World Wrestling Entertainment, Inc.
Q3 2017 Earnings Call Transcript

Published: 26 Oct 2017

[Operator:]

Hello and welcome to the webcast entitled WWE Third Quarter Earnings. We have just a few announcements before we begin. [Operator Instructions] I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead, Michael.

[Michael Weitz:]

Thank you, and good morning, everyone. Welcome to WWE’s third quarter 2017 earnings conference call. Leading today’s discussion are Vince McMahon, our Chairman and CEO; George Barrios, our Chief Strategy and Financial Officer; and Michelle Wilson, our Chief Revenue and Marketing Officer. We issued our earnings release earlier this morning and have posted the release, our earnings presentation and other supporting materials on our website, corporate.wwe.com/investors. Today’s discussion will include forward-looking statements. These statements reflect our current views, are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings. Actual results may differ materially and undue reliance should not be placed on them. Additionally, the matters we will be discussing today may include non-GAAP financial measures. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website. Finally, as a reminder, today’s conference call is being recorded and the replay will be available on our website later today. At this time, it’s my privilege to turn the call over to Vince.

[Vince McMahon:]

Good morning, everyone. As you probably – already have the numbers and revenue increased 14%. OIBDA is may an all-time high as far as records are concerned and go back up. Network’s paid subscribers consistent with our guidance as far as [Inaudible]. We launched WWE Network in China with our partners PPTV, a successful launch and obviously we’re looking forward to the retail of growth there in the months and years to come. What are we’re doing in a lot of our markets, we have this in OSN and in the Middle East, we have in India and as well as in Mexico which is pretty much Mexico and Central America. And that’s a two hour or 90 minutes in language, it’s sort of a review of what went on in WWE that week, highlights things of that nature, but in language and that’s doing very well for us with these, this week in pretty much [Inaudible] to that obviously, we’re doing a lot of in language live things on our paper view which helps the network and things of that nature. So we’re moving more and more that way, we think that’s really going to help us in so many different areas. There are some other color – we first signed up first to female talents I think from India and where else, Middle East then?

[Michael Weitz:]

Yes, Middle East, Jordan.

[Vince McMahon:]

And you want to tell us those names?

[Michael Weitz:]

Kavita Devi from India and I cannot remember how to pronounce the word from Jordan, I’m sorry.

[Vince McMahon:]

All right, maybe we’ll take a guess of that. But anyway that creates a lot of [Inaudible] information. Here in the States as well as over there, and that’s one way for moving obviously as well and which is very successful [Inaudible] put this together, very successful and branch out in terms of our female superstars who were extraordinarily athletic. We – and speaking of the Indian talent and we announced a two live events going back to India on December 8, 9 in Delhi, look forward obviously to producing that one. Some of my favorite topics obviously, the digital video views and social media which is crucial to success, the long range and short range to a fan here in WWE. And first nine months digital videos reached 14.2 billion or 23% social medial followers surpassed 825 million, up 17%. And it is overall awareness obviously strings of revenue as well but so many different ways we can derive revenue from so many different areas, and of course, this is one of them. One of the [Inaudible] in terms of the NBCU we secured 20 new advertisers which is important to us. We’re at about 200 advertisers now, 70 [Inaudible] over the past three years and you can see that trend and where that’s going. And just generally as part of 2018 is concerned, we obviously anticipate continued growth in and another year record revenue and profits, so that’s much pretty where I am.

[George Barrios:]

