TKO Group Holdings Inc (TKO) 2015 Q1 法說會逐字稿

Hello, and welcome to the webcast entitled WWE first 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 your webcast screen. Also at the bottom of your screen you will find a help icon for technical assistance, an enlarged slide 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. Welcome to WWE's First Quarter 2015 earnings 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 ir.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 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. As a reminder, WrestleMania occurred in the first quarter of 2015 versus the second quarter of 2014. Given that WrestleMania occurred in late March this year, we believe the timing impact of WrestleMania is best estimated from the event's ticket sales, merchandise sales, pay-per-view revenue and pay-per-view production costs. In order to facilitate analysis of our financial results on a comparable year-over-year basis, we have prepared a pro forma statement which identified this timing impact as shown in both our earnings release and earnings presentation. 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.

Good morning, everyone. We're proud to announce that we've delivered record quarterly revenue and strong earnings growth reflecting our strategy to realize greater value from our content. Our network surpassed, WWE network surpassed 1.3 million subscribers at the quarter end. And speaking of WrestleMania as part of that subscription, WrestleMania 31, became the highest-grossing live event in our history, which is a milestone for us. Some other key measures are Total Divas, which is on the E! Network, Season 3 was the most watched season, it actually is number one show, that's probably largely because Kardashians were on hiatus.

Our live event average attendance, which is a very key metric was up 4% that excludes WrestleMania social media, which is extremely important to our company, reached 484 million followers, that's up 9%. The network has grown audience engagement, in addition to subscribers which is extremely important meaning that those who are subscribing enjoy what it is they are viewing, and continue to. And speaking of that, our new content coming to the network, a lot of excitement around Camp WWE, Swerved, Divas Search, WWE too hot for TV, which is currently aired and titles along those lines. So we have a lot of original series yet to debut on our network. And other -- some other key business developments, we announced that SmackDown is going to move from Syfy to USA Network in January, and we think that just in and of itself would introduce viewership just from one network to the other. We're developing, and some of you know about Tough Enough, which is a new show on USA debuts June 23, I think it is. We have a show before this show and that we are asking for potential videos for those of you, maybe some of you on the call might want to attempt to be tough enough for it to be in WWE. In any event, we have got over 5,000 video submissions.Some of those are ridiculous and quite humorous, and others are interesting. In any event, those are some of the key business developments, and we've got a lot going on in our company these days, and all of it is good.

Thanks, Vince. There are several key topics which I'd like to review today. These include management discussion of our financial performance, the progress of key strategic initiatives and our business outlook. As you know, for some time, we've communicated our global strategy to distribute our content across new platforms and realized much greater value from that content. As we entered 2015, we foresaw significant earnings growth driven by the expansion of WWE Network. The escalation of television rights fees and continued innovation across all of our businesses. In the first quarter, our business accomplishments and financial performance reflected the successful execution of this strategy and exceeded our financial commitment. For the first quarter, our financial results surpassed our guidance in analyst consensus earnings based on strong business performance and continued cost savings.

Specifically, we achieved adjusted OIBDA of $21 million, with an average of 927,000 WWE Network paid subscribers. This compares to our guidance, which implied an OIBDA range of $3 million to $8 million at that subscriber level. This strong performance was primarily driven by higher than expected pay-per-view buys, video game sales and WrestleMania attendance revenues as well as the timing of certain expenses. Quarter was highlighted by the performance of our network segment, where revenue more than doubled from the prior year quarter. During the quarter, WWE Network added 511,000 subscribers, representing a 63% increase from December 31, and reached 1.3 million subscribers at quarter-end. Through March 31, WWE Network has attracted nearly 1.8 million subscribers with 74% of these subscribers active as of that date. Subscriber growth reflected the acquisition of 795,000 subscribers, which was 13% above the gross subscriber additions in the comparable prior-year period. That is from the network's February 24 launch through WrestleMania 30 on April 6, 2014.

