Q3 2020 World Wrestling Entertainment Inc Earnings Call
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Ladies and gentlemen, you currently standing by for the W. W. E third quarter fiscal year 2012 earnings call. At this time, we are still a minimum initial purchase guns and play to be underway. Shortly we do appreciate your patience for <unk>.
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Hello, everyone and welcome to the W. W. E third quarter earnings webcast. We have just a few announcements before we begin first please use the question Mark icon in operation corner of your web console for technical assistance.
And to a large slides it located to the right on your slides with the four arrows pointing in different directions.
If you are calling to the phone line you may ask a question verbally by pressing Star then one you touched on some of it if you wish to be removed from the queue. Please press star and then number two.
Now I'll turn the call over to Michael Weitz, SVP financial planning and Investor Relations. Please go ahead.
Thank you and good afternoon, everyone.
Welcome to <unk>.
Third quarter 2020.
Earnings Conference call.
Today's discussion are.
Chairman and CEO.
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President and Chief revenue Officer.
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He's chief brand Officer Christina sales.
Financial Officer, your remarks will be followed by <unk>.
Our third quarter earnings release earlier this afternoon.
As opposed to the release or presentation and other supporting materials on our website.
This discussion will.
These statements. These forward looking statements reflect the current views are.
Are based on various assumptions and are subject to risks and uncertainties.
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Actual results may differ materially.
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Additionally, the matters, we will do.
Discussing today thanks.
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Reconciliations.
The GAAP information set forth in our earnings release and presentation.
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You should note that all financial comparisons are versus the year ago quarter.
Slide.
Finally, as a reminder, today's conference call is being recorded.
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On our website later.
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So in order that will take viewers on the ultimate home to find someone wwe's most iconic loss memorabilia.
This deal furthers our relationship with first communications through Andy.
Andy is also ordered additional episodes of our soon to be released documentary series, which featured a standalone documentaries on legendary superstars like stone cold, Steve Austin, the ultimate Warrior and many others.
If you recall the Andre the giant documentary from 2018 was not only the highest rated sports documentary on HBO and the last 15 years or was the highest rated documentary on HBO and the last 15 years.
Produced by WWE Studios in Association with HBO Sports and executive producer Bill Simmons.
Founder of the Ringer.
With that said I am happy to share with you that and groundbreaking deal we have sold a multipart documentary to Netflix.
On the life of none other than.
Then our very own Vince Mcmahon.
By groundbreaking I mean, one of the highest budgeted docks and Netflix is history.
Bill Simmons as previously mentioned will executive produce Chris.
Chris Smith, the Amazing director of Netflix is fire festival documentary with direct and produce alongside WWE Studios.
As I mentioned when I first joined the company, it's rare to have an opportunity to work at a company that's not only legendary and what is already accomplished but also uniquely poised to expand across all lines of business.
To maximize current opportunities and find new paths to higher growth.
This includes exploring an alternative strategic option for WWE network.
All lies in greater economics from Wwe's international markets, and cultivating new business opportunities.
Let's discuss WWE network for a moment.
Even with potential partners impacted by COVID-19 conversations have resumed for alternative strategic options to our current model.
We are currently unable to estimate when that alternative option will be completed.
We still believe in the potential for a transaction that enables WWE to reach a larger audience and realize a greater economic return.
In the interim we continue to capitalize on the growth and digital consumption.
Promoting content sampling and subscription with the free version of WWE network.
Since the pandemic began ww's subscriptions are up.
Even with our marching annual event Russell maintenance being presented in a non traditional way.
Notably the third quarter margin increase in network viewership and content consumption too.
2.4 million total viewers watch content across all tears, representing a 60% increase.
And those viewers watched 37 million hours of content, which was an 8% increase.
Perhaps more importantly average paid subscribers the network increased by 6% to one 6 million.
To realize greater economics from Wwe's International markets, we remained focused on developing localized content.
Which you utilize local talent and is produced in local language.
We are excited to now be working with our content partner in India, Sony on of 2021 event that.
That will primarily feature are developing Indian superstars.
