World Wrestling Entertainment Inc  (NYSE: WWE) Q1 2020 Earnings Call Transcript

World Wrestling Entertainment Inc  (WWE) Q1 2020 earnings call dated
Apr. 23

Corporate Participants:

Michael Weitz — Senior Vice President-Financial Planning and Investor Relations

Vincent K. McMahon — Chairman & Chief Executive Officer

Frank A. Riddick — Interim Chief Financial Officer

Analysts:

Curry Baker — Guggenheim Securities — Analyst

Vasily Karasyov — Cannonball Research — Analyst

Eric Katz — Wolfe Research — Analyst

David Karnovsky — JPMorgan Chase — Analyst

Ben Swinburne — Morgan Stanley — Analyst

Eric Handler — MKM Partners, LLC — Analyst

Laura Martin — Needham & Company, LLC — Analyst

Ray Stochel — Consumer Edge Research — Analyst

Alan Gould — Loop Capital Markets — Analyst

Jason Bazinet — Citigroup — Analyst

Steven Cahall — Wells Fargo — Analyst

John Belton — Evercore ISI — Analyst

Mike Hickey — The Benchmark Company — Analyst

Presentation:

Operator

Hello, and welcome to the webcast entitled WWE First Quarter Earnings. We have just a few announcements before we begin. [Operator Instructions] I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead, Michael.

Michael Weitz — Senior Vice President-Financial Planning and Investor Relations

Thank you, and good afternoon everyone. Welcome to our first quarter 2020 earnings conference call. Leading today’s discussion are Vince McMahon, our Chairman and CEO; as well as Frank Riddick, our Interim Chief Financial Officer. Their remarks will be followed by a Q&A session. We issued our first quarter earnings release earlier this afternoon and have posted the release, our earnings presentation and other supporting materials on our website, corporate.wwe.com/investors.

Today’s discussion will include forward-looking statements. These forward-looking statements reflect our current views, are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings. Actual results may differ materially, and undue reliance should not be placed on them.

Additionally, the matters we will be discussing today may include non-GAAP financial measures. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website. Finally, as a reminder, today’s conference call is being recorded and the replay will be available on our website later today.

At this time, it’s my privilege to turn the call over to Vince.

Vincent K. McMahon — Chairman & Chief Executive Officer

Thank you, Mike. Good afternoon, everyone. As you obviously know, our Q1 performance was pretty strong. It exceeded our recent guidance in a pretty challenging environment. COVID-19, which had a limited really financial impact on us, because it was only like two or three weeks, it was negative, but with only a couple of weeks really, but we have adapted our business model to produce content in new ways and reduce our cost as well. We will continue to produce compelling content to provide obviously a diversion in — of everyone. Generally speaking, we’re very family oriented. We think that’s going to help us considerably and along those lines, we — in terms of consumption of our programing, there are so many different ways obviously we do. And we do that in every conceivable medium, even it was on television straight off, whether not it’s television straight off, whether not it’s digital or social. So we are there.

On the — as far as television is concerned, Raw and SmackDown. On Raw, we’re off considerably. On SmackDown, we’re pretty much even is to where we started January 1 and it’s interesting to look at, okay, what happened, once we went to and as it’s our studio, which is our performance there. And there really wasn’t, especially on SmackDown, there really wasn’t that much difference in terms of where we were, in terms of where we are now. It’s a challenging environment obviously. So it’s — but nonetheless, you have to take advantage of that challenging environment and somehow make it is obviously as good as we can to make it special. So we’ve done certain things, we are going to do more of for instance, outside environment and doing in assets, many movies and assets like we did at WrestleMania and many other personality profiles that we can do a whole lot better and well.

Digital and social was way up for the quarter, which is certainly a great barometer as well as our television ratings and everything else are. Our digital video views increased 25% over the quarter to 9.6 billion hours and consumed an increase of about 15%, 344 million across digital and social media platforms. I don’t know any other property that can do anything like that. And again, that’s plus everything else we’re doing in terms of Raw, SmackDown, NXT, all of that is what makes us big wheel to go around the course.

In addition to that, WrestleMania, I know it’s out of the quarter, but WrestleMania gives you some idea of the culmination of where all of this can lead and WrestleMania was off the chart. We had viewership records with more than 967 million video views across our digital and social platforms. That’s up 20% from the previous year. It was the most social event in our history with more than 13.8 million social media interactions on Facebook, Instagram and Twitter.

And on the network, we, of course, the weekend is what we do look at it. Subscriber additions were the highest in history. Total subscribers reached 2.1 million. So, WrestleMania was a huge success for us over Saturday and Sunday night. Obviously, we are now living in an evolving. We’ve implicated some very short form of cost, as of late, cash flow improvement actions and as we announced on April 15, for instance, the cost reductions include decreasing Executive Board member comp, operating expenses, telecast, third-party stuff consulting expenses for lowing and then of course, our employees. So we’re getting ready for what’s to come, what’s the new normal, which quite frankly I’m not so sure. I know what anyone else knows what is the new normal, but we are very, very flexible and obviously, we can adapt so quickly to just reading the tea leaves of what you can do safely and what the government tells you can do and what your audience wants. So there’s a lot of factors in going into what the new normal is going to be, but our growth prospects remain strong, all the way across the board.

We think obviously that if you’re most agree with a live sports rights over the long term are very, very healthy in terms of rights fees and things of that nature. We just get to have to get back to what is it that we’re doing here in our country and open it back up in some capacity and then what’s that going to look like three months, six months, two years, and we’re not so sure what we’re going to be ready for it and be flexible.

So with that in mind, Frank take it away.