Thanks, Vince. There are several key topics, which we’d like to review today. These include management discussion of our financial performance, the progress of key strategic initiatives and our business outlook. For the third quarter, we generated OIBDA of more than $40 million, it’s an 14% increase in revenue from across our businesses. This execution enabled us to deliver an all-time record quarter for reported OIBDA. It also put us on a path to exceed the financial objective that we established at the start of this year. These results reflected the successful execution of our strategy to create compelling original content, engage our global audience, to leverage these strengths to increase the monetization of our content across our three core platforms pay-television and direct-to-consumer network and our digital and social platforms. Demonstrating the efficacy of this content strategy our medial division including the network and television segments was the predominant source of OIBDA growth during the quarter. As shown on page six of our presentation, network segment OIBDA increased $8.5 million primarily due to the growth in network subscription revenue and it is anticipated more programming expenses from the timing of new original programming release. WWE network averaged over 1.52 paid subscribers over the quarter which was in line with our guidance, representing a 4% increase from the third quarter last year. Importantly our network content including paper views, original series and specials continue to drive viewer engagement. During the quarter, we added more than 70 hours of original contents to the network’s featured programming, including Summerslam, our first Women’s Tournament, the action packed Mae Young Classic. We also added more than 600 hours of archival content, which now results in an on-demand library of over 8,900 hours at quarter-end. As we continue to drive this direct-to-consumer transformation, we also realize increased revenue and profits from our Pay TV platform. OIBDA from the licensing of content, the Pay TV providers increased $4.1 million reflecting higher right fees and our key distribution agreements. Our consumer products business also contributed to earnings growth. As shown on page eight, OIBDA generated by our licensing business increased $2.1 million driven by higher sales in mobile video games, including WWE Supercard, our most successful mobile title to date. In terms of our overall performance, changes in another business segments didn’t have material impact on our consolidated results. Page nine on the presentation shows selected elements of the capital structure. At the end of the quarter, WWE held approximately $260 million in cash in short-term investments and had approximately $100 million in debt capacity under the Company’s revolving credit facility. We believe this capital structure enhances our ability to execute our long-term growth strategy. Year-to-date free cash flow increased approximately $22 million, driven by the improved operating performance I just described and nearly $5 million paid as part of the purchase of a building in real estate property in the prior year period. I’d like to turn the call over to Michelle to provide some additional perspective.

[Michelle Wilson:]

All right, thanks George. Our third quarter reflected meaningful progress on initiatives that enhance our ability to engage our fans and optimize the value of our content across platforms, essentially executing our strategy as George described. Strengthening our ability to deliver localized content, we continue to diversify our talent base. After holding talent trials in Dubai, the participants from the region as Vince mentioned, we recently hired our first two female athletes from the Middle East and India. International talent now represents 40% of the roster of at our world-class performance center in Orlando. To increase engagement with our global audience, we launched a localized weekly TV show in Mexico and Central America. WWE Saturday night produced in Spanish with Fox Sports Mexico features highlights of both Raw and Smack Down. The program expands our lineup of localized content, building upon our success in the Middle East with our partners OSN and in India with Sony. Completing our global coverage, we launched WWE Network in China with PPTV, a Suning Media Company. The service brings WWE’s major live events, our original series, documentaries and classic matches to WWE Network subscribers on PPTV’s digital platform which reached over 400 million homes in the market. As I mentioned on our earnings call last quarter, the power of our brands to reach a broad global audience on multiple platforms has attracted a record level of sponsors. New deals with Blue Chip companies and gaming partners have contributed to a 29% increase in our global sponsorship revenue in the first nine months of the year. Also demonstrating the increased value of our content, NBCU secured 20 new advertisers for WWE programming in the 2018 upfront, and has added over 70 advertisers as Vince mentioned over the past three years. This brings NBCUs roster to nearly 200 advertisers for WWE shows. Our key operating and brand metrics has continued to grow through the past nine months of the year. Consumption of WWE content increased 23% to 14.2 billion video views across YouTube, Facebook and wwe.com, and we’re on a path to reaching nearly 20 billion video views by yearend. Additionally, WWE social media followers increased 17% to exceed 825 million. Regardless of the metrics that you choose, whether it’s total attendance, network subscribers or hours of WWE content consumed, they all demonstrate a robust health of our brand. And all of the activity that I described provide prove points on how we are capitalize on our brand strengths, delivering unique content and diverse products to drive long-term growth. I’ll turn the call back over to George to discuss our growth expectations.

[George Barrios:]