Event will air in India on a Sony platforms, and we'll also be distributed domestically in the United States.
We believe partnerships like this are the best way to build engagement and to maximize the value of content or international distribution partners and our fans.
And the current environment, we expect to invest in international at a measured pace balancing near term results and long term growth objectives.
W. W has demonstrated tremendous creativity and responding to today's unprecedented challenges and and argue we are well positioned deliberate leverage the value of live content and growth and digital consumption.
In this context, we believe WWE can develop new content and distribution platforms introduced new products and increase our returns from international markets.
We look forward to sharing our progress on these objectives with you in the future.
Given the importance of Wwe's brands trained for future success.
I am pleased to introduce forms number two most influential marketing executive Stephanie Mcmahon.
Thank you, Nick and maintenance embarrassing name, calling that out I appreciate it.
A lot of people asking me what guidance exchange brand are prepared really deal and while every company is different right wrong here is to expand and strengthen WWE brand by amplifying our presence across all media platform.
Deepening engagement with our fanbase.
Creating value for partners and driving revenue.
Everything we do begin with what we call. The WWE universe comprised of our fans employees partners and superstars, we call. It the WWE universe, because it is influencing like being a part of a giant community, which is especially important during times like the.
When the pandemic hit and sports leagues and content providers begin to postpone and shutdown WWE became focused on not.
But how we were going to continue to deliver hour in range content to our fans through our media partners.
We needed to provide relief our audience and escape from their fear and uncertainty and do our best to deliver on our mission putting smiles on faces.
Okay WWE did what we do best we pivoted and.
Began to innovate.
Wrestlemania went from a sold out Raymond James Stadium in Tampa, Florida with a over 80000 people to a two night event at our performance center with no one in attendance.
Rob Smackdown Annex T followed suit and we begin to test and learn and what was our new normal week.
We experimented with audio techniques instead of matic style matches, we've started to bring in some of our developmental talent to serve as an audience through plexiglas.
But it wasn't good enough.
After many months, we found a way to bring the spectacle back and WWE.
On August 21st we launched what recall WWE Thunder down we've returned to an arena setting and took up residency at the Amway Center in our Orlando, Florida.
With a famous group to bring their nearly 1000 live virtual fans back two hour show.
We're using pyrotechnics laser displays augmented reality and drawing cameras and waved me never have before making raw and Smackdown feel alive again.
And we have seen a list and the ratings of 6% for Ross and 12% for Smackdown, as compared to the prior four weeks without fan.
Additionally, we made an investment in WWE performance centers transforming the location into the capital Wrestling Center.
To my grandfather's organization, and a new location to shoot and rang content. The CWC launched on October 4th for Nxt's live special take over 31.
Also as a part of the localization strategy Nip referenced earlier, we were able to bring back the Nx T. UK brand with our partners of Beachy sport shooting out of their state of the art studio from Queen Elizabeth Olympic Park in London in the U K.
It's incredible to watch production teams from Orlando, Stanford and London, all working simultaneously connected through technology and innovation to create this show.
And just more and more people started to gravitate to streaming platform, we adjusted our digital posting strategy to incorporate new original content.
Wonder matches versus clipped and resurface high performing historical content across Youtube, Facebook and WWE network, resulting in increased digital digital views of 28%, excluding the impact of geographical restrictions in India.
We recently surpassed 50 billion views on Youtube, making a WWE the fifth most viewed you tube channel in the world.
And we've partnered with new and upcoming platforms, most notably Ticktock, where we are the second most popular sports brand behind the N B a.
In order to reach new audiences, we need to expand outside of our ecosystem. In addition to some of the content. Nick mentioned, we also have a pop culture strategy, where we work to bring celebrities and influencers into our programming as well as casting are superstars outside of our programming. Some recent.
Integrations and the quarter included Adam Sandler.
<unk> Kim Jong and just this past Monday, Matthew Mcconaughey with the guest and the Thunder on rock.
Most importantly, we need a reason to keep our audience coming back for more.
In addition to compelling content people want to invest their time and resources and brands that has purpose and value.
