WWE Network content, we introduced a simplified price plan at $9.99 per month with no commitment and migrated current subscribers to the plan in December.

The network, which features are premium live pay-per-view programming, continues to add original content, increase its video-on-demand library to more than 2700 hours, and rolled out new resume, play, and watch lists features across all of our platforms. During the quarter, WWE Network added 85,000 subscribers, representing a 12% increase from September 30 and reached 816,000 subscribers at year end. Subscriber growth reflected the acquisition of 336,000 subscribers which was 17% above the gross subscriber additions in the preceding quarter.

Our November free promotion contributed to the growth attracting approximate 242,000 free promotion contributed to the growth attracting approximate 242,000 trial subscribers with approximately 70% of those active in January. The performance underscored the impact sampling can have on subscriber growth. As Vince mentioned, we're very pleased that the network surpassed 1 million subscribers in January, representing a 37% increase from the end of the third quarter. That growth was driven primarily by the conversion of November trial subscribers to paying subscribers, the launch of WWE Network in the UK, and the attraction over our Royal Rumble event.

Through the January 27 announcement of this milestone achievement, WWE Network had attracted more than 1.4 million unique subscribers with 71% of these subscribers active at that date. During the quarter, the network's live and original programming continues to drive audience engagement. Viewer data shows that on average over 2014 close to 90% of subscribers access WWE Network at least once per week and that 90% of subscribers are satisfied or very satisfied with the network.

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. As we've said before, we are executing a five-part strategy that includes implementing high impact customer acquisition and marketing programs, making the network available in new geographies, creating new content, expanding distribution platforms, and developing new features. As part of that strategy we continue to broaden our global distribution WWE Network. Beginning January 19, we made the network available in the UK and Ireland which almost overnight became our second largest market globally. We're also expanding WWE Network distribution in Canada, the Middle East, and North Africa.

Rogers Communications, our exclusive network distribution partner in Canada, has reached agreements with Cogeco Cable in Canada, Eastlink, Shaw and Shaw Direct, TELUS Optik TV, and TELUS Satellite, and Videotron, ensuring WWE Network will be available nationally in Canada before WrestleMania on March 29. Additionally, we reached an agreement with OSN, the leading pay TV network in the Middle East and North Africa, to distribute WWE Network in the region as a premium linear channel, also launching before WrestleMania. This means that within about one year we will have reached distribution in all markets except for India, China, Germany, Japan, Italy, Thailand, and Malaysia. Plans for these markets will be communicated at a later date. Based on the successful execution of network's free trial offering in November, all new subscribers who register for the network in February will receive the network for free, including the opportunity to watch WWE Fastlane live on Sunday live on Sunday, February 22.

Of course we continue to excited about our ability to create new and original content for the network. During the quarter, our NXT Live program, which features WWE's emerging talent, attracts increased viewership and field social media activity. The production of two network specials with Stone Cold Steve Austin have been among the most watched programs on the network. We're really excited about the new programs that we're developing for the coming year. We expect to expand our original programming with more exclusive live specials with sought after interviewees, talk shows, animation, short form content just to name a few. Overall, we believe our strategy for attracting subscribers will facilitate the expansion of WWE Network and provide a global platform for driving long-term growth.

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. Our adjusted OIBDA growth as shown was driven by the escalation of television rights fees as well as increased profits from home entertainment. Network revenues, which include revenue generated by WWE Network and pay-per-view, increased 64% to $27.2 million driven by the ramp-up of network subscribers. WWE Network generated $23.3 million in subscription revenue based on an average of approximately 721,000 paid subscribers. Pay-per-view contributed $3.9 million in revenue with 271,000 buys as three events were produced during the quarter.

For the full year 2014, network segment revenues reached $115 million, representing their highest level in the past 10 years and a 33% increase from 2013. Moreover, the network segment generated near breakeven OIBDA for the year. We believe these results demonstrate important progress in the execution of our network strategy.