Thanks, Michelle. Looking back over the quarter, our financial and operating results continue to reflect our driving innovation and transforming our business model. Looking ahead for the fourth quarter we project average paid subscribers to WWE Network of $1.47 million plus or 2%. We also estimate fourth quarter 2017 adjusted OIBDA of approximately $31 million to $35 million. This range represents an expected year-over-year increase primarily due to the continuation of the growth subscribers we saw in the third quarter. These include the contractual escalation of TV rights fees, the continued growth of WWE Network subscribers on a year-over-year basis and as well as more favorable year-over-year comparisons in our fixed cost base. For the full year 2017, we project average paid subscribers to WWE Network of approximately 1.53 million, representing year-over-year growth of 8%. Based on our expectation of continued strong financial performance, we’re raising our guidance for record 2017 adjusted OIBDA to a range of $108 million to $112 million. Looking further ahead to 2018, we expect to achieve another year of record revenue and have targeted adjusted OIBDA of at least $115 million which would represent another all-time record. We believe there is significant long-term growth opportunities for WWE, the 2018 target balances OIBDA growth with investments in key strategic areas. In the coming year, our key initiatives include delivering a wide range of content across all platforms, continuing to develop our data and technology infrastructure and by strengthening our ability to engage our global audience, and investing in markets with the greatest long-term potential. We believe these initiatives will enable us to achieve record results and to help maximize long-term shareholder value. The monetization of content is a fundamental element of our business model. In 2017, we completed new content licensing agreements with Pay TV partners throughout the world, moving in countries such as Japan, Australia, South Africa, France and Canada. As you know, certain distribution agreements representing a significant share of our television rights revenue will expire in 2019. These include the licensing of our premier programs Raw and Smack Down in the US which expires on September 30, 2019, as well as in the UK and India which will expire on December 31, 2019. We currently expect to announce our US distribution plan for Raw and Smack Down sometime between May 2018 and September 2018. We also expect to announce our UK distribution plan in the second half of 2018 and our distribution plan for India in the first half of 2019. Our future plans are subject to negotiations which are expected to begin next year. Well the announcements could occur either before or after the dates that I just referenced, we do believe that these ranges represents the most likely periods for our communication. That concludes this portion of the call. And I’ll now turn it back to Michael.

[Michael Weitz:]

Thank you, George. Tiffany, we’re ready. Please open the lines for questions.

[Operator:]

[Operator Instructions] We’ll go first to Brandon Ross with BTIG. Please go ahead.

[Brandon Ross:]

Hi, thanks for taking the questions. Thanks for the color in the press release about your distribution deals. But just curious, in the US, are you currently locked into an exclusive window with NBC and if so, when are you opened to talking to third-parties? And then also on TV – okay. You are currently…

[George Barrios:]

Look, on the – we’re not going to talking about the mechanics of the agreement. So we’ll – we’ve given the dates we think will public which will be sometime in the middle of next year. And it’s a fairly small cohort of potential buyers around the world and the world is talking to folks just to understand their strategy, make sure they understand ours.

[Brandon Ross:]

And as you talk to those folks, how is your thinking involved in terms of selling all rights to a single player globally versus breaking up the market – breaking up by market or breaking up between TV and digital. Do you think you are going to want to package your TV and digital rights together or split them up, any conclusions yet there?

[George Barrios:]

Yeah, look, Brandon, and we’ve talked about it all the time, we’re always balancing kind of where content goes trying to get to one of four or so key in objectives, how do we engage our current fans more, how do we grow the fan base, direct monetization of the content through our advertising subscription or licensing it. And in the second order monetization of giving us a platform to promote all of WWE. So, when you look at Pay TV versus digital and different geographies, you got to take that all into account, but I think what you’ll see is us being flexible and tailoring the approach kind of market-by-market as we move forward.

[Brandon Ross:]

Okay, and then finally, you’ve mentioned your data and technology infrastructure to sort of investment for next year. Can you talk about some of your plans for that? Thanks.

[George Barrios:]

Yeah, I mean we said it before, we have a significant number of user accounts that have been generated over time through our direct connection to a fan. This include registered users on dot com, it includes active and inactive subscribers to the network, it includes people who buy tickets online, it includes our e-commerce, so people who buy consumer products directly from us, we now have millions of user accounts. Around that, we have a lot of data that we are currently integrating. Today we’re able to go pretty deep into the areas I just described. It might be tailored promotions to people on the network, tailor promotions to ticket buyers but the vision for us is ultimately for each of our fans to have a complete understanding of how they’re consuming out content, really – what puts the most smiles on their faces which lets us kind of do a better job with that, and doing it’s scale and doing on an automated basis. So we’re building towards that, it’s an arduous journey but we have a pretty good head start because of all those millions of accounts that we already have.

[Brandon Ross:]

Thank you.

[Operator:]

So, the next up by Evan Wingren with Keybanc Capital Markets. Please go ahead.

[Evan Wingren:]

Thanks. Hey George, the midpoint of your guidance I think this year is a $110 million and you outlined $115 million at minimum in 2018. Correct me if I’m wrong, but I think you’ve got $25 million of contractual increases in TV from your major distributors next year. So I guess the question is, outside of the investments maybe that you outlined, is there any part of the business in your initial outlook that you think could actually decline next year or is the delta there purely those potential investments you’re looking to make?