Frank A. Riddick — Interim Chief Financial Officer

Thanks. Thanks, Vince. There are several key topics we’d like to review today, including a discussion of our financial performance, recent actions we’ve taken to address the COVID-19 impacts on our business and our business outlook. We generated record first quarter revenue of $291 million and adjusted OIBDA of $77 million, which exceeded our rescinded guidance of $60 million to $65 million. Based on accelerated cost reduction efforts, COVID-19 had a limited impact on our financial performance.

Although government mandates resulted in the cancellation of live events, we were able to offset the loss of ticket and merchandise sales by producing content from our training facility and significantly lowering our production and other costs. During the quarter, strong revenue growth from our new US distribution agreements and the timing of our Super ShowDown event in Saudi Arabia were partially offset by year-over-year increases in fixed costs to support the creation of content and lower results across our live event and consumer products businesses. As we produce content in new ways, we also develop new creative opportunities to promote our brands. This included extending our partnership with Fox Sports to offer 22 hours of content on successive Tuesday nights on FS1, collaborating with ESPN to air historic WrestleMania events and granting free access to WWE’s networks library content for a limited time. Importantly, we adapted our business to continue to safely stage hindering performances, produce other content for our global markets and multiple distribution channels, as well as to market our brands.

During the week leading up to and including our two-day WrestleMania event, we set viewership records with more than 967 million video views across digital and social platforms. It was also the most social event in our history, with more than 13.8 million social media interactions. And in networks, weekend to subscriber additions were the highest as in our history, bringing our total subscribers to 2.1 million, 5% above prior year. The record breaking engagement generated by WrestleMania is a testament to our creativity in these unprecedented times. Our ongoing efforts to strengthen our brand and customer engagement were evident during the quarter. Of note, SmackDown television viewership increased 16% and was essentially unchanged after mid-March when we begin to perform our events without attendees.

Raw’s viewership in the quarter declined 16% from the prior year quarter, but outpaced USA Network, which experienced a 29% decline. Average attendance at our live events in North America increased 33%, excluding the late March events as compared to an 11% decline in the first quarter last year. Consumption of WWE content on digital platforms such as YouTube and Facebook increased 15% to 344 million hours and digital video views increased 25% to 9.6 billion.

To review our business performance in the quarter, let’s turn to Page 4 of our presentation, which shows the revenue, operating income and adjusted OIBDA contribution by segment, as compared to the prior year. Looking at our Media segment, adjusted OIBDA increased $74.1 million. Revenue growth driven by the escalation of domestic rights fees for our Raw and SmackDown programs and the favorable timing of our Super ShowDown event was partially offset by a year-over-year increase in content-related production expenses. WWE Network’s average paid subscribers decreased 8% from the prior year quarter to approximately 1.46 million.

We continue to believe in the viability of alternative strategic options for WWE Network. Our confidence is based on our discussions with multiple potential partners and consideration of broader media industry factors such as the evolution of new streaming services and increasing value of live sports content. As our potential partners have been impacted by COVID-19, these discussions have been extended. Currently, we are unable to estimate when an alternative option will be completed, but still believe the potential for a transformative transactions as possible.

During the quarter, we made important progress on other strategic initiatives that extended the reach of our brands. Specifically, we completed multi-year distribution agreements with Sony Pictures Networks in India and DAZN in Germany. We partnered with Netflix to launch a new original series The Big Show Show and a feature film, The Main Event both of which ranked among Netflix top 10 most viewed programs during their premiere week in the second week of April. We also finished the second season of Miz & Mrs. on USA Network, premiered the fifth season of Total Bellas on E! earlier this month and launched a new series Fight Like a Girl on Quibi.

Turning to our live event business as shown on Page 6 of our presentation, adjusted OIBDA from our live events declined $3.4 million, primarily due to the government-mandated cancellation and/or relocation of events. Although our live event revenue reflected 49 fewer North American events in the quarter, the majority of this change derived from efforts to optimize our touring schedules, which had a limited impact on adjusted EBITDA. Until mid-March, we were able to hold arena and stadium-based events in front of ticketed audiences. During the quarter, we continue to successfully stage large-scale events for our fans, including Royal Rumble before capacity crowd of more than 42,000 in Houston and Super ShowDown in Saudi Arabia.

In our Consumer Products segment, adjusted OIBDA declined $2.2 million, reflecting lower royalties from the sale of toys and video games at retail as well as lower sales of merchandise both online and at our venues. During the quarter, we continue to support new products while driving growth from our mobile game portfolio. In partnership with Unilever, we launched our Superstar Ice Cream Sandwiches at grocery stores nationwide and released three new replica title built on our e-commerce platform, WWE Shop. Notably, on mobile games, WWE SuperCard and WWE Champions, both generated more than 10% revenue growth from the prior year quarter.

The Page 8 of our presentation shows selected elements of our capital structure. As of March 31, we held approximately $292 million in cash and short-term investments. Additionally, subsequent to quarter end, we drew $200 million from our revolving credit facility. Accordingly, we now have approximately $500 million in cash and short-term investments to ensure we have the necessary resources to execute our strategy and deliver long-term value to our shareholders.

In the first quarter, we generated approximately $58 million in free cash flow as compared to a $10 million use of cash in the first quarter last year. The increase was driven by improved operating performance and to a lesser extent, reduced payout of management incentive comp and lower capital expenditures.

