TKO Group Holdings Inc (TKO) 2017 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.

(Operator Instructions)

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

Please go ahead, sir.

: Thank you, and good morning, everyone.

Welcome to WWE's First Quarter 2017 Earnings Conference Call.

Leading today's discussion are Vince McMahon, our Chairman and CEO; George Barrios, our Chief Strategy and Financial Officer; and Michelle Wilson, our Chief Revenue and Marketing 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/investors.

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.

Finally, as a reminder, today's conference call is being recorded and a replay will be available on our website later today.

At this time, it is my privilege to turn the call over to Vince.

:

Good morning, everyone.

As you obviously see, we've delivered pretty strong revenue growth of 10% and that, of course, is due to our Live Events as well as network and television businesses, generally speaking.

And speaking of Live Event attendance, that's always been one of my barometers since Day 1. And we've increased our attendance by over 100,000 in the quarter compared to last year, which is pretty amazing, 91 events as compared to 72.

Another barometer, of course, as you know, I always use is our -- the content in terms of our social media as well as digital.

Our content had more than 4 billion video views on social and digital combined platforms for the first quarter, up 8%.

And it continues to be, as you know, for many, many years now, we've been trying to be a part of that land grab.

I'm happy to say we're still grabbing and holding onto ours, and it looks well.

Social media itself, 774 million followers, that's up 23%, which is extraordinary and speaks to the power of the brand and the health of the brand ongoing.

And many of you know, the WrestleMania results were excellent in terms of all aspects.

And as far as our Monday Night Raw and SmackDown television shows are concerned, they continue to hold their own and do better than that.

And generally speaking, we're -- with a network averaging 1.49 million paid subscribers over the quarter, that's 16% above 2016.

And right at WrestleMania, right after 1.95 million subs, we just missed 2 million, which we were hoping for.

But nonetheless, the business is very, very healthy, and bodes well for the future.

:

Thanks, Vince.

There's several key topics we like to review today.

This includes management discussion of our financial performance, the progress of key strategic initiatives and our business outlook.

For the first quarter, our adjusted OIBDA of $18.6 million was within the range of our revised guidance that was provided on April 3, 2017.

As a reminder, we revised our original guidance to reflect an increase in stock compensation expense that was driven by the rise of our stock price during the first quarter.

Additionally, the revision reflected the timing of other results.

As previously indicated, we anticipate that these timing elements will reverse over the coming months, and we're maintaining our full year adjusted OIBDA target of $100 million, which would be an all-time record.

To review our performance in the quarter, let's turn to Page 5 of the presentation, which shows the revenue, operating income and adjusted OIBDA contribution by business as compared to the prior year quarter.

Our reported operating income reflects nonrecurring items that impact comparability on a year-over-year basis.

These included $5.6 million in expenses primarily related to certain legal matters and other contractual obligations and $2.1 million in film impairment charges.

As such, our discussion will describe our performance on the basis that excludes these items, focusing on adjusted OIBDA.

As shown in the presentation, revenue increased 10% to just over $188 million, with growth driven by the performance of our Live Events, Network and Television segments.

The growth in revenue, however, did not translate into increased profit as our top line growth was offset by the timing of expenses in our Corporate and Other and Network segments, and the impact of increased stock compensation expense across all segments.

These factors contributed to the quarter's $9.1 million decline in adjusted OIBDA.

On an adjusted basis, Corporate and Other expenses increased $11.2 million, reflecting $2.2 million of the aforementioned increase in stock compensation expense, as well as the timing of key strategic initiatives.

Importantly, over the remainder of the year, we expect lower corporate and Other expenses than in the comparable 9-month period of 2016.

Obviously, excluding the impact of increased incentive compensation due to company over performance with stock price appreciation.

As shown on Page 6, Network segment OIBDA declined $1.5 million as growth in subscription revenue was offset by the timing of higher expenses within the quarter to produce live, in ring and reality programming, including our U.K. Championship Tournament and the series Holy Foley.

