Q4 2020 World Wrestling Entertainment Inc Earnings Call
[music].
Please standby we're about to begin.
Hello, and welcome to the webcast entitled WWE Fourth quarter 2020 earnings Conference.
We have just a few announcements before we begin.
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I will now turn the call over to Michael White, Senior Vice President financial planning and Investor Relations. Please go ahead Michael.
Thank you and good morning, everyone welcome to the WWE fourth quarter.
Sure.
[laughter] Thanks George.
Yes, hi, good evening and welcome to our fourth quarter earnings Conference call, leading today's discussion are Vince Mcmahon and WWE Chairman and CEO.
The card WWE, <unk>, President and Chief revenue Officer.
Stephanie Mcmahon WWE, Chief brand officer, and Christina ceiling, WWE, the Chief Financial Officer.
The remarks will be followed by the Q&A session, we issued our fourth quarter earnings release earlier. This afternoon and the posted the release our earnings presentation and other supporting materials on our website.
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.
Clients should not be placed on them.
Additionally, the matters, we will be discussing today may include non-GAAP financial measures reconciliation of non-GAAP to GAAP information is set forth in the earnings release and presentation, which are available on our website.
You should notice and all comparisons are versus the year ago quarter, unless otherwise described.
Finally, as a reminder, today's conference call is being recorded and the replay will be available on our website later.
At this time it is my privilege to turn the call over activity.
And so as you can see the generated very strong financial results.
Very challenging environment.
We continue to produce gotcha.
Ever Miss a week in terms of Bruce and John.
It shows the flexibility and.
And our commitment to our audience.
And so the translation.
Our flagship programs the training facility.
And of course of the amyloid.
To your home.
Some of them with all the Thunder zone.
Well, it's a great day.
The.
And of course of your sales.
Okay.
Average and allows us to have the light sounds and we're just not and seats across release of some of the other things either one of them.
Certainly we are multi year agreement with NBC.
The service.
And my knowledge and I don't think there's a big.
With the announced there isn't the cohorts sort of stuff.
Yeah.
Well the thing that's pretty extraordinary of all the airports and I believe one of our board.
And as well.
And again, we just.
This agreement is really awesome the floor.
WB zones for.
Of the universe of as we call. It it's just gives them.
Book value and not just the WWE.
I watched the great value of what we do.
A majority of the.
And for less money and go.
Our.
And our network as well as all sorts of entertainment and so it's great for fans.
And they're getting 70% of you can provide a little more perspective.
Oh all of this day.
Development looking ahead, the 'twenty 'twenty one.
The expected to take advantage of.
Challenges of the Covid environment.
And it continues on.
We.
We expect a gradual return to chicken and the audiences.
And that is something that the.
Sure. Okay, we have a lot of it.
It is lack of its Michael.
And the 20% of approximately 30% 50 per cent of words of your breakeven.
And so the best will be determined by anyone who's in the live event business and now everyone knows the handle on exactly the one that sort of happening Michael.
Nonetheless, we are ready we are the most flexible adaptable and media company and the world. We can in terms of the around the stores a lot of and the six weeks.
And it just speaks to our ability to innovate and sort of media company and <unk>.
And the current environment.
The long term.
So that's pretty.
Pretty much where we are.
Eric.
Thank you very much Vince and thank you everyone for calling in today.
A week and a half ago, we made what we believe was.
And with the big announcements regarding WWE and Peacock and.
Starting on March 18, and the entire WWE network and its content will shift the peacock in the United States.
This includes Wrestlemania our vast library and all of our pay per view of events, starting with the fast Lane on March 21.
As part of this partnership WWE will maintain access to valuable audience data.
As we all know Peacock is free the Comcast Xfinity and Cox cable customers sort of watching fast Lane and subsequently Russell Mania on April 10th and 11th we will be free to all of those consumers.
Additionally, WWE network will be available for 499 of months on the AD supported Peacock tier which is half the price. The Vince just mentioned of 999 of months. The price we have been charging for WWE network in the United States.
There will continue to be no upcharge of any time for any of our events.
499 price is the all in price for a great library and pay per view and rig action and addition to the office Saturday Night live modern family the Big World franchises, and the English Premier League and the Olympic games.
I believe the last time, we all spoke in October we collectively discussed how the recent warrant structure changes and NBC you and gives me more indicative of the fact that streaming has become a top priority for both companies.
Many months in advance of those org structure changes and we started to engage and deep conversations with multiple buyers and the marketplace a lot of potential deal.
Ultimately, we felt like the partnership with Peacock was the right move at the right time for our fans and the shareholders.
It was Vince Mcmahon and WWE, we were the first mover for closed circuit. The pay per view. It was based and WWE that were the first movers out of pay per view and it's the the S. Five world and 2014 and WWE is now again, the first mover from a standalone of our spot of partnering with the media conglomerate.
That has tremendous assets reach and promotional power.
With the Peacock deal closed domestically, our focus now shifts to international markets.