[George Barrios:]

Yeah, look as we look forward by the only business line where we would generally say it’s secularly in decline is home entertainment. It doesn’t mean that another business can have a hiccup or hit a speed bump along the way, but if you just say secularly, yeah, that one looks like it is in secular decline. Otherwise the guidance for next year is the combination of our internal forecast on revenue, including the top seven contract escalation that you mentioned, as well as balancing that investment for the future. A lot of the things Vince talked about and Michelle mentioned, I mentioned in my prepared remarks, we see a really big long-term opportunity. And so we’re trying to drive leverage and expansion of OIBDA but at the same time, making sure we take it to position ourselves for opportunities in ’19, ’20, ’21 and beyond. So it’s a balance of that.

[Evan Wingren:]

Okay. And then on game specifically since you called that as potential area of strength, although modest. Do you expect that strength to continue and maybe are you expecting any incremental contribution from kind of this year’s version of WWE 2K?

[George Barrios:]

Yeah, look, we continue to work with Take-Two on the core game, we have a lot of insight into our fans, so we work together with them around the development of the game and the road map. And we – Michelle has touched on it before, we’ve spend a lot of energy building on our portfolio of mobile games, we’ll continue to add to that in the quarter. We’re too much into it, you know, of projecting future performance but in the quarter we had a really good performance especially with the Supercard but we’re excited. And we mentioned again before that in the mobile game space it’s about having a broader portfolio so we’re going to just keep building on that overtime.

[Evan Wingren:]

And then one more and then I’ll hop out. The 20 new advertisers that you’ve outlined, could you maybe just give us a bit more color on potential word on where those are coming from in terms of the verticals? And then the 70 that you mentioned in total over the past three years, is that all additive or have there been some replacements there? Just trying to gain a little bit of color on how the overall base is changed. And thanks very much.

[Michelle Wilson:]

So to take the last part of your question first, so 70 that we added over the last three years have been incremental and additive, so literally we’ve gone from hundred and whatever to almost 200 advertisers, so that has been all incremental. And to add a little bit color on the verticals, which again we’ve made tremendous progress. In the past WWE programming was relying primarily on theatrical studios coming to WWE and games were really our key categories, and we knew that we needed to diversified beyond that. And so the 70 advertisers that we’ve add, the verticals that we really focus and have been successful were automotive, retail, wireless, package goods, pharmaceutical, insurance. So we’re starting to add brands like Nationwide, Toyota, Cricket Wireless, Sprint, Pfizer, Craft, so these are really blue chip companies and verticals that we were not attracting in the past, we’re very – feeling very good about the progress we’ve made on that front.

[Evan Wingren:]

Okay, thanks George, thanks Michelle.

[Operator:]

We’ll go next to Daniel Moore with CJS Securities.

[Daniel Moore:]

Good morning, congrats on really solid results and thanks for taking questions. Wanted to just follow-up there a little bit, obviously as it relates the upcoming or pending rates – rate negotiations. You’re clearly make a lot of stride new verticals just as you related and making tremendous headway in terms of digital. Now the flip side, the NFL which has been the halo for all sports contents is losing ratings. Talk about how much of that is – is that a concern to you at all just in terms of the overall landscape of paying for live sports entertainment and a quick follow-up on costs. Thanks.

[George Barrios:]

Yeah, I think one of the things Vince mentioned in his remarks was how important social and digital has been to us on a variety of levels. And seven or eight years ago we all sat in kind of the room we’re sitting in now and talked about how important it was for us to own that platform in terms of engaging our global audience. Similarly had discussions around the ability to bring our content direct-to-consumer and monetize directly through either advertising or subscription. So we’ve done that, and we created these really powerful platforms. We still believe in the Pay TV platform, we think bundles will exist. There may be different bundlers but we think they’ll exist. Raw and Smack Down have proven to be pretty powerful tools of engagement that allows our partner to monetize through advertising and subscription. We’ll see what the market is like next year, we’re having these discussion, we don’t know. So nobody likes to see the ratings go down but relatively speaking, Raw and Smack Down in the US specifically, other markets like India are – were powerful aggregator of eyeballs. And what that means in the market place we’ll see.

[Daniel Moore:]

Thanks, George, very helpful. And on the cost side SG&A down 3% despite of 14% increase in revenue. What were the biggest changes there and you mentioned bringing down your fixed cost base, maybe just talk about what’s driving that either the network or across the organization? Thanks for the color.

[George Barrios:]

Yeah, and Dan as you know that, that corporate and other segment includes both G&A and as well as unallocated costs, it’s really are more direct cost to our business lines, things like our talent development, things like our international sales team, what brand marketing across the organization. So, it’s unallocated direct costs with both pure G&A. But regardless as we mentioned in the first part of the year, we knew because with some timing elements just how we chose to deploy some of that OpEx throughout the year that we have favorable comps in the back half of the year, so that’s just really what you’re seeing, more timing related elements.

