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Operator
Hello, and welcome to the webcast entitled WWE Fourth Quarter Earnings.
This call is being recorded.
(Operator Instructions) I will now turn the conference over to Michael Weitz, Senior Vice President of Financial Planning and Investor Relations.
Please go ahead, sir.
Michael Weitz - SVP, IR & Financial Planning
Thank you, and good morning, everyone.
Welcome to WWE's Fourth Quarter 2017 Earnings Conference Call.
Leading today's discussion are Vince McMahon, our Chairman and CEO; as well as George Barrios and Michelle Wilson, our Co-Presidents.
Earlier this morning, we issued our earnings release and a release covering some financial reporting changes that will be effected with the communication of our first quarter 2018 results.
These releases, our earnings presentation and other supporting materials have been posted 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, today's conference call 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.
Vincent K. McMahon - Co-Founder, Chairman & CEO
Good morning, everyone.
As you know, for the year, we achieved record revenues of $801 million and record Adjusted OIBDA of $112 million, which is more or less at the high end of our guidance.
For the year, WWE networks average paid subs increased to 1.53 million, which is representing about an 8% increase.
In our social and digital platforms, which is extremely important, WWE content reached a record of 20 billion video views, which is, by the way, up about 32% from 2016, so we continue to grow that, which is extremely important to our landgrab, as well as social media engagements are about 1.2 billion.
WWE YouTube's channel alone remained the #1 most viewed sports channel, and actually the #2 most viewed channel in all of YouTube.
We formed partnerships at the launch and create content across multiple platforms, and we continue along that way.
There's a television show we call Mixed Match Challenge.
It's a live in-ring series that is launched on Facebook, launched -- and that was launched around January 16 and doing very well.
There's a new reality show coming out on the USA Network, called Miz & Mrs., turning the title of Miz Mizanin and his wife, Maryse.
We've as well launched some content as it relates to virtual reality experiences; most everyone's doing that and we're partnering with them.
NextVR produced content with some special events.
As well many of you know, this January we celebrated our 25th anniversary overall, which is a pretty good milestone, but it's just a milestone of many more to come.
In addition to that, we recently held our first Women's Royal Rumble match, which was highlighted by the appearance of Ronda Rousey.
Kudos to Stephanie and Paul for contracting Ronda Rousey and continuing especially on with the women's evolution, which has been so strong for us and opening so many doors, and so valuable to our consumers.
And we're pleased, generally, with performance, looking forward to 2018, and we expect again to achieve record revenue.
That's about all I have to say.
George A. Barrios - Chief Strategy & Financial Officer
Thanks, Vince.
There are several key topics which Michelle and I would like to cover today.
It includes our discussion of performance, progress on key strategic initiatives and our business outlook.
Looking back, as we entered 2017, we communicated an overarching objective to drive growth by increasing monetization of content across all our platforms.
And supporting that objective, we focused on creating compelling original content, Vince just described, leveraging our large, digital and social footprint to drive engagement, and utilizing data across the enterprise.
For the year, all of this generated revenue of more than $800 million and Adjusted OIBDA of $112 million.
This represents the highest annual revenue and profit in the company's history, and exceeded the objectives that we established at the start of 2017.
The successful execution of our content strategy also contributed to our strong operating and financial performance in the fourth quarter.
For that period, we generated Adjusted OIBDA of nearly $35 million based on a 9% increase in revenue.
Demonstrating the effectiveness of our content strategy, our media division, which includes our Television, Network and Digital Media segments, was the predominant source of our revenue and Adjusted OIBDA growth.
As shown on Page 6 of the presentation, we realized increased revenue and profits from our Television segment.
OIBDA from the licensing of content to Pay TV providers increased $8.4 million, reflecting higher rights fees in our key distribution agreements.
Network segment OIBDA increased $5.5 million primarily due to the growth in network subscription revenue, and as anticipated, lower expenses from the timing of our pay-per-view events, with one fewer event in the recent quarter.
WWE Network averaged over 1.48 million paid subscribers during the quarter.
It was in line with our guidance and represented a 6% increase from the fourth quarter last year.
On digital platforms, an incredibly important part of our content ecosystem, we saw marked increase in video consumption.
OIBDA from the sale of advertising across these platforms as reflected in our Digital Media segment increased $4 million, in part due to the increase in consumption.
In fact, in the quarter, over 211 million hours of consumption occurred across these digital platforms, our highest total ever and an 84% increase over the prior year.
Our film entertainment business, WWE Studios, also contributed to the growth in profits.
Adjusted OIBDA from this business increased nearly $3 million based on the timing of releases, including the delivery of Fighting With My Family, a feature film produced in partnership with Dwayne "The Rock" Johnson.
Partially offsetting the growth in adjusted OIBDA, corporate and other expenses increased $5.1 million, reflecting an increase in stock compensation due in part to the increase in WWE's stock price.
In terms of WWE's overall performance, changes in other business segments didn't have a material impact on the consolidated result.
Net income, as reported on a GAAP basis and excluding any adjustments, declined to $4.8 million from $8 million in the prior year quarter.
Our recent fourth quarter results were reduced by onetime noncash charges totaling $11.3 million that arose from the enactment of the new tax law, primarily due to the remeasurement of our deferred tax assets.
The remeasurement was due to the reduction on the corporate tax rate from 35% to 21%, to reduce the future benefit the company would have realized with these assets.