In addition to distributing our great domestic content internationally. Our focus is to also develop content that is specifically targeted the fans and certain international territories.
Two examples of this I'd like to discuss here today.
First is India.
We recently produced a two hour and ring special with our partner in India some of them, which.
Which featured our developing Indian superstars the event.
And which premiered across some of these platforms on India of Republic day was available on Sony and one Sony and 10, three and Sony Max which have a combined reach of 50 million households, as well as on the Sony streaming platform Sony Linda.
The event took place at the WWE Thunder zone, two and all India and virtual audience. It was announced and it can be and English and incorporated studying and contemporary elements of India and culture.
The international and music sensation, and known as spin and canvas executed and amazing performance and honor of Indias National holiday.
We saw record engagement on digital and social content around the event and learned just before this call.
And that was viewed live by over 20 million people on the Sony platforms I just mentioned that.
And that's five times, greater and our average weekly ratings for raw and Smackdown, and India, which are both already considered highly rated shows.
And we await the live plus seven numbers, which will obviously substantially add to the total viewership number.
We believe this event will further grow our product and India, which is already a robust WWE market and demonstrates our commitment to our partner, Sony and our WWE fans and India.
The rest of the credits events all of Vac, otherwise known as Triple H and the entire creative and production team put together. This event during the pandemic, while also producing 3% to four other live in ring shows the week.
And look forward to more from us and India along these lines.
The second area of our international focus as Latin America, and localizing content tailored towards that region.
A key part of our strategy is bringing and authentic talent, who resonate with particular international markets.
You may have seen of red hat on the Royal Rumble pay per view of this past Sunday, Puerto Rican superstar bad volume performance as new head of single broker fee, which is based on our WWE Hall of Fame superstars of the same day.
And internationally of claim recording artist Bad Bunny songs were streamed on Spotify and more than eight 3 billion times and 2020.
Helping to make them the most streamed artist and the world that year.
And Lo and behold at the instigation of one of the WWE is up and coming Puerto Rican stars Damian <unk>.
And we got physically involved later and the macro.
Setting the stage for future storylines.
As of this past Wednesday of this collaboration has led to over $35 million total video views and $2 5 million engagements across Youtube Facebook Twitter and Instagram.
Total media impressions to date are nearly a $170 million.
And it was reported on by the top sports and entertainment properties, ranging from ESPN and Rolling stone the Telemundo the TMC.
And within 24 hours of the co branded bad Bunny WWE and merchandize became the hottest selling drop we've had on record on our E Commerce platform WWE shop.
And idea, which was born simply from seeing the cover of the New York Times Sunday Magazine last October has evolved and some one of the most of the engaging pop culture collaborations and our history with a targeted focus on the laden ex community.
Look for more of us and the last one for more of this excuse me and the Latam region.
In addition to our work in India and Latam. We also closed new international deals with IV Media, and Korea, and Fox tell and Australia and in China, We expanded our broadcast footprint, which already included.
The <unk> and pp sports by.
And by launching raw on Tencent video.
Let's also discuss some out of the ring opportunities and deals we were excited about as we continue to expand Wwe's brand beyond the range.
And in terms of original programming from our WWE Studios, we continue to develop our slate as.
And as you May know WWE used to finance productions, we stopped doing that a few years ago.
Instead of a licensing content for the.
Scripted and unscripted to buyers and the marketplace. We're pleased at how quickly our portfolio has continued to grow.
The new developments include the multi episode Unscripted series order created by and voice by John Cena, which will be produced with WWE Studios and.
Additionally, we have closed the deal for WWE studios to join the MVC show Young rock.
A long time long time WWE family members Wayne Johnson, and my actual family member and my sister Monostrophe Com.
The show premieres on Tuesday February 16 on NBC.
And finally as you may be aware, we send championship title belts to many of the major Sports League teams with one championships and in some cases, our title belts are more popular than their own trophy.
You may have seen the Brian James Holdup of WWE Championship title belt after winning the NBA finals the.
Golden State Warriors have done the same as well as the Los Angeles Dodgers and many other teams.
This led us to close the deal with the major Sports League, where you will be seeing WWE championship title belts that will be made using the team logos of some of the most prominent pro sports franchises.
The real Testament to the power of our brand.
At this point I'd like to turn it over to my colleague and friend Stephanie Mcmahon.
Thanks, Nick one of the lessons and Vince always taught me and business was to always be slightly ahead of the curve not so far ahead of the people don't understand what you're doing and certainly not be great. WWE was ahead of the kind of with the advent of pay per view, bringing wrestlemania and directly into People's home. So.
So media allows one to one connection between our superstars and our fans and when.
And consumers started migrating to what was then and new short form the platform called the Youtube WWE became one of the Youtube original paid content partners.
When research showed our audience with five times more likely to consume the online video and we Cannibalized our pay per view business and launched the first live S. Five service of its kind of WWE network and now we're ahead of the curve again licensing WWE network, our most premium content.