For the full year, we continue to expect that the network's programming expenses will be essentially flat to 2016.

During the quarter, network revenue increased $6.2 million with growth in subscription revenues to $43.7 million as the network's average paid subscribers increased 16% to $1.49 million (sic) [1.49 million].

We continue to increase the global distribution of WWE Network.

As measured on a year-over-year basis, the network had 1.57 million paid subscribers at quarter end, including 1.16 million paid U.S. subscribers and 409,000 paid international subscribers.

Partially offsetting the decline in profit as just described was the performance of our Live Events and Television segments.

OIBDA from the Licensing and Television content increased $2.5 million, reflecting higher right fees in our key distribution agreements.

As shown on Page 7, OIBDA from our Live Events increased $2 million based on a 27% increase in revenue of $6.8 million.

The growth was primarily due to our performance in North America, where we held 19 additional events, and as Vince mentioned, increased our total events in North America by over 100,000 from the prior year quarter.

All of this while achieving a 7% increase in our average effective ticket price to over $51.

In terms of WWE's overall performance, changes in other business segments were largely offsetting, and as such didn't have a material impact on consolidated results.

Page 9 of the presentation shows selected elements of our capital structure.

As of March 31, 2017, we held approximately $270 million in cash and short-term investments that reflected the proceeds of the company's convertible note financing.

Additionally, we estimate that WWE has approximately $100 million in debt capacity under the company's revolving credit facility.

Importantly, we believe this capital structure enhances our ability to execute our long-term growth strategy.

Our free cash flow improved approximately $4 million from the prior year quarter.

Favorable changes in CapEx in working capital requirements offset lower operating performance.

I'll turn the call over to Michelle to provide some additional perspective on the quarter's performance.

:

Thanks, George.

Our first quarter reflected some important operational achievements, including: the robust consumption of our video content across all platforms; the sustained year-over-year growth of WWE Network; and the recent record-breaking attraction of WrestleMania.

During the quarter, WWE content had more than 4 billion video views across our network, digital and social platforms.

WWE Network averaged 1.49 million paid subscribers, which was in line with our guidance and represented a 16% increase from the first quarter last year.

We produced more than 75 hours of original content for WWE Network.

This included: the continued production of our new weekly series, 205 Live, which brings more live In Ring content to our most ardent fans; and the U.K. Championship Tournament in January that features a roster of local talent to further engage our global audience.

Over the coming months, we expect to debut other captivating original programming on WWE Network such as new episodes of WWE 24 that will take viewers on a journey through a day in the life of WWE's most intriguing superstars; and an all-new, action-packed women's tournament that will feature 32 athletes from around the world.

On television, we continued the sixth season of Total Divas, which airs on the E!

network and our flagship television programs, Raw and SmackDown, maintained their dominant positions as the highest rated prime time programs on U.S.A.

Network.

On social and digital platforms, our YouTube channel, UpUpDownDown, surpassed 1 million subscribers, reaching Gold Play Button status.

And our recently launched [fellows] channel exceeded 500,000 subscribers.

As an added proof of the compelling nature of our content, WrestleMania set the attendance record at the Orlando Citrus Bowl and achieved new heights in terms of viewership and social media activity while WWE Network reached 1.95 million total subscribers who watched 22.5 million hours of content during the week of WrestleMania.

That's an average of about 13 hours per subscriber.

WrestleMania also accounted for more than 30% of all social TV interactions on Sunday, April 2, surpassing the Country Music Awards, The Walking Dead Season Finale and Major League Baseball's opening day.

The power of our brands to engage a broad global audience on multiple platforms has attracted an increasing level of Blue Chip sponsors over the past 12 months.

We have completed integrated deals with KFC, Cricket Wireless and Nestlé, and of course, Mars/Snickers who was the presenting sponsor of WrestleMania for the second consecutive year.

All of these partners took advantage of our reach across all of our platforms.

The development of new video content and its increasing value to advertisers represents critical strategic initiatives for WWE.