Given the network's significant long-term potential, we continue to invest in ad development, programming, marketing, and customer service cost. Reflecting in the increases in revenue expense, network segment OIBDA was essentially unchanged from the prior-year quarter. Revenue from the licensing of television content increased 20% or $8.4 million from the prior-year quarter due to the renegotiation of a key dissolution agreement which became effective in the fourth quarter. Additionally, the growth in revenue reflected contractual increases in existing international distribution agreements. Home entertainment revenues increased $2.7 million to $7.8 million predominantly due to the recognition of $2.1 million in contractual guarantees related to our 2014 sales. Notably, the contractual guarantees recognized during the quarter were the most significant source of home entertainment OIBDA growth from the prior-year quarter.

Corporate and other expenses increased $3.3 million to $38.2 million. As a reminder, corporate and other expense includes corporate G&A costs as well as sales, marketing, talent development costs that and assets cannot be allocated to specific lines of business. The $3.3 million increase primarily supported the enhancement of our international and talent development infrastructure.

Results in our other areas such as licensing, live event, and WW Studios were impacted by timing and did not have a material impact in aggregate on our results. Licensing profits increased $0.9 million from the prior-year quarter, primarily due to a higher effective royalty rate for our franchise video game. Live events profits increased $1 million, primarily due to the staging of five additional events in North America. Regarding our film and entertainment, WWE Studios recognized revenue of $2.9 million as compared to $5 million in the prior-year quarter. The decline was primarily due to timing of results from our portfolio movies. The fourth quarter reflected revenue from the animated feature Scooby-Doo! WrestleMania Mystery, which has surpassed our performance expectations. Additionally, based on an evaluation of our film assets, an impairment charge of $1.5 million was recognized in the quarter.

In 2014 we invested approximately $16 million to develop our movie portfolio, and we're targeting net film spending of $20 million to $30 million in 2015, resulting in a three-year average of approximately $20 million. Adjusted OIBDA, which excludes the impact of film impairments, increased $10.7 million from the prior-year quarter driven by the escalation of television rights and to a lesser extent the recognition of that contractual guarantee in our home entertainment business. Our adjusted net loss decreased $7.3 million, reflecting the increase in our adjusted OIBDA results. Our effective tax rate was 54% as compared to 34% in the prior-year quarter and the current your quarter reflects the tax benefit associated with our operating loss in the period that increased our effective tax rate. For the full year, our adjusted net income declined $31 million as WWE Network continued to develop scale as we and investments to support key content and brand initiatives and due to a reduction in licensing profits stemming from the transition to our new video game partner.

Page 15 of the presentation contains the balance sheet. As of December 31, 2014, the Company held approximately $150 million in cash and short-term investments and currently estimates debt capacity under the Company's revolving credit facility to be approximately $170 million.

Page 16 shows our free cash flow which increased by $44 million from the prior year. The increase was driven by a $50 million advance that was received in conjunction with a recently executed television distribution agreements. This advance is reflected in our fourth quarter financial statements and will be recognized as revenue is earned over the term of the agreement.

Looking back over the past year we are more innovative than ever in seeking new ways to build our business. Of course taking our video content direct to consumers with WWE Network ahead of major franchises like CBS and HBO is a testament to our entrepreneurial spirit. That achievement reflected major accomplishments in terms of content, development, technology, and design. As we develop and introduce new programs to the network, such as the Monday Night War, WrestleMania Rewind, WWE Countdown, we also strengthen our other business at a pace that I would describe as unprecedented in WWE history. We premiered two new seasons of our program, Total Divas, which continues to be among the most much most watched cable program on E. We developed an animated webisode for kids, Slam City, which now airs on Nickelodeon's Nicktoons TV network.

We produced exciting new movies such as Scooby-Doo! WrestleMania Mystery, The Flintstones and WWE: Stone Age SmackDown. We developed new fantasy-based video games for mobile platforms, thereby extending our presence in the interactive gaming sector beyond the ring and beyond the consol. These included the launch of WWE Superpower which was downloaded more than 1.5 million times during its first week of release. SuperCard has now been downloaded nearly 6 million times in 25 weeks of release. Additionally, in January we launched a new mobile game, WWE Immortals. The game was developed with Warner Bros. Interactive Entertainment and NetherRealm Studios, the creators of Mortal Kombat and features superstar battles in a fantastically reimagined WWE world.

