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--WWE held its quarterly investors conference today. It was far more combative than usual and actually ended abruptly. Someone even joked that the company should take itself private so Linda McMahon wouldn't have to put up with things like this. The main point said several times is stockholders wondered why insiders or the company itself wouldn't buy back stock since the price is relatively low (it's hovering at $11 a share, actually up from yesterday's close because the quarterly report beat most market investors predictions, although it didn't beat the predictions of those following the business closely because of the strong European tour and Wrestlemania). There were also complaints about having so much cash on hand (more than $250 million) in the bank collecting 2% interest when it could be distributed back to stockholders with an increased dividend (most of which would go back to the McMahon family anyway) or investing in other projects. One person brought up $140 million in losses total on the XFL and restaurant debacles when bringing up the movie projects.

 

--The company reported annual revenues of $366,431,000 and an annual profit of $39,147,000. Both are down from last year ($375 million in revenue and $48 million in profit). Considering international business is way up, domestic business is still declining even with ratings up, but the strong international is somewhat disguising it. For the quarter, revenue was $118,305,000 and profit was $16,029,000. The same Wrestlemania quarter last year did $126,733,000 in revenue and $19,735,000 in profits. It sounds like a quarter decline, but that's misleading, because Backlash figures into the next quarter, and there was a licensing commission legal settlement of several million last year that made the numbers seem better. Because of timing of Backlash, next quarter will be way up in both revenue and profits.

 

--Among the key things mentioned is there is no start date for the Steve Austin movie "The Condemned" for filming but they are talking now about the fall. There is no planned release date for "The Marine" starring John Cena, but the Kane movie, "See No Evil," looks to be coming out in January or February. They expect no movie revenues to start hitting the books until the 2007 books (the fiscal year 2007 starts on May 1, 2006). Linda McMahon talked about Cena as being a bona fide action adventure movie star from the first movie. She tried to say the Smackdown move to Friday is a good one because more younger viewers watch TV on Friday and that Dawn Ostroff of UPN told her ratings would increase with the move. The move to Friday will be on 9/9. The loss of ad income on Raw when it moves to USA on 10/3 was discussed and they talked about cost cutting internally, which coincides with recent cutbacks. They talked about the double tapings as saving money. They were confident the move to USA would increase Raw ratings and she said it was premature to talk about Smackdown being off UPN when the contract expires in September of 2006. Of course she said there was no thought to consolidating the brands.

 

--The company was not expecting any significant changes in business over the next year, projecting $355 million to $370 million in revenue and $31 million to $34 million in profits. Keep in mind they are also paying out $33 million over the next year in dividends.

 

--ECW never came up during the presentation, but it did in the Q&A. She said the plan was not to revive it was a regular brand, but gave the indication there would be occasional usages of it in the future and that some of the stars of that PPV are going to be signed to Raw or Smackdown. When someone brought up the show doing 500,000 buys in response to Linda saying it will do "about budget," she said that figure was wrong and that no estimates have been released. When pressed, she ended up estimating "high 200s or low 300s."

 

--They talked about running fewer domestic shows over the next year and more overseas, estimating 55 shows outside North America, and talked about running shows in South America for the first time, as well as going into New Zealand over the next year in conjunction with Australia tours.

 

--The biggest revenue decline was DVD sales, but that's misleading, because this quarter last year had the Monday Night Wars DVD and there was nothing even close to that level released this year. Wrestlemania DVD is up slightly in sales over last year at the same point--120,000 to 114,000.

Anyone who would have stock in WWE at this point is the ultimate money mark. The McMahons are surrounded by people so often that tell them what they want to hear that when they're actually faced with tough questions that suggest things aren't all roses, they get very angry and defensive. It looks like there may have overall been a slight increase in business, but nothing earth-shattering.

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Better recap from DVDVR:

 

WWE Conference Call Highlights 6/30/05, 11 AM

Major Subjects: WWE Films, USA Advertising Revenue, Smackdown to Fridays, ECW PPV/Brand, WWE 24/7, Legends Initiative, International Touring, Stock Buy-back?