[Daniel Moore:]

Got it, thanks again. Appreciate it.

[George Barrios:]

Yeah.

[Operator:]

We’ll go next to Eric Handler with MKM Partners.

[Eric Handler:]

Yes, thanks for taking my question. First of all, let’s talk about the WWE Network for a second. There has been a lot of discussion over the last probably 18 months about more localization efforts, also possible peering. And understanding that you move at a measure pace and you want to look at your data, but it does seem like the competition for direct-to-consumer services between internationally is increasing monthly. And how do you think about the increase competition versus your measured pace of development. And can you talk about some of the things that have happened this year, like the WWE UK, where does that go from here and how do you think [Inaudible] results?

[George Barrios:]

Yes, well the first part, and just as a reminder when you talk about competition in the space, and you know this, WWE Network is not a general entertainment network competing with other general entertainment networks like a Netflix or HBO. The platform given our success on the broader platforms with Pay TV and the digital AVOD platforms, the network is really to superstar on those passionate fans, so it continues to do that. And as Vince mentioned early on about our localization efforts, you’ve seen us localizing more and more over the last couple of years on the content across all those platforms. I think if you said two years from now what is the network look like, it probably has multiple peers in it that allows different types of our consumers to experience it. And it probably is in at least in one additional language, I think that’s what’s coming, but it’s less about the competition, it really is about the timing, back to the element of investing versus driving earnings growth with balancing that and so that goes into the discussions around timing.

[Eric Handler:]

Great, and then…

[Michelle Wilson:]

And just to add to the localization – just to add to the localization on the network, on the paper views which our live events are obviously drive a predominately – predominate part of our viewership. We are providing those in eight languages livewire which we just started about a month ago. So that, our most important content is already provided in multiple languages and we’re getting out ahead of that to market that locally as well as we were kind of testing through that, so we’re feeling good about that is a key driver on local viewership.

[Eric Handler:]

Great, thanks. And just as a follow-up, a quarter ago you’ve signed an international licensing deal to grow your brand. Just curious to see how those efforts are going and are we seeing any deals get signed because of that?

[Michelle Wilson:]

Yes, I think you’re referring to our partnership with [Inaudible] and again we just signed the deal the last quarter, so we are out in the marketplace and started the selling process, so nothing to report yet but I will tell you that we’ve secured a lot of meetings with brands that are based in the US that have global presence, so a lot of positive discussions but nothing to report yet.

[Eric Handler:]

Thank you very much.

[Operator:]

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

[Eric Katz:]

Thanks, good morning. I wanted to take another swing at your approach to these TV licensing deals for maybe a more backward looking perspective. I was hoping if you give some insight into what you learned from the last cycle and how your leverage diverse today with the ecosystem evolving so much and so quickly?

[George Barrios:]

Yeah, I’m not sure it’s so much learning, I think it’s just your point the world has changed pretty dramatically, I think there are lot of changes internally. So the success on social and digital I think has, it might not be too small to describe it’s transforming the B2B brand of WWE. I think the digital, social and direct-to-consumer has repositioned us in the media industry and among your peers, so I think that’s a big change. I think the absolute transformation and the advertising roster on Raw and Smack Down that Michelle talked about, that’s a manifestation of that. I think our fact that places like ESPN are now covering us is part of the – part of their digital and social coverage, I think that’s another example of that internal change. And what’s happening externally, the proliferation of ways to get content I think you could argue, potentially could make demand for our content even greater challenges because again we are able to aggregate a lot of live eyeball. Don’t know that for sure, we’ll find out whom in our discussions but there is just been a dramatic featuring for where WWE is at as well as where the rest of the world is at, so.

[Eric Katz:]

Okay. And we know a large share of your social media presence and views, video views come from oversees. What are some of the things that you do differently to really kick start a transition of those people becoming paid subs. Is there anything that you can do besides between content, maybe something on the marketing side?

[George Barrios:]

Well I think it gets to that localization element, I mean, you know, we all know that the WWE Network today is a US product that because of the beauty of the internet available to anyone in the world, so that gets us 27% of ourselves from outside the US, which is great. I think the growth eventually, and especially in some of the larger developing markets where we know a pretty good fan base was that India or the Middle East or Latin America will come through that localization. And back to Eric’s question, it’s a matter of time and balancing the – our desire to drive growth as well as invest for the future. But I think the real growth internationally eventually will be in that more and more localization across all elements content, commerce so on.