Finally, we enhanced our talent development program and production capacity through increased use of the WWE Performance Center, utilizing that facility to produce content, such as our NXT program. These are just a few examples. Over the year, as we (inaudible) across our businesses, our key brand metrics remain strong. TV ratings for Raw and SmackDown increased 2% and 3% respectively. Consumption of WWE content on YouTube increased more than 80% to 3.9 billion video views which now made WWE the number one sports channel on YouTube with more views than the NBA, MLB, and ESPN among others.

Our social media presence grew more than 80% and recently surpassed 450 million followers. Our app has reached nearly 17 million downloads while our second screen up averages close to 300,000 users during Monday Night Raw. These are pretty amazing statistics.

As we look ahead we're working to leverage our entrepreneurial spirit and that brand strength to drive earnings growth. In 2015, we expect growth from almost all our businesses with the most significant increases driven by the performance of the WWE Network, the escalation of our television rights fees, as well as continued innovation. As stated previously, the level of network subscribers is a critical determent of our financial performance. Given the lack of visibility regarding the rate of subscriber adoption, our presentation provides ranges for the Company's overall expected financial performance at different levels of subscribers for 2015. Ranking financial performance are shown on adjusted basis, excluding nonrecurring items which would be unknown at this time.

Page 12 of our presentation provides ranges of adjusted OIBDA at different subscriber levels for the first quarter of 2015 as well as for the full year of 2015. So, as an example, if WWE Network were to average 900,000 subscribers for the first quarter 2015, this would translate to an estimated range of adjusted first-quarter OIBDA for the Company ranging from $2 million to $7 million. As shown, the expansion of WWE Network subscribers could significantly raise the Company's earnings profile.

Regarding our global TV distribution, in 2014 we completed key television distribution agreements in the US, UK, India, Canada, Mexico, UAE, and Thailand. These seven agreements account for television revenue that's expected to increase from $130 million in 2014 to approximately $235 million in 2018. As such, over that four-year period these distribution deals provide over $100 million of contractual revenue growth subject only to counter-party risk.

Importantly, we believe we reached a financial inflection point with significant opportunities ahead. In 2015, we expect year-over-year adjusted OIBDA growth in every quarter with growth driven by the factors that I just mentioned, the performance of WWE Network, escalation of TV rights and continued innovation. We believe we're executing well, innovating faster than ever, and managing these key drivers has the potential to drive significant economic returns over the long term. That concludes this portion of the call. And now I'll turn it back to Michael.

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

(Operator Instructions)

Daniel Moore, CJS Securities.

Good morning, and thanks for taking the questions. Obviously saw a very nice boost in subscribers from the rollout in UK and Ireland a couple weeks back. Looking forward at markets like Germany, China, India -- what are the markets that have the biggest potential for an uplift, and how would you compare those to the UK? Obviously it's one of your larger opportunities.

Dan, I'm going to stay away from making projections. Obviously those are important markets for us. But I'll tell you, internally, we were even surprised at how quickly the adoption happened in the UK. So, we'll stay away from making projections. But we're excited. We're developing plans for those markets, and we'll be excited to launch there.

Okay. And after the success in November, and given the trials that you're running in February, do you plan to make sort of one-month free trials an ongoing part of the plan? And just out of curiosity, how do you monitor to ensure that customers that may have disconnected previously aren't signing up again for the free trial?

Yes, so, on the first part of your question, we're not ready to make a commitment one way or the other. We're going to continue evaluating, both, as Vince said, how they work in the month, and also what the retention looks like afterwards. But to underscore, November was incredibly successful, and we expect February to be as well.

As far as monitoring, there are some tools we use today. We'll continue to roll out more tools to strengthen that, but I don't want to get into the specifics of how we do it.

Okay. I'll sneak one more in, if you don't mind. Other than the satellite providers last year that had dropped, do you expect most major cable operators to carry -- continue to carry pay-per-view through this WrestleMania, and any thoughts for pricing on pay-per-view? I know it's declining in importance, but any thoughts for pricing given you can get WrestleMania now on the network as well?