Turning now to COVID-19 actions and business outlook, the spread of COVID-19 and related government mandates have impacted our business as we have been directed to cancel, postpone or relocate our live events since mid-March. To date, we’ve been able to substantially offset the loss of ticket and merchandise sales at our live events by reducing operating expenses across all area of our business. These efforts were highlighted by the introduction of a new model for producing content. We believe, however, the potential impact of COVID-19 may not be limited to the sale of live event tickets and merchandise, and the adverse impacts on other areas of our operation are not known at this time. To mitigate the potential risk to our financial performance, we evaluated our operations and developed extensive contingency plans. This resulted in the implementation of various short-term cost reduction and cash flow improvement actions. These precautionary measures included reducing executive and Board member compensation, decreasing operating expense, cutting third-party staffing, consulting and expenses, and a reduction of headcount by way of furlough.

The decision to furlough rather than permanently reduce headcount reflects the fact that we believe these reductions will be temporary in nature. Notably, the reductions of employee compensation and headcount resulted in an estimated savings of $4 million per month. To enhance our liquidity, we’ve deferred spending on the Company’s new headquarters directly reducing 2020 capital expenditures by approximately $140 million. For 2020, we now estimate total capital expenditures of $40 million to $50 million compared to our previous guidance of $180 million to $220 million.

As additional precautionary measures, we’ve also temporarily suspended the repurchase of stock under our $500 million program and drew $200 million from our revolving credit facility after quarter-end. As such, we believe we have sufficient cash liquidity totaling approximately $500 million to manage the challenge ahead. We remain unable to quantify the potential impact of COVID-19 on our business going forward, but the financial impact of the Company may be material. Accordingly, we previously withdrew our full-year 2020 guidance and based on sustained economic uncertainties, are not reinstating guidance at this time.

While our financial performance to date has been strong, the ongoing and uncertain impact of COVID-19 on our business has required us to take quick short-term actions to strengthen our financial performance and capital resources. We continue to believe that our growth prospects remain strong and that WWE is well positioned to take full advantage of the changing media landscape and the rising value of live sports content over the longer term.

Looking ahead, this also includes capitalizing on the growth of media and entertainment in international markets, growing our sponsorship business and leveraging increasing digitization to expand and engage our audience. Previously, we committed to providing a comprehensive perspective on our road map for creating shareholder value, which we expected to communicate in the first quarter of this year. However, given the uncertainties of the impact of COVID-19 on our business, our focus on developing actions to address these impacts and the difficulty in planning and effective event in this environment, we postponed this communication and look forward to speaking or meeting with you at an appropriate time.

This concludes the portion of — this portion of our call, and I’ll now turn it back to Michael.

Michael Weitz — Senior Vice President-Financial Planning and Investor Relations

Thank you, Frank. Jenny, we’re ready for questions. Please open the lines.

Questions and Answers:

Operator

Thanks. [Operator Instructions] We will go first to Curry Baker of Guggenheim Securities.

Curry Baker — Guggenheim Securities — Analyst

Okay, thanks. I’ve got one for Vince and then another follow-up. Ratings for both Raw and SmackDown have appeared soft here the past couple of weeks, which is a bit surprising since you guys are basically the only live sports content on television. Do you have any idea why this is the case? And could you maybe discuss some of the steps you’re taking to reverse this?

Vincent K. McMahon — Chairman & Chief Executive Officer

Sure. In terms of the why, it goes back to the product itself, and we are the only — you’re right, sports environment at the moment. And — but again, it’s a different feel completely than in front of a live audience. We were the first sports to have interaction with live audience as many, many years ago, it was yay, boo. That’s the first interaction, and we don’t have that now. But we’re doing really well, I think, beyond anyone’s expectations actually by doing the show with — without an audience, and everything we do is about the audience and how they react and what you read them and to fund and what have you that they all have by coming to WWE event. So that’s really I think why and we need to be able to figure out ways, which we are in that, we will hear the performers putting the bad mouth on each other and so forth, which you never hear before, minimize some of the more creative words, we will say, but nonetheless, there are advantages and we can go outside of the environment too. So we don’t want to stay there for two or three matches. You need some relief there. In one form or another, we’re figuring that out as well.

A lot of things to figure out in this sort of environment, what can you do and what resonates and things of that nature. So it’s really, it’s brand new for us and for anyone. So there is no audience and it’s a different show, completely different show, and I think we’re going to get there with — we may be able to take this negative and already turned into somewhat of a positive as far as ratings and what have you concerned. SmackDown has virtually been no change, very little. Raw has suffered, but not necessarily because of the environment. It’s suffered because we bring in a lot of new talent into Raw and it takes a while to get these new talents over. We no longer have Brock Lesnar obviously, but we have a new champion and a lot of new performers coming out, it takes a while. So that’s the reason. And how you use those performers in this story or that story, what have you. So with new talent, it’s just going to take a little while. And then, so the Raw’s ratings are kind of bounced back considerably.

Curry Baker — Guggenheim Securities — Analyst

Okay. Thanks. That’s helpful. And then maybe just switching gears a bit. Can you guys provide any update on the MENA deal with Saudi Arabia? Is there any — is there still an agreement in principle? Do you guys have any better sense in terms of time line, or is there any kind of additional color you can provide at all there?

Vincent K. McMahon — Chairman & Chief Executive Officer

I’ll do it.

Frank A. Riddick — Interim Chief Financial Officer

Yes.

Vincent K. McMahon — Chairman & Chief Executive Officer

Do you want to do it Frank?

Frank A. Riddick — Interim Chief Financial Officer

No, you take it Vince.

