WWE Files SEC Document For The WWE Network

WWE released the SEC document they have filed for the WWE Network. Here are some highlights from that document…

Vince McMahon on The Network: “WWE Network allows us to transform and reimagine how we deliver our premium live content and 24/7 programming directly to our fans around the world. “WWE Network will provide transformative growth for our company and unprecedented value for our fans.”

Chief Strategy & Financial Officer George Barrios’ Thoughts: “The creation of a network is one of WWE’s primary growth drivers, which also include the renegotiation of key global content agreements and monetization of WWE’s best-in-class digital and social media presence. We continue to believe that these initiatives will enable WWE to significantly raise its earnings profile by 2015. Although these initiatives hold significant potential, our financial performance for 2014 could fall within a wide range of outcomes depending on the rate of subscriber acquisition for the network, potential pay-per-view cannibalization and the outcome of our content negotiations. This wide range of outcomes in 2014 includes potentially lower earnings than 2013. As we manage this transition, our plan indicates sufficient financial capacity to fund our growth initiatives, support ongoing business requirements and maintain our current dividend.”

Statement On Foundation for Growth: The Demand for WWE Content: We believe that a premium subscription model delivered through OTT digital distribution is the best approach in the U.S. to capitalize on our fans’ commitment to our brand, their desire for more WWE content, and their propensity for consuming video content on alternative digital platforms. Our consumer research indicates that a high proportion of U.S. and international television viewers have an affinity for WWE content. This research indicates that in the U.S., approximately 53% of television households have an affinity for WWE content (i.e., 62 million homes including lapsed fans), two-thirds of which (41 million homes) are characterized as active households, including passionate and casual viewers. Our research also indicates that an additional 18% of U.S. television households, or 21 million homes, include lapsed fans that we have the potential to re-engage with our content.2

Statement On The “OTT” Network Business Model: Fans can subscribe to WWE Network beginning at 9am ET on Monday, February 24 at WWE.com, and for a limited time will be offered a free one week trial. Based on our market research, we estimate that a fully distributed domestic pay network could ultimately attract between 2 million and 3 million subscribers at a “steady state.” These subscriber estimates derive from a current base of approximately 47 million WWE broadband households in the U.S. (which is projected to grow to 52 million households in “steady state” including lapsed fans). These take-rates are based on extensive consumer research and the value proposition for a network that reflects the inclusion of our pay-per-view events, including WrestleMania, as well as compelling new original content, reality programming, in-ring shows and a vast video-on-demand library that leverages the tremendous appeal of WWE’s historic content. 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 price per month of $9.99, this would represent revenue to WWE of between $225 million and $350 million and incremental OIBDA between $50 million and $150 million at a “steady state.”3

WWE Network will be delivered directly to fans through over-the-top digital distribution on desktops and laptops via WWE.com and through the WWE App on: Amazon’s Kindle Fire devices, Android and iOS mobile devices; media players such as Roku; and game consoles such as Sony PlayStation® 3, Sony PlayStation® 4 and Xbox 360. Availability on additional devices, including Xbox One and select Smart TVs, will follow this summer.

Actual results are contingent on several factors, including the necessity of entering into additional platform distribution agreements. Financial results of the network 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. Reaching a range of 2 million to 3 million subscribers at “steady state”, assumes a subscriber ramp that reaches 1 million to 2 million subscribers by year-end 2014. Although we will continue to offer our pay-per-view events to consumers on an à la carte basis through current providers, there is risk that not all providers will continue to transmit our pay-per-view programming. We expect the network will reduce OIBDA and net income in 2014 as the initial ramp in subscribers and revenue is not likely to be sufficient to offset both the foregone pay-per-view revenue and the incremental, direct expenses associated with a network launch, such as programming, marketing, customer service and content delivery costs. Ultimately, we believe the network represents a sizable economic opportunity in the U.S. and internationally. WWE Network is expected to launch in the United Kingdom, Canada, Australia, New Zealand, Singapore, Hong Kong and the Nordics by the end of 2014/early 2015.

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