As of right now, we expect to be on all the platforms we're currently on, which includes obviously the cable platform being the most significant. As far as pricing, we don't set the pricing. The pricing is set by the cable operators.

Okay. I'll jump back in queue. Thank you again.

Laura Martin, Needham.

Let's just follow up on Dan's last question. I think what he was asking is: Are you going to put WrestleMania in the $10 a month, which would then -- subscribers more likely would pay that than go into the $60 price point for the cable guys?

I'm not sure if that was the question or not, Laura, but obviously WrestleMania is part of the WWE Network, and it's part of the $9.99 a month. It was last year, and it will continue to be.

Okay. So, then, my question is: When we think about cancellations -- when you guys calculate the average subs, like in a quarter like November, is the average -- the ending subs -- is it a zero number for November, or do you just take first day of the quarter, last day of the quarter, and average them, even though nobody paid in the November month because it was free?

People paid, Laura, because, remember, the free month is only for the additions that came in, in the month. So, there's always a base there that's paying.

Okay.

And then, to your other question, if you look at page 10 in the presentation, there's a table below the bar chart that shows the averages for the quarter. So, Q4, the average paid subscribers including November was 721. If you wanted to see the average total subscribers, including promotional subs, it's off to the right; that's the 762. So, 721 was the average paid.

And the average you asked about -- it's not a simple average of first day of the month, last day of the month. It is a weighted average by day.

Okay. Great. And it seems like pretty much all of your subs will be on month-to-month by the time WrestleMania comes, right? So, then we'll be able to look at real churn -- so, on a same-store churn ratios month to month after that, don't you think?

All of them are just about on it right now.

Okay. Great. Perfect. Thanks.

Mike Hickey with Benchmark.

Great quarter. Congratulations.

Thank you.

I guess I was just curious what measures you're taking to reduce network subscriber churn, particularly post-WrestleMania. And then, as it relates to your average Q1 subscriber range, it seems on the surface maybe more cautious than you would've expected, given that you already -- or were plus 1 million subs, and 1.4 million uniques, and of course, I think WrestleMania is in March this year. And then I have a follow-up. Thank you.

Sure. Mike, I missed the first part. Did you say the measures we're taking to manage churn? Did I hear you right?

Yes. In particular, post-WrestleMania.

Look, I think we've got to do what every subscription business needs to do to manage churn. We've got to deliver incredible value in the content, the experience has to be great; and so, that's what we're working really hard on. We think if we deliver great content -- it starts with our pay-per-view events, our live events. But as I mentioned in the script, and as Vince mentioned, we're working a lot of new content that we're excited to talk about, and will be soon. But that's the way we'll keep subscribers over the long term.

Okay.

On the second one -- on the guidance table, for the quarter, the first thing I'll say is -- and obviously I mentioned it in the script -- at this point, we know a lot more than we knew 11 months ago, but I'd still say we're learning so much every day, that predicting the adoption rate is really, really difficult for us. I will say, on the average for the quarter, it's some of the things we've just been talking about that impact the average.

So, because it's a daily weighted average, for example, even though January we hit 1 million, a lot of those came towards the end of the month because of when the UK launched, and when the pay-per-view actually occurred -- when Royal Rumble occurred. So, the weighted average in the month is not a simple average.

Similarly, in answering Laura's question, in November, for February we have our base subscribers that are coming out of January. We'll lose some to churn, and there won't be gross paying adds coming into February. We'll get that when we convert the free into March. I don't want to get too much into the mechanics because I think it loses the broader point of just grow subscribers and the average takes care of itself, but that's kind of the bridge between ending subscribers and averages.

Thanks, George. That's helpful.

We're also kind of wondering here, and I know you've given some insight, but maybe some additional sort of non-pay-per-view-related content for your network -- so, where the most active interest, if you will, from your subscriber base? Maybe more specifically, how NXT is taking shape as it relates to subscriber interest, as it kind of seems at least the entertainment has elevated excitement from WWE fans online from what I can tell.

When you do something live, as you'd expect, and we see it in the general TV ecosystem, it resonates. And so, that's been very successful on the network.