Subscriber growth was driven by the iconic attraction of WrestleMania, continued international expansion and the success of our free trial promotion in February. At quarter end, WWE Network had approximately 196,000 international subscribers representing about 15% of our paid subscriber base. Importantly, the network's live and original programming continued to drive audience engagement. Viewer data shows that close to 94% of total subscribers access WWE Network at least once per month. Additionally, WWE Network subscribers watch 53 hours of content per household over the quarter. As shown on pages 12 and 13 of our presentation, this puts WWE Network among Netflix and the top cable and broadcast networks in terms of viewer hours per household. Additionally, WrestleMania 31 was viewed in 1.6 million homes, more homes than ever before. These metrics reinforce our view regarding the potential of WWE Network.

We recently announced exciting ways in which we are expanding the network's compelling original content, in addition to our premium monthly live pay-per-view events, new programming for the network will feature brand new original series such as Camp WWE, Swerved, WWE Too Hot for TV and Diva Search. Overall, we believe our strategy for attracting subscribers will facilitate the expansion of WWE Network and provide a global platform for driving growth. Consistent with our other subscription-based businesses and our past practice, we do not intend to provide an update on current subscriber levels on this call. Our next planned update will be on our second quarter earnings call.

To review our performance in the quarter, let's turn to page 5 of our presentation, which lists the revenue and OIBDA contribution by business as compared to the prior-year quarter. As shown, revenue increased throughout our businesses generating overall growth of 40% to $176 million, importantly the highest quarterly revenue in WWE history. Changes in foreign exchange rate did not have material impact on either our reported revenue or profit. As referenced earlier, the timing of WrestleMania had an impact on reported growth. This impact can be estimated from WrestleMania's direct contribution to ticket sales, merchandise sales, pay-per-view revenue and production costs. In aggregate, these items increased revenue by $24.9 million and reduced OIBDA net income by $0.4 million and $0.3 million respectively. As a reminder, historically, the economic value of WrestleMania occurred in a single period. With the evolution to a subscription-based platform, the value of WrestleMania and frankly all our content is reflected in the acquisition and retention of subscribers over longer periods of time. On a pro forma basis, the quarter generated revenue growth of 20% and OIBDA growth of $28.6 million. Growth that we would describe is very solid under any measure. As reported, OIBDA increased $28.2 million driven by the escalation of television rights fees, higher profits from live events, the expansion of WWE Network and increased video game sales.

Profits from the licensing of television content increased $15 million based on a 43% or $17.6 million increase in revenue. The growth in revenue and profits was predominantly due to the renegotiation of key domestic and international distribution agreements, the largest of which became effective in the fourth quarter of 2014 and the first quarter of 2015. Additionally, the increase in revenue reflected the production and monetization of a third season of Total Divas, which had 10 episodes in the quarter as compared to three episodes of the second season in the prior-year quarter. As Vince mentioned, the third season of Total Divas proved to be the most-watched season of that show and consistently delivered the most viewers of any program on any network. Live event profits increased $13.8 million based on a $17.6 million or 81% increase in revenue. The growth in revenue and profits was primarily due to the timing of WrestleMania and stronger performance of our other live events in North America. WrestleMania generated $15.7 million in live event revenue and that became the highest-grossing event in WWE history.

Excluding the impact of WrestleMania, revenue growth reflected a 7% increase in the average ticket price to nearly $45 and a 4% increase in average attendance to 6,700 fans. Network revenues which include revenue generated by WWE Network and pay-per-view increased 104%, to $37.6 million driven by the ramp-up of network subscribers. WWE Network generated $28.6 million in subscription revenue based on an average of approximately 927,000 paid subscribers. Pay-per-view contributed $9 million in revenue with 505,000 buys as three events were produced during the quarter. WrestleMania accounted for $4.9 million of this revenue with 259,000 pay-per-view buys.

Network segment OIBDA increased $2.1 million, a significant growth in subscription revenue, was partially offset by WrestleMania related production costs. Licensing profits increased $1.7 million with an 18% increase in revenue, primarily due to higher video game sales and effective royalty rates.

