10-K 1 wwe12311410k.htm 10-K WWE 12.31.14 10K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-K
____________________
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2014
 or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-16131
WORLD WRESTLING ENTERTAINMENT, INC.
(Exact name of Registrant as specified in its charter)
Delaware
04-2693383
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1241 East Main Street
Stamford, CT 06902
(203) 352-8600
(Address, including zip code, and telephone number, including area code,
of Registrant’s principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT
Class A Common Stock, $.01 par value per share
New York Stock Exchange
(Title of each class)
(Name of each exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
     None
    Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of Securities Act. Yes o  No x
     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x
     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer
o
     
Accelerated filer
x
Non-accelerated filer
o
Smaller reporting company
o
 
 
 
 
                      (Do not check if a smaller reporting company)
     Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x
     Aggregate market value of the common stock held by non-affiliates of the Registrant at June 30, 2014 using our closing price on June 30, 2014 was $379,334,858.  
As of February 13, 2015, the number of shares outstanding of the Registrant's Class A common stock, par value $0.01 per share, was 33,232,110 and the number of shares outstanding of the Registrant's Class B common stock, par value $0.01 per share, was 42,298,437 shares. Portions of the Registrant's definitive proxy statement for the 2014 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.



TABLE OF CONTENTS
 
 
 
 
Page
 
 
 
PART I
 
 
 
Item 1.
 
Business
 
 
Item 1A.
 
Risk Factors
 
 
Item 1B.
 
Unresolved Staff Comments
 
 
Item 2.
 
Properties
 
 
Item 3.
 
Legal Proceedings
 
 
Item 4.
 
Mine Safety Disclosures
 
 
 
 
PART II
 
 
 
Item 5.
 
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
 
Item 6.
 
Selected Financial Data
 
 
Item 7.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 7A.
 
Quantitative and Qualitative Disclosures about Market Risk
 
 
Item 8.
 
Financial Statements and Supplementary Data
 
 
Item 9.
 
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
 
 
Item 9A.
 
Controls and Procedures
 
 
Item 9B.
 
Other Information
 
 
 
 
PART III
 
 
 
Item 10.
 
Directors, Executive Officers and Corporate Governance
 
*
Item 11.
 
Executive Compensation
 
*
Item 12.
 
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
*
Item 13.
 
Certain Relationships and Related Transactions, and Director Independence
 
*
Item 14.
 
Principal Accountant Fees and Services
 
*
 
 
PART IV
 
 
 
Item 15.
 
Exhibits and Financial Statement Schedules
 
 
____________________
* Incorporated by reference from the Registrant’s Proxy Statement for the 2015 Annual Meeting of Stockholders (the “Proxy Statement”).




PART I
Item 1. Business
WWE is an integrated media and entertainment company. We have been involved in the sports entertainment business for over 30 years, and have developed WWE into one of the most popular brands in global entertainment today. We develop unique and creative content centered around our talent and present it via network, television, online and at our live events. At the heart of our success are the athletic and entertainment skills and appeal of our Superstars and Divas, and our consistently innovative and multi-faceted storylines. Our network, live and televised events, digital media, home entertainment, consumer products and feature films provide significant cross-promotion and marketing opportunities that reinforce our brands while effectively reaching our fans.
     Based on the strength of the Company’s brands and its ownership and control over its intellectual property, the Company has been able to leverage its content and talent across virtually all media platforms. We continually evaluate additional opportunities to monetize new and existing content, including our subscription network ("WWE Network"), which launched domestically on February 24, 2014, and internationally beginning August 12, 2014. In support of this initiative, during 2012, 2013 and 2014, the Company increased staffing levels and expanded our content production capabilities. The launch of WWE Network, which changes the distribution of WWE’s pay-per-view events, has reduced the monetization of our assets through other platforms such as pay-per-view and other content distributed on certain digital platforms.
     "WWE" refers to World Wrestling Entertainment, Inc. and its subsidiaries, unless the context otherwise requires. References to "we," "us," "our" and the "Company" refer to WWE and its subsidiaries. The initials "WWE" and our stylized and iconic "W" logo are two of our trademarks. This report also contains other WWE trademarks and trade names as well as those of other companies. All trademarks and trade names appearing in this report are the property of their respective holders.
Our operations are organized around the following principal activities:
Media Division:
Network
Revenues consist principally of subscriptions to WWE Network, fees for viewing our pay-per-view and video-on-demand programming, and advertising fees.
Television
Revenues consist principally of television rights fees and advertising.
Home Entertainment
Revenues consist principally of sales of WWE produced content via home entertainment platforms, including DVD, Blu-Ray, subscription and transactional on-demand outlets.
Digital Media
Revenues consist principally of advertising sales on our websites and third party websites including YouTube, sales of various broadband and mobile content and magazine publishing. The Company discontinued the magazine publishing business in August 2014.

Live Events
Revenues consist principally of ticket sales and travel packages for live events.