It's amazing that NXT, which domestically is only on WWE Network, trends on Twitter pretty regularly, especially when it's live. So, yes, to your point, I think it has become a favorite of our fans. It does very, very well in the network.

The other finding that we have is that, as we know, video-on-demand allows people to program their own -- based on their own likes and viewing habits. So, we just see a big utilization of the video-on-demand library. It's one of our -- what we think is a real -- of strategic import to the network.

We have 100,000 hours of video library; we have moved about 2,700 onto the network. The value of the network will keep growing as that video-on-demand library grows. We think that's pretty special.

Thank you. That's helpful.

The last question from me -- this is a bit on the fringe, I suppose, but curious nonetheless. We were hopeful you could compare and contrast your fan base with that of the MMA world or UFC, I guess. And if you strategically look to build a bridge between the two, as you think about the growth of your network? And then maybe, again, more specifically, if you think about signing new talent from the MMA world as a vehicle to further engage MMA fans with WWE-related entertainment. Thank you, guys.

Yes, I think I will answer the first one on the demographics. We've talked about it before. I know you've been to a show, so you've seen it live. It's one thing to talk about the data, but when you go to a show, you see it live; and if you went to an MMA event, you'd see the distinction.

We're about multi-generational family viewing. That's what you see at the event; that's what you see in our TV ratings. I think that's fundamentally different than MMA.

Thank you.

Brad Safalow with PAA Research.

Can you just reiterate what your budget will be for 2015 for feature films, and then new content for the network?

We didn't talk about the budget for the content for the network. For feature films, we said the net spend we expect $20 million to $30 million for 2015; and in 2014, we did $16 million; in 2013, we did $9 million. So, if you kind of average that out, you're in that $20-million range, which has been essentially our historic rate; a little lumpy because if we don't find films that we think are worth doing in the year, we won't do them. But that $20 million has been kind of our standard run rate on average. We haven't gotten -- we didn't give any guidance on what the programming expense for the network is.

Directionally, is it going to be same level, higher, lower than what we've seen in the last year or two?

Yes, I think, if you look at the fixed costs overall for the network, it would probably be right around the same range. Some of the cost areas are a little bit higher, some lower. I think on the programming side, probably pretty similar.

Okay. And then you said that -- I think the number was 70% of the people who sign up for the free month in November wound up being paying subs in January. Is that correct?

That is right.

So, help me reconcile this, because you did give us some of these stats. If I look, you had 772,000 domestic subs, up to 872,000 or so as of January 27. You had 44,000 international subs at the end of the fourth quarter, going about 128,000. We know the UK came on, and that's the big mover in the international subs, but the free promotion, 70% attachment, that would be 172,000 subs. Something about those numbers doesn't make sense to me.

Yes, I think all you're missing is just the churn that you have in the month.

Okay. Understood. So, 70% -- okay, understood. So, we're missing what happens in between. Okay.

And then, just help me understand -- when I look at the network contribution margin, which obviously I think was better than almost anyone expected, and you're back to where you were a year ago, and higher than you were even two years ago. I'm trying to understand why you had such a large sequential increase in profitability for that segment -- what was like a $1-million change in revenues quarter to quarter?

The big for us is the -- what the pay-per-view performance. So, that's a little bit different sequentially in the quarter.

Okay. That was the big mover?

That -- on advertising and promotion, we tweaked that a little bit as we're learning. So, there's a few.

Okay. And what were network advertising revenues in the quarter?

We haven't published them; and at this point, they're de minimus.

Okay. I have asked this before, but in light of what you guys are trying to achieve internationally with the network, can you give us any sense as to what your viewership is in your top three or four markets -- so, Canada, UK -- I don't know what would be next in terms of viewership, on a weekly basis for Raw or SmackDown, to give us a sense of where you are?

The number, Brad, that we look at -- the viewership will depend on what the type of distribution that we have in the country. So, in the UK, we're actually on a sports tier.

But you can't lose sight of that almost 4 billion video views on YouTube, because our distribution -- we're kind of trained to think about video viewing traditionally -- traditional TV. The word's changed dramatically.

