WWE 2014 Q4 earnings reflect growth of Network

WWE Earnings for the 4^th quarter of 2014 exceeded company expectations as it increased 19% to $140.5 million from the fourth quarter of 203.  WWE announced the results during a conference call on Thursday.  The company stock is up over 7% at close of trading on Thursday.

During the 4^th quarter (October-December 2014), the WWE Network added 85,000 subscribers which reached 816,000 by the end of 2014.  The “free” November promotion was credited with adding 242,000 trial subscribers.  It appears that the WWE seeks to replicate this strategy with a free February for new subscribers.  In January 2015, the network indicated it had exceeded 1 million subscribers.

On the conference call, WWE CFO George Barrios stated that the network reached 1.4 million unique subscribers as of the January 27^th “1 million subscriber announcement” with 71% of the subscribers’ active at that date.

The U.S. version of the WWE Network was made available in more than 170 countries and territories in August 2014 and had approximately 44,000 international subscribers.  Barrios indicated that he hoped the network would be available in all of Canada by Wrestlemania this year.  The WWE also announced a deal for the Network with OSN in the Middle East and North Africa.

Overall, in 2014, the Network revenues reached $115 million which reflected an almost “break even OIBDA for the year” according to Barrios.  The WWE’s adjusted OIBDA (Operating Income Before Depreciation and Amortization) for the Network was $5.1 million.

Vince McMahon noted that its social media reached over 454 million followers as of the end of January and that its YouTube content reached over 3.9 billion which put it as the number one sports channel on the platform overtaking the NBA.

One of the interesting things coming out of the conference call was the question about whether the outrage over the outcome of the Royal Rumble was a concern.  Essentially, WWE fans angered that Roman Reigns won the Rumble started a #cancelwwenetwork twitter hashtag.  McMahon stated that the controversy was good for the WWE.  More importantly, it did not result in substantial losses in subscribers.

There was a question by an analyst about whether the WWE could compare and contrast its fan base with that of MMA.  Barrios indicated that the WWE is “multi-generational family viewing.”  The inference is that MMA is for a different demo, namely the young adult demographic.  Thus, the WWE has a broader audience.

Other tidbits worth noting:

• WWE Network advertising revenues in the quarter were not substantial.
• WrestleMania, the company’s biggest event, will continue to be carried by satellite and cable providers despite also being carried on the Network. Barrios stated that the pricing is set by the cable operators.
• When asked about subscription “churn” post-WrestleMania, Barrios indicated that it would provide “great content” and indicated that there would be “a lot of new content” which the WWE intends to combat the possibility of subscribers dropping the Network after WrestleMania.

Payout Perspective:

One note to mention about the Network is the success the company had with the strategy of “sampling.”.  The company attributes some of the additional subscribers to the “free” November.  The WWE hopes that it will happen again with a “free” February.  The Network may still be behind the projections but it is catching on and will gain more subscribers as it expands globally.

It is interesting that WrestleMania will still be available on the Network for $10 (per month) while satellite and cable operators will likely charge $60 for it.