Excluding the impact of these charges, net income would have increased to $16.1 million.
Later in my remarks, I will address the overall positive impact of the recent tax law changes.
Page 9 of the presentation shows selected elements of our capital structure.
December 31, 2017, WWE held nearly $300 million in cash and short-term investments, and had approximately $100 million in debt capacity under the company's revolving credit facility.
We believe this capital structure enhances our ability to execute our long-term growth strategy.
Finally, for the year, our free cash flow increased approximately $40 million, driven by improved operating performance.
Now let me turn the call over to Michelle to provide some additional perspective.
Michelle D. Wilson - Chief Revenue & Marketing Officer
Thanks, George, and good morning, everyone.
Our fourth quarter reflected meaningful progress of initiatives that enhanced our ability to engage our fans and optimize the value of our content across all platforms.
What really sets WWE apart from other media companies is our unique ability to create new content in ways that reflect the evolving preferences of our fans, particularly as it relates to mobile consumption and social interaction.
As Vince mentioned, during the fourth quarter we announced the new in-ring series, Mixed Match Challenge, that premiered live on Facebook Live this past January.
The tournament-based series enables fans to directly influence and interact with the in-ring action, follow rivalries and story lines in between the episodes, and connect with one another on -- as the drama unfolds.
As a result, our WWE Superstars can now connect with our massive fan base on Facebook in ways that they never could before.
Over the 4 weeks since the debut of Mixed Match Challenge, the show has produced over 6 million views and 12 million minutes watched on Facebook.
Providing another means for our fans to connect with our Superstars, we recently announced a new docuseries, Miz & Mrs.
This series will air on USA Network and will chronicle the lives of our Superstars, Miz and Maryse, as they become parents for the first time ever.
On another front, we marked a new milestone, as Vince mentioned, in WWE's women's evolution just 2 weeks ago, with our first-ever Women's Royal Rumble match.
It included the surprise appearance of Ronda Rousey.
Our previous innovation, together with our proven ability to craft intriguing stories about heroic characters, is what makes WWE a media powerhouse, one that continues to deliver strong viewership across all platforms.
On television, Raw and SmackDown maintained their dominant positions as the #1 and #2 ranked programs on USA Network.
And again, as Vince mentioned, in January, we celebrated the 25th anniversary of Raw.
The event attracted the best ratings in 3 years.
At the same time, we also completed our seventh successful season of Total Divas and continued production of the third season of Total Bellas in partnership with the E!
Network.
On a separate note, WWE Network continues to be a leader in the direct-to-consumer video services.
In 2017, our network ranked as #2 -- as the #2 branded service behind only MLB.
TV.
Beyond our direct-to-consumer business, consumption of WWE content increased 32% to a record 20 billion video views across YouTube, Facebook and WWE.com.
Importantly, our global sponsorship revenue increased across all platforms 30% in 2017.
Our pursuit of innovation extended throughout WWE.
We strengthened our talent base, launched new mobile games, delivered the #1 selling action figure in the U.S., ahead of Transformers and Marvel Avengers, and applied data analytics to enhance our marketing.
These accomplishments and operating metrics provide proof points on how we are capitalizing on our brand strength, delivering unique content and products to drive our long-term growth.
I'll turn the call back over to George.
George A. Barrios - Chief Strategy & Financial Officer
Thanks, Michelle.
Looking in the future, as you know, over the past several years, WWE has undergone a strategic transformation, pivoting to a multi-platform strategy with a growing digital, social and direct-to-consumer capabilities.
As part of that process, we've evaluated the way we analyze our results and allocate resource.
Therefore, beginning with the communication of our first quarter 2018 results, we're planning to make 2 changes in how we report our performance.
The first change is to revise our reported segment structure and the second change involves modifying our definition of Adjusted OIBDA.
This revised approach is intended to make our business performance easier to evaluate and analyze, make our financial statements more informative, and present results in a more consistent manner to our peers.
I'll take the change in business segment reporting first, and it involves 3 key components: First, a streamlined organizational structure.
Shown on Page 12 of the presentation, the revised organizationally, comprised of 3 operating segments: Media, Live Events and Consumer Products.
We believe this presents an improvement compared to our current 10-segment approach.
Second, we're also developing plans to allocate certain costs that were previously aggregated in our Corporate and Other segment, which we referred to as business support costs.
We will allocate those to the revised segments.
The remainder of our Corporate and Other expenses will be labeled corporate and will be treated as a reconciling item rather than as a reportable segment.
Third, with the implementation of this revised reporting structure, we expect to provide greater visibility into secular revenue streams.
So as shown on Page 15, these include entertainment rights fees, the advertising and sponsorship revenue that Michelle mentioned.
As part of the process, we'll also be revising our disclosure of key operating metrics.
As I said before, we believe that the revised presentation of the results will be more informative to users of our financial statements, and that this revised approach will be more consistent with that of our media peers.
The second change is the definition of Adjusted OIBDA.
To further facilitate analysis of our operating performance, we are planning to change our primary measure of performance, an SEC term, from OIBDA to Adjusted OIBDA, and to modify our definition of Adjusted OIBDA to exclude stock-based compensation expense, a noncash expense that may vary from period to period with limited correlation to underlying operating performance in the period.
We'll also continue to exclude certain impairment charges and other nonrecurring items, as these items also impact the comparability of results between periods.