Estimated unit sales of our franchise game WWE 2K15 increased by approximately 30% in North America and Europe. Additionally, the increase in licensing revenue and profit benefited from higher sales of downloadable content associated with our franchise game WWE 2K14 and our branded game WWE Supercard. Reduced profits from home entertainment and WWE Studios partially offset our overall OIBDA growth. The reduction in home entertainment reflected the broader challenges in the DVD industry. Corporate and other expenses were essentially unchanged from the prior-year quarter and performance in other areas did not have a material impact in aggregate on our results. OIBDA increased $28.2 million, from the prior-year quarter, driven as described earlier by the escalation of television rights fees, higher profits from live events, the expansion of WWE Network and increased video game sales.

Net income increased $17.8 million reflecting the increase in our OIBDA results and a reduction in our effective tax rate to 32% from 36% in the prior-year quarter. The rate in the current year quarter reflects increased deductions for domestic production activities.

Page 17 of the presentation contains our balance sheet. As of March 31, 2015, the company held approximately $114 million in cash and short-term investments, and currently estimates debt capacity under the company's revolving credit facility to be approximately $161 million.

Page 18 shows our free cash flow. In the first quarter, we generated $9 million of free cash flow representing a $22 million increase from the prior-year quarter. The growth was driven primarily by the company's improved operating performance. Looking back over the quarter, we continued to pursue innovative new ways to grow our business. We announced compelling new network programming including eight original series. We developed and implemented a new business model for the network that facilitate distribution in the Middle East and North Africa. Completed a third series of Total Divas, developed Tough Enough for its return to USA Network and announced the move of SmackDown to USA Network early next year. These are just a few of the examples. As we continue to innovate, our key brand measures remained strong.

As we look ahead, we are working to leverage our entrepreneurial spirit and brand strength to drive sustained earnings growth. For the remainder of 2015, we continue to expect year-over-year adjusted OIBDA growth for most of our businesses, with the most significant increases driven by the performance of WWE Network, the escalation of our television rights fees and continued innovation across our businesses. As stated previously, the level of network subscribers is a critical determinant of our financial performance in any given period. Given the lack of visibility regarding the rate of subscriber adoption, our presentation provides ranges of adjusted OIBDA at different average paid subscriber levels for the second quarter of 2015.

Ranges of financial performance are shown on an adjusted basis excluding non-recurring items, which would be unknown at this time.

The table shown on page 14 of our presentation outlines potential outcome for the range of 1 million to 1.3 million average paid subscribers in the second quarter. Although all the numbers in this range exceed the average subscribers achieved in the first quarter of this year, the OIBDA levels associated with these averages are lower than our first quarter results. The primary factors for this sequential decline are the seasonality inherent in our licensing business, higher television production costs, and the timing of certain other expenses. You should know that the outcome specified by our second quarter guidance table would generate anywhere from $15 million to $25 million of year-over-year OIBDA growth in the second quarter. Our full-year 2015 business outlook at various subscriber levels can be found in our fourth quarter 2014 earnings materials. As discussed previously, the expansion of WWE Network subscribers could significantly raise the company's earnings profile. Importantly, we believe we're executing well, innovating faster than ever and managing the key drivers that can drive significant economic returns over a long term. That concludes this portion of our call. And I'll now turn it back to Michael.

Thank you, George. We're ready for Q&A part now. Please open up for questions.

(Operator Instructions) Daniel Moore, CJS.

Good morning. First, Vince, thank you for the invitation to participate in Tough Enough, I think I'm going to get back to you on that one.

I know you, Dan.

Just focusing on, Q1 obviously very strong relative to your guidance, what were some of the biggest areas of out-performance, was there some timing of costs and or revenue that's kind of shifted between Q1 and Q2, relative to your initial budget or was it just simply better, stronger growth, revenue and cost containment?

Yes, I mean, as I said in the prepared remarks, pay-per-view revenue was significantly ahead of what we had expected. The video game outperformed, WrestleMania, live event revenues as Vince mentioned setting a record. Obviously, we expected, really, really good results but exceeded our expectations. And then there was some timing on the cost side Dan, where we delayed some planned expenses, and we'll come back into Q2 and beyond, which then gives some of the timing impact on Q2 for the sequential decline.