The outcomes that I described represent just a few of the examples of the increasing strength of our brands, and our potential to capitalize on these strengths to drive long-term growth.

I'll turn the call back to George to discuss our growth expectations.

:

Thanks, Michelle.

Looking at the second quarter.

Based on the performance of subscribers following WrestleMania, we're raising the low-end of our projected range of subscribers for the second quarter.

Specifically, we now project average paid subscribers of at least 1.63 million for the upcoming quarter.

We also estimate second quarter 2017 adjusted OIBDA of approximately $13 million to $17 million.

This range represents an expected year-over-year increase that can be attributed to 3 primary factors: Continued revenue growth, driven by the growth of WWE Network subscribers and contractual escalation of different television rights fees; year-over-year reduction in network programming expenses due to the timing I mentioned before; and more favorable year-over-year comparisons and other fixed costs, also due to the timing I mentioned before.

Now for the full year 2017.

Achieving this range of second quarter financial performance that I just mentioned would result in adjusted OIBDA for the first half of 2017 that's essentially flat to the first half of last year.

In contrast to this outcome, we anticipate significant year-over-year adjusted OIBDA growth over the second half of 2017 from continued revenue growth and more favorable year-over-year comparisons in our fixed cost base.

Specifically, this includes continued year-over-year growth in WWE Network subscriber levels, contractual increases in television rights fees and lower production costs in professional fees.

Based on these factors, we continue to target record financial results for 2017 with adjusted OIBDA of $100 million.

Over the remainder of the year, we're going to continue to focus on creating new content across all our platforms, strengthening our engagement with a broadening audience and continue to support our digital and direct-to-consumer transformation.

As we continue to transform our business, we continue to expect to achieve record revenue, record adjusted OIBDA and record subscriber levels.

That concludes this portion of the call.

And now, I'll turn it back to Michael.

:

Deanna, please open the lines to questions.

:

(Operator Instructions) We'll go first to Brandon Ross with BTIG.

:

First question is for Michelle, since we have you on the call now.

It seems like you took a more data-intensive approach in marketing the network this year in customizing offers, especially for WrestleMania.

You have a lot of data on your customers compared to, I'd say, most other entertainment businesses.

Can you talk about some of the other opportunities you see to leverage that data in the future?

And -- go ahead yes, and then I'll follow up.

:

To your point, Brandon, we've obviously have built a strong muscle around data analytics internally, and believe that we are ahead of our counterparts in this regard.

Obviously, to your point, leveraging that data to do specific offers on both -- on the win back front, which we think is tremendous opportunity.

I think the other side of that and how else we are looking at it is the engagement level and the key on how we continue to retain these subscribers over time.

So again, our customized marketing, as you know, it's the right message to the right consumer at the right time; and the analytics are really allowing us to capitalize that, not only on targeted commercial offers for win back and prospects, but also keeping those subscribers engaged.

So custom messaging on: what other programming to watch; new programming that's coming; what that subscriber is tending to watch.

So again, really customized marketing is our goal on a one-to-one basis.

:

I noticed that I think by my calculations churn came down at the network over 100 basis points for the second quarter in a row.

Do you think your data analytics played a role in that or...

:

Yes, Brandon, there's a couple of things.

It's impact of what Michelle mentioned, kind of at the cohort level.

And then as we've mentioned before, in any subscription business, as long as you're bringing new subscribers, time is your friend because the duration of the subscriber base keeps increasing, which drives down the average churn.

You get both the improvement of the cohort level, but you can't lose fact of the time -- of the fact that just as the duration of the subscriber base increases, that's an incredibly powerful driver of reducing the average churn in any period.

:

Right, got it.

And then in your press release, you mentioned extending your reach in China and India.

Could you give us an update on your initiatives in those markets?

And do you think bringing the network to China is actually a possibility?

And then I have one more after.

:

Yes, I mean, we've been working real hard on the e-commerce front, so we mentioned about the partnership in both China and India.