WWE continued to support our community partners with the resources they needed to help them deliver on their mission.
We quickly transitioned from in person events to virtual events, including hospital visits career workshops to resume for higher heroes to support service men and women virtual anti bowling alleys with boys and girls clubs of America, and digital to meet and greets for which kids through make a wish foundation. We also produced cause.
To support physical and mental health for Special Olympics athletes as well as Kid power of videos for the launch of Unicef's Kid power at home platform and during the month of September we engaged our fanbase employable superstars to raise money and awareness for pediatric cancer research through our partnerships with the V.
Foundation and holiday hope on wheels.
Speaking of partnerships as a final measurement of our brand strength or advertising and sales revenue outpaced industry trends.
<unk> global brands continued to partner with WWE throughout the year, even during the challenges with Covid highlighted by companies such as Coca Cola Cricket Wireless time today, Mars, Microsoft Studios, Papa Johns and you know liver.
And this month, we announced a major new partnership and the beer category with constellation brands, the largest clear import company in the United States, focusing on their Victoria, Corona and Modelo brands beginning next year.
In 2021 and beyond we remain bullish about the opportunity to focus on long term partnerships and capitalize on our unique ability to bring engagement scale and reach would be ease of negotiating with one party WWE.
And now I will turn the call over to our new Chief Financial Officer, Christina failing thank.
Thank you 17.
[noise] Hello to Ww shareholders today, I'll review W. W E financial performance liquidity and capital structure and business outlook as a reminder, call comparison versus the year ago quarter, unless I say otherwise.
W. W. E generated third quarter revenue of 221 $6 million of 19% and adjusted OIBDA of 84 $3 million up more than two time.
Both for driven primarily by higher rates fees from U S distribution agreement.
Although government mandates continued to resolve from the cancellation of live events.
W E offset the absence of ticket sales with a reduction in event related production expenses and other short term cost savings.
During the quarter WWE executed a reduction in force, resulting in severance expense of.
Five $5 million given the non-recurring nature of this expense it has been excluded from adjusted OIBDA.
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To review the third quarter performance in more detail, let's turn to page three of the presentation, which shows revenue operating income and adjusted OIBDA contribution by segment.
Looking at the W. W. E immediate segment adjusted OIBDA increased approximately $60 million to 101 $7 million.
Primarily due to higher domestic rates fees for raw and Smackdown program.
Despite a challenging environment WWE continue to produce a significant amount of content more than 550 hours of programming for television streaming and social digital platform.
That's definitely mention with the loss of WWE centered home in August in the capital rest of Wrestling Center in October WWE continues to lead the sports and entertainment industry with innovative ways to safely recreate the interactive entering the atmosphere that has been a staple of WWE events for decades. This <unk>.
<unk> and a large scale virtual experience brings a high level of production excitement and most importantly brings our fans back into the show.
The third quarter ratings for raw and Smackdown declined, 29% and 2% respectively. They showed improvement from July to September.
Then they achieved this result, despite unprecedented competition from the return of major sports such as the NBA, NFL, MLP and including playoffs and premier events, such as the Kentucky Derby and the Indy 500.
Meanwhile, while delivering Ralph Smackdown, and next thing on television W. W. E announced the continued second season of Midland misses on USA network and the sixth season, a total balance on E and reaching beyond television WWE also produced original content for social on digital platforms.
And partnerships in partnership with Sunday.
WWE line strive for better series, which is posted on WWF digital platform and superstars social media channel.
In Ww.
W. The podcasts unquote with Alexa Bliss, which is available on all major audio streaming services.
Now, let's turn to W. W. E live events business on page five of the presentation adjusted OIBDA from my of events declined by $1.2 million two losses for $1 million due to a $22.5 million decline in live event revenue.
Declines were primarily due to the loss of ticket revenue, resulting from the cancellation and or relocation of events.
Until mid March W. W. E Health Arena Infineon based event in front of ticketed audiences during the third quarter. However, WWE help knows such event.
At this time it is challenging to predict when ticketed live events will return, but our intention is to return as quickly and safely as possible.