Absolutely, and then you gave -- you started to -- you gave kind of the buckets of the delta between OIBDA, despite the higher level of average subscribers, likely to be the case in Q2. You mentioned seasonality in TV licensing, maybe just remind us how the seasonality and the profitability works in that business on a go-forward basis?

Yes, its seasonality in the consumer products licensing business. So, as you know, our revenue recognition in Q1 reflects actual holiday sales in Q4, so we received payments from our licensees in Q1, that's when we recognized revenue. So if you look at last year, for example, there was an $8 million or $9 million sequential decline between Q1 and Q2 in the licensing business, and so that's just part of our business model.

Okay, and you talked about, obviously as part of your sort of five pillars growth -- a expanding distribution platforms. Maybe just talk about any examples you might have of those opportunities that we've not yet tapped as we think about going forward?

Sure. I mean, look, I think it's important now that we launched, as you remember, on the majority of the core platforms, the gaming consoles, the major streaming boxes like Apple TV and Roku, iOS, Android, but we continue to add, since launch we've added Fire TV, we've added some of the smart CE devices, for example from Samsung, and so we'll continue to add that. Android TV obviously is something that's on our road map that we're looking at, Chromecast on the smart CE devices, you could launch with the manufacturer, but you have to develop for different model years because they don't all use the same software. So we've now reached a point where we've got to really evaluate the long tail of these platforms and decide whether it makes sense to develop on them because each level of development is obviously time and money. But we still think there's a few platforms we want to be on. And so we're closely watching things like Android TV and Chromecast.

And then obviously adding content, increasing compelling content on the network like Seth Green and Jerry Springer and the expanded Diva shows, how much in terms of sort of fixed investment do you expect to add this year?

Yeah, I mean, what we've said on Q4, and we still feel the same way that when you look at the total cost factor of the network in 2014, we expect it to be right around the same as this year. So last year was about $115 million or so, total cost all in across all the major components. And I think we'll be within plus or minus 10% of that this year.

Got it. And lastly, any consideration or increased considerations to either adding or expanding advertising model around the network at this stage?

Yeah, we're going to keep working that. I don't think its material, it'll be material in 2015. We had a great integration, as you know, WrestleMania with Paramount in the Terminator movie. So I think there's a lot of cool things we can do. We're going to continue to evolve that. But from a pure financial performance, I wouldn't expect any real financial, material financial upside in 2015.

All right, thanks again.

Thank you. Laura Martin, Needham.

Hi, couple for Vince and a housekeeping for George. Vince, let's see yours first. The first thing I'm really interested in learning from you is pricing strategy. So for a long time, you always distinguish between the different priorities of content on your pay-per-view platform, and now we've gone to $10 a month regardless of whether that month has WrestleMania or whether that month has sort of a secondary kind of content (inaudible). And I get that the industry leader is Netflix, but 99% of their content really doesn't change month to month, yours really does. So my question is, given the numbers we have now to WrestleMania, do you feel any inclination to go back to more of a tiered pricing structure based on what content is in a particular month and if not, why not? And let's just start with that one.

Laura, I think we're looking at all this, you will have a starting point and we have, that's not to say we can't change the pricing, if it were WrestleMania or SummerSlam or things of that nature, we could change that pricing. We're trying to look for more consistency than anything else and trying to keep the viewer interested all year long as opposed to just cherry picking and things of that nature, in and out. But again, we are looking at all of this financial information in terms of how we want to adapt, and we are a very adaptive Company, we do it very flexibly we can move very quickly. But at this juncture, we're not pricing our pay-per-views differently, it's not to say that we won't in the future Laura.

Okay. Excellent. And then, Vince, the other thing I thought, I was very interested in your prepared remarks, you talked about, you said social media had 484 million like social media interactions and you said that was very important, and I just would be really interested in learning, tell me -- you are the best businessman of anyone I covered, tell me those words very important to you, how do that pull into the economics, all of those social media interactions in your mind.