Vincent K. McMahon — Chairman & Chief Executive Officer

No, you take it. As far as Saudi is concerned, there is — they want to have — I’ll get back to your question, sorry, but they would love to have another huge event, WrestleMania-type event. We normally have two per year in Saudi. The others are under the same constraints as we are here in the United States and everyone else has in its pandemic. So they are not too sure they’re going to be able to give us the okay to perform in November or December. They really want us to, because it represents a big — a huge turn and what’s allowed, what not allowed as far as live events concerned. So — but good part about that is if in fact we don’t perform, we’ll just tackle on that event on the backside of our contract. So we’re not to going to lose the money. And again this — everyone is having to deal with the pandemic in one way or another, but we’re fortunate that we would just move another event on the other side of our 10-year agreement.

As far as the media rights concerned, we’re still working on those. I — sometimes, things move very slowly. And that’s one of the most things we thought we would have our media rights done by now for sure. We don’t. And there’s some degree of uncertainty as to when that’s going to happen.

Curry Baker — Guggenheim Securities — Analyst

Okay. Thanks, Vince.

Operator

And we’ll hear next from Vasily Karasyov of Cannonball Research.

Vasily Karasyov — Cannonball Research — Analyst

Thank you. Good afternoon. I had one clarification and one question. Can you please clarify if the core content rights revenue this — in the first quarter included Indian — new Indian deal terms or is it still the old terms of the Indian TV rights deal? And then the question is about advertising and sponsorship, we saw a nice acceleration in the quarter in growth. I was wondering what kind of trends you saw in the second half of March and you are seeing now there, and also maybe you can help us understand what proportion of this revenue is sort of longer-term sponsorship contracts versus spot-driven revenue? Thank you.

Frank A. Riddick — Interim Chief Financial Officer

So the first quarter had India at the old deal terms.

Vasily Karasyov — Cannonball Research — Analyst

Got it. Thank you.

Frank A. Riddick — Interim Chief Financial Officer

And then your question about sponsorship, we saw, in the quarter, a good performance there. Some of the trends that we’re now seeing in advertising as we get into the second quarter, we did not experience in the first quarter. Currently, while we are adding to the corporate sponsorship elements and we did have a very successful WrestleMania, those sponsorships were tied to that event. For the most part, we have seen some growth in overall corporate sponsorships. But to date, most of our revenue there is more transactional in nature.

Vasily Karasyov — Cannonball Research — Analyst

Thank you. And when will we see the new terms in — of the Indian deal flowing through the P&L? Is it fair to expect that in Q2?

Frank A. Riddick — Interim Chief Financial Officer

Yes.

Vasily Karasyov — Cannonball Research — Analyst

Thank you.

Operator

And we’ll go next to Eric Katz of Wolfe Research.

Eric Katz — Wolfe Research — Analyst

Hi, thank you. So I think what some of us trying to do is also reconcile your prior OIBDA guide of the $300 million to $350 million for 2020 with stronger results, understanding you pulled that guide, but that came before some of the cost-cutting actions you’ve announced in the COVID-19 impact. So it seems like from the prior guide that a large portion of your new TV rights revenue was going to be reinvested in the business. And ultimately, it sounds like you now have a lot of cushion to harvest those revenues by pulling back on those investments. So I’m curious if you could maybe talk through some of the originally planned investments versus what you now plan on moving forward within this environment, what are sort of the must haves versus the nice to haves?

Frank A. Riddick — Interim Chief Financial Officer

Michael, do you want to cover that?

Michael Weitz — Senior Vice President-Financial Planning and Investor Relations

Sure. I think first of all, Eric, it’s a little bit of a misnomer. In past calls and follow up, we tried to go through pretty extensively what the different sources of expense growth were year-over-year. So we had expense growth related to the increase — the content changes in the business related to Raw — particularly SmackDown, sorry, and the new distribution on Fox. So we have increases in costs associated with essentially how we’re delivering content is kind of bucket one. Bucket two was related to incentive comp and last year, we accrue to lower amount of incentive comp based on the performance of the Company and also we had some. What you’re getting out I believe is we also had some carryover or full year annualization of some investment that we made going into — or at the end of 2019 and the annualization is significant when you look at the full year.

And what I would point out is that the mode that we’ve been in this year has been heavily focused on thinking about how to reduce costs, strengthen our financial performance and align our investment with the current environment. So the content and creative investments that we made last year have been pulled back significantly. And we’ll be very thoughtful as we move forward and think about the future about how to invest, but I’d say right now the balance of how we’re thinking about the business is very focused in terms of aligning the business with reducing cost and keeping focused on having strong financials for the current times.

Eric Katz — Wolfe Research — Analyst

Okay. To be clear, that sounds like there is quite a bit of whatever you guys were budgeting for 2020 that you can flex back on. Is that correct?

Michael Weitz — SVP – Financial Planning and Investor Relations

Of the buckets that I talked about, there are things that flex back on. That’s correct.

Eric Katz — Wolfe Research — Analyst

Okay, all right. And then separately, I guess — I mean look, clearly, Florida has deemed an essential business here, if there is a scenario where you’re at 180 [Phonetic] ends — production fortunately get shut down. Can you talk a little bit about maybe backup plans to continue filming? Do you have other locations available?

Vincent K. McMahon — Chairman & Chief Executive Officer

Yes, we do a number of them in a number of states that would welcome us.

Eric Katz — Wolfe Research — Analyst

Okay, great. Thank you.

Operator

We’ll hear next from David Karnovsky of JPMorgan.

David Karnovsky — JPMorgan Chase — Analyst

Hi, thank you. I guess, Vince, just a follow-up on that point, but ask it another way. Is there any potential to move tapings over to full wholesale at some point where you could maybe shoot with a live audience, albeit with some social distancing in place, but at least you would have that audience interaction at some point?