Summary by Chris Harrington

 

You can listen to the replay of the conference call here:

http://media.wwe.com/audio/corporate/earni...nings062005.wvx

 

There were several calls and questions about the WWE film venture. I'll summarize all the information shared here --

 

Joel Steinman is running WWE Films in LA (he is formerly of Warner Bros. and also led Quincy Jones' Production Company for 4-5 years)

 

WWE Films has confirmed three films:

* The Marine (Action-Adventure), starring John Cena - $20 million budget (in post-production phase, with Fox)

* See No Evil (Horror), presumably starring Kane - $10 million budget (in post-production phase, with Lion's Gate)

* The Condemned, starring Steve Austin - $20 million budget (not yet filmed, script was purchased from outside the company, still working on distribution plan, will not start filming until distribution deal is in place)

 

The films that have been finished did stay within their budgets. Both distribution companies (Fox & Lion's Gate) are said to be pleased with the films. "See No Evil" was described as "riveting" and "compelling" and will probably be released in either January or February of 2006. Since WWE?s fiscal year ends in April 2006, WWE is not expecting to see actual revenue from the films until Fiscal Year 2007.

 

Question: "Could WWE lose a star like Cena if he was a success as an action-adventure star??

Answer: "John Cena under a long-term contract & preferential movie contract deal."

McMahon also noted Steve Austin has a preferential movie control deal as well.

 

When asked about how many films WWE would be looking to produce (would it be in the range of 5-10 a year?), Linda McMahon responded, "We are not looking to produce 5-10 movies a year; more like 2-4/yr."

 

WWE undertook an Economic Study of the Benefit of having Wrestlemania in your city. They found a $13.5 million economic benefit for WM XX at MSG (NYC).

 

There are plans to have four TV-tapings outside the US in the 2006 fiscal year.

Linda McMahon noted there would be "16 PPV events in 2006"

(I count 15 known US PPV events - New Year's Revolution, Royal Rumble, No Way Out, Wrestlemania, Backlash, Judgment Day, ECW ONS, Vengeance, Great American Bash, SummerSlam, Unforgiven, No Mercy, Taboo Tuesday, Survivor Series & Armageddon - I presume the last one will be a UK PPV.)

 

Another season of Tough Enough will be produced and shown as part of Smackdown Show.

 

WWE will not receive RAW TV advertising from USA deal, thus the 2006 Fiscal Year profit will be down. Later, a caller asked for clarification on the new deal with regards to WWE dealing with advertisers. Were there issues concerning advertisers working with WWE vs. working with USA? Could WWE pursue alternate methods of advertising like product placements?

McMahon insisted that, "We're working in partnership with USA."

She pointed out they still had their Publications (magazines), Syndicated Television Programming (like Afterburn), Products on the Web, Sponsorship Opportunity (PPVs). USA has first rights on Product Placement.

In particular, McMahon mentioned that they're "looking to making our website more robust, increasing subscribers & advertising revenue."

 

Regarding WWE 24/7: there has been rollout on small and medium systems. The only system carrying WWE 24/7 described as large was Cox Communications. Linda McMahon acknowledged that the subscriber base was "not yet large" but as the numbers were ?churning" they were definitely adding new subscribers each month. WWE is receiving somewhere in the range of a 55%-60% profit split from participating systems.

 

A question was asked along the lines of, "Do increasing TV ratings & live attendance numbers precede PPV buy increases?"

Linda answered, "In general, yes."

 

A caller had a question about the USA deal. With the timing of the move, WWE stands to lose about 1/2 of a year (since the move comes in the middle of their fiscal year) of Ad Revenue. With this in mind, why wouldn't future earnings predictions be down?

The answer given was that WWE was engaging in Cost & Spending Cuts. They would be extra PPVs (though one would think this was already figured in?) but it will take probably 18 months to recover. They would also not be receiving any RAW ad revenue for the 2007 Fiscal Year.

 

A caller remarked that the WWE was already a very lean organization. ?How could they continue to cut costs??

Linda McMahon gave the example of Monday's Supershow where they shot Raw live and then taped Smackdown at the same arena. This opened the possibilities of both brands to travel to Asia immediately afterwards. (They also let several people from the front office go but that wasn?t mentioned on the conference call.)

 

Question: "How will the Legends Initiative work overseas? Will Legends be traveling overseas?" The Caller also remarked that many of the legends would be much better known in Europe than in markets like South America (where the WWE states they are looking to expand into in FY2006).

Answer: WWE has been on UK television (Sky Television) for 18 years. Places like Germany and possibly Australia (McMahon wasn't positive) have been showing "classic footage" on television. Also, many DVDs incorporate these legends. Still, the initial big push will be domestic with programs like 24/7, on-sale events and DVD footage. Superstar Billy Graham was listed as an example. McMahon acknowledged that the 34-59 age segment remembers the legends superstars very well.

 

Question: "How do ticket prices compare in a market like South America?"