Well, it's a land grab out there. And it's important to grab as much as you can now because, again it will stay with you going forward. Social media is a part of all programs, maybe a television or what have you, and it's extremely important because it engages the audience in so many different ways, and we have the flexibility to be able to attract audiences from every form of show business, every form of sports integrated into what we do. We are sort of a hub and the only hub that really can accommodate all these different forms of entertainment. So going forward, what we've done in the past has been, I would say, decent to good, maybe even a little bit better than good, but going forward, social media, you have to marry that with everything that we have, and it's important to do that. It's not just about a television rating, simple television rating. Advertisers are not interested in just a simple television rating. You know it's reaching out (inaudible) engagement is extremely important, so with our programming and everything we do can be engaging. So it's not just an experience, it is one that, it's immersive and it's so important for us to do that, and I think that other people will attempt to catch you on down the line.

Very helpful. And just last one for George on housekeeping. So it looks like, you, I think you said you did 259,000 pay-per-view, you had announced the 1.3 million subs are streaming. So that gets me to 1.559 million. And then, I thought you said in your prepared remarks there was a 1.6 million viewers of WrestleMania, so I'm missing like 40,000, did I do the math?

Yes, its the, 1.327 million is the number actually of the network subs, plus the 259,000, plus there is roughly 15,000 or so pay-per-view buys in Canada that are not -- that are covered in a different type of economic model. We don't recognize them as pay-per-view revenues. So if you add all that you're right around 1.6 million.

Okay. That's perfect, and the average revenue on that 259,000 pay-per-view to you is about $30 per buy. Right?

Yes. It's a little bit less, the ARPU is little bit less now because of the mix. So, we -- that 259,00 was weighted towards international, about 60-40 or so, which is different than it used to be. So the ARPU is down a little bit.

Okay, cool. Thank you very much, very helpful. Thanks guys.

Brandon Ross, BTIG.

Good morning, thanks for taking the question. One of the good things about owning your own network is that you have solid data on your subscribers. Can you speak to the demographics of the current subscriber base on the network and compare that to your overall fan base, both in terms of age and income? As streaming becomes more widespread to older and less wealthy demos do you expect that to be a big tailwind for you guys?

Yes. I mean if we start with -- I'll use the US just because obviously this goes kind of around the world. The demos in the US from an age standpoint kind of tends to mimic the age of the population which as you know, Brandon, is because we're a multigenerational viewing content, that's the way people view our content. So about 40% or so of our viewers -- program are under the age of 34. To your question around the network, yes it skews younger. The network right now is skewing younger. As far as income, I want to stay away from that just because it is a little bit harder to get that data on the network, but it definitely is skewing younger. And Vince's point about social media and the land grab, that's also part of the strategy as you know millennials and youger, YouTube and other social platforms are key ways that they consume content. So that's critically important as we move forward.

Thanks for taking the question.

Jamie Clement, Macquarie.

Good morning. George, two questions. First on television, and then the second on guidance. You know, in the first quarter, you were up almost $18 million year-over-year in television revenue, more like maybe $15 million if you kind of pick the middle of 2014 when you announced the new rights fee deals. I had been under the impression that you were going to get less of a bump from 2014 to 2015 from the new rights fee deal. Can you talk us through these numbers a little bit? Like in other words, I mean, on an annualized basis, I mean, you're maybe winding up $60 million year-over-year.Is that part of that $105 million between 2014 and 2018? Are you getting more of it upfront than we thought? Like, can you talk us through some of that?

Yeah, so as you know, we said 2018 revenues for those seven major deals should be around $100 million greater than 2014 which you mentioned. We haven't really given an explicit breakout on how that goes year-to-year. We have said that usually that first year has a little bit bigger bump, it's not completely linear, that's general question on those [seven] contracts. In the first quarter, when we do license shows like Divas, they have a -- the revenue impact is greater than the profit impact, so the margin on producing a show like Divas is much smaller than the margin of an escalating contract which is close to 100%. And so in the quarter, we also had seven more shows of Divas. So, that itself drives a revenue variance of $5 million or so, but doesn't translate the same way to elevate that as the increases in the rights fees.

Should this be -- for modeling purposes, should this be a number of that you did kind of expect to see Q2, Q3, Q4, is there other seasonality or timing stuff that we kind of need to be aware of?