And obviously, WrestleMania, which is a core part of the programming on the network, was made available in China for the first time on a paid basis, both in English and in Mandarin.

And an interesting fact, as everybody on the call knows, Vince launched the first pay-per-view in the United States.

WrestleMania was the first sporting event offered on pay-per-view in China, so we've knocked 2 countries off the list.

:

Great.

And then just more on the quarter.

Any more details on the one timers?

Are there outstanding legal issues now after, I guess, this onetime charge?

Or does that put it to bed?

And you mentioned other contractual obligations as a onetime hit.

Can you explain a little more about that?

:

There's a couple of things.

So obviously, we can't predict the future.

It's unknowable.

The items in question are subject to confidentiality agreements, but we can say it has nothing to do with any pending legal matters that the company has.

But other than that, we're not going to comment on it.

:

We'll take our next question from Daniel Moore of CJS Securities.

:

It's actually Lee Jagoda for Dan.

So just looking at the TV contract, can you remind of the next renewal date for your TV contract as it relates to Raw and SmackDown?

And when you might start the process of negotiating or reviewing that contract?

:

Yes, our domestic, we've mentioned before, the domestic deal expires at the end of the third quarter of 2019, and our 2 other largest deals in the U.K. and India expire 3 months later at the end of '19.

We have not been public on the negotiating timeline and we're not going to be.

:

Okay.

And any update around -- as it relates to the network around tiering the plans for various people and options?

:

We continue to research that and evaluate it.

No specific timing that we're ready to announce yet.

:

And last one for me.

As it relates to the free trials, are you seeing stronger and longer conversion rates from those free trials or any other color around that?

:

Yes, we continue, again, as we've said in previous calls, the free trials continues to be a terrific way to bring in those who are considering the network.

And again, we've seen the conversion rates remain the same as they have been historically.

:

We'll go next to Eric Handler of MKM Partners.

:

Two questions.

First, you've had a number of announcements in the last month with various regions throughout the world, and I'm curious how you are -- how would you prioritize or rank your near-term opportunities to monetize the various regions?

And secondly, it was, I guess, teased in the 205 Live early in the month, last month that there is going to be a weekly WWE U.K. show.

Any update on when that might occur?

And I'm assuming that's going to be on the network.

:

Yes.

On the first one, Eric, kind of double-edged sword for WWE is that the brand has such global scale and is so popular in so many regions that, that prioritization is a key part of what we have to do.

And we've said it before, India today is our third largest market in terms of revenue.

It's one -- it's our largest market on a weekly basis on traditional TV, and it's our second largest market on digital.

It's got a $1.7 trillion GDP that's growing somewhere between 8% to 10% a year.

So we've been public before.

We've got a hell of a head start in India, and we think there's a lot of tailwinds for us.

So that's an incredible opportunity over the long term.

And similarly, really strong in the Middle East, really strong in Latin America and with a great cash flow business in the U.K. and elsewhere in Western Europe.

So we've got a lot of opportunities, but those markets as I just mentioned are ones we're really strongly focused on.

:

Great.

And on your second question regarding the U.K. weekly show, as we mentioned in the comments, the U.K. Championship Tournament in January was a large success for us, not only locally, but obviously, aired in local prime time but was viewed by our subscribers around the world.

So again, a tremendous success for us.

So we are looking at a U.K. weekly show.

Most of you may know, we're headed to the U.K. this weekend.

And obviously, continue -- Paul Levesque and his team continue to look at local talent and the opportunity there to produce content.

So nothing yet to announce, but absolutely on our development schedule.

And I mentioned also in the comments that one of the other things that Paul and his team are working on in the near term is a women's tournament.

So again, our focus right now is getting that 32 women tournament up and running and debuting on the network sometime in third quarter.

So that is coming as well.

:

We'll take our next question from Jason Bazinet from Citi.

:

So as I've chatted with a number of investors that are maybe less enthusiastic about your story than I am, it seems like they're all very focused on the number of paid subs at the WWE Network being a lot lower, ultimately, than where sell-side estimates are.