So one of America's Premier streaming services and D. C is peacock.
So why now.
Cause of the landscape has changed all of it.
19, and quarantine accelerated of behavior, all the viewership shifts to streaming platforms.
The streaming behemoths are investing heavily in technology and infrastructure in order to scale with operational efficiencies, creating more flexible pricing options and the biggest thing all of these providers have in common and the need for branded content.
In order to be competitive we need to pivot away from the technology necessary for an optimum user experience and allocate our resources against what we do best.
And creation of production and storytelling.
And we get to do it with the trusted partner, we have had for over 30 years NBC you.
Partnering with NBC use P got not only provides the greater value proposition for our current subscribers. It also allows us to deliver our most premium content to a significantly larger audience, including the 33 million people, who have already signed up for the service and <unk>.
Additionally, this partnership gives greater access to NBC use best in class team across sales marketing and promotion as well and some of the most iconic franchises and the United States and around the world.
Just imagine with NBC, you and Peacock and every three years as the Super Bowl every two years of the Olympics and every year is Wrestlemania.
We believe more than ever and the power of our brand.
In 2020, WWE and TV viewership held steady once we transitioned out of the performance center and invested and WWE Thunder Donna.
In fact over the period from August 'twenty, one through year end, which covers our move to the Amway Center and subsequently the Tropicana field, Rob viewership is essentially unchanged and Smackdown, and viewership has increased 8% compared to the prior three months period.
During the fourth quarter and digital views increased an estimated 25% and hours consumed increased 44%, excluding the impact of geographical restrictions and India.
And 2020 as a whole we saw a record 38 billion views and one 4 billion hours consumed across our Avon platform, both representing a 10% increase year over year, and and 11% increase in revenue.
In order to reach new audiences, we maintained our pop culture strategy, bringing celebrities and influencers into our programming and casting and WWE superstars outside of our content in.
In the quarter, Matthew Mcconaughey of the parents and the Thunder and then the other WWE content generated 5 million impressions and fact, Jimmy Kimmel use the footage from the Thunder and an interview with Matthew just this week the.
The biggest opportunity outside of WWE programming with Barr Nunn smacked out of the women's champion Sasha Bank, appearing as a recurring character and season two of Disney's Man Delorean.
And as Nick already highlighted this past week multi platinum artist and award winning the singer songwriter Bad Bunny not only performed at the Royal Rumble. He got physically involved diving off the top rope and then showed up again on Monday night Raw. The next night driving of Mugabe I think it was the first time.
I've ever seen Abu Dhabi Iraq.
And that funny.
One of the most recognized Latin ex performers and of our generation said being of WWE superstar and has always been his green.
As the final measure of our brand strength, our advertising and sales revenue outpaced industry trends throughout the year the.
The quarter was highlighted by an increase and gaming partner Activations, including War gaming World of tanks Cyberpunk 2077, two K battlegrounds and Microsoft gears Adil.
Additionally, we signed a multiyear partnership with our first banking partner credit one as well as our first official beer partnership with constellation brands, focusing on Victoria Corona and Modelo.
And in fact, if you were watching the Royal Rumble on Sunday Night, you would have seen WWE superstar rain the cereal, although it's your legend wary of the Victoria brand on his mask range also posted two and $3 6 million followers on Instagram and Spanish about how proud he was to partner with the brand as authentic to the law.
<unk> fan base and Victoria.
Forbes complex and sports illustrated where just a few of the outlets the highlighted this and integration.
And 2021 is already off to a promising start kicking off of multi year partnership with cricket wireless of the presenting sponsor of the Royal Rumble of costume content series with first time partner GM for the rollout of their Silverado campaign and the announcement of Mars Snickers as the returning the sponsor of Wrestlemania.
For the sixth consecutive year.
WWE is the perfect partner as more and more brands look to engage consumers with customized content creation and authentic influencers and when you couple that with our over 1 billion followers across digital and social platforms as well as our broadcast cable and streaming partners Fox USA and key.
Got in the states WWE is poised now more than ever to deliver scale engagement and reach.
And now I'll turn the call over to our Chief Financial Officer, Christine of Sandra. Thank you, Stephanie and Hello to WWE shareholders. Today, I'll review, the WWE <unk> financial performance liquidity and capital structure and business outlook.
As a reminder, all comparisons are versus the year ago quarter, unless I say otherwise.
For the year WWE E achieved record revenue and record profit WWE.
WWE Eve adjusted OIBDA of $286 2 million was that the high and of our rescinded guidance and reflected nearly a 60% of an increase of more than $100 million.
This growth was driven primarily by higher rights fees from WWE ease of use distribution agreement.
Throughout 2020, WWE, he managed a challenging environment, particularly for producers of live content.
We estimate the WWE lost more than $90 million and revenue as a result of COVID-19 restrictions primarily from the loss of ticket sales and the postponement of large scale international events.
WWE never went off the air.