Vincent K. McMahon — Chairman & Chief Executive Officer

Yes, we could. Again, we’re just waiting for the okay to do that, like everyone else is. I don’t know what live audience is going to mean anymore. Obviously, there is a huge need and want by our audience to want to be their live-live. And again, I don’t know whether it’s six-feet apart or whether or not — everyone has been tested before they come in, which you might be able to do in a smaller arena type thing. If anyone knows how to do it in a safe and exciting way, it would be us. Chances are we’re the first ones to do it pretty much like we’re the first one to do everything else.

David Karnovsky — JPMorgan Chase — Analyst

Okay. And then, just regarding a deal with a third-party for the network content. And just to be clear, I mean is the main headwind here that potential partners don’t really want to kind of make any agreement in the current environment or do you sense a need by the potential partners that may be fully reevaluate how they might view licensing WWE programing and has the current crisis maybe changed your thinking at all and how you want to distribute some of this?

Frank A. Riddick — Interim Chief Financial Officer

Well, the main issue has been they just — they have their own issues to deal with and trying to respond to COVID-19. We haven’t heard that they don’t have a lack of interest in the property. That’s not the case. I think we’re excited about the performance of the network in this environment. I think it only enhances the value of it, and it gives us more options, but we’re still pursuing a strategic transaction.

David Karnovsky — JPMorgan Chase — Analyst

And I guess maybe just a follow-up on that point, I mean in absence of that strategic transaction, would you ever consider any other changes to network such as different pricing tiers or maybe asking subs to commit to some number of months?

Frank A. Riddick — Interim Chief Financial Officer

I think we would consider anything that would optimize the value of it. And we have some of those things. We’ve also looked at some of those specific things. We have a plan for the network in absence of doing a deal this year or having it delayed. So we continue to be in this environment pretty excited by the response we’ve gotten. And if there are things we can do to add value to that, we will.

David Karnovsky — JPMorgan Chase — Analyst

Okay. Thank you.

Vincent K. McMahon — Chairman & Chief Executive Officer

I think maybe the COVID-19 stuff caught everybody with their pants down. We had a number of individuals who are very active in our network and of course, and just when you think you’re getting close, the bottom fell out. Very close with a number of individuals that really want our network. On the other hand, we’re continuing to invest in it with a free tier. We are going to do in a number of improvements and what have you and different marketing for it. So it’s a complete go from the standpoint of not doing anything with anyone else just doing it right here. And if something happens with someone else after this, COVID-19 is over and they look at our balance sheet, etc., then that will happen too.

David Karnovsky — JPMorgan Chase — Analyst

Thank you.

Operator

And we’ll go next to Ben Swinburne of Morgan Stanley.

Ben Swinburne — Morgan Stanley — Analyst

Thanks. Good afternoon. Vince, I know it’s been, I guess, a month or so — a month and a half under this COVID situation you’ve been running the Company, but I’m just wondering if you have any early ideas and early thoughts on how this may change, how you run the business, how you approach the product and how we might want to think about how WWE looks operationally, financially on the other side of this, because obviously, it’s forcing a lot of kind of forced experiments like you mentioned WrestleMania. I don’t know if you had one or two things you would highlight today that you think we should be thinking about as you sort of work through this experience.

Vincent K. McMahon — Chairman & Chief Executive Officer

All right. Firstly, I don’t know that we’re going to be in the live event business as we were before. I think no one can predict what’s going to happen here. We’re ready if it’s allowed. But I think that’s one of the things that going forward. I think it’s going to take a while for consumers to want to come out, put 70,000 people in that live stadium — 5,000 people in an arena. I think there is a different learning behavior that people who have now in terms of the consumer. And we — if anyone can configure it out, we will. So we are — again, we’re highly adaptable as you’ve seen through the years, and whatever happens, we’re there. And I think it’s going to be more content-oriented, heavily marketed.

And in terms of — not live events, but more in terms of programing and social and digital media, which are way up, there are a lot of things we can do there. So I’d say it’s a creative environment is the way I look at it. Obviously, it’s not a problem. It’s an opportunity, right, it really is.

Ben Swinburne — Morgan Stanley — Analyst

Yeah. And just a follow-up, you guys talked a lot about Raw and SmackDown and what you’re doing there. Is there any risk that we need to be thinking about that your broadcast partners and say, this isn’t the product that I agree to pay for, because there is a live audience. I realize they’re probably thrilled that they’ve got anything, but you mentioned it’s a different product before. So, I was just curious if we need to think about that potential with your partners. Our partners obviously are not doing as well as they would like to, nor are we, but as far as the content is concerned, I totally get. It’s not our fault, it’s not anyone’s fault. You’re not performing in front of the audience, but they’ve lauded what we’re doing because again as you just said there’s nothing out there now. You know we’re live sometimes, we’re tapped sometimes, and we have a lot of the really good relationship with both partners and they have our backs as we do theirs.

Operator

And our next question comes from Eric Handler of MKM Partners.

Eric Handler — MKM Partners, LLC — Analyst

Thank you very much. A couple of clarifications hoping you can learn to give a little bit more perspective. First with your WrestleMania, or your post WrestleMania WWE network subs of 2.1 million members, are those all paid, or is that — does that include free subs as well?

Frank A. Riddick — Interim Chief Financial Officer

That includes free subs.

Eric Handler — MKM Partners, LLC — Analyst

That includes free subs. Are you willing to give what the number is just on a paid perspective?

Frank A. Riddick — Interim Chief Financial Officer

No, not right now, we’re not.