We believe this revised definition of Adjusted OIBDA is relevant to investors because it provides a meaningful representation of operating cash flows generated by our business segments and is a primary measure used by media investors, analysts and peers for comparative purposes.
We began to expect -- we expect to begin reporting actual results using this revised definition of Adjusted OIBDA with the communication of our first quarter 2018 earnings.
Separate from these changes, as you know, in May 2014, the FASB issued a new standard for revenue recognition, ASU #2014-09, revenue from contracts with customers Topic 606.
We adopted this standard as of January 1, 2018.
As illustrated on Page 18 of our presentation, the adoption of the standard requires WWE to record revenue based on current period estimates rather than our prior approach, which is based on the receipt of statements that would show actual results for the prior period.
The revised approach is expected to have the most significant impact on our consumer product licensing and our filmed entertainment businesses, which is the timing of revenue recognition throughout the year.
We do not expect a material impact on full year results.
However, we do anticipate changes in the quarterly timing of revenue.
With these changes in mind, I'll now review our projected results for the upcoming year.
For the first quarter 2018, we estimate Adjusted OIBDA of $23 million to $27 million where these figures exclude stock-based compensation expense.
As compared to the first quarter of 2017, this range represents higher profits from the increased monetization of content, offset by an $11 million to $13 million reduction in licensing revenue due to the timing that I just explained.
To facilitate the year-over-year comparison, Page 19 of the presentation shows that the range of first quarter 2018 Adjusted OIBDA represents growth of $8 million to $12 million from the first quarter 2017 on a pro forma basis.
For the first quarter 2018, we're also projecting average paid subscribers to WWE Network of approximately 1.53 million.
In 2018, we expect to achieve another year of record revenue and previously targeted Adjusted OIBDA of at least -- of $115 million.
Based on a revised definition, which excludes projected stock compensation expense, this equates to an approximate 2018 Adjusted OIBDA target of at least $140 million, which would represent another all-time record.
We continue to believe there's a significant long-term growth opportunity for WWE, and the 2018 approach balances earnings growth in the short term as well as investment in key strategic areas.
In early 2017, you'll recall we've discussed a step-up in capital expenditure expected in 2017 to retrofit our recently purchased facility.
This project was delayed and will now begin in 2018.
Therefore, expecting originally projected for '17 will occur in '18 and we anticipate capital expenditures of $50 million to $70 million in the year.
Although we don't provide specific guidance on net income, EPS or cash flow, we believe the new tax law will provide long-term benefits to WWE in all 3 areas.
Prospectively, our effective tax rate is expected to decrease from approximately 36% to between 25% and 27% excluding discrete items.
The lower effective rate is the result of the reduced corporate tax rate under the law, offset by the elimination of certain deductions, including deductions for domestic production activity and certain executive compensation.
Additionally, due to the immediate expensing of certain capital expenditures under the new tax law and our capital plans over the next year, we expect that our cash taxes will be significantly reduced in the near term.
In fact, investors should expect that some portion of dividends paid in the next year will likely be deemed a return of capital that reduces their cost basis but does not get taxed as dividend income.
In the coming year, our key initiatives include: delivering a wide range of content across all our platforms; continuing to build out our data and technology infrastructure; and investing in global markets where we see great long-term opportunity.
Of course, the fundamental component of delivering contents across platforms is to develop our future distribution plans for our most important content, Raw and SmackDown, in key markets.
As a reminder, we expect to announce plans for future distribution in the U.S. sometime between May and September of this year, the U.K. by the end of this year, and India in the first half of 2019.
We believe continued execution of our strategy will enable us to achieve record results and maximize long-term shareholder value.
That concludes this portion of the call and I'll turn it back to Michael.
Michael Weitz - SVP, IR & Financial Planning
Thank you, George.
[Nicole Wray], please open the line for questions.
Operator
(Operator Instructions) We'll go to our first question from Brandon Ross with BTIG.
Brandon A Ross - Associate Analyst
Congrats to both George and Michelle on your new titles.
First, just a couple of questions on the Facebook, Mixed Match Challenge.
Wanted to first understand what your goals were in creating that series with Facebook?
And have the results thus far given you confidence that Raw and SmackDown could be successful if they were to be distributed exclusively on a digital platform?
And then any color on the economics of that Mixed Match Challenge?
George A. Barrios - Chief Strategy & Financial Officer
Yes, Brandon, the show from our perspective has been great.
Obviously, it's a new way of producing content, a new way for our fans to engage it.
We're learning every day on the production side.
In terms of the engagement levels, there's not really a benchmark, but we're really happy, and what we hear from our partners at Facebook, they're really happy.
Regarding your question around Raw and SmackDown, as you're aware, Raw and SmackDown today is available on YouTube in certain countries around the world and it has been for some time.
So we've been monitoring the consumption of long-form content on digital platforms.
Not going to release any data but more and more what we're seeing is people are comfortable watching long-form content as long as it's engaging.
So we'll see what that means into the future, but it's something that I think our fans are becoming more comfortable every day on, and the rest of the world, quite frankly.
Brandon A Ross - Associate Analyst
And then just any color on the economics of that deal?
George A. Barrios - Chief Strategy & Financial Officer
Well, it's a 12 episode, 20 minutes.
So you're essentially looking about 4 hours of content.