As shown on page three of the presentation, we implemented short term cost reductions and realized other cost savings that substantially offset the revenue losses. This was of a remarkable achievement, but it does foreshadow a tough comparison for 2021.
In the fourth quarter and the absence of of large scale international events contributed to a 50%.
We're at $56 4 million reduction.
The reduction in the fourth quarter, adjusted OIBDA, which also reflected lower advertising revenue and higher television production costs.
The review the fourth quarter performance and more detail, let's turn the page five of the presentation, which shows revenue operating income and adjusted EBITDA contribution by segment.
Looking at the WWE E media segment, adjusted OIBDA decreased 37% or approximately $44 million the $73 million, primarily due to the aforementioned of that loss and to a lesser extent decreased advertising sales and higher production volume.
On December 11th and we transitioned the WWE thundered out of state of the art environment for producing wrong Smackdown to a temporary residency at Tropicana field and St. Petersburg, Florida.
And not stadiums setting and we bring nearly 1000 live virtual fan and back to ourselves and surround them with pyrotechnics laser displays and augmented reality and drone cameras the.
The staging increases production costs by approximately <unk> 25 per cent per episode.
Expect this investment to continue through at least the first half of 2021 as it brings a high level of excitement to our program and most importantly brings our fan and back into the shop.
Despite the challenging environment WWE continued to produce a significant amount of content more than 700 hours of programming in the quarter and more than 2300 hours for the year across TV and streaming and social and digital platform.
As we prepare to transition the WWE network. The Peacock, we continue to capitalize on the growth and digital consumption.
And content sampling and subscriptions with the free version of of WWE network since.
Since the pandemic began WWE subscriptions and consumption have been up meaningfully.
And the fourth quarter $2 2 million total viewers watch content across all tiers, representing a 40% increase and those viewers watched 35 million hours of content, which was 14% higher.
Perhaps most importantly average paid subscribers to the network increased 6% to $1 5 million.
Now, let's turn to WWE He's live event business on page seven of the presentation.
Adjusted EBITDA from live events declined by $4 $9 million to allow us of $6 $7 million due to a $26 7 million decline and why the net revenue.
These declines were due to the loss of ticket revenue, resulting from the cancellation of events.
And until mid March WWE held arena and stadium based events in front of ticketed audiences.
During the fourth quarter, However, WWE held no ticketed events.
We are delighted to have announced for the current of Wrestlemania The Tampa Bay on Saturday April 10th and Sunday April 11th 2021 at Raymond James Stadium, with tickets availability and safety protocols forthcoming.
And it remains challenging to predict the pace of which we will return to a weekly live event schedule, we do not anticipate the staging of other ticketed events until at least the second half of 2021.
Looking at WWE is consumer product segment on page eight of the presentation adjusted OIBDA decreased $3 $2 million to $9 $1 million, primarily due to lower video game sales and the absence of venue merchandise sales and.
The drop and video game sales was anticipated as WWE E and take two had previously determined to delay the release of Wwe's franchise game until 2021.
WWE continued to introduce new products and expand its video game portfolio and develop partnerships across product categories.
For example, during the quarter WWE continued to build out its video game portfolio launching WWE undefeated and WWE E racing showdown and partnership with N way and jet synthesis prospectively.
As of year and WWE, He had 140 million installs across its game portfolio.
Demonstrating our commitment to product innovation WWE released 2000, new products on its E commerce platform, including 18, New champion shop ship titled Zone, which generated category growth of more than 100% for the year.
Now, let's turn to WWE. He's overall cash generation as shown on page nine of the presentation.
In 2020, WWE generated approximately $292 million and free cash flow and increase of $240 million.
The increase was driven by improved working capital and the timing of collections associated with large scale international events.
Longer operating performance and to a lesser extent lower capital expenditures.
As of December 31, 2020, WWE, ehealth $593 million and cash and short term investments.
This included $100 million borrowed under WWE revolving credit facility, which was repaid in January 2021.
And finally, a word on WWE he's business outlook.
Last week.
E. W E issued guidance for 2021 adjusted OIBDA.
As previously indicated WWE, he expects restrictions related to the spread of COVID-19, particularly related to ticketed live events.
To continue at least through the first half of 2021 of.
Additionally, we anticipate a significant year over year increase and expense due to continued higher television production expenses at WWE Thunder zone as well as the return of employees from furlough.
We estimate the WWE can achieve 2021, adjusted OIBDA of $270 million to $305 million at.
As revenue growth driven by the Peacock transaction, the gradual ramp up of ticket and live events, including large scale international event.
And the escalation of core content rights fees.
Is offset by the increase and production and personnel expenses.
And our view this.
And the stated 2021, adjusted OIBDA guidance range would be approximately 15% to 20% higher without the ongoing impact of COVID-19, which includes the loss of ticket and merchandise sales of live events and the increased investment and production. The further fan engagement.
Turning to WWE ease of capital expenditures and early 2020, we deferred spending on the company's new headquarters.