And what's interesting to me about that is at least when I go through the numbers, it seems like you're sort of gliding toward something in the mid-1.7s for paying subs.

So I'm just wondering if you just take a second and sort of remind us what your long-term subscriber aspirations are.

And then what are the sort of mile markers over the next few years that you think could cause that sub number to change in its current trajectory, which seems like it sort of gliding toward something in the 1.8 range when all is said and done.

:

Yes, so I'll provide a little bit of context and then get specific to the question.

So Context #1: As you know, Jason, about 2/3 of the business today is media monetization, the remaining 1/3 is selling products and tickets.

That 2/3 monetization of media is what Vince, Michelle and I always talk about, it's those 3 platforms: it's our direct-to-consumer platform; it's the digital and social third-party platform; and it's traditional pay-TV.

And our strategy has always been to be really, really strong on all 3. And so as the media sector evolves, we'll go where it's best for the WWE brand to go and we'll control our own destiny, if we will.

So I think that's important context.

The second piece of important context, as we talk about the network today as a direct-to-consumer video service, Brandon touched on it.

We now have a stronger relationship with our most passionate fans than we've ever had before because of that connection.

And we're able to serve them in ways that we've never been able to serve them before.

Over time, we believe the video service will expand to include the entire WWE ecosystem.

So it won't just be direct-to-consumer for video content, it'll be direct-to-consumer for all of WWE.

So that to us is really, really strategically important.

And then when you get to mile markers, we still think over the long arc of time, we can get to 3 million to 4 million subscribers in the network.

And as long as we're growing year-over-year, we feel good about the progress.

:

Okay.

Are there any sort of specific things that you think would cause the number to inflect?

In other words, like changes in the type of spending you're doing or marketing in international markets or changing the type of content internationally?

:

Yes, I always say it's kind of instructive to look at the history of other subscriber businesses.

I think a lot of them have now been around for a long time, so you kind of see these steady state businesses.

But if you go back in time, what you see is nobody got to their ultimate subscriber level, and I'm talking about music, video, Software-as-a-Service, you pick the subscriber business.

They don't just go to their ultimate steady-state immediately.

It actually takes quite a bit of time to get there.

Netflix is a great example, right?

They said they think they could get to, over long arc of time, 60 million to 90 million subs in the U.S. They're about 6 years in, and they're about 2/3 to the low end of that range.

And they keep growing year-over-year.

So we got to take that long view, and we're not going to get caught up in this quarter, next quarter, last quarter.

As long as we're growing and deepening that relationship, we think the economics are powerful, and we think there are economics that we haven't envisioned yet.

It gets -- got back to what Michelle was talking about, the data, as we get smarter and smarter and connect more and more, we think there's economics to unlock that we don't even know yet.

:

We'll go next to Laura Martin with Needham & Company.

So I'm hoping Vince would address this issue.

We're under margin pressure where revenue's growing faster than we hoped, but EBIT's not.

And what we're writing is that we think that you guys are doing a good job expanding the TAM, so a lot of this money is to invest in going international or bringing in women to the wrestling world or going younger with NXT.

And I guess, what I'm really interested in hearing from Vince is, Vince, are we just making that up?

Are you really trying to expand the TAM or are you trying to drive deeper engagement with the clients you already have and more money out of these super fans that you already have?

I'm interested in that from you.

:

So it's important that we grow in every conceivable way, whether or not it appears as though it's a direct correlation or not.

And again, through Stephanie's efforts and Michelle and head corporately, there's a huge effort on our part to grow our base, and you can start growing the base, and continue to grow the base.

As far as women is concerned, again, they're gatekeepers many times to programming and what have you and the likes of whether or not they enjoy the brand.

There's an initiative now and has been for a while, but initiative is everyone is trying to get to the younger audience.

One of our secrets, of course, has been generation after generation.

So again, we continue to broaden our platforms on an overall basis.