I would say that on a per-hour basis, if you looked at it, it's certainly not Raw and SmackDown levels, but it's significantly higher than what we see on a per-hour basis from the digital platforms prior to this.
So I think it kind of shows people are out there, everyone, traditional, new platforms, looking for compelling content that can aggregate audiences.
And if you can do that on a live basis, all the better.
Operator
And we'll take our next question from Eric Handler with MKM Partners.
Eric Owen Handler - MD, Sector Head, & Senior Analyst
Some accounting number questions for you, I guess, for George there.
The first half of '17 saw a disproportionate share of the expenses.
Wondered if you could talk about sort of maybe the cadence of your -- how your expenses are going to be laid out in 2018?
And then secondly, with the elevated CapEx in this year, in 2019, should that go back down to sort of like normalized levels?
George A. Barrios - Chief Strategy & Financial Officer
Sure.
In the first half, we have a -- on the timing of expenses, and you see it in the Network segment certainly, you see it a little bit on the Live Events segment.
The timing of WrestleMania was a higher level of production and programming expense in the second quarter, and you are always going to see that.
On a year-over-year basis, you're probably seeing some favorable comps towards the back half of the year.
But otherwise, it's really the timing of WrestleMania.
As far as CapEx, we're giving guidance for this year, Eric, not into '19 or beyond.
As I've mentioned before, we purchased a facility in 2016 in the third quarter.
We have to retrofit that for production capabilities.
So we'll give the '18 guidance, and we'll see -- we'll talk about '19 later on this year.
Eric Owen Handler - MD, Sector Head, & Senior Analyst
Okay.
So let me just -- as a clarification, so absent WrestleMania, I think in '17, you guys pushed forward some spending on -- maybe some investment spending that occurred in the first half of the year.
Is that more normalized this year?
Is that -- or you again -- will again be front-end loaded on those non-WrestleMania sort of investments?
George A. Barrios - Chief Strategy & Financial Officer
Eric, our approach is we don't give line item guidance for the full year.
We've talked about OIBDA and we've talked about setting the record in revenue, but we're not going to be going into line item guidance.
And as far as different periods, we'll do that quarter-by-quarter.
Frankly, we want to give ourselves the flexibility to manage the investments at different times of the year where we see, we think, we can make the most impact.
So don't want to give a quarterly view.
Operator
Our next question comes from Evan Wingren with KeyBanc Capital Markets.
Evan Todd Wingren - Research Analyst
So George, if I take a step back and look at the full year growth rate for TV, 12% this year versus 5% in the prior year, and I look at your historical phasing of revenue recognition from your major distributors, it essentially implies that the nonmajor distributor revenue accelerated to mid-teens year-over-year growth.
And I know you guys have been renewing or creating new distribution partnerships internationally.
But I guess, I'm curious, one, if I'm right.
And can you speak to the level of economics you're getting in these new distribution deals or the renewals relative to the prior deals or comparable geographies?
Hopefully, that made sense, and you know why I'm going there.
George A. Barrios - Chief Strategy & Financial Officer
Yes.
I think the best way to think about the escalation of the core content, which is Raw and SmackDown, is to look at the information we provided about our top 7 deals.
It's the predominant revenue around Raw and SmackDown.
So you can see that on average risk, we have escalators of 8% to 10% after the step-up in the last renewal cycle.
I think that's the best indicator.
Market-by-market, the reality is the deals on a percentage basis can vary quite a bit.
But in absolute dollars, those top 7 deals make up the vast majority.
There's also an element period-over-period.
We're depending on how many of these third-party productions we do like Bellas or Total Divas.
It shifts the revenue.
It doesn't have a big impact, actually not -- there's no impact on profitability, but it can make the revenue comps a little bit difficult to see.
We put it in the disclosure in the Q, but it's a little bit difficult to see just on the basis of financial statements.
That's one of the reasons that we go to the revised segments.
We're going to isolate the Raw and SmackDown rights fees, because we think it's important to pull those out, and that will be one of those kind of secular views into revenue that we provide consistently.
But I would say, if you really want to get a sense of the escalations in the deal, looking at what we put out for the top 7 deals, I think it's the easiest, cleanest way to do it.
Evan Todd Wingren - Research Analyst
Okay.
And so just to paraphrase, you're saying that the other -- the non-top 7 deals, you're still seeing comparable escalators to the -- to what you put out?
George A. Barrios - Chief Strategy & Financial Officer
Look, it varies market-by-market and then any one deal, you're talking much smaller levels than the rest -- than those top 7. So you can have big percentages on small numbers, but we've certainly seen markets where we've done -- we've had a great result in the renewals on a percentage basis, again, on much smaller dollars.
What we recently announced in Africa is an example of that.
Evan Todd Wingren - Research Analyst
Okay.
And just one more.
The Digital Media step-up, I think it was in absolute dollars, the highest step-up that we've seen maybe ever for that segment, in the sort of the last few years.
Is that mostly still coming from volume?
Or are there CPM increases that also contributed to that?
And if so, what is the driver of that?
Is that platform mix shift or is that just advertisers warming up to the content, for lack of better term?
Michelle D. Wilson - Chief Revenue & Marketing Officer
I'll take that one.
So it's -- to answer your question, it's really a growth driven by both volume and CPM, which is obviously, good news.
A couple of things on that front has been across the platform.