Given increasing visibility regarding WWE is projected performance and liquidity, we are planning to restart this project and the second half of 'twenty one.
For 2021, we estimate total capital expenditures of 65% to $85 million, including funds to begin construction as well and fund to enhance WWE technology infrastructure.
You are and the process of reevaluating the headquarters project and we.
We'll provide further guidance on future capital expenditures when that work and something that.
For the first quarter of 2021, we estimate adjusted OIBDA will decline.
And incremental profits from Peacock and higher content rights fees are more than offset by the absence of ticketed events, including a large scale international of that.
And increased production costs.
The timing and rate of returning ticketed audiences to WWE ease of live events remains subject to significant uncertainty and as such we are not restating reinstating more specific quarterly guidance at this time.
And finally.
I'd like to take a moment and talk about WWE <unk> financial outlook in a post COVID-19 world whenever that maybe.
And analysts and investors will likely use the ex Covid range of 2021, adjusted OIBDA guidance to estimate future performance.
I'd note that 'twenty and 'twenty, two and future years will be impacted by a variety of factors.
Certainly the contractual escalation of WWE EES core content rights fees will continue to be an important source of growth.
However, other.
Other factors may temper that growth.
Based on the accounting treatment of Peacock revenue for example, we expect the highest incremental impact of the peacock transaction to be booked in 2021.
Another key factor to note in the W. W. E post Covid business model is that while TV production cost may decline somewhat in 2022 relative to 2021.
Costs will likely remain higher than in 2019.
This is due to the shift in 2022 of Monday Friday production schedule and.
Compared to a Monday Tuesday schedule of previously.
Incremental costs related to this change where mouth and 2020 by residency and various locations.
And particularly and WWE, He's one performance center and the early months of Covid.
WWE E continues to adapt its business to the changing environment as.
As Vince Nick and Stephanie indicated we believe WWE. He can and will continue to innovate across all business lines as we execute our strategic objectives, and we look forward to sharing progress on these initiatives with you all in the future.
And that concludes our prepared remarks, and I'll turn it back to Michael for Q&A. Thank you.
And Christina Karina.
<unk> were ready now please open the lines for questions. Thank.
Thank you as a reminder, that star one if you'd like to ask a question. We will go ahead and take our first question from David Joyce with Barclays. Please go ahead.
Thank you very much if you could please.
I'd sort of color.
The other cost side of the equation for the Peacock and WWE network deal, we could think about the fate of the phasing of the cost savings and what kind of areas of will come in.
Also if you could talk about the sort of the one time migration of expenses.
All of that feeds into your guidance this year. Thank you.
Okay.
Sure David It's Christina and thank you for your questions.
From the perspective of of migration costs, most of that would be and the first quarter and so.
And it.
It's embedded in our and our guidance for both the first quarter and for the full year of 2021.
And as our any potential savings from a technology perspective.
But I would caution you and in.
From a technology perspective, and that I did highlight in my remarks, a potential capital expenditures around technology infrastructure at least some of the technology savings will be offset by investments in systems that are long overdue.
But it is all embedded in the 2021 guidance of being provided.
Alright, Thank you very much.
Youre welcome.
And we'll go ahead and take our next question is from Greg blocks with the light shed partners. Please go ahead.
Hello, and thanks for taking the question.
What was also hoping you could help us better understand the financial impact of the Peacock deal and I'm thinking more on the revenue side are there any potential revenue offsets there against the licensing deal. Besides obviously.
Scriber revenue going away and then maybe the one related for Stephanie.
And I wanted to think about your sponsorship opportunity following the deal.
As I assume you're keeping network inventory to NBC you what sponsorship.
What's your sponsorship for the look like and the week of the field, particularly around the large pay per view.
And how is their sales force going to help you with your other sponsorship and ambitions.
Sure I'll work backwards I'll start with that last question Brandon and thank you for the question and we can't really comment on specific deal terms, but Comcast NBC you is in the industry leader, particularly in the sales and sponsorship space and as we mentioned and the comments never before have we been.
Positioned alongside properties like the Olympics, and the Sunday night football et cetera. So we're looking forward the amplifying our current partnerships and.
And certainly working with N Btu and Peacock.
And Brian and the Christina just to answer your question about the incremental revenue opportunity I think is ultimately what youre asking about and it is embedded in our guidance.
We're thinking about it from and incremental perspective and.
Youre correct.
The at the offsets of would be the loss of subscription revenue related to the network.
Okay, and and no other offsets besides that.
No.
Okay and then the other question and I wanted to ask was about content and flexibility given your broader relationships with and we see Ya.
Is there the ability to perhaps move higher.
The higher profile of content off of the pay per views and into lots of help kind of.
Great and broad ratings.
Back to growth.
I can answer the branded this is the next thank you for that part of the question where all.
Always looking for ratings growth no matter how high the ratings are.
It's all about exceeding nbc's expectations. So there is flexibility if the two entities came together and decided to put certain content onto the linear platform. We have the ability to do that obviously, both parties again would have to agree to that.