Looking at W. W E consumer product segment on page six of the presentation adjusted OIBDA increased one $6 million to five $6 million due to higher sales of merchandise on WWE shop E Commerce site as well as higher sales and video games and toys.
Notably the increase in E commerce off at the absence of venue merchandise sales during the third quarter W. W. E continue to introduce new products expanded video game portfolio and develop partnerships across product categories.
The strong E Commerce business was driven by the release of six new title belt, including the Ric Flair signature theories and by the launch of two targeted spice WWE lessons and up up down down left.
Licensing revenue reflected a 25% sales increase from the franchise game W. W. E. Two K 20.
And continue to benefit from the build out of W. W. E video game and <unk> toy portfolio.
W. W. E partnership partnered with wargaming for lunch World obtained Summerslam and would take to to launch W. W. E. Two K battleground.
W. W also partnered with Mattel.
Let's release WWE, he slammed UN, which immediately became a top WWE products at target and Amazon.
Now, let's turn to W. W E capital structure as shown on page seven of the presentation.
As of September 30th 2020 W. W. E held approximately $638 million in cash and short term investments.
This includes $200 million borrowed under W. W E revolving credit facility to ensure the necessary capital to execute the company's strategy and deliver long term value to our shareholders.
And the third quarter WWE generated approximately $111 million in free cash flow and increase of $127 million.
This increase was driven by improve working capital and the timing of collections associated with large scale international events.
Stronger operating performance and to a lesser extent lower capital expenditures.
And finally, a word on WWF business outlook.
The spread of COVID-19, and the related government mandated had directed WWE to cancel or postpone our relocate live events since mid March.
E. W. E is continuing to adapt the business to the changing environment by investing to enhance content production value and deepen fan engagement with examples of this being the creation of Wwf's Underdown and capital Wrestling Center.
With regard to fourth quarter performance W. W. E anticipates that fourth quarter of 2020, adjusted OIBDA will be below third quarter of 2020 results.
W. W anticipate $40 million to $45 million is incremental fourthquarter expenses versus the third quarter. This is due to $22 million to $27 million from one incremental production expenses associated with the creation of WWF Endoderm and capital Wrestling Center and two incremental personnel expenses.
Located with employees returning from furlough.
Both of these are expected to continue in the coming year.
Also contributing to the incremental increase in expenses is that W. W. E books $18 million and production incentive in the third quarter of 2020.
Typical timing for the incentive.
Distantly fourth quarter of 2020, adjusted OIBDA will likely be below fourth quarter 2019 results based on the absence of an event in Saudi Arabia, the absence of ticketed live events and to a lesser degree increases in other fixed costs W. W. E is currently developing of 2021.
<unk> operating and financial plan and continue to evaluate the personnel requirements and potential investments needed to support W. W. E long term strategy.
Going forward the potential impact of COVID-19 on W. W E business, which could be material remains uncertain.
Based on the sustained economic uncertainties W. W. E is not communicating full year 2020 guidance at this time.
Given the lack of visibility WWE did not buyback any stock in the third quarter under $500 million stock repurchase program.
But may resume activity on an opportunistic basis in the future.
W. W. E continues to have significant long term opportunities as an extended we believed WWE can develop new content and distribution platform introduced new products and increase returns from international markets and we look forward to sharing progress on these strategies you in the future.
That concludes this portion of our call and I'll turn it back to Michael for question. Thanks. Thank you Christina.
Christine we're ready now please open the lines for questions.
Thank you if you'd like to ask a question. Please press star followed by the number one on your telephone keypad, if you're calling from a speaker phone. Please make sure give me a function is off to make sure. Your signal can reach our equipment again, so I wanted to ask a question and we'll go first to Curry Baker from Guggenheim Securities. Your line is open.
Good evening, everyone. Thanks for the questions first maybe one of the ratings.
Obviously, we all sit there waiting to remember under pressure for like Raw Smackdown, I I think we all understand the empathic K. They just submit product generally but can you.
Give us any concrete plans you guys have going for to improve ratings I guess for busters, just clearly strategy.