[Michelle Wilson:]

And just to add that on the technology front, George talked about the infrastructure we’re building around data analytics and I do believe from a marketing perspective, when you think about the outside of the US, the digital and social data that we have add to that, if a fan buys a ticket to a live event, we’re not directly using all of that data as effectively as we could in terms of driving network subscription. And I think the infrastructure what when building overtime will help us do more direct one-to-one marketing, we’re just – we are customizing our messaging outside the US but not the level that I think we will be able to optimize it overtime. So I do believe that marketing and the data will help us drive that more effectively moving forward as well.

[Eric Katz:]

Okay, last question. Last year you guys did provide some at least soft guidance on to what subs growth could look like for the following year. We didn’t see anything with that for 2018, I’m not sure if there is anything you’re willing to update today?

[George Barrios:]

I think last year was pretty consistent to this, like we just say we expected to keep growing. I think the previous year we gave some soft guidance, but at this point, like Vince said, we expect record revenues next year, we expect the subs to keep growing next year and we expect to set any record in adjusted OIBDA, again next year, so that’s all the guidance we’re giving.

[Eric Katz:]

Great, thank you.

[Operator:]

The next question comes from Curry Baker with Guggenheim Securities.

[Curry Baker:]

Hey, thanks for the question guys. You launched the version of the WWE Network in China in mid-August. Can you give us any update or indication there of what you’re seeing in China on the ground since the launch? And I guess just more broadly the level of interest and engagement you’re seeing for WWE content and aggregate in China. I know you’ve done a lot there over the past years and ultimate, what you guys see is the long-term opportunity in China? Thanks.

[Michelle Wilson:]

So, again it’s early days there as you know and early days for us and early days for SVOD services in China. So really, too early to tell, again it’s definitely a long play in that market. What I will say is the activation and the subscribers that we’ve seen come on board in the first couple of months, we’ve been pleased, our partners have been pleased but nothing beyond that that I think we’ll disclose at this point but again a longer play in that market as SVOD continues to grow in the market place. As far as engagement, as you know, we have a team on the ground there on the digital and social front. We obviously are delivering Raw and Smack Down there live wide in local language, so the engagement levels around that continue to grow at a healthy pace which we think will ultimate feel the growth of the network overtime. But again, it’s early days.

[Curry Baker:]

Okay, thanks for that.

[Operator:]

We’ll go next to Jason Bazinet with Citi.

[Jason Bazinet:]

Thanks. If I can just go back to the right fees. If I was in your shoes preparing for those negotiations right, there’d be the viewership and the number of advertisers and then lot of variables that you would stick in there for what fair value is. But is there another way maybe we could go out externally in terms of what fair value is by looking at analogs, because I’ve sort of difficult that your content is so unique sort of thinking globally about analogs. Are there something that you guys have in mind that you’d use to benchmark?

[George Barrios:]

Yeah, well, we tend to – we think the ultimate metric is time and that’s what everybody is competing for. One of my favor quotes from Reed Hastings was he competes against sleep because…

[Jason Bazinet:]

Yeah.

[George Barrios:]

..that’s the way to spend your time. And all of that that’s what we’re doing, we’re competing for time and attention. So we tend to just measure how much time attention each piece of content that we have I guess on a particular platform. And then we see what the market value of that is, we also see what we think we could – how we could monetize that time directly through advertising or subscriptions and we just kind of compare all three and we’ll make our decisions based on that.

[Jason Bazinet:]

Okay, thank you.

[Operator:]

Our next question comes from Laura Martin with Needham.

[Laura Martin:]

Hi. Let’s try to get Vince to the conversation here, I’ve got a couple programming questions Vince. So, you’re spending a lot of money on international and I get that local language is a good idea and I get they’re having wrestlers outside the US is a good idea. But couldn’t we be doing this 15 years ago, is there something new about the international markets? The change that’s now, because I always thought we have big wrestling markets outside the US. So, is it just the WWE Network a lot to monetize those international investors who are making them now or I mean why weren’t we doing this like earlier Vince?