For now we're focused on helping the Peacock Rover subscriber base and we're confident that we can do it.
Thank you.
We'll take our next question from Laura Martin with Needham and company.
Hi, everyone.
Maybe one for Vince first.
And if we just sold the 1 million sub business.
And what.
Which I'll cover the overhead cost of the network why is it the what Ronnie is at the country for 400000 and Goodbye.
It looks like the Airbus is doing what you did in Canada, which is just starting and the rights to Rogers of syndicated out the like how do you think the that's close to the P&L options of offshore.
Okay.
Hi, This is Nick I can sort of answering.
The answer to that.
Sure.
I tried to articulate some of our international plan.
We have robust thoughts on WWE network internationally as we did.
12 to 24 months ago of domestically.
So again, we're always looking at our existing partners in terms of growing our viewership growing our audience.
And that's going to be one of our men and focus is moving forward as it already is.
Okay, and then the other ones the casino.
And here that the EBITDA would've been.
What about 15% to 20% higher if <unk> been able to have live events and alerts, but I thought one of the great learnings of going into the lockdown.
The EBITDA margins exploded once you didn't have lots of lots of sort of breakeven and it's great for revenue management, but it actually looks like.
So could you just walk us through like the longer the walk down space, the more EBITDA and if I can.
And not the other way about one of them I get it wrong and that equation.
Hi, Laura Thanks for your question and I think ultimately it's looking at.
The television production expense so.
We are spending incrementally.
Two two and increase our fan engagement and keep the excitement and energy around shows that normally would be life and half ticketed audiences against them. So there's not incremental revenue associated with the incremental spending that we're doing inc.
And the production of.
Raw and Smackdown in Tropicana Tropicana field right now.
The degree to which we're able to.
Dart.
Bringing fans physically back into.
And two arenas and stadiums and getting them to buy tickets by merchandise.
And we'll have a higher incremental margin than just spending money with no revenue against it at all.
Super helpful. Thank you very much.
Welcome.
We'll take our next question from Curry Baker with Guggenheim. Please go ahead.
Thanks for the question I think my first one is for Nick could you maybe walk us through the key revenue opportunities from here now that the network built on it and most of all the key television rights agreements are done and save Nino and I think in particular.
And maybe what the opportunity is for sponsorship the Pam there.
And just given that it's an area of that WWE has historically under monetize debt and relative to other sports leagues.
Thanks, Terry a couple of things there are international plan as I mentioned, a few moments ago is really just getting started and we're confident where we are internationally. We're also confident that there is a lot of room for growth. So we're looking at new revenue opportunities there in terms of the sales and sponsorship element.
As you May know Stephanie took that over about six months or so ago, we've already seen a strong uptick and the results of that we think with the NBC U partnership across the with WWE and Youre going to see more of that so we're confident and those revenue opportunity.
In terms of the scripted and unscripted TV opportunities that I mentioned and the prepared remarks, we're just getting started and.
And we're excited about.
<unk> of items in that arena.
The championship title belt things that I mentioned to you and that's just with one of the major sports leagues. So obviously, we're going to look to replicate that.
<unk> zone at a decent price point.
And.
Are a good source of revenue for the company now and we believe something of that can grow substantially and the future.
Okay. Thanks, and then my last one is for whoever wants to take one question I get the most of our investors how will you guys. The reverse ratings trends aside from bands coming back hopefully later this year, which should help.
All of those ratings what else is the company doing to enhance the product and drive the ore stacked raw and Smackdown.
So a couple of things this is Nick again.
<unk>.
We don't believe that we've lost eyeballs, we believe eyeballs tends to shift from linear and digital platforms.
If you look at even our Facebook numbers, which are significantly up the last six months or so including the revenue against those numbers. We think the eyeballs of there like I said, we're always looking to grow ratings. So now that we're coming out of the competitive presidential race, but a lot of people were focused on and we're still.
All in the midst of a virus and a lot of people are focused on we believe with the continued great in bringing products that the.
The eyeballs are continuing to grow and will result, and more linear eyeballs as some of the other stuff that I. Just mentioned passes so we feel good about our position and we think of our network partners do as well.
Okay. Thanks for the questions. Thank.
Thank you.
We will take our next question from Ben Swinburne with Morgan Stanley.
Hi, good afternoon.
Two questions and maybe maybe for Nick it's interesting the Peacock deal.
You mentioned or maybe Stephanie mentioned that you were of the company or of Ww is the company that started this whole direct to consumer trend many years ago.
And now all of these companies are are pouring into that space.
I'm wondering if you think youre going to see the rest of the industry sort of moves and the direction you've lived in.
Sort of.
Offloading, the Reits and a broader platform and also are you, giving anything up and the estimated of direct to consumer and having relationships with your fans. Obviously strategically important I think you mentioned that because you guys of retaining data. So I'd love to hear more about that and how you think about maintaining those relationships and this new model.