But certainly, as we see our video views continue to grow on YouTube, that's a major contributor.
So again, we're being affected both Google reserves selling it effectively as well as our own digital team selling it.
So I think we've -- as we've built muscle around data analytics, we've also built muscle around selling those digital video views ourselves directly to the marketplace.
So we've gotten great reception and been successful doing that on our own as well.
So those things are what's really driving volume and CPM.
Operator
And we'll take our next question from David Karnovsky with JPMorgan.
David Karnovsky - Analyst
Just a question for Vince.
With the relaunch of the XFL, can you speak about how you see this impacting both your day-to-day and then maybe longer-term role?
And then in the context of your recent stock sales, do you see the funding for the XFL as currently sufficient?
Vincent K. McMahon - Co-Founder, Chairman & CEO
Well, I must speak to XFL in terms of, obviously, going forward, it's going to take more than the original idea.
But what we announced as far as investments, what I announced in terms of investments, as far as management's concern, my role won't change at all.
We're going to have a separate management for XFL.
So I don't see any significant or if any changes in what I do on a day-to-day basis.
David Karnovsky - Analyst
Okay.
And then just a question on the network, can you just talk about how the cadence of that addition can potentially be impacted by a later WrestleMania this year?
George A. Barrios - Chief Strategy & Financial Officer
Yes.
In terms of cadence, because the 1-week delay has had a little bit of a ripple effect, which is why, back half of the year, you probably see slightly higher growth rate than the implied growth rate for Q1 because of that, since it's such a big aggregation of gross ads.
Operator
Our next question comes from Eric Katz with Wells Fargo.
Eric Katz - Senior Analyst
A couple of questions.
First, in your last round of TV renewals, there was some concern that your launch of the network was too close to the negotiating window.
And considering the media companies didn't know if the network would affect their own ratings, maybe there's some issues negotiating higher rates or finding demand for your content from other players.
Can you discuss the differences this time around in the conversations and if you're seeing maybe an unexpected amount of demand from other players both in traditional media and outside of traditional media?
George A. Barrios - Chief Strategy & Financial Officer
Yes, I'm not going to characterize any of the conversations.
I think it's fair to say that we were pioneers on both the social and digital that Michelle and Vince talked about on direct-to-consumer.
You have to ask people how they felt about it.
But certainly, there were folks who were public about their negative perception.
I think given that today, there's not a media company probably in the world that's not trying to create a social and digital and direct-to-consumer capability as well as the data capability, you don't hear the negativity anymore in the press.
But again, you have to ask people about what that means in terms of their appetite or not for WWE.
Eric Katz - Senior Analyst
Would you say that your phone's ringing from more players this time around than last time?
George A. Barrios - Chief Strategy & Financial Officer
You're kidding me, right?
Eric Katz - Senior Analyst
All right, I'll skip to the next one.
So one thing around just the Facebook content, since you're able to easily add content for Facebook, what's your capacity to expand the amount of programming you can provide for other platforms?
So do you have the ability to produce for Raw and SmackDown and then potentially many more hours of initial content for either Facebook or other players out there?
Michelle D. Wilson - Chief Revenue & Marketing Officer
I mean, we kind of -- because of our business model, we joke that it's really an unlimited ability to create content.
And so when the opportunity for Facebook came, and just to add to what George said about Mixed Match Challenge, it really provided us an opportunity to engage with our fan base and to really test what -- how consumption happens on a digital platform.
And so for us, it's been a great experience, a great learning experience, not only how our fans are engaging, how our Superstars can engage, but also from a production standpoint, how we shoot it, what it looks like.
So it's been a tremendous test experience for us.
And as George mentioned, the metrics are -- we're happy, Facebook is happy.
So again, I think we have the ability, we have the unique ability to create content.
We felt strongly about coming up with a concept that was unique to Facebook.
And for those of you who follow our content, the idea of Mixed Match, mixed tag teams competing and the brands competing, we've never done that anywhere before.
So the exclusive nature and our ability to continue to come up with ideas like that is truly unlimited.
George and I don't necessarily write to [creatives]; there are obviously other people who focus on that.
But when an opportunity comes our way, it's really impressive how as a team we're able to come up with unique and ownable ideas specific for that platform.
So really great start and learning on the digital space around building compelling content.
George A. Barrios - Chief Strategy & Financial Officer
And just to link it to the discussion on the CapEx, I mean, the reason we're making the build-out that I talked about before is to support what Michelle just said, is to be able to create more content for a pretty passionate global fan base.
Eric Katz - Senior Analyst
Can I squeeze one more in, just to make sure I understand this right around the Q1 OIBDA guide.
If there was no revenue recognition change, you essentially would have a Q1 OIBDA guide of $10 million higher or $33 million to $37 million, is that correct?
George A. Barrios - Chief Strategy & Financial Officer
That's right.
Operator
We'll take our next question from Ben Swinburne with Morgan Stanley.
Benjamin Daniel Swinburne - MD
George, can you just talk a little bit about where you guys are investing incrementally in '18 versus '17?
And I'm particularly interested in international investments around building the brand, Live Events, et cetera, where you might be trying to put some incremental capital to work to build outside the U.S. And then for you and/or Michelle on the Facebook side, could you tell us a little bit about WatchTime?
I've heard the head of Watch talk about sort of 17 minutes for a long form -- average watch time for a long-form piece of content.