Eric Handler — MKM Partners, LLC — Analyst

Okay. And then secondly understanding that visibility is very limited and you know it makes sense to withdraw guidance. Just wondering if you’d be willing to sort of give a little bit of perspective on 2Q all things remaining equal right now considering you didn’t have a WrestleMania in front of fans is that historically that has cost you about $15 million to — that represents about $15 million to $20 million of EBITDA. If you look at where last year was and then you take out all the live events, is it proper to think that 2Q should be profitable?

Frank A. Riddick — Interim Chief Financial Officer

Yes. I believe based on the cost reductions again we’re not in the position right now to give guidance mainly because of uncertainty on the revenue side but if you assume everything else equal and based on the cost reductions yes it should be profitable.

Eric Handler — MKM Partners, LLC — Analyst

Okay. Thank you very much. And well let me see if I can push it one step further. When you look at all things assuming that you have a second Saudi Arabian event this year and at some point, later this year, we start seeing live events come back, do you still feel you are on a path for a record adjusted OIBDA year?

Frank A. Riddick — Interim Chief Financial Officer

I really don’t want to — again I think we’re not in a position to give guidance on the full year right now because if we were, we would have given it publicly so I think we’d like to defer on that. See a few more cards here and how things actually play out in the next month or so as we — as it looks like the economy may reopen and we see how that affects our business and so forth and so on, I just think it’s too early to kind of go out on that.

Operator

And our next question comes from Laura Martin of Needham.

Laura Martin — Needham & Company, LLC — Analyst

Vince. So, you’re exactly the guy I want as head of the production company right now. So globally Netflix had the only two companies producing content in the world are Iceland and Korea, except you’re still producing content. So my question to you is sort of following up on earlier that you think there’s going to be more digital, more stay at home and it’s going to take longer for consumers to go back into venue, 5,000, 70-person [Phonetic] venue. Ultimately, in your mind from what you know today from doing a bunch of live event to this new reality the new-new, is your cost structure lower or said in other ways is your cash flow higher, in that world I think 2022 two years from now and COVID is clearly behind us because we have cured it or fixed it or whatever. What do you think?

Vincent K. McMahon — Chairman & Chief Executive Officer

My crystal ball is just as cloudy as anyone’s else is. Again, I think we’re going to do it out really quickly whichever way it goes, we’re there, we need to be there flexible we are and I read content on what I think the future really holds for the country, but I just know that we’re going to well.

Laura Martin — Needham & Company, LLC — Analyst

All right. Fair enough. And sum to up two fold at Netflix over expectations, and here you have referenced sub growth. Do you think that is COVID dependent, or do you think your new content can hold on to those new stuff that you’ve garnered in this April COVID lockdown period?

Vincent K. McMahon — Chairman & Chief Executive Officer

I think new content is always a driver in terms of stimulating interest and what have you, and obviously everyone is pretty much starved for new content. It could very well be that you’re tired of watching Netflix and you want to see strong men running around their underwear. So I think that we have a product that’s very unique and it will always be that way and that’s really a big time advantage that we have over the form of show business or support. You know it’s nothing like this, it’s just a question of where you want to go a bit how creative and we’re going to — again, wherever there’s a need, we will go there.

Operator

We will go to our next question from Ray Stochel of Consumer Edge Research.

Ray Stochel — Consumer Edge Research — Analyst

Is there a good way to think about the net impact of the change to Raw and Smack Down pre and post COVID-19 on a per-show OIBDA basis? So if I think about the benefits that you would get on the cost side from having it just be in Orlando your performance center relative to the laws of live event attendance and the loss of live event merchandise spend.

Vincent K. McMahon — Chairman & Chief Executive Officer

Well, I think that obviously the cost is nowhere near the differential in terms of a live event in an arena and what we’re doing — the performance center we hardly have to change anything. The trans are in one location the stage is one location. So there’s not much at all moving anything in or moving anything outside. I would say it was a lot of money.

So you can look at it that way, but at the same time — our audience – we need an audience, everyone does too but it’s the interaction that we draw from the audience in terms of their having fun and we’re having fun performing for them. So there’s always a — you don’t want to just continue to produce for sure even though the cost you loss.

You don’t want to continue produce in a studio environment; I’ll call it as compared to what you could do. It’s certainly more costly. I want a remote, no doubt about that. But you get a lot of a — I guess maybe intangibles you get a lot of things that in a live audience obviously merchandising, yada yada but nonetheless you know performers have to give kudos to all of our performance, they are working so hard and when you’re in the ring and you normally are playing off of a live audience and there is no one there. It’s different, but our performers are stepping it up and really, really working hard and we’re trying to produce a great product given with the consideration of where we are.

Operator

We’ll go to our next question from Alan Gould with Loop Capital.

Alan Gould — Loop Capital Markets — Analyst

I’ve got a few questions. First Frank you’ve got four of the five big international deals done everything, but the Mideast deal. Would you be able to quantify for us the delta of the four deals? How much of an increase you got the new deals versus the old?

Frank A. Riddick — Interim Chief Financial Officer

Michael, I don’t think we’ve disclosed the specifics of the deals particularly internationally. We’ve given you know high level looks at the total revenue of content, but not by deal, not by region.

Alan Gould — Loop Capital Markets — Analyst

That’s correct. Even aggregating the four of them?

Frank A. Riddick — Interim Chief Financial Officer

Michael?

Michael Weitz — Senior Vice President-Financial Planning and Investor Relations

That’s fine Alan.

Alan Gould — Loop Capital Markets — Analyst

Okay. Second timing of the freakier on the WWE Network?

Frank A. Riddick — Interim Chief Financial Officer

Current thinking is in some — current thinking is sometime in the fourth quarter. I mean we already tried you know put it out around WrestleMania. Well, in terms of the – putting it out there with the revenue model that we might use with it and sometime in the fourth quarter I think it’s the current one.