And then I don't want to let Kristina down so I'll ask or the accounting question.
Can you tell us anything about how the mechanics of this deal is going to work on the P&L over time I'm, just wondering particularly on the pay per views whether it is going to be volatility, we should be aware of or anything you can help us with thank you both.
Thank you Ben I think they were like a compound question of Brexit.
Very well done by you.
And when I talk about.
And you see you and feedstock.
If you look at the Big media conglomerates, there is not one.
That has the cable, which obviously the pipestone the homes, including broadband and the content the theme parks and remove any company that has a satellite companies and we're talking about broadband pipes.
And we see us unique and that way.
It was sort of the right time to look at it and say even if you caught this ts of few weeks ago on the football Night and America pre NFL pregame NFL show going into the playoff game on Saturday Primetime of few weeks ago. They announced the next three locations of Russell media, including the upcoming.
And April 10, and 11 and Tampa.
Just that announcement on the linear platform combined which.
We thought was a very creative content output by Paul and step in terms of talking about the different cities, we're going to.
During the football game of the whole thing went viral.
Most took over social media and again the NFL. The NFL, we're not certainly it's not for us to compare ourselves to them.
But we feel great about how that work it was a bit of the Ts because of the Peacock deal was already done.
Which is why they tag that announcement with rock coming up on Monday night, Theres going to be more of that we are putting together our 2021 finalizing our schedule in terms of pay per view premium events and look for events to the piggyback onto big NBC events, where we will have the promotional power and it all the way.
It's the first time ever that WWE has partnered with someone who has that sort of reach all of these events. So we feel good about our chances.
In terms of the financial part of it.
I'll turn that over to Christina.
Hi, Ben Thanks for throwing me and the accounting phone.
Glad you brought it up because I think part of things.
The main floor.
For all of our analysts and investors to understand of course, you all have a lot of experience with content rights deals and and the mechanics of them and and there is two things of that I want to underscore here first I think and your questions and there was an underlying assumption that debt.
And there would be volatility around pay per views just so everyone understands there is no upcharge around the special content.
And for a fourth WWE. This is one 499, you get everything and get our library and of pay per view plus the amazing content.
And out of the Peacock as well, so there won't be that kind of volatility and.
The second thing I would say and I touched on it briefly in my prepared remarks is that we're still working through the accounting from the perspective of just making sure that it <unk>.
Early reviews, but in any case, regardless 2021 will be.
The biggest year in the deal from an incremental revenue and adjusted OIBDA perspective, because of time delivery of the.
The deal so to speak upon the onset we have the values of subscribers that we're transferring over and we have the value of any IP that we're transferring over and that will be all recognized in 2021 and then in 2022, you will have the regular.
The record revenue recognition of the ongoing deal. So hopefully that's enough kicking out of an accounting for you to keep you busy.
Thank you very much everybody.
And can I just tag that with one thing if it is still with us and of course.
Thank you what I had mentioned in terms of the power of broadcast we don't believe broadcast is going anywhere if you look at our partners at Fox David.
Put together a pre Royal Rumble show for Us, which did over 1 million viewers, we announced the 30 years since 2009.
I'm, sorry, we announced the first and second people to enter into the Rumble and all of that stuff matters that Fox network platform and having them promote interim smackdown. It matters. So again in terms of broadcast networks, we're thrilled with box and we're thrilled with with NBC can do for us promotional wise.
Thank you.
And we'll go ahead and take our next question from David Karnofsky with Jpmorgan.
And that's sort of the question Nick one.
I was wondering if you could discuss how you expect the NBC news.
And we'll evaluate the success of WWE content of Pincock Allen.
And obviously that apply.
If you take the tank.
How do you think the way factors like subscribers the advertising other than just the promotional value of having something like Russell and the AMR.
So we think it always comes down so we refer to them as the three r's ratings relevancy and revenue ratings and the subscriber base, obviously based on subs and.
Relevancy for a product like Russell.
And for them to be as excited as they are about it and.
And revenue, obviously is a tremendous opportunity for them to sell against it on an AD supported tier of 499. So we always look at it by thinking about close to <unk> in terms of.
Our partner satisfaction.
Okay, and then just kind of a separate topic and speak to how the shutdown of the yen the team sports network and the net.
With all the sports content of the USA and potentially impactful and Alex team.
And in terms of scheduling of the.
Kind of the overall role that your content tired of that network and.
And it seems the other kind of a bit of longer than any of that content over the peacock, we can kind of debt.
Okay.
We believe it has no impact on us the the departure of NBC Sports network.
We think what youre seeing and the cable universe is going to be further consolidation. So we know that the bundle has now sort of been on bundled or little exposed. So the networks that were profits up but not as strong cable networks that were propped up by the stronger cable networks like USA, but not as strong ones probably cease to exist across.
The board so look for more content migration onto the stronger cable platforms that there'll be no effect on the on raw NXT.
Thank you.