Strategy going forward to improve ratings separately thinking longer term, it's waiting to remain at or below current levels. Do you think this impacts the overall value of the rights I'm heading into the next contract renewal cycle.
Okay.
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Television has lost eyeballs viewership is not so consumption of content across many many parties is significantly.
Significantly.
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Consumption excuse me of content for us as Vince mentioned is up significantly. So we're confident in being in the marketplace. That's our rights are going to continue to go up if you look at some of the head to head ratings since Covid here.
Head to head against the Stanley Cup finals on network television.
Our ratings exceeded their some of the demographics, we went up against the Lakers in Nebraska.
One or two occasions, we had a ratings increase week to week on that so we're confident in where the products going and we're confident that the marketplace understand that.
Okay.
Thanks for the color and then maybe one final question on the name of television rights is there any update there are you guys still talking to the saudis or other parties regarding getting a deal for the Mena region Uhm and if so can you frame any expectations or or Taiwan.
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Alright, Thanks Bye.
Thanks care Alright, let's take a.
We'll take our next question from David Karnofsky with J P. Morgan Your line is open.
Okay, well I was hoping maybe you could elaborate a little bit I'm looking for thank you for choosing alternatives for the mall or.
You can tell them out like the survey.
Content and do you envision doing something as in person, what what kind of global basis.
Domestic side.
Everything you said outside of the sale of the network is what we're looking at so what would be a licensing of the network.
As we know there are a number of streamers now domestically and abroad.
Everyone is looking for subs that will travel.
We believe and it seems like the media marketplace believes that we have those.
So we are now in constant dialogue.
With companies domestically and globally about potentially licensing the network to them.
Okay, and then you'll be able to you definitely prefer the mall. So just monetizing international we can better and maybe get elaborate on the phone with her primarily being a cold right.
Just need something like replicating the television.
Your call is a little muffled on this and I think I heard it correctly.
More along the lines of what we mentioned, we're doing with Sony in India. The globalized local content as some would say local content. So it's not simply streaming R. U S constant out internationally.
We're doing that it's developing local content for the international territories for their fans to embrace on them even closer basis.
Okay.
And we'll go next to David Beckham from Bamberg capital markets. Your line is open.
Okay, great. Thanks for the questions I have a question about the the free version of the network I was wondering if you could share any initial data on leadership four hours watched maybe it sounds like whoa potentially be pursuing an advertising deal give mister.
<unk>, but if you could update us on plans for advertising that'd be great and then the <unk>.
Sure. This is this is bad.
I think some of the numbers that I mentioned when I was chatting earlier about our spent on WWE network. Some of that is due to the free to where people can sample the product, which is proven now to lead to new subscribers. So we're happy with the free tier there no immediate.
Lands of making it a combo Avon S five type situations.
Subscription model with a free tier for now certainly things can change in the future but.
That's not the immediate plan.
In February.
Alright, I'm in advertising perspective, we are in the process of testing various technology to allow us to bring as in and whatever strategic way, we want to use them.
That's helpful Banks, and just as a quick follow up on the.
The topic of the strategic review Ah No data is really important to you guys is that something you plan to preserve and a strategic partnership going forward.
Yes.
Okay, you're very important.
<unk>. Thank you.
And we'll go next to February Teresa from Cannonball Research. Your line is open.
Thank you. Good afternoon. My question is about the maybe a segment so <unk> a year ago. The company good guidance. The management team I would say give guidance for have been crazy cost. So they have so much went down and at that point. We also didn't know the out come up with the Indian Uhm.
Right straight negotiations them call that's happened and so on so I was wondering if you could tell us how much confidence you have in the cost structure, that's implied by the queue for for for future years, and now that we're pretty much now the top line more or less much better than a year ago at least.
Did you see this segment, there's a segment with a staple margins.
Slept with declining correctly growing margins like any kind of color on the trajectory of course on a normal let's.
On the call it environment that would be super helpful.
Thanks for your question, it's Christina I'll take a stab at answering it.
I think as you think about our expenses going forward.
Or.
Two things as it pertains to media events that you should consider obviously outside of media events. The most important thing to consider is the return of live events and touring.