Answer: "We have not been there and tested the market." WWE works with Local Promoters to set prices and figure out how long before the event to put tickets on sale. She said ?there is no barometer yet.?

 

A caller noted that the Spike TV to USA transition should increase the number of homes able to watch. Linda said it would give them, "stronger penetration."

 

Question: "As the number of international events increase, what is the plan for domestic events?"

Answer: "The number of domestic events will probably decrease accordingly." It was also noted that ticket prices & attendance are higher Internationally.

 

There were two separate calls about the Thursday night move so I'll group all that information together.

 

WWE confirmed UPN will move Smackdown to Friday Night starting in October and the UPN Contract expires 9/06.

Linda tried to spin the move describing it as, "a chance to prove our value to UPN"

Friday Night was described as a night with Less Television Competition and a Younger Audience. When pressed for what WWE would do if UPN chose not to renew the contract, McMahon stated they had several other options, namely other networks & cable.

 

When the caller asked, "Why the move to Friday?? McMahon responded, "Not our decision. It was a decision by UPN. UPN has solidified it's Monday-Thursday lineup." She added, "Our Friday Night Opportunity is stronger because of our fanbase that finds us and follows us. We will grow UPN's audience for sure on Friday." McMahon also noted that immediately following the September move, there are early pre-emptions in some major markets the first two-three weeks on UPN due to Major League Baseball. When questioned whether Thursday or Friday night had stronger young Demographics, McMahon said both are strong but numbers are "are a bit higher on Friday night."

 

At this point, there were several calls criticizing how much cash on hand the WWE insisted on retaining. The first caller wanted to know why WWE was not initiating share buy-backs. The next caller was far more blunt:

Stock is down 50% from 2004 highs. No insider purchases. All the Stockholders & Analysts the caller has talked with think share buy-backs would be a good idea. Why would $10/$11 not be a good price to buy-back? Significant questions! Caller also noted that the McMahon Family pulled out $7 million. Will we see more purchases?

 

McMahon answered along the lines of: Our philosophy over the past few years - do not initiate share buy-backs unless something drastic happens - not a great float in the marketplace - share buy-backs restricts the float. Our position is that we're not looking at major buy-back of shares. There was a Secondary Offering last year ? so there are more shares out there, increase in the volume and we are open to acquisitions.

 

The next caller was especially critical of the WWE and the massive amounts of cash-on-hand they were retaining. He noted that despite saying in the past that cash would be used for things like movies and acquisitions, despite paying out $34 million in dividends and producing two movies, cash only dropped $15 million. He also noted that their acquisition history (both XFL & Restaurant) were failures that cost in the nine digits. Basically, he wanted to know why the WWE was withholding that cash from the shareholders and only providing about a 2% return on it. He stated emphatically, "this company is not run for the benefit of the McMahons. Why do you hold this money?"

 

The CFO responded. He urged patience and insisted that if an investment made sense - we'll do it. He believed that the opportunity for investment will come. Not all companies buy-back stock; the company has a healthy dividend, willingness to increase the dividend over time, and higher return on capital.

 

The caller rebuked the CFO for urging patience exclaiming that he'd been an investor four times as long as the CFO had a job at WWE! They'd been sitting on this money since the IPO and haven't done anything of worth with it. WWE said, "Thank You!" and that was the end of that caller.

 

Regarding ECW One Night Stand, Linda McMahon said that "it's coming in on budget numbers". She also referred to PPV as a "one-off event" (i.e. not an example of a new brand.) She noted the rushed release of the DVD and said they expected the DVD to sell especially well. Another caller asked about specific PPV buyrate numbers. He had heard 500,000 buys. Linda McMahon won't give out a preliminary buyrate. She denied the rumors of high buyrates by insisting, "We haven't posted any numbers. We haven't been given any numbers." She said the PPV had been budgeted with high 200-low 300s buyrate in mind.

Question: "Will WWE bring back ECW as a brand?"

Answer: "At this time, we're not looking to resurrect it as fulltime brand."

She continued that it was their general consensus they tried it as a "one-off" but may be "bringing in some of the stars from ECW". (Is this a reference to Axl/Balls?)

 

A caller asked about the Games License/Jakks Lawsuit. McMahon said there was no new news and it was still in the courts at this point awaiting the judge to enter the next round.

 

Question: "Any plans to recombine RAW & Smackdown?"

Answer: "No. Split going well."

 

Question: "Any plans to become a private company?"

Answer: "No. Happy being a public company."

 

All further questions were urged to contact Michelle Goldstein.

 

That was it. Feel free to contact me with your thoughts on the recap.