So, the data that we think reflect the opportunity is surveys we've done in market to try to understand the size of the WWE fan base and the affinity. And, as we've mentioned before, in the top 16 markets, we think there's about 100 million broadband homes with at least one active WWE fan in them; about 30 million or so we describe or characterize as passionate, about 70 million or so as casual. That, to us, is the available opportunity.

Okay. So, to me, I can look at the -- you have 5 million YouTube subs. Is that an important number, because, again, we are all trying to look at this. These surveys are so vast, and obviously the pool is big, but directionally it hasn't been necessarily an indicator of your subscriber trends, at least not in the near future. Maybe it will be over a five-year period, but is that a good data point, or do you have like a data point where, if I look at the international market, you could tell me, of the 17 million app downloads, here's how many are uniques, and here's how many are overseas. Is there anything else you can share on that front?

Yes, I think no one metric gets to the -- there is no one simple metric, which is why personally we can each decide what we want to choose. I go more with the in-field work we've done, because that, to me, is the best way to normalize. But all the ones you mention we view as important.

So, the 4 billion views, we view as important; the 450 million social touchpoints we view as important. In the US, the viewership data is easier to quantify; the 12 to 14 million viewers that we have with some WWE program every week is important.

So, all of that talks to the scale, including the 5 million subs that you mentioned. I think we have more -- not only the most video views of any sports channel on YouTube, I think we have the most subscribers, more than NBA, and more than MLB. So, all of that is what supports the thinking on the scale of the opportunity.

Okay. I'll get back in queue.

(Operator Instructions)

Jamie Clement with Macquarie.

George, curious -- and I don't know if you have data on this, but in the absence of data, maybe just a gut feeling on your part. But, for subscribers that maybe joined in December that, for example, were not subscribers in March, do you have any sense about how much of that growth may have come from, A, their understanding of kind of what an OTT network was; and, B, maybe going out and buying a device that actually gave them the opportunity to watch that? So, in other words, looking forward, to the extent that people buy more Roku's and that sort of thing, how much growth you might expect just from that?

Look, I think, over the last three years or so, there was obviously a tipping point on not just the penetration of smart devices, but the usage of those. And you saw that primarily in Netflix's subscriber growth. So, I still think there's more room there, but I think it's fairly well penetrated in the US.

I think, to your first question, one of the things we're in the field on right now is awareness of the network. That's something we survey; also ask about intent to buy over the next 12 months. I will tell you the last time we did it, a couple of months ago, as you would imagine it takes time for complete awareness of what anything is, including the network. And when I say complete awareness, I mean what's on it; what's the price that you can cancel any time; all of that. So, I think there's still momentum to be gained as the awareness increases.

Okay. That's fair. And then, George, last question: I haven't been able to find any kind of really good data on this, but in terms of OSN and kind of your addressable market as you see it in the Middle East that's going to be covered by this agreement, do you have a rough number?

Yes, it's a great question. The reason you don't see it is because there's not a ton of research or hard data for that region. Our estimate says that there's probably 3 to 4 million paid TV homes.

As Vince mentioned early on, this deal is more similar in kind to the Rogers deal. And it will be less driven by actual subscribers, and it's essentially much more like a license deal for the content.

Okay.

It's a different deal.

Fair enough. Okay. Thank you all for your time.

Laura Martin with Needham.

Yes, if Vince is still there, I'm interested in this Twitter controversy, and whether you thought the Royal Rumble controversy with who won that started that Twitter feed about cancel WWE Network? Is that good for you because it alerts a bunch of people in your demo that a WWE Network exists, or is it bad for you because people actually listen to these super fans and they disconnect WWE for a week or two until WrestleMania shows up? I'm curious. (multiple speakers)

Thanks for the question. That's good for WWE. It created controversy, and really it was a gesture by some -- a vocal minority -- in terms of not lacking the creative -- Santa Claus didn't come for that pay-per-view. And so, that's really what that was for them.

But it's like someone who watches our television show, or things about nature, and the babyface, as we call them, does not win. They say: I'm never going to watch this ever again. Well, I know that person is going to be glued to the television next week.