But within media event within the media segment and.
It's about the reset of the short term cost savings uhm with regard to uhm furlough.
But also actually expenses that come into media because of the returns alive inventory.
And most importantly is we think strategically it's about perhaps shifting expenses or maybe even investing a little bit further as we adjust W. W. E business model to focus on content production on new platforms to focus on digital and then any other investment to support key.
Would you take initiatives within that localized content for example comes comes to.
To mind.
So.
We're not we're still in the process of going through our 2021 operating and financial plan.
But those are some of the things that we're thinking about and that we would encourage you to think about as as.
As we think about the reset of 2021.
Thank you and one funded care for him a I think in your prepared remarks, Nick you said that.
They approached the spending international I will be I think the exact wording with something like more balanced the rest of the potential rewards. So I just wanted to make sure I'm understanding that correctly, it's got a departure or does it the change to the previous philosophy until just pending internationally or is it still the same but if you could just give us a couple of points of.
What the the differences.
We simply one to be surgical and strategic with it so for the Indian Superstar then that we're doing with Sony in 2021.
We look at all angles on that we have to make sure. It's the right talent.
We'll resume and can be we have to make sure that the cost structure of the event is some that something that will resonate for our business and Sony's business. So it's simply taken a deep dive into each and every one of these events there will be more of them and making sure that it makes sense for all parties involved.
Thank you very much.
Okay next we'll go to Brandon Ross from My Kid Parkhurst Your line is open.
Hi, Thanks for taking the questions I have a couple of for Nick, especially Fincher sports strikes expert and I. I know you you said earlier in response to courage question that you'd think about for WWE total viewership, but a lot of your profitability of it.
<unk> is is the life uhm, the greater television ecosystem and I wanted to get your perspective, what you think is going on with ratings not not just for the WWE, but for sports more broadly and does that and kind of the broader G.
The ecosystem pressures impact, how you think about who you're gonna Parker with in the future and how you potentially need to adapt.
WWE contact.
Then I have a follow up.
Thanks for the question Brandon I think there's a couple of things I think if you look at the structure of the traditional conglomerates. If you will so remove the thing for a moment if you look at the traditional conglomerates.
They're all getting there in terms of the recent corporate structural changes. It certainly appears to us that many of these structures are realizing it's about content first where we put a second.
As long as we put in the place that the consumers can easily access it.
So would it be so shocking to you to me to anyone who's following this stuff is Disney in there we were.
It is.
Is looking at will Hey, wait a second.
We have great intellectual property, we have great films, we have great sports rights, if we put that all into one package could we be competitive and beat accompanied like net Netflix.
We are thinking that if you look at NBC, Universal's reward and sort of indicating the same thing. So the most important thing to us.
Addition to our fans on the business side is that our current partners remains happy with the product while we all look at the landscape about where the business is going to be in three to five years from now I think we all see where it seems to be going let's see if it gets there is this the streaming first world. Therefore.
Great and then I also wanted to get your view on the core content right internationally, which was a bit of it this appointment last time.
Where do you see the biggest opportunities and what do you think it's gonna take to significantly grow inter national right is it is it simply the things, which you just mentioned becoming.
I'm engaged and I guess since since you work done sportswear I'd steal from the past where do you think the things are in terms of their interest for the type of programming that you have.
So I think we've all seen with Amazon certainly an appetite for the NFL. We've also seen them sampling.
Internationally, specifically would tenants in the U K.
It certainly indicators to me if you look at some of the recent executive hires we don't believe that you make those hires unless you're going to get more.
More.
Unless you're going to go deeper into the lives business.
If you look at Netflix is model if in fact this.
<unk> contemplating what they might be contemplating and N B C. Universal the same thing if you're not flakes, you're sitting there saying okay.
We can continue to put out fresh content that registers, perhaps on a weekly basis, but we haven't yet tested lives. So are they looking at testing why do they look to tested globally or internationally first so they can make a few mistakes as it seems that Amazon did with tennis.
They're all getting there if they're not they're already so.
We're gonna be them with them.