At the same time as Michelle and George were talking about, we can capitalize on the data that we do have with our current super fans.

So you have to grow, and we're looking at all of those areas and continue to invest in all of those areas, whether it's direct, okay, we're going to invest $1 here, it comes right back to us tomorrow.

That's not necessarily our point of view.

We have a long-term point of view.

We try to get as many different areas, many different demos and what have you as we possibly can, whether it's through CR initiative, whether or not it's consumer interest or direct back to backs.

There are many different ways that we're doing it.

But generally speaking, it's a broader audience.

:

And Laura, just the fine point on the quarter and the margin expansion specifically, I don't want to lose track of the sight of the timing.

The translation wasn't in the first quarter because of that timing.

Over the next following 9 months in total, especially the second half of the year, you'll see much greater translation, we expect.

So I don't want to lose that as well.

:

Okay.

Let's stay on cost for a second and margins, George.

I'm very interested specifically in cost items for the model and are you going to have to sort of expand the Performance Center?

And how much are you guys spending on localization of your programming into individual markets?

:

Yes, so a little thing -- a separate point just to keep in mind.

If you look at last year, especially in the Corporate and Other line, where a lot of the cost you just mentioned actually live, things like our Performance Center.

First quarter last year was about $41 million.

This year, it's $57 million reported, about $52 million adjusted.

So you have the lowest corporate other last year in the first quarter in the year.

And this year, we think the first quarter is going to be the highest.

So that timing issue is really driving a lot of that.

Then to your specific question, obviously, we're not going to itemize every area, but we've talked about it a lot.

We're going to continue to invest in creating content, especially more local content.

We think the opportunity there is incredibly important.

We talked about some of the priority markets, and we think there's a real opportunity there to do that.

We're going to keep investing on the tech and data side.

As Vince mentioned, as we get more digital, more direct-to-consumer, that becomes now a core part of our infrastructure.

So we're going to keep investing in those areas: Content, regions and data and technology.

And we think the long term is pretty bright for us.

:

We'll go next to Curry Baker with Guggenheim Securities.

:

This is related to your TV ratings.

In aggregate between Raw and SmackDown, you're outperforming both the USA Network and cable networks in general, both in the first quarter and the past couple quarters.

However, Raw ratings have been fairly consistently down year-over-year for the past few quarters.

Can you share why you think Raw ratings have been down, especially given the strong growth of SmackDown?

And what are you currently doing and what do you think you still need to do to improve Raw ratings going forward, especially heading into the 2019 renewal negotiations with NBCU?

:

Yes, Curry.

And again, as context, we produce between Raw and SmackDown 260 hours of live content.

And we -- you focused specifically on the U.S. In the U.S. we're one of the largest purveyors of quantity of live content as also in the quantity of live viewership, right.

We average about 3 million viewers per those 250 hours, so you're at almost 800 million hours consumed over a 12-month period.

We have great talent.

They're split amongst these 2 great brands.

From time to time, one may be doing a little bit better than the other, but back to Vince's point about the long term, we don't worry so much about this month or this quarter.

If over time, we're driving that level of engagement especially relative to our peers on the platform, we're excited.

But we're excited about the storylines on Raw, and we're excited about the storylines in SmackDown.

:

(Operator Instructions) We'll go next to Michael Hickey with The Benchmark Company.

:

Curious on your social media.

Obviously, it's an important, I guess, barometer, Vince, you said in terms of the strength of your business.

But I'm also curious if you think at some level it could be cannibalistic to your TV network segments?

Purely anecdotal, but my 9-year-old, I mean she's a huge fan of WWE, but she primarily watches it all through YouTube.

We don't have TV, cord cutting, obviously, is a trend that has grown significantly and trying to get her to turn on the network seems impossible.

So I'm sort of wondering how we should think about sort of kids today that have changed their media consumption patterns and seemingly are finding a wealth of content on social media versus perhaps on the surface, seem like better monetization efforts through the TV and network.

And I have a couple follow-ups.

:

Great.