Chris dot Harrington at gmail.com

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Guest Cam Chaos

If they are hanging up on their investors, I don't see investors staying around or buying stock in a company that doesn't respect their financial interests. They dig their own hole sometimes.

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I really miss that guy that used to throughly research the product and then get hung up on the minute he started asking tough questions.

 

It sounds like they're in for some really really lean years. That tv deal sounds horrible and almost TNAesque.

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Guest Dorian

Actually, its not TNA like. At least TNA doesn't have name power like the WWE does (or did, I should say), so you can understand why a company would rather they pay in.

 

The WWE having a deal like this? Oh you better believe some of the high up stars are gonna get hacked from the roster or asked to take a pay cut.

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They'll lose a good part of their roster during the next few years. They'll be demanding a harder schedule with so many foreign dates and paying less. I wouldn't be surprised if a lot of guys just walk away.

 

They really got screwed on that deal though. Basically USA has more control over product placement on Raw than Vince does from the way it sounds. How long until we have the WCW-like ads on the turnbuckles or a giant battery attacking a wrestler backstage?

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Guest teke184

first "name" to bite the dust I guess:

 

PWI:

 

 

Announcer Marc Lloyd was released today.

Thank God this putz was one of the first to go...

 

He set a new low in WWE commentating when doing commentary with, IIRC, Benoit and Malenko over one of Benoit's Japan matches on the Benoit DVD.

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first "name" to bite the dust I guess:

 

PWI:

 

 

Announcer Marc Lloyd was released today.

Thank God this putz was one of the first to go...

 

He set a new low in WWE commentating when doing commentary with, IIRC, Benoit and Malenko over one of Benoit's Japan matches on the Benoit DVD.

actually that was Todd Grisham, who will be replacing Loyd in all his announcing duties
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Guest teke184

first "name" to bite the dust I guess:

 

PWI:

 

 

Announcer Marc Lloyd was released today.

Thank God this putz was one of the first to go...

 

He set a new low in WWE commentating when doing commentary with, IIRC, Benoit and Malenko over one of Benoit's Japan matches on the Benoit DVD.

actually that was Todd Grisham, who will be replacing Loyd in all his announcing duties
Whatever... all the guys below the level of Michael Cole are absolutely horrible, while Cole, JR, and The King are at least semi-competent.

 

The only announcer who pulls his own weight right now is Taz.

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Guest Some Guy

I have one share of WWF stock that my dad bought for me as a joke for my 20 or 21st birthday. It sits framed on my DVD shelves. I haven't paid the slighest attention to it's value but I think my dad paid about $20 for it back in the day.

 

The WWF never should have gone public, Vince is a carney at heart and no one trusts a carney, I don't think Don King has taken his company public and he and Vince are in essentially the same business.

 

Vince makes an ass out of himself on TV in interviews and allows the product to slide to the point that people are disinterested and then sends his wife out to get yelled at by stockholders. Great guy, that Vince.

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Guest Cam Chaos

first "name" to bite the dust I guess:

 

PWI:

 

 

Announcer Marc Lloyd was released today.

Thank God this putz was one of the first to go...

 

He set a new low in WWE commentating when doing commentary with, IIRC, Benoit and Malenko over one of Benoit's Japan matches on the Benoit DVD.

actually that was Todd Grisham, who will be replacing Loyd in all his announcing duties
Whatever... all the guys below the level of Michael Cole are absolutely horrible, while Cole, JR, and The King are at least semi-competent.

 

The only announcer who pulls his own weight right now is Taz.

You must be joking. Cole does a better job than Tazz now.

 

Tazz most of the time is going "WHOA!", repeatedly mentioning "popping those hips", giving Rey Mysterio verbal BJs over the same moves he does every match or going off on tangents.

 

Tazz and JR helped keep each other on topic at RR and they did a decent job but Tazz has actually got worse over the years while commentating. I remember when he used to bust Cole's balls about calling the right moves but now he himself is usually prefixing his calls with "a version of a ---- " because he doesn't know what to say himself.

 

I'll admit Cole will find any tenuous link to shill something ("JBL beating down Moore with a clubbing blow to the back of the neck, you can bet he'll be wanting to do the same to Eddie Guerrero next Sunday") and can be annoying as fuck as a result but he's actually now has taken to cutting off his shilling to call the action in progress. Cole does better play by play than JR these days, as sad as that is.

 

I'd like to see Cole and Coach and JR and Tazz as the commentary teams simply because the geek versus the cock asshole would be great and Tazz and JR respect each other enough to not dog it when working together.

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