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WWE Dips as NBC Deal 'Not What We Wanted'

Stocks in this article: WWE

NEW YORK (TheStreet) -- World Wrestling Entertainment (WWE) shares dipped Monday as the company discussed in a conference call its business outlook from last week that caused the share price to drop nearly in half as investors were concerned about the viability of the WWE Network and the company's new television rights deal.

On the call, CEO Vince McMahon said WWE was a little disappointed, quite frankly, in the NBC Universal deal. "We nearly doubled our prior deals," McMahon said, calling from London, where he is producing Monday Night Raw. He noted the company raised its rights revenue by about two times when factoring in international deals. "Internationally, we did much better than domestically. A good deal," McMahon said referring to the NBC Universal deal. But it wasn't "what we wanted," he said.

Following the new television rights announcement, WWE said that it expects to potentially double or triple its 2012 OIBDA (operating income before depreciation and amortization) to a range of $125 million to $190 million by 2015.

On the call, McMahon noted that WWE Network, a $9.99 a month streaming over-the-top service, affected the television rights deals but he wasn't sure how much. "The other aspect [of not launching the network now] is if we didn't come out with network when we did, it would've taken us another year. I do know it was a part of a lighter number in term of television rights, but not the whole."

Shares were down 1.6% to $11.09 in mid-Monday trading.

On the call, Chief Financial Officer George Barrios said the television deals were materially less than five years, but the company has not quantified their length. 

WWE reiterated that its OIBDA from television will increase from $65 million in 2013 to $150 million in 2015.

With regards to the network, Barrios noted the company believes it could get to between 2.5 million and 3.8 million subscribers in a steady rate in both the U.S. and international markets. If the network gets to 1.3 million to 1.4 million global subscribers, it would equal the loss of the cannibalization of the pay-per-view business. Prior to the network, the PPV business was $80 million globally, with $60 million domestic and $20 million in international.

Assuming the network gets to 1 million subscribers by the end of 2014, it would mean an average of 650,000 subscribers for all of 2014, as the network launched in February, which would represent an OIBDA loss of $40 million for 2014. Currently, the network has 667,000 subscribers as of "WrestleMania 30," and Barrios would not give an update, noting the company will stick to its decision to give updates on a quarterly basis.

When asked about the company's healthy dividend, Barrios noted that to maintain the dividend as is, the Stamford, Conn-based WWE needs successful execution with the network, but would not give any other clarity on it.

McMahon noted that the over-the-top (OTT) streaming model is the way to go. "I think everyone recognizes that OTT is the future," McMahon said on the call. "We're wide open, flexible, and encouraging to deal with everyone."

Ultimately, the company believes the WWE Network represents a sizable opportunity, even if it impacted the company's TV negotiation rights. If the WWE Network can get to 2.5 million subscribers at a steady state, it can generate $200 million in OIBDA, $140 million more than the PPV business. 

Also See: Here's Why the WWE Network Is a 'Ground Breaking Event'

Also See: WWE Plunges As New Television Deal with NBCUniversal Announced

Also See: WWE Gets Smacked Down: What Wall Street's Saying

--Written by Chris Ciaccia in New York

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