But I think you said 12 million minutes and 6 million views, which would be a lot shorter than that.
Maybe I'm interpreting that data set incorrectly.
But can you give us a little more sense of how much people are -- how much time they're spending when they sit down to engage with the product on Facebook?
George A. Barrios - Chief Strategy & Financial Officer
Yes.
In terms of the investment, Ben, it really -- it's the same 3 areas for us.
It's more content, more on the consumer technology and data side, and then local markets.
And specifically to your question on local markets, a lot of it is localization of content, so more languages even in countries where we have multiple languages already.
A country like India, where we do it in couple of languages in addition to English, we're going to do more.
And then a lot on the social and digital engagement front, so not just video, but on the marketing and engagement front.
So that's what we're -- we continue to build out.
And again, as we said before, we're trying to balance continuing to grow the bottom line but making these investments that we know will pay off in the long term.
Look, on the WatchTime, it's a different -- obviously, when you're talking to the head of Facebook Watch, they have data that we don't have.
So I'd like to stay way out of the comparison.
I will say what we've seen, because we can see content, how it does on YouTube, Facebook and other platforms.
I would say we've seen a marked improvement in the watch tab for WWE content, the time spent viewing versus pre-watched tab.
Obviously, we want to continue to see that grow, but I don't want to make any comparisons just because we don't have access to that information.
Benjamin Daniel Swinburne - MD
If I could just ask one follow-up on taxes, George.
I think you said minimal cash taxes going forward.
I just wanted to go back and see if you could clarify or quantify exactly your point there.
George A. Barrios - Chief Strategy & Financial Officer
Yes.
I mean, when you look at the impact on the rate side, there's a benefit to cash flow.
And then because of the accelerated depreciation that's part of the new tax law and given our step up in the CapEx, that's right, minimal cash taxes here in the future -- into '18.
Operator
Our next question comes from Dan Moore with CJS Securities.
Pete Lucas
It's Pete Lucas for Dan.
Just regarding network guide -- regarding the network.
Guidance for Q1 seems to imply 2% to 3% year-over-year growth in average paid subs.
Just wondering, is that the right way to think about growth in subscribers for '18?
And also, any update on plans for timing around tiering?
George A. Barrios - Chief Strategy & Financial Officer
Yes.
So I'll answer the question on guidance in a second.
One thing to keep in mind, Pete, is how we think about the network today.
So as we currently sit here, it's our second largest business.
It's got the second highest OIBDA generation for WWE.
It's got 30%, today, OIBDA margins.
And it has great unit economics because of our low cost to acquire subscribers.
Every incremental subscriber is really profitable and the business is growing.
And as Michelle mentioned, today it's the second largest branded service out there behind MLB.
TV.
So however you look at it, it's just a phenomenal business in the portfolio.
Longer term, as we've talked about, we think localizing the network, doing different things on tiering, both on the high side and on the lower side to expand the consumption and engagement, we think is a real opportunity to kind of bend the growth curve.
And moreover, the network because its video will serve as the fulcrum to the overall direct-to-consumer strategy.
So long term, it's got significant benefits as well.
Now to your specific question, in the short term, you're right, the guidance implies 3% year-over-year in Q1.
As I was talking to on the prior question, because of the cadence and the timing of WrestleMania, you actually will see, if our assumptions on gross adds are correct, you should see some year-over-year improvement in the back half of the year versus the first quarter.
Pete Lucas
Very helpful.
And then you touched on it in the call, but can you tell us any more about the agreement with U.S.A.
for Miz & Mrs.
in terms of timing, how many episodes?
Michelle D. Wilson - Chief Revenue & Marketing Officer
Yes.
We are looking probably to premiere that sometime in the summer.
And right now, it's a 6-episode season.
And economics, we [normally] don't disclose that.
Operator
Our next question comes from Jason Bazinet with Citi.
Jason B Bazinet - MD and U.S. Cable and Satellite Analyst
I just had a question on Slide 15 of your deck.
Maybe I'm misinterpreting this, but it says expect to provide enhanced visibility of revenue such as rights, advertising and sponsorship.
But on the left-hand side, there's sort of 10 numbers that you're going to give going forward and then -- or in the past.
And am I right in the future, you're giving 3 revenue numbers?
So essentially clubbing TV rights and network subscriptions together, is that right?
George A. Barrios - Chief Strategy & Financial Officer
No, no, we won't.
We'll continue to give subscription revenue, we'll continue to give TVOD or pay-per-view revenue.
We will show different rights numbers, so you'll see kind of the core rights number for Raw and SmackDown.
And we'll pull out and show rights for things like Miz & Mrs.
or Total Diva.
So you'll see an increase in the media right side.
So the media side will have about 5 secular line items.
The Live Events will have 4, and the Consumer Products will have 3. So there'll be increased visibility and especially on the media side, which we think will be helpful.
Jason B Bazinet - MD and U.S. Cable and Satellite Analyst
Understood.
Operator
(Operator Instructions) Our next question goes to Laura Martin with Needham and Company.
Laura Anne Martin - Senior Analyst
I guess I'm last.
Okay, yes, 3. So Vince, one of your early comments was social and digital, 20 billion video views.
And I'm interested in -- up 32%.
And I'm interested in where that growth is coming from.
Would you characterize most of that growth from more video views?
And I think we're making about $20 million on that 20 billion views.