[George Barrios:]

Look, I think like everything Laura in it, you know, there are moments and times. The one thing that has changed dramatically, if you look back 20 years ago, 15 years ago, if we wanted to get a piece of content in front of someone, there was only one way to do it. You needed to find in good space and it was limited because there was linear program television, so you had limited inventory and limited partners. Today we can get a piece of video content into any broadband enabled home in the world that does a couple of things. To your point, number one, investors monetize it directly, it also changes the competitive dynamic. People now understand that they don’t secure the content, it could get there anywhere. That has changed a lot, that’s number one. Number one, WWE is a different place today like most companies are after 10 years, it’s got infrastructure resources, it didn’t have 10 or 15 years ago, it allowed us to make investments for the future. It’s a lot of what Vince mentioned in his remarks, what Michelle touched on. So it’s a combination of the world changing and for anything as opportunities and other thing is company changing. We’ve got different muscles that maybe 20 years ago we didn’t have, just because 20 years is a lot of evolution, lot of muscle building happens during that time.

[Vince McMahon:]

And Laura, I thought I answered the question pretty good, didn’t I?

[Laura Martin:]

I was hoping. So I guess so on women, so the MDA paid each of the WMDA changed $10 million because women historically have not really have the viewership or economic feeling then. You’re adding a lot of women to the roster, you just announced I guess the first women’s tournament it’s like women talent in India it sounds like. Is the comfort you have with the return on capital for the women part of the business with the women, is that coming from data you’re getting from the WWE Network?

[George Barrios:]

It’s coming from data across the board, we see it on the network, we see it on social and digital and, you know, well the data may not be as pure and clean on traditional TV, we see it on the Nielsen data that we have access to. The – our women performers are getting the same traction as our male performers, so but definition back to the time metric, we get the return on investment, it’s a like times are economic unit and if we can get people to spend time with our content, that’s a win and we’re seeing it and so we’re kind of continue doing that. And guess so what Vince and Michelle talked about talent outside the US as well, we can see it, we can measure it.

[Laura Martin:]

Okay. And then 70 hours of new programming in the quarter which is awesome, because my recollection is when we started the WWE Network we have 500 hours total, so if 70 added in a quarter is high in number. Is that happening your physical resources, like the entertainment center to be adding all that like video content, do we need the investments more infrastructure here given the pace that we’re adding original contents?

[George Barrios:]

Yeah, I mean we’ve been doing about 70 to 80 hours a quarter and kind of debuting premiering content on the network since launch. I think the 500 hours have actually little bit more than that you’re referring was the VOD available, which is now up to close to 9,000 hours. So, every quarter we move content, archival content from our library on to the network and we’ll do about 500 hours or so a quarter of that. And then we debut, whether it’s a paper view, NXT, 205 Live, [Inaudible] WWE, we debut about 70 hours or so that a quarter. So that’s been fairly consistent for a while. If you say that detecting our resources, if I said no, I’ve had a lot of angry people at me of the folks doing all that work, but there is no doubt, we’re creating more content today than we ever had. We’ll do about 1,700 hours of content created across digital platforms for the network as well as Raw and Smack Down and it’s the different derived versions of that in one language one hour and two versions of that, so and that’s the significant for us. We’ve got a great team, a growing team and for us we think that fuels a lot of that long-term growth.

[Laura Martin:]

And Orlando can handle all that, you don’t need to expand Orlando to handle all this new programs?

[George Barrios:]

Look I, you know, we’ve talked about it before, the performance center has been a homerun based on its original intent which was to really have greater infrastructure for our development process. Probably the significant incredible success of the brand of NXT and the talent has wide opened some eyes. And is there an opportunity kind of keep growing that and coupling that with our international expansion, there is, we’re thinking about it. Again it’ll be a matter of time and balancing that earnings versus investment out on it. But we think there is real opportunities to keep increasing the talent pace around the world.

[Laura Martin:]

Okay, and then last question for me. I think – I’ve always had a higher estimate for what you guys could do internationally on subs. Are you guys still with the 2 million to 3 million offshore subs or do you think with this extra investment you can get that higher overtime?

[George Barrios:]

You know what, before launch, you know, as similar to when Netflix made their big pivot and I think they had a put on a number of 60 million to 90 million that they thought they can get into the US. Our analog was 3 million to 4 million around the world, as we now, Netflix eight or nine years in and it’s about two-thirds or 70% of the way to that 60 million, us about three years in and we’re about half way to the 3 million. We’re going to keep growing the network, obviously the faster growth the happier we are about. Well it is growing. This is a 10, 20 year platform for us and it forms the core, more importantly this whole direct-to-consumer strategies what Michelle mentioned, our ability to now go direct-to-consumer across all our businesses, media, product and tickets. We think it’s strategically really important and the network is a big part of that. So, longer growing feel good, some quarters will be better than others, we really don’t move any sleep about that and [Inaudible] around the long term.