It's the same here. We saw no decline whatsoever in any of that. It created controversy, and that was really good for us.

Very helpful, Vince. Thank you.

Robert Routh with FBN Securities Incorporated.

Congratulations on the results. A couple quick ones: First, given how well you're doing obviously with WWE Network now, and obviously you're expanding globally, I'm curious, can you give us any sense as to any geographical areas domestically where you're doing much better in terms of getting subscribers than other areas? Because I would think that there's probably certain pockets where you're just getting a lot more traction than in others?

And in the areas where you're not doing quite as well as you'd hope to, is there any possibility of you partnering or working with a distributor and co-marketing or doing something to start on a really local focus basis subscriptions to WWE Network where it isn't quite doing what you had hoped? Any color on that would be great.

First, a broader point on geography: If you looked at our fans just broadly, generally across the US, there's not a real region where we over- or under-index significantly. We're everyone's home team, if you will.

As far as the network, it's the same issue. I think that you see a slight over-indexing based on broadband penetration in the region, and what the average income is of a particular region, and certainly nothing where we really think we need a lot of help. We're pretty good at reaching our customers directly.

Okay. Great. And another question is: Given the uniqueness content -- there's really nothing like what you guys have -- and the fact that you're replenishing it weekly, have you ever thought about doing something like a WWE radio show on Sirius or something that would be a subscription-based model? Because I would think that's something they would want, and you could get paid a lot of money to do, given your roster of talent and your interactivity, and also as a way to continue to pound into people's heads about the WWE Network on the over the top side? I'm just curious of other initiatives in addition to WWE Network like that, that you may have in your back pocket that you're thinking about?

On that point, there's about 100 that we're thinking about. It just becomes a choice of where we think -- is the juice worth the squeeze for us to go after? That example you used is one that's been talked about.

Okay. Great. Congratulations again, and thank you very much.

Daniel Moore with CJS Securities.

Just looking at the film's business that you had -- you've done a lot of work over the last couple years to de-risk that, but still spending relatively aggressively, $20 million to $30 million, and you had the $1.5 million impairment for Oculus. Was that surprising to you, or is that a reasonable or acceptable level of risk as we think about films going forward?

I think, if you look at for the year where we ended up, I think given the size of our investment, the total impairment charges for the year are somewhat what you would expect. Obviously, those are things that are hard to predict. It's lumpy, but it's not outside a reasonable range of expectation.

I will say Oculus has done kind of what we expected on the revenue side. So, the costs have come in a little bit higher than we expected, and that was the rationale for that.

On the $20 million to $30 million, Dan, it's a bigger number sequentially, but, again, the way we look at it is, over a three-year average, what are we investing in films. And if you looked at 2013, 2014 and 2015, even if we were at the higher end of that scale, we would be averaging about $18 million over that three-year period. So, that's the way we kind of think about that business.

That's helpful. Thank you.

Lastly, George, tax rate for 2015, and CapEx?

Look, the tax rate is going to fluctuate pretty heavily with what the overall earnings are, obviously. Even when you see the tax rate in the quarter being what it was, that's just really driven by the size of the income that where a few adjustments make a big difference. Our natural tax rate we expect is consistent with what it's been; however, small adjustments can throw the reported rate pretty significantly.

So, long-winded way of saying: Depending on where you think the average sub will be for the year, and how much income for the year, that will drive the average tax rate. But if we had income consistent with previous years, we'd be in that 35% to 40% range.

Did you -- I apologize if I missed it -- did you give the CapEx projection for 2015?

We didn't, but, as you know, our traditional CapEx has been around the $20-million range, plus or minus. I think that's a fair expectation for 2015.

No major projects or changes to that?

No.

Perfect. Thank you.

And with no further questions at this time, I'd like to turn the call back over to today's presenters for any additional or closing remarks.

Thank you, everyone. We appreciate you listening to the call today. Certainly, if you have any questions, please feel free to reach out to us -- myself, Michael Weitz, or Laura Kiernan at 203-352-8600. Thank you.

This does conclude today's conference. Thank you for your participation.