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As they plan to launch a new TV network, World Wrestling Entertainment CFO George Barrios says pay-per-view customers will shift to WWE TV subscriber base

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03/20/2013 | 07:35pm CEST




ANCHOR (OFF-CAMERA) ENGLISH SAYING:

You're meeting with analysts and investors and you're telling your story. It's fascinating, it's intriguing, it's probably a tough business overall in terms of content. You had said in the last earnings call that you're going to significantly increase earnings. The potential is there. From what area of your business will that growth come from?

GEORGE BARRIOS, CFO, WWE (ENGLISH) SAYING:

Sure. Well, over the last few years our core business has been performing well. We generate $75 million to $95 million of EBITDA. Those EBITDA margins have been 16% to 19% so the core business performed well. We have invested a lot in the last couple of years to take advantage some of that growth that we see. And the big strategic thesis for us is the value of content. There is more and more distribution alternatives available. Netflix is one everyone talks about. YouTube not being part of just social video but now real original content. So there's more and more distribution alternatives and it's on a global basis. As a content creator and owner, which makes us unique, we own 100% of the rights of our content. We license them out, we'll license windows but we own it all. And that's a unique position to be in. We think the rising distribution opportunity is driving up the valley of content. In fact, you look at what HBO does to produce Game of Thrones, right? You're talking $10 million to $20 million an episode for 13 hours, right. So now you're in the $150 million to $200 million. That's incredible value. Raw and SmackDown are two franchised programs, average more viewers than any cable network average of prime time. So USA is a number one cable network in the US. It averages about 3 million viewers a week in prime time. Raw and SmackDown, our two top programs, averages more than that. We create a lot of value with the content. That's going to be a big driver for growth.

ANCHOR (OFF-CAMERA) ENGLISH SAYING:

So you're launching a television network, probably another distribution channel. I know there's been a lot of questions about the timing and you don't want get to the timing but how does it get monetized? I mean, how many subscribers do you need until you make a profit?

GEORGE BARRIOS, CFO, WWE (ENGLISH) SAYING:

Sure. So on the first part, continuing on with our core products, we're going to keep them fully distributed. We think that's a great platform for a network. And we think there's a lot of value as those shows come up for renewal. Our four biggest contracts will be renewed over the next three years. We think that's a great opportunity for us because of the value we deliver. Then to the network, we said we're going to take our pay-per-views. We're one of the preeminent pay-per-view providers today and our pay-per-views are priced anywhere between $49.95 and $59.95 today and we're going to make that the core of a value proposition with a lot of other new content and put it on a premium network so that our fans can subscribe. We said the price will be somewhere between $12.99 or $40.99, to be determined as we go to market but we think that's a real great opportunity. And to your question about breakeven, about a million subscribers because the pay-per-view buyers will migrate over to the network. That's our belief. About a million subscribers, we breakeven at 2 million, it's a really good business; at 3 million to 4 million, for us it's transformative.

ANCHOR (OFF-CAMERA) ENGLISH SAYING:

So then, does pay-per-view essentially go away?

GEORGE BARRIOS, CFO, WWE (ENGLISH) SAYING:

We believe over time. We believe the value proposition will be much more powerful to subscribe to a network at $12.99 to $40.99, 24/7, you have the pay-per-views, a lot of great content, our library, a lot of retrospective programming that we're doing that's testing really, really well, we're producing it right now so over time, I think the pay-per-view does go away.

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