[Laura Martin:]

Okay. Thanks guys, that’s very helpful. Appreciate it.

[George Barrios:]

Yeah, thanks.

[Operator:]

[Operator Instructions] We’ll go next to Mike Hickey with Benchmark Company.

[Mike Hickey:]

Hey guys, congrats on the quarter, awesome job. Thanks for squeezing me in too, I appreciate it. Just a couple of questions, one I guess to piggyback on Laura’s topic on female wrestling or wrestlers, pretty shocking I guess just in general how fast women’s wrestling is growing in the US for a recreational at least unrequitedly. But wondering, and it seems like you guys sort of had a, I guess a gradual progression in terms how you’ve been sort of building up the athletic roster for women. But it feels like that sort of accelerating and I’m guess or I’m wondering if that’s true or not, also wondering what percentage of your active wresters or currently women, and then I guess broadly speaking, how that you feel that impacts your brand overtime and your relationships with business partners.

[George Barrios:]

Yeah, I think Vince mentioned early on about Paul’s success in the performance center. I kind of rekindle the memory mine when Paul first came and joined the management team and we sat down with him and he laid out kind of the vision he had and that were a little bit of help on thinking through what the kind of economic investment would be. And it’s really, when you see a plan kind of manifest itself and do even better than what you originally anticipated, it’s great, kind of it makes you feel really good for the person who did it. So, because of that success, we’re going to keep building on that. I mean, I think for all the WWE’s great success have been organic, where you start small and you build and you build and you build and then it’s kind of a massive success. And I think the performance under are my guess it is when we look back 10 years from now it’d be the same thing, it will have started in Orlando, and 10 years from now it’ll be all around the world and feeling another round of success, so it’s just been great. On the female superstars…

[Michelle Wilson:]

Yeah, the female superstars represent 35% of our roster currently and that number has grown over the past couple of years as you’ve noted. And again as George mentioned, you know again Paul has been really instrumental in this is that, we basically look at the data to reinforce the fact that the women and the female athletes and performers are really resonating with our fan base. So, again whether it’s on the digital or social media following, the rating that we see when we have a women’s match, the feedback we get during a paper view when there is a main event female match, has all been extremely positive. And so when we see trends like that, we’re obviously going to continue to invest in it. So, the acceleration has been simply a result of the success that we’ve been seeing and we expect that to continue. The Mae Young Classic was our first ever female tournament that we aired on the network and again the viewership around that was on par with the male tournaments that we’ve done, so very encouraged by that. And again, we continue to get favorable response. From a market place perspective, even from the business kind of sponsor perspective, we’ve gotten tremendous feedback around the notion of female empowerment and that we are supporting that initiative, and so again it is a win-win for us all around.

[Mike Hickey:]

Nice. Good job, Paul, and rest of the team. The last question from me is on a – I think we talked before about Esports. Obviously you guys have some exposure in the game market, you think it by your demographic there is definitely overlap there. It looks like you recently maybe took a your first step and trying to monetize that that you made investment in Cloud9. And so I’m sort of curious about data on your strategic direction on these sports, what you see there and maybe what you’re thinking with your investment in Cloud9. Thank you.

[George Barrios:]

Yeah, generally as we’ve talked about, we have – we make some small venture investments. Obviously, the goals of the portfolio has an economic return but equally important to us is to invest in areas where we think there is a – they could be strategically important over the long-term, that’s why we are invested in the [Inaudible], other types of sports like the DRL, Drone Racing League. We’ve been looking at Esports for quite some time specifically on how our IP would play in that and we’re continuing to work through that, but as we get smarter about the market and the players in the market, we had been looking at Cloud9 for some time, we think they have a great management team, they have a great investor group. And when the opportunity came to invest, it kind of fell under the guidelines that we just talked about. We think there is an economic opportunity, we think there is an opportunity for us to learn about something that overtime we think has legs. And also, obviously they’re about monetizing subscription, advertising, events, we’ve got a little bit of experience in that, so we probably be a little helpful to the management team. So it’s just been all kind of check all the boxes for us.

[Mike Hickey:]

Thanks guys. Good luck.

[George Barrios:]

Thanks.

[Operator:]

And that concludes today’s’ question-and-answer session. At this time I’d like to turn the call over to Michael Weitz for any additional or closing remarks.

[Michael Weitz:]

Thanks everyone. We appreciate you listening to the call today. If you have any questions, do not hesitate to contact us. Thanks.

[Operator:]

And this concludes today’s call. Thank you for your participation. You may now disconnect.