Alan Gould — Loop Capital Markets — Analyst

Vince any guess when you will have your next Live Event, I know the theatres are talking about late June, early July we’ll see if they open up or don’t at that time, but any idea, any guess when you’ll be able to have your own next live event?

Vincent K. McMahon — Chairman & Chief Executive Officer

No not really. And we have holds on buildings naturally, but it’s not revolving type thing. I have no idea quite frankly. I know people are somewhat itching to get out their house and come and see our product for sure, but I don’t know when it’s going to be allowed. I don’t know what it’s going to look like when it is allowed. I don’t think anyone does. So — right now we’re just taking them month by month as we continue and push it further out every month. You know in terms of when we’re going to do this thing soon. I really have no crystal ball at all.

Operator

And we will go to our next question from Jason Bazinet of Citi.

Jason Bazinet — Citigroup — Analyst

I have a high level question. Some of the actions that you’ve taken regarding like the draw down on the revolver and the lack of buybacks and the reduction in sort of your capex guidance. It all sort of — if a company that doesn’t have a lot of debt it seems like a lot of aggressive actions candidly to me. And so it makes me think that — made them under estimating the quantum of the cash burn or that you guys are anticipating to the balance of the year or there is some sort of exogenous risk that you guys see outside of the live events in consumer products degradation, which I think is sort of obvious. So can you provide color on either of those two fronts? I just don’t know if you guys are very risk-averse company if there’s something more dowered that’s about ready to happen. Any color?

Frank A. Riddick — Interim Chief Financial Officer

So I think, overall we are concerned about the uncertainty of the impacts of additional government regulations or changes in societal behavior around COVID and how long it will last, so we wanted to be — since we don’t know that — we felt like we needed to be maybe overly cautious, if you will or overly conservative to try to make sure that we had adequate financial resources to adapt the business, however it needed to be adapted and whatever opportunities might put themselves in front of us, and so it ended up — I would say maybe in an abundance of caution, because if you look at the cash flow in the first quarter with the changes that we’ve made in capital spending going forward, we don’t see anything right now that would result in a huge use of cash, but we don’t know what the outlook.

We don’t know what the market is going to look like or the performance is going to look like in the next few quarters because we don’t know what the impact of COVID is going to be, since we know that we’ll have a better idea of how to model it. So we’ve been very cautious.

Vincent K. McMahon — Chairman & Chief Executive Officer

And the old expression of cash is king. Again, like we have no debt. We’re not looking as Frank said, to have some crazy something we’re just making certain that we’re being conservative, and as Frank said maybe overly cautious, that’s what it is.

Operator

And moving over to question from Steven Cahall of Wells Fargo.

Steven Cahall — Wells Fargo — Analyst

First off, looks like in the slide deck that your paid subs on WrestleMania were down a little bit and then you’re up including the 3,000 about 476,000. Just wondering if you could talk about what you did on the promotional side to drive that Delta. And if there anything we should read into the modest decline in pace of the WrestleMania?

Frank A. Riddick — Interim Chief Financial Officer

Michael, do you want to handle that one?

Michael Weitz — Senior Vice President-Financial Planning and Investor Relations

Well, there were a lot of creative things that we did to drive the growth around WrestleMania, if you think about it we expanded access to the free tier, we partnered with Fox and ESPN, one of the interesting — content with Fox, which Royal Rumble. It was one of — it was the number one program across sports net, gave content to ESPN in terms of WrestleMania airing, they were number two across all the sports net.

So really important development there and I think all the things that we’re doing feel the brand and gain exposure which includes delivering program like the Big Big Show in Netflix and Fight Like a Girl on Quibi, all contributed to how we dealt the brand importantly around WrestleMania.

Steven Cahall — Wells Fargo — Analyst

Okay and then Vince could you maybe talk a little bit about talent morale some of the other sports leagues they’ve been shut down I think in part because players in unions have wanted safety restrictions or testing in place before they get back on the field or on the court. Can you just touch on how your talent is responding to production and also how you’re thinking about access to testing and if you’ve had any insight there and how that might impact your ability to continue producing content?

Vincent K. McMahon — Chairman & Chief Executive Officer

As far as test is concerned we do everything imaginable. You can’t even come on the premises, and in fact, you have a fever, obviously you’re or we have this whole form you have to fill out and you have to do it every week in terms of whether or not you’ve been exposed, the idea is a whole long gone.

So we’re doing everything we can for safety and making sure the environment is as good as it possibly can be. Not only monitoring our talent, but our employees as well. Anyone was at the training facility, and we’re very careful as to how many people are in and out one time, but our talent been a question of how and when they’re here. We’re performing in small groups in terms of waves and as far as in arena is concerned.

We have changed the turnbuckles and ropes in all that kind of stuff between matches. We sort of have pandemic cleaning initiative I would say cleaning I would say on a very frequent basis. and the Clorox 360 stuff, but we have something additional as well in all of that is going to cost us, but that new stuff you did was I would say.

Frank A. Riddick — Interim Chief Financial Officer

So it’s a company called Allied BioScience that we work through. They have a spray that is – there’s a process which makes it clean to surfaces, and that surface once it’s coated with this it last for 90 to 120 days and it acts like sort of how it was explained to me, it actually the sword that punctures the cell wall of the virus or what causes the virus and kills it on contact in that last 190 days, I mean, 90 to 120 days and it lasts through even the other cleaning and various levels of everything we’re doing.

So we coated our facility the performance centers, our warehouses, even our production trucks with all the that in addition to what Vince said is that the level of cleaning every single usage and cleaning between everything and we’re taking every precaution that we have been advised is a best practice to take and then some.