It'll depend, so we're not going to get into line item guidance, that's why we've given the OIBDA table, but it will depend on time when we do license shows. So for example, we'll be doing Tough Enough in June, not a Q2 event. The event will be in July, so that's a Q3 event. So right now, we don't have that Diva-like bump on a year-over-year basis. So it all, as Vince said, we move very quickly and we're very flexible so it's hard for us -- for me to give guidance on exactly when things like that will manifest themselves.

Understood. And moving on to guidance, I would have thought with the heavy expenses of WrestleMania that are presumably captured in Q1, with more subs in your table, the corresponding OIBDA numbers would have been higher without the WrestleMania cost. Is it, I mean, is really the offset, the incremental pay-per-view buys that you get in Q1 versus Q2, that kind offsets those costs, is that the right way to think about it or are you being (inaudible)?

No. that's a little bit. It's really more of the items I mentioned in the remarks, so our licensing business, sequentially last year declined by $8 million to $9 million. So there's seasonality there, and we expect a decline in the Q2, so that's a big chunk of the Q1 to Q2. The second is, we'll do our live event tour internationally including television internationally, so the costs are a little bit higher, so that's also a seasonal element. And then some of the costs that we delayed in Q1, we've moved into Q2. So those are really the three big drivers of the sequential decline.

Brad Safalow, PAA.

Thanks for taking my questions. I just wanted to delve in a little bit on the churn side. I guess churn in the first quarter is maybe higher than, some people might have expected given you have your most popular content, you had WrestleMania, you had the Royal Rumble. What have you learned incrementally about the sources of churn at this point?

I don't know that we've learnt anything, Brad, about the sources of churn. I think, what we're working on is the different types of marketing messages, the different types of content that we can provide to minimize, I think, as Vince mentioned, we trained for a long, long time our audience to come in and now they can choose events. I think we've done a pretty good job of breaking that for a big chunk of people, but I think for -- we'll still have to keep working on that. I think the way we get there is the combination of really compelling content. I don't know if you've seen the first episode of Too Hot for TV, Love Hurts, pretty good. I think if you saw it, if you'd looked at it, you'd say, yes, I get what he means by that. But we got to keep doing that kind of compelling content that drives the stickiness of the subscriber. And then on the other end, we'll get better and better on the retention as well as reactivation of inactive subscribers. So, it's less about the source, it's more about content, messaging to our subs.

Okay, looking at it another way, what percentage of subs from last year's WrestleMania are still active?

Yes, that data, we haven't published that data.

Okay. Then separately on the network, any updates on the geographic expansion?

Yes, as we mentioned, we knocked off the UK, we broadened the Canada, we did the Middle East and North Africa, and so there's not a lot of countries left and there are some big ones obviously and ones that are important to us and we continue to work on those. Obviously China, India, Germany, Italy and like we've done with the other countries as we said before we'll continue working on those and then we'll announce them when deals get done or launch points get set.

Any countries that will be launched in your expectation this year, you don't have to say them, just (technical difficulty).

Yes, it's hard to tell. These things can move pretty quick. So, my guess is for all the countries that are left here over the next 12 months to 18 months, we'll have announced our plans. Is it possible something happens this year? It's possible.

Okay. I'm going to keep asking this question till you guys are done with this project, but I know you're working on getting better data on your consumer base across your various platforms. Do you have any sense at this point in the overlap between your network subscriber base, your YouTube sub-base, those who have purchased something through wwe.com, those who attend your events, this large consumer ecosystem and really what should be a fairly synergistic CRM effort on your part?

It is, yes, I know you'd ask it. I'm not going to give you all the details, but yes, everyday we're matching up more and more information. I think the journey for us, like a lot of media companies, is the unique identifier of IDs across all those platforms or algorithms to make judgments, right, because as an example, our YouTube -- we're the number one sports channel on YouTube. We'll do 4 billion to 5 billion views this year on that platform. But, we don't have the unique ID to match with a network subscriber, right, so we don't get that information from YouTube. So the way people are dealing with that is building algorithms where you kind of classify groups of viewership behavior. That hopefully gets you enough information to do some of the CRM you're talking about, but yet you're absolutely right. We know more today than we've ever known. It's manifesting itself in the day-to-day and there's still lot more work for us to do there.