Again with our current partners in mind first but as the business continues to shift and Peacock becomes more of a priority for N B C universal and with boxes frequent recent acquisition.
Then it's all going so yeah, our anticipation is that the things if they're not all there was a great majority of them are going to be there in the not too distant future in terms of life.
Thanks for your perspective.
Thank you.
And next will go to Stephen King All from Wells Fargo. Your line is open.
Thanks, I just wanted to revisit the Opex guidance Uhm. So maybe just first could you clarify that most of that 40 to 45 million is gonna be at the media segment and then should we think about that is kind of a new run right for Opex before special events like something you might do in in Saudi Arabia R. A N D.
Yeah, I think if so it kind of implies that media opex, it's gonna be writing about 150 million over 2019 levels. So just curious if I'm thinking about that correctly and then my second question is kind of connected which is that sounds like some of this is going into contact production you're a media company content is the lifeblood, what do we think about.
That is this content that you're producing that you've already got revenue booked for is this perspective, new content that you want to produce for the network that might be tied into some of the transformative transactions are you looking at we're just kind of love some more clarity on that content production P. Since it could be a pretty big piece of Opex going forward. It. Thanks.
Sure thing I'll, let Nick answer the content production sourcing part, but first of all Adrastea Opex question Uhm I think first and foremost you need to think about that 40 to 45 million.
And that $22 million to $27 million, an incremental expenses remember, yes, uhm in part it's due to increased in production expenses related to Thunder down and.
And capital, but it's also associated with the return of employees from furlough and by the end of the year, we anticipate that uhm.
Nearly all of the employees, who were furloughed and roughly 25% of our employee basis furloughed, we estimate that the majority that nearly all of them will be back by the end of the year.
And so to answer your explicitly then no. The majority of it will not be in just a media the media segment.
More importantly, I'll go back to comment that I made earlier in the Q&A uhm.
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Let me think about live event, having clarity around when live events will come back.
How many live events, we do in a year and.
What what the capacity those lines events will be will give us a much clearer picture with regard to operating expenses as I said in in my Ugly opening remarks.
The lack of lines that revenue has been offset by the lack of live event expenses [laughter].
And those expenses may come back and I say may because he had very little clarity on that at this moment, but those live event expenses may come back at lower revenue because of limited more limited capacity constraints due to covid.
And so when we think about expenses moving into 2021, you have to consider that as well.
And I'll turn it over to make that.
A complaint about content sourcing bye.
Thank you in terms of the content sourcing as we all know it all comes down to intellectual property. We think we are a treasure trove of this year. So it's how do we <unk>.
Develop that content monetize properly where it serves the audience and expands the audience at the same time.
We think we've made a few good bets you'll see soon as the days off.
Great and I just one quick follow up I was wondering if that ratings. It for Tonight, you've talked about cents. The change out. The performance Center is that continued into October. We just wanted to know if that trend line is kind of can do this plan. Thank you.
Yes.
Thank you. This is nextgen our ratings of health consistent since the clutter fall season began with all of the other leagues in sports coming back into play our ratings is held consistent across the board in October yes.
Alright, we'll go next to Eric Cats from Wolf Research Your line is open.
Okay.
Oh, all it's cause there should be voice on the call and congrats to that can Christine for joining what to talk on some of the revenue opportunities in the pipeline here Uhm, a swimming stone one more time on expenses. The first I Wanna make sure I heard this correctly I'm 2021.
What's it come with a 2021 or it is likely lower than 2020th.
So within though are you assuming no Saudi events in 2021 and no life events for all of 2021 or maybe half of it is there any color.
I'm, sorry, I just to be clear, we make no comment about 2021 out of it at.
Okay. Okay.
Is there any assumption on Saturday, that's what all for next year, one or two or.
No comments.
As I said and I'm sure you can appreciate given that Nick and I are about 90 days in the seat were very diligently working on the 2021 operating and financial plan with the executive team and we are full intention to speak about our strategic.
Focus for 2021, and let me meet with you next.
Okay, and with regard to the medical expenses for for too.