So I'll take that one.

As Vince mentioned with the next generation, I think our strategy on social and digital is that absolutely, we have to be there.

Vince mentioned it as a land grab, not only for monetization in the long term, but also bringing in those new consumers.

So you mentioned your 9-year-old daughter, we know that, that's where they're discovering brands and where they become attached to brands.

So they're not necessarily turning on the TV.

For us, that's absolutely imperative to our growth.

And at 9 years old, she's watching it on YouTube.

At some point, she'll be engaged in long form content.

Who knows where that will live in the long term, but we still see that as a strategic imperative to bring them in.

So again, we don't worry about the kind of, is it cannibalizing or not, we really see it as a rising tide and that you have to be there to grow the brand long term.

So that's our view on it.

And as George mentioned, we think all parts of the ecosystem are important, the digital and social, bringing in the next generation, ultimately moving them to long form on pay TV and then, obviously, up to our direct-to-consumer WWE Network.

So in our view, it all works in concert.

:

Okay.

So Michelle, just to clarify, you think there's sort of a bridge between kids today consuming social media as their primary content for -- or window for WWE?

You think there's a bridge eventually to TV, is that correct?

:

I wouldn't necessarily say that, that's a clear path.

I think there's a -- if our crystal balls were clear, we could tell you the exact path.

I think our priority is to bring them into the brand and then present them with a path over time.

That's a change, but I'm not saying it's a direct bridge to pay TV.

I think we have to be in both.

But certainly, as they get older, we will look at what platforms they're on, and we will plan to be there.

:

Yes.

Look, Michael, I'll -- adding to that, right, we talked about this, for the 100 years of media eventually money follows the eyeballs.

It takes time, right.

Usually the money is slower than the eyeballs.

So to Michelle's point and Vince's point, we -- our view is, if we dominate on these 3 platforms we'll have the choice of where to go, where the viewers are.

And so we control our own destiny.

It's important to know and we've mentioned this before, 5 or 6 years ago, if we created a video -- a piece of video content, the only way we could get it in front of a fan was to find a partner with a limited shelf of inventory to put it on.

Today, we can get a piece of video content to any broadband-enabled home in the world either through an ad-supported model or through a subscription model.

That's an incredibly liberating place to be.

:

Yes, and to just add from the analytics perspective, I mean, we're getting smarter about measuring total video consumption.

So again our metric is not Nielsen ratings, that's not the only way we're viewing whether we're succeeding or not in terms of growing overall consumption.

So when you ask the question about cannibalization, we look at it in totality and the analytics are giving us a much clearer view that year-over-year, as long as we're growing total video hours consumed, then we're doing to the right thing, and that's the direction that we're headed.

So again, we don't see as kind of a direct trade out or cannibalization.

As long as it's all increasing, then we are going in the right direction.

:

Okay.

One more, if possible, maybe 2 little ones.

Certainly, kids are changing, TAM is changing.

One of the biggest, I think, global phenomenons, at least I'm directly tied to the growth of e-sports.

I think your -- I know that your partner that helps develop and publish your video game is as a JV with (inaudible) and the creation of a e-sports league.

And of course, you're seeing similar e-sports teams and so forth across more traditional sports programming.

But I'm curious if you feel that you have any sports opportunity with your video game?

:

Yes, so Take-Two, the partner that you're referring to, Take-Two and 2K, who is obviously doing the joint arrangement with the NBA, obviously produces our video game.

And we've had multiple conversations with them about the passionate gaming fan base that we have and the opportunity in e-sports.

So absolutely, we're looking at that.

Obviously, some development work to happen so nothing, again, definitive to announce, but trust that we are absolutely looking at that with 2K and Take-Two.

:

Good, good to hear.

Last one for me.

I know Stephanie is -- I think she's primary the lead, has done a lot to sort of evolve your brand since, call it the attitude era.

And I guess, you're making it more compatible to media buyers and I think you've had a lot of success there.

I'm just sort of curious how you think about your brand today.