(Operator Instructions) Mike Hickey, Benchmark Company

Hey guys, thanks. Great quarter.

Thanks, Mike.

Thanks for taking my questions. Just this is sort of an outlier but curious back on the social media. I know your Facebook presence for the network continues to drive pretty good engagement, from what I can tell 5.2 million likes. I'm curious how you guys see the relationship there between social media engagements in terms of likes for your network over your potential networks total addressable market. I mean it seems on the surface here that if I like the network engaged with the content online that theoretically would be a potential subscriber, but any insight there you could provide would be helpful?

Yeah, I'll go back to -- I know you are asking a very precise question on the number of likes on the Facebook network page, and you referenced a number. I think Vince's point about when Laura asked the question, why you guys -- so why do you think it's so important. Well we think it's really, really important because it's a way to engage and activate our consumers around the world, and probably the most effective way possible. So that's the way people are spending their time. So social for us around all our businesses and for the network, massive opportunity. I'll say, I think we're just scratching the surface on utilizing that platform to drive -- specifically your question to drive subscriber growth. We're doing things on there, we are doing good things, but I think we're just scratching the surface.

Yeah, fair enough. we just saw Cablevision do a deal up here with Hulu, I think it's the first for them as they sort of target cord cutters specifically. I know you have your deal already with Rogers, but curious how you view the opportunity to get domestically working with cable providers for a similar distribution deal for your network? And I have a follow-up, one more follow-up. Thanks.

Yeah, it's interesting. 14 months ago when we launched WWE Network, we were kind of outliers in going direct to consumer and it's interesting how much the world has changed in the last 14 months or 15 months. So yes, the Hulu deal with Cablevision is interesting. I believe Netflix has a similar deal with them. So we talk to everyone and if we think it's the right thing to do, we will make a commercial transaction. And we've been very flexible, I mean, you mentioned Rogers, so the model in Canada is different than the model in most other places around the world. The model in the Middle East and North Africa is probably more similar to the Canadian model. So we're very comfortable kind of having "WWE Network" take different forms if it makes sense.

Thank you. Last question for me guys. Thinking about international growth opportunity for the network and maybe focusing on the East or I guess China here, curious how you view the potential of working with (inaudible) strategic regional partner for product distribution, like Tencent per se could complement your efforts, I guess at driving that international growth which appears on the surface to be huge for you guys.

Yeah, I mean, obviously our strategy in China over the last seven years or so has mimicked our strategy around the world which is establish a TV presence, and that becomes the beachhead that then allows you to expand. Obviously, China is a unique country. The regulatory framework and so on, means you go at a slow pace. I would say over the last 12 months to 18 months, there's been a fairly sizeable pivot in both the kind of the digital presence in China and also have those big players, you mentioned Tencent, but there are others, how they're viewing original content, including original Western content. And there is a bunch of examples that have popped up over the last six months to 12 months. So, what I'd say about China is that we are currently really, really looking at re-evaluating our approach and seeing if there is a way for us to move a little quicker, maybe in a slightly different way.

All right. Thanks guys. Best of luck.

(Operator Instructions) Jamie Clement, Macquarie.

Hey, George, follow-up on three-month samples, technologically do you have a way of preventing people from, for example, just turning off in April and signing up for free in May or is that just sort of part of the game that that's going to happen and fall through the cracks here and there and its something you can live with.

Yes. So, obviously as you saw in the release, we've extended our month free promotion into May. And then to your question, yes, there are ways that we can manage it, obviously they're never perfect. So, you live with some of that kind of the leakage that you are mentioning, but there are tools that you use to try to manage that.

Okay, very good. Thank you.

At this time, we have no further questions. Mr. Weitz, I'd like to turn the call back to you for any additional or closing remarks.

Well. Thank you very much. We appreciate all of our investors and analysts listening to the call today. Please contact us, if you have any questions. Thank you.

This does conclude today's presentation. We thank you for your participation.