If so, I know you think of this as sort of a marketing channel.
At some point, does this really become a revenue stream for you?
Or is it always going to be sort of a marketing channel for you?
And then, I guess, for George, as we go into the renewals with Comcast U.S.A., Fox said last night on their call, you probably haven't seen the transcript, that they are pivoting their core Fox broadcast strategy to live sports.
And so they just paid over $500 million for 11 NFL games on Thursday nights, to add to their Sunday night lineup.
What I want to know from you is how you think about that exclusive negotiating period that NBC has?
And does it make you more likely to try to exit that exclusive negotiating period in hopes that there may be other bidders for your rights that would top a USA Network-NBC Comcast bid.
And then, Michelle, international, you guys usually do a lot on international.
And I was actually specifically interested in December quarter, India and the U.K., whether you guys have done any events there?
And if there was any update on progress in those 2 countries?
Vincent K. McMahon - Co-Founder, Chairman & CEO
Generally speaking, Laura, just as far as the popularity and thinking about the nature of the growth of YouTube and others, it's just good content, really.
And you can look at it both as we do in terms of revenue and marketing; that's really the simple answer.
Just one thing I would say as far as rights and what have you concerned, and George will take the rest of it, I'm sure you guys have done your homework.
When you considered a percentage of total overall ratings that we deliver as compared to the entire rating of the whole week of USA Network, we compare -- I'll let you make that comparison.
And the other aspect of that, when you take those growth rating points and then apply them to other networks, then obviously, you can do your homework there and see where we take those other networks, as well as if they were not on USA.
So there's a lot that you guys can do and I'm sure you've already done in terms of television ratings and percentages, that we have on USA percentages, that we would increase other networks in.
And the other aspect of that is, we have proven many, many times that we are very good at audience migration.
Our audience will follow us from one location to another very easily.
So George, I'll let you answer the...
George A. Barrios - Chief Strategy & Financial Officer
Yes.
First, on Vince's first point, just the way you characterized it, well, it's only $20 million.
Obviously, we're not public with that number, but it's only $20 million so it's obviously a marketing channel.
We don't think about it that way.
7 or 8 years ago, it was only a marketing channel; today it's an incredibly powerful channel for us.
And the monetization is coming.
It's not where traditional TV is, but it's coming.
I'll just remind you not to go back too far in time.
But at the advent of cable TV all around the world, people said the same thing.
Oh, yes, there's a lot of stuff out there, people are watching, but there's no money.
And today it's the engine -- or it was the engine that drove the media business for a long time.
So there's a long history of dollars following eyeballs.
We believe that into the future and we're starting to see it.
Is it where traditional TV is?
No.
Do we know where it will end up?
No.
Do we think it will continue to grow?
We do.
So first on that element.
On the renewals, Vince touched on it in the data.
He mentioned it's public.
So everyone can go do their own math and jump to their own perspective.
As far as commenting on what that means on how other people are thinking about it, I'm not going to characterize that.
You can go ask them and they may answer it.
But the data that Vince mentioned is really public.
Michelle D. Wilson - Chief Revenue & Marketing Officer
Laura, on the international front, just before I simply talk about India and the U.K. Just as a reminder, where George mentioned that international is an area that we'll continue to invest, whether it's localizing content for TV or localizing content and language for digital and social, that is an investment area for us.
And I think most of you have heard us state the data before that about 70% of our video consumption for WWE happens outside of the U.S. So we obviously believe there's an opportunity to continue to build our monetization on that front and the investment is to go after that specifically.
As it relates to India and the U.K., I think you know that those are 2 of our top linear television agreements.
We, again, see opportunity in both of those markets.
In the U.K. we, as you know, did the U.K. tournament the previous year, had a great response from our fan base on the network, where Paul has done a great job on recruiting local talent in that market.
And we continue to plan to create local content around our network, but also in partnership with Sky.
We continue to have discussions with them about highlight shows that have local announcers hosting.
We believe in that market there's an opportunity to continue to build a fan base on that front.
So more in-ring content, more localization to come in the U.K. and, again, all building out that fan base.
Not dissimilar in India, the same story.
I think you know that we launched a -- relaunched our localized show called Sunday Dhamaal.
It airs on Sony MAX, which is their general entertainment network.
It continues to perform extremely well, hosted by 2 local talents and really telling what happened the previous week in WWE.
So again, localizing that content, localizing digital and social.
We, last week, acknowledged and recognized an Indian holiday, which we posted in 3 or 4 languages.
Tremendous response from our fan base there, acknowledging that we weren't just putting out posts in Hindi and English, that we were posting them in 3 or 4 other languages.
So again, investment around that and making that scalable in the market will allow us over time to monetize.
As George said, we believe that the dollars will follow on that front.
So again, a lot of growth we're excited about in both India and the U.K.
Operator
We'll take our final question from Mike Hickey with The Benchmark Company.
Michael Joseph Hickey - Research Analyst
Vince, George, Michelle, just a couple little questions from me.
Just wanted to clarify that you're still guiding for subscriber growth in the network in '18?
I didn't see it specifically laid out.
I think you had it before.
And then on the new segmentation, the new construct, is there a way to preview your historicals there?
I can just imagine, Q1, I believe, has been penalizing, at least as we rebuilt our models.
But any help there, I guess, with preparing us would be nice.
And then, I guess, my real question is just on Ronda Rousey.