Do you feel like you've sort of arrived at that goal in terms of making it family-friendly enough, but edgy enough, to sort of embrace your audience but also get media buyers?

Or do you feel like there's still work to be done in that direction?

:

Well, I think, again, the comments that I made about the Blue Chip partners coming onboard is one of the greatest metrics to determine our success in that area.

To your point, Stephanie has done a tremendous job as our Chief Brand Officer getting out to the higher level decision-makers in the media and advertising world and sponsor CMOs around the country and around the world.

And we think we've made tremendous progress.

As a reminder, our content has been family-friendly since 2008.

What I think our opportunity has been, what we've been able to do is get that message out there in a much bigger way, certainly domestically through our partnership with NBC Universal.

We've also seen over the last few years that we've added 15 new advertisers and they're quality Blue Chip companies that we've added.

So we've made tremendous progress on that front.

We plan to continue those efforts globally.

So yes, I think we've made tremendous amount of progress on that front.

Obviously, we're going to continue to get that message out there and make sure that the world knows that we have family-friendly sports entertainment brand.

So again, we won't take our foot off the gas pedal per se but, obviously, tremendous progress has been made over the last few years.

:

We'll take our next question from Eric Katz with Wells Fargo.

:

I just want to come back to expenses a bit.

We're trying to get our arms around that one, a lot of moving pieces, particularly on timing and I'm not sure how much more you can offer there.

But I guess first, you mentioned network programming expenses expected to be flat this year.

And I'm hearing a lot about more local programming, new shows.

So I'm wondering how you're keeping that flat, and do you see a need for more programming spend to grow subs?

And then secondly on costs, should we expect corporate expenses to be flat year-over-year?

I know you mentioned some timing in Q1, but anything you can help to -- or to help us model that out and anything maybe on the strategic spend you could add?

:

Yes.

So what we said was on the Corporate and Other, there will be favorable for the -- over the next -- over the 9-month period.

We're not going to guide to a specific number, but you're not going to see another number starting with the 5 in Q2, 3 or 4, we don't expect.

And then on the network programming, it's a matter of timing.

So we think we've got the right level of investment, and it's just a matter of sometimes, period to period, we'll make some changes.

But we think it's the right level to keep growing the network.

:

And the point I'll add to that is the type of content that we're doing, again, to Brandon's point, the analytics that we have are tremendous.

So we have full visibility on what our subscribers are viewing, and so we make those programming decisions accordingly.

What we're finding is that, obviously, localization, more In Ring content is what they're looking for.

And we are able to produce that incredibly efficiently.

And if you look at some of the other programming that we've done that has done well, reality series and those other genres tend to be a little bit more -- require a little more investment.

So I think over the -- what we're focusing on now, where we're able to produce that more efficiently and that helps support that flat year-over-year.

:

Okay.

And as far as that local content, so is the local content very clearly performing better than some of the scripted stuff or just more program shows that you would do?

And then secondly, just sort of collateral to that.

I noticed one of your Indian wrestlers on the roster was getting a big push.

I'm wondering if you're seeing any changes in viewership in India since that push?

And is that really something strategic or am I reading too much into that?

I'm just curious on that topic.

:

Well, I think as you can imagine, WWE Superstars are WWE Superstars in every country in the world.

So John Cena's popular in India, in the Middle East, in Latin America, in the U.S. However, we're all human beings and there's a certain level of ethnocentrism and when a local character is really popular, it kind of pushes up in that country maybe a little bit more.

But we let the storyline drive kind of who's hot or not as opposed to one specific geography, but it certainly doesn't hurt in India.

:

With no further questions, I'd like to turn the conference back over for any additional or closing remarks.

:

Just want to say thank you to everyone.

We appreciate you listening to the call.

And certainly, if you have any questions, don't hesitate to reach out to us, Michael Weitz or Michael Guido at (203) 352-8600.

Thank you.

:

Thank you for your participation.

That does conclude today's conference.

You may now disconnect.