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MUMBAI:
Sports entertainment company WWE is planning to launch a television
network through traditional cable, satellite and telco distribution.
WWE
will also explore monetising content through alternative digital
"over-the-top" distribution.
In
order to maximise the value of content, WWE also plans to
utilise more effectively licensing content to established
television networks. These three options are not mutually
exclusive.
Regarding
a potential network, WWE said it is evaluating multiple approaches.
It believes that a premium subscription model is the best
approach in the U.S. to capitalise on fans’ commitment
to brands and their desire for more WWE content.
Based
on market research, the company estimates that a fully distributed
domestic pay network could ultimately attract between 2 -
4 million subscribers at a “steady state.” These
subscriber estimates derive from a projected base of approximately
47 million WWE digital TV households in the US (including
lapsed fans), and the proportion of which have an affinity
for WWE content, although there is no guarantee that this
affinity will translate into actual subscribers.
These
take-rates are based on a value proposition for the network
that reflects inclusion of pay-per-view events, except WrestleMania,
as well as compelling original content. Under the preferred
subscription model, while its pay-per-view events would still
be offered on an á la carte basis as currently available,
the research indicates that a WWE network offering would drive
significant consumer interest (including households that currently
do not purchase pay-per-view events).
At
a proposed price per month between $12.99 and $14.99, this
would represent incremental revenue to WWE of between $125
million and $250 million and incremental EBITDA between $50
million and $150 million. Actual results are contingent on
several factors, including the necessity of entering into
distribution agreements, and such results could vary materially
from the expected range based on the rate of subscriber adoption
and churn rates, as well as changes in pricing, promotion
levels and distribution terms.
"Until
a base of approximately 1 million subscribers is achieved,
we estimate the network would represent a net investment for
WWE. Ultimately, the company believes that a network and other
distribution and monetisation options would represent
a sizable economic opportunity in the US and internationally,"
WWE said.
Leveraging
its global brand strength is a key pillar of WWE's
long-term strategy. Audience measures such as social media
followers and the ratings of television programs demonstrate
its brand strength, WWE states. It claims that last year,
the average number of viewers of its Raw and SmackDown programmes
exceeded the average number of primetime viewers for all cable
networks and historically.
Q4
financial results
Meanwhile,
for the fourth quarter ended 31 December, WWE reported revenue
of $115.1 million as compared to $112.9 million in the prior
-year quarter. Operating income was $2.6 million compared
to a loss of $13.1 million. Net income was $0.6 million as
compared to a loss of $8.6 million in the prior -year
quarter.
Revenue
from the Asia Pacific region fell to $7 million
compared $9.4 million in the same quarter in the previous
fiscal.
Business
Outlook for 2013: In order to make significant earnings growth
a possibility, it is critical that WWE invests in key areas,
including talent development, content creation and marketing.
WWE expects 2013 EBITDA performance will approximate the 2012
results, plus or minus 10 per cent. In addition, it anticipates
that net income will be impacted by incremental expenses from
the return to a more normalized tax rate and increased depreciation
expense of approximately $2 million to $3 million that derives
from its investment in assets to support the long-term growth
objectives, including the launch of a potential network.
If
a network is launched within the year, WWE expects a further
reduction in EBITDA and net income in 2013 as the initial
ramp in subscribers and revenue is not likely to be sufficient
to offset the incremental, direct expenses associated with
a network launch, such as marketing, program amortisation
and transmission costs.
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