Pier that if I have enough for the Thunder dome, if you're bringing back to furloughed workers, which I believe you said before.
Somebody that they might have a four nine per month 'cause previously announced so there's does that assume that you'll be the M. I center for all of <unk> cause I believe there's some press reports that your contracts for them or centers to the end of November some of that might be related to when the MBA restarts.
And Ah. So would you guys go back to the performance center give a backup location to sense of fun to do them again, how do you approach that.
Alright sounds good as that will be in some sort of centered like the Emily center for the foreseeable future, meaning through 2020 unlikely into 2021.
And given the fact that there aren't many live events occurring in the United States or anywhere in the world right. Now there are lots of places for us to go so that it's not a concern of ours.
Okay, maybe just one last one on the 89 in production incentives for for too.
Can you give me more color on exactly what those are and there's any of that sort of recurring into.
Until next year.
These are a production incentives not the actual amounts, but the production incentives incentives themselves we receive from primarily from the state of Connecticut, but some others seats as well with regard to quite frankly, the production of content. We have received them every third quarter for multiple quarters.
In this particular corner Uhm, we felt compelled to call them out.
Because relative to what's occurring and adjusted EBITDA in the fourth quarter Uhm, but it occurs at every quarter, sorry every third quarter for multiple quarters.
Okay. Thank you very much.
You're welcome.
Thanks, Eric Christian that can take the next question.
And next will go to John Dalton from Evercore. Your line is that okay.
Hi, Thanks, Yeah, just a couple of annex too so.
It from the wall, it's not done that and it looks like an X P has held up pretty well I'm wondering first off.
You can put I'll note that on when you agree with D. As in your network expires for N S T.
And now that you've got about a year distributing N. A T to any of the T V. Under your belt, you can compare monetization narrow that Saddam W. W network any thoughts about how you my plan to distribute our next two longer term.
Uh-huh.
Couple of things on that number one.
Congratulations to the entire team call his team Ww team on the ratings last night for the next day, which were particularly strong.
We've seen an increase in subscriber ship on the network, even with the absence of an X T on the network. So we're comfortable.
With a physician there.
Drawing a relationship with USA, we think that platform has led to many.
Many eyeballs seen or new talents.
Terms of the length of the deal typically don't.
Talk about those things almost our partners.
On board with us discussing it but it's a certainly long enough term deal where.
Where we feel that we have a long runway for fall into to continue to grow that product the way that they.
And any learning from.
That's been working with the N S. P content that maybe isn't working for large that down.
Okay, I think from from my point of view.
It seems to be working with a flutter full schedule across the board.
So like been said earlier, we always want the best writing, we always want the best talent to do that consistently.
52 weeks, a year is always gonna be a challenge for our company, but I think it's a challenge that we've always lived up to so we feel good about all three products and that all continue to head in the right direction.
Got it thank you.
Thanks Cruzan next next question.
Thank you next so I'll go to John Healey from Northcoast Research. Your line is open.
Okay. Thank you it might be that's a great question, but I'll ask it anyway, I remember when that coat that covered and then they started watching a press conference with the President Company. You mentioned, you then says being one of the people here is gonna rely on to get them to repeat back about sports and how it could come back and wanted to come back.
So given your possession of the leader in the industry in a library attainment. What is it that you and leadership are needing to see or want to see before you begin to say hey, we are going to let fans.
Fans back into the.
The setting where they can cause it to my product. So I'm just I'm, just trying to understand kind of mentally.
As a leader what you're trying to see before you say, we're gonna go for it.
Regardless of them.
And the panel.
It was a conference call with them.
Alright, Sir.
On that one as well.
Let's see.
Hello.
If you would like.
What does he turn important I dunno.
I would suggest.
Obviously when code.
And when it is schaefer okay.
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Oh I can tell you Joseph.
Fair enough.
Sorry.
Where do you stop the call right now.
Please if you have further questions follow up with.
Your Iron Department, Michael Lights, and Michael Guido, who will be happy to talk with you.
Thank you all thank you.
And that does conclude our call for today. Thank you for your participation you may now disconnect.
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