Vincent K. McMahon — Chairman & Chief Executive Officer

And then again as — when these testing come along, you do as you do that when they become more prevalent and hopefully more accurate, we’ll be right there with the first. Our only natural resource obviously is our talent. And our talent of taking this as a challenge and taking this almost as a daily, which is always happened with us.

And they realize it, people are sitting on their Board and the fact that we could think and we used to get, we can entertain them like no one else could entertain them. So I think that if they look at us as a challenge and they’ve really risen to the occasion, it’s amazing actually.

And there are a few that are unable to come down due to a certain things that exist, but nonetheless by and large — I mean, kudos to them they are very special people. They’re extraordinary athletes. They love to give. That’s what this business about. That’s why you’re into it, is to give and perform for the audience, because the live audience to do that — and that with another kudos to them, because you have to think about that. And when you’re in the ring as if the live audience is on or you’re in the next.

Operator

And we’ll go to our next question from John Belton of Evercore.

John Belton — Evercore ISI — Analyst

I just wanted to ask about the DAZN deal. Any more insight you can share there. It looks like your licensing digital rights in Germany, Austria, Switzerland, I know they’ve been buying up right across more of Europe. Anything in your existing broadcast contract that would prevent you from licensing digital rights in other markets? And did you discuss with the DAZN about expanding the deal beyond Germany? And then I wanted additional one on capex after that.

Frank A. Riddick — Interim Chief Financial Officer

Michael, you want to talk about the DAZN.

Vincent K. McMahon — Chairman & Chief Executive Officer

Jay can talk about.

Frank A. Riddick — Interim Chief Financial Officer

Jay is not on the call, Vince. But I would offer a few key points as our pay TV provider, DAZN is a very sports centric partner. They carry the NBA, NFL, Champions League, so they’re — it’s a very good partner to work with us. And then you have to remember that in the same country we work with the Prosieben. So they act like dual partners. One covering pay TV, the other covering free TV. So that’s the context that I’d like that around DAZN.

John Belton — Evercore ISI — Analyst

And just one additional one on capex. So I think your prior guidance was that capital intensity would moderate by 2022. Should we assume that this is — that basically this project gets pushed out a year now and capital intensity now moderates in 2023?

Frank A. Riddick — Interim Chief Financial Officer

Yes. It will be pushed out at least six months. So it will probably extend into 2023, the spending, it will just be moved out.

Operator

And we’ll go to our next question from Mike Hickey of Benchmark Company.

Mike Hickey — The Benchmark Company — Analyst

I think it’s squeezing in. Just a couple, I guess the first on economic, the unemployment here is staggering. Just curious you talked to your fan base if you have sort of a perspective on your fans relative to exposure call it to the current economic and employment downturn?

Vincent K. McMahon — Chairman & Chief Executive Officer

Yes. I think…

Frank A. Riddick — Interim Chief Financial Officer

We don’t have the details of that in granular form of how it’s more exposed our fan base, maybe, the unemployment things like that. Historically our business is not being all that sensitive to economic downturns. But this is unprecedented times, and as we talk about, you know consumer behavior, sociology may be more important than economics and in determining what fans ultimately do. I don’t know, if you had anything to add to that Vince?

Vincent K. McMahon — Chairman & Chief Executive Officer

Well, just our fans are very robust like — fans as we said, we’re going to play in Madison Square Garden, it would be sold out immediately. I don’t know the old format which we know is never going to get back or it take a long time. Our fans are like in any conceivable way they can consume the product, they will paint it. I think that – and is – and as Frank just mentioned, historically, because we can change prices when you think about it’s going to be a new normal, all right.

So when you go to an arena, are they going to charges the same amount of rent? Probably not. Because what — you have to attract an audience and you have to — they have to come down and whatever those prices are for the rent and everything else. Likewise as a producer you need to know your cost as well, for the public ticket, because things are going to get a little bad, hopefully they don’t get worse, but they may, so we need to adapt to all that marketability and give them what they want. But it’s not — I don’t anyone has a crystal ball on this.

Mike Hickey — The Benchmark Company — Analyst

Thanks for that. I guess the difference maybe here in terms of your ability to sort of hand out what could be a huge recession would be the exposure to the network. I mean, do you have any sense sort of survey your fans that their willingness to pay for the network, unemployed obviously that’s you’re seeing a lot of core cutting, etc., how big is that sort of a biggest economic concern I guess you would have on the business?

Vincent K. McMahon — Chairman & Chief Executive Officer

That may be one of them. But again, we don’t know. We’re just ready for action whatever is coming at us, we want to be ready for it. But I don’t think anyone is again as across the board wherever it goes you know we’re going to be flexible enough to go there too and adapt to it.

Mike Hickey — The Benchmark Company — Analyst

Okay. Thank you. Last question for me, do you have an annual wrestling game? Is that in the budget this year?

Vincent K. McMahon — Chairman & Chief Executive Officer

What’s in the budget?

Mike Hickey — The Benchmark Company — Analyst

The 2K21 WWE game or take to is that in your budget this year?

Vincent K. McMahon — Chairman & Chief Executive Officer

Mike, if you can handle out that.

Frank A. Riddick — Interim Chief Financial Officer

Yes. No. There’s not going to be a launch of the game this year.

Operator

[Operator Instructions] And currently there are no other questions in the queue.

Vincent K. McMahon — Chairman & Chief Executive Officer

Thank you very much for joining us.

Frank A. Riddick — Interim Chief Financial Officer

Thank you everyone. We appreciate you listening. If you have any questions don’t hesitate to contact us. Thank you.

Operator

[Operator Closing Remarks]