Obviously, I think, it's easy to get caught up in the importance of maybe one particular talent.
But she [points] star power that is very remarkable.
Just curious, any measure from your fan base or the reception of her and how active you expect her to be, whether she's sort of going be a part-time like Brock or more of an ambassador like The Rock?
Or how do you plan to use her in the future?
George A. Barrios - Chief Strategy & Financial Officer
So on the subscriber growth, as I mentioned, Mike, that's one of the previous questions.
First of all, yes, we do expect year-over-year growth in the average daily pay, which the metric we usually use.
3% we got it to in Q1; we expect that to be higher in the back half of the year.
On the segments, I think there is a way to start previewing, given that we've laid out how the segments are going to change.
In fact, if you look at our media division today, a large part of the way we characterize that, it looks like the new segment moving forward, as well as business support costs, which we've called out in the K, so you can see how much of the allocation it would be.
So there's public data on being able to at least start a preliminary view, and certainly the IR team is standing by to kind of help kind of guide you towards that public data.
But yes, there will be.
And we'll also, as we start reporting, provide a bridge between the 2 different models so people have some guideposts.
Vincent K. McMahon - Co-Founder, Chairman & CEO
You're right about no one individual is like the panacea of our talent, and things of that nature.
But as far as Ronda's concerned, I'll let Paul answer where we are with Ronda.
Paul Levesque - EVP of Talent, Live Events & Creative and Director
So we're finalizing the details of the deal now, just crossing Ts and dotting Is.
But just to be clear, it's a multiyear deal.
We are her #1 focus and goal.
We're in first position on everything with her.
And as she has stated, she wants to be ingrained in the fabric of WWE.
This is not a journey into something quick where she wants to come in and do a few events.
This is her life now and she wants to be here, wants to be ingrained in it, wants to be with us for a long time.
And we look forward to that opportunity, as she is a massive global star that can do amazing things in this industry.
Vincent K. McMahon - Co-Founder, Chairman & CEO
And she fits into what we're doing, what other women -- I'll let Stephanie answer that, how all of that works (inaudible).
Stephanie McMahon Levesque - Chief Brand Officer & Director
Sure, the women's evolution has certainly been a huge driver in our business.
And we've seen our female talent go from being secondary or tertiary type characters to actually being the main event in a number of our different programming.
We saw the first ever women's Hell in a Cell match, Money in the Bank match and, as Vince mentioned, the first-ever women's Royal Rumble match.
We also had the first-ever women's match for WWE in Abu Dhabi, where the audience actually started chanting, "This is hope," men and women in that entire arena chanting, "This is hope." And it's a huge movement in our business and it is bigger than just one person.
And it's something that we're really proud of and look forward to continuing.
Michelle D. Wilson - Chief Revenue & Marketing Officer
And I would just add, from a response standpoint, I think your question was what was our fan response.
Our social media, it essentially blew up at Royal Rumble.
But not just about Ronda, it was really around the entire Women's Royal Rumble match.
So what's great is, as Vince said, it's no one star.
I think that our fan response continues to build around the women in general.
So social media feedback was incredibly positive, the engagement level around our women's Royal Rumble match was incredible.
And again, we see even in our linear TV ratings, that when we have women, our matches on for the women, that those are some of our highest rated segments.
So when you look at the actual data around it, it continues to be a great story for us.
Vincent K. McMahon - Co-Founder, Chairman & CEO
It's not just as relates to matches and things of that nature.
But it's part of an overall aspect of what the women's evolution really means to us.
Stephanie McMahon Levesque - Chief Brand Officer & Director
And it certainly helps grow interest from a number of different business partners, whether that's the sales and sponsorship, whether that's media partners.
Everyone is really interested in this women's evolution in our business.
And it is actually something that our fans really helped organically start with a hash tag that trended worldwide for 3 days.
They are as much a part of this movement.
It's not something that we're doing for the movement sake.
It's something that's happening because our fans and our audience demanded it.
And our women are rising to the occasion and taking advantage of every opportunity.
Paul Levesque - EVP of Talent, Live Events & Creative and Director
And the truth is, because of what we have started with the women's evolution now for the last few years and the increased popularity of it and everything that we've accomplished, is the reason why somebody like Ronda wants to be involved in this.
She sees this opportunity as a platform for her globally as well, to create social change around the world for women not just within WWE, but globally around the world on so many levels.
So what we have already started and accomplished is now attracting people like Ronda, and around the world, women to want to be involved with WWE at a much higher level.
Michael Joseph Hickey - Research Analyst
That's awesome.
One little quick follow-up.
I guess people want to compare your negotiation fee rights, these -- ['14] back in the day to where you are today.
I would imagine everything that's happening, the growth of the women's revolution and your brand and the sport in general is a pretty positive development, I -- would you say in the negotiations?
George A. Barrios - Chief Strategy & Financial Officer
We'll find out soon enough.
Nicole, do we have anybody else in queue?
Operator
We do not have anybody else in the queue at this time.
I would like to turn the call back over to our speakers for any closing remarks.
George A. Barrios - Chief Strategy & Financial Officer
Thank you, everyone.
We truly appreciate you listening to the call today.
If you have any questions please do not hesitate to call -- contact us.
Thank you.
Operator
Once again, ladies and gentlemen, that concludes today's conference.
We appreciate your participation today.