We'll take our next question from David Michael with Baird. Please go ahead.
Great. Thanks, so much for your question Phil of the high level. One you talked a lot about the ongoing shift and moving towards digital platforms and of course of the Peacock deal.
It really hits, the nail and the head there I'm wondering how this negotiation and this deal might influence future TV deals.
And obviously, especially in the U S quite a ways away a lot can change between now and then are you thinking about the way in which you might license raw and Smackdown, and the use of any differently as a result of the steel maybe taking that.
And exclusive basis to what they do a platform and the bag.
All of them.
Thanks, David first of all we're always going to look to our incumbent partners to see what their plans are and the future and to make sure that those conversations happen first.
We are open to all buyers. So I think it was the light share folks who had predicted.
The first day night football May go to Amazon exclusively for the first time and the exception on that exclusion as of May also be an NFL network, but it wouldn't be on our traditional broadcast network.
We agree with that assessment and Thats, obviously speculative on someone else's property, but you see Amazon hovering around the big test of live out in the U K first with tennis.
Entertainment and tested it out when Thursday night football digitally was on Twitter. They took the package and put it on Amazon and some interesting things with the obviously, there's a executive change that we all learned about not too long ago. So we'll see how that shakes out, but we'd like the things we have our finger on the pulse of what most.
Of these buyers are looking for down the road again with the heavy emphasis on Fox and NBC Universal to make sure that they're taking care of.
Great. Thanks, and just as a quick follow up.
Maybe you can mention of the 15% to 20% impact to EBITDA from the.
And the pandemic I was wondering if you could maybe help us flights out of a little bit in terms of.
And how that's comprised of what percent of what portion of that is related to production costs versus the.
And the other impact you mentioned that some of the loss of ticket sales and merchandise and thanks.
Okay.
Thanks for the question, we haven't broken it down.
Publicly with regards to percentage of impact but.
What we have said is.
We expect there to be of significant year over year, Inc, increase and WWE <unk> expense base.
Due to continued higher expenses and associated with the production of Ron's back down.
<unk> Ah at Tropicana or any any other facility like that post.
And we have said that our TV production expenses up 25% per episode.
And we also pointed out that there was also an impact of the return of employees from furlough, which won't start to be of year over year comparison really until the second quarter of.
2021.
And of course at the biggest X factor and our minds is the return of.
The life of ticketed live event, and the pace at which they ramp and Vince talked about and his opening remarks, what's the capacity restriction going to be how many stadiums are available to us across the United States and any given moment.
Are we allowed to sell merchandise and all of these things are kind of up and the air right now it's anyone's best guess and the live event of business as to when and then as to how so.
And so all of those are kind of impacting as we think about that 15% to 20%.
Estimate of.
What do you think the ongoing COVID-19 impact is on our numbers for 2021.
Thank you Christina.
We have time, sorry, given the length of the call and we'll just going to take one more caller. Thank you.
Thank you. We'll go ahead and take our last question from Vasily <unk> with Cannonball research.
Thank you good afternoon and wanted to follow up on Christine's point that the company should the looked at.
In terms of normalized earnings power.
So if we think back to Saudi Arabia events.
And you help us understand the profitability of those event and so but we're kind of.
Sort of broad sense with David is if I remember what can figure out the revenue from <unk>.
The reported financials, but if.
A couple of years ago, you spoke about the first event being more profitable than the second so if you could just help us triangulate the EBITDA impact.
That's what the Super helpful. Thank you.
Sure I think just looking at the business recent fourth quarter, we'll give you.
<unk> fine in terms of understanding what the absence of of large scale and are international event has on.
And the impact that it has on our business as we discussed and the fourth quarter and the absence of of large scale international events contributed to a 50% or of $56 4 million reduction in the fourth quarter adjusted EBITDA and that did also reflects lower advertising revenue and higher television production costs.
And so we're seeing it very very starkly in in this quarter, just reported and what the the.
Positive and R&D.
And when they come with a large international of that comes back to us the positive impact that can have on our adjusted OIBDA.
Alright, the quick follow up then.
The both of them have the same profitability profile.
So if you have one and the year or two in the year you just multiply the positive by the by two or the second one is the less profitable.
I think that most of the case before.
I would say is it's really and talk.
And your about live events. We are we are in the hyper theoretical right now because of the guy.
And even talking about live events and the United States, it's quite difficult to hypothesize of what it will look like.
And even in 2022, what some of the restrictions may be but what.
And I would say is comparing one event to another event in any given year depends on where it is.
And where it is with within within the country. What the expectations are around the show itself. There are so many factors that go into it that would just be of highly theoretical conversation.
Alright, Thank you very much.
Thank you. Thank you everybody. We appreciate you listening to the call today. If you have any questions. Please do not hesitate to contact me, Michael Weiss or Michael Guido your contacts and the Investor relations. Thank you.
Once again that does conclude today's conference. We do appreciate your participation you may now disconnect your phone lines.
And.
[music] Donna.