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Consumer Products Division:
Licensing
Revenues consist principally of royalties or license fees related to various WWE themed products such as video games, toys and apparel.
Venue Merchandise
Revenues consist of sales of merchandise at our live events.
WWEShop
Revenues consist of sales of merchandise on our website through our WWEShop internet storefront.

WWE Studios
Revenues consist of amounts earned from the investing in producing and/or distributing of filmed entertainment.

Media Division
(represents 63%, 60% and 59% of our net revenues in 2014, 2013 and 2012, respectively)
WWE Network
Launched on February 24, 2014, WWE Network became the first-ever 24/7 live streaming network. This subscription based network is currently available in more than 170 countries and territories, including Australia, Canada, New Zealand, Hong Kong, Singapore, Mexico, Spain, and the Nordics, among others. Subscribers can access all 12 of WWE’s live pay-per-view events, exclusive original programming, and more than 2,700 hours of video-on-demand library. WWE Network is available on desktops and laptops via WWE.com, through the WWE App on Amazon Fire TV and Kindle Fire devices, IOS devices, Apple TV, Roku streaming devices, gaming consoles, interconnected TV's, Blu-Ray players and Smart TVs. As of December 31, 2014, WWE Network had 816,000 subscribers. For domestic subscribers, the current subscription to WWE Network is $9.99 per month with no commitment period.
Network subscription revenues were $69.5 million, representing 13% of total net revenues in 2014.
Pay-Per-View Programming
WWE has been one of the world’s leading providers of pay-per-view programming for over 30 years. In 2014, WWE produced 12 live pay-per-view events which ranked among the highest selling live event programs in the industry. WWE’s annual crown jewel, WrestleMania, has historically achieved more than one million buys worldwide. On April 6, 2014, WWE celebrated the 30th Anniversary of WrestleMania in the Mercedes-Benz Superdome in New Orleans, Louisiana, before a sold-out crowd with millions watching at home. WrestleMania 30 achieved approximately 0.7 million buys and generated $16.4 million in pay-per-view revenue. Additionally, WrestleMania 30 was the first pay-per-view to air live on WWE Network.
WWE produced 12 domestic pay-per-view programs in 2014, 2013 and 2012. The suggested domestic retail price for all pay-per-view events in 2014 was $44.95, with the exception of WrestleMania which had a suggested domestic retail price of $59.95. Consistent with industry practices, we share the revenues with cable systems and satellite providers that distribute the events. Average revenue per buy was $19.55 in 2014, $21.41 in 2013 and $20.60 in 2012.
Beginning in 2014, these monthly marquis shows are offered as part of our WWE Network. Inclusion of these events as a part of our subscription WWE Network has resulted in a large decrease of á la carte pay-per-view revenue in the markets where WWE Network is available.
Our international pay-per-view partners include BSkyB in the United Kingdom, Maxxdome in Germany, SKY Perfect TV! in Japan, SKY Italia in Italy and Main Event in Australia, among many others.
Pay-per-view net revenues were $45.2 million, $82.5 million and $83.6 million, representing 8%, 16% and 17% of total net revenues in 2014, 2013 and 2012, respectively.



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WWE Classics on Demand
WWE Classics On Demand had been a subscription video on demand service that offered classic television shows, older pay-per-view events, specials and original programming for a monthly subscription fee. In anticipation of WWE Network launch, it ceased operations in January 2014.
WWE Classics On Demand net revenues were $0.3 million in 2014, $3.8 million in 2013 and $4.1 million in 2012, representing less than 1% of total net revenues for 2014 and 1% in both 2013 and 2012.
Television
Relying on our in-house production capabilities at our technologically advanced, high definition, production facility, we produce five hours of original weekly domestic television programming. We also produce reality shows and other programming. Many of these programs, with the exception of live and near live airings of RAW and SmackDown, currently air on WWE Network. Our television programming is distributed domestically and internationally. Our domestic television programs currently are: RAW on USA Network with replays on mun2 and Uni HD; SmackDown on Syfy with replays on mun2; and Total Divas on E! Network. WWE’s TV programs reach approximately 13 million viewers in the United States during the average week. USA Network, the Syfy Channel and E! Network are owned by NBC Universal.
RAW and SmackDown are licensed domestically under a multi-year contract with NBC Universal which became effective on October 1, 2014.
RAW is a three-hour live primetime program which ranks among the most watched regularly scheduled programs on primetime cable television. RAW, which has been on air for 21 years, is the longest running weekly episodic program in primetime TV history and anchors USA, consistently helping make it the top-rated cable network.
SmackDown is a two-hour show which aired in primetime on Fridays before moving to Thursdays on January 15, 2015. SmackDown has on average been Syfy’s most-watched program each week. SmackDown is the second longest running weekly episodic program in primetime TV history, only behind RAW.
WWE Main Event is a one-hour original series featuring WWE’s Superstars and Divas. WWE Main Event is distributed via television in certain international markets and also airs on WWE Network.
Total Divas was added to WWE's programming line-up in July 2013, continued to air Sundays on E! beginning with an eleven episode run of Season 2 earlier in 2014, and ended the year with the first ten episodes of Season 3. The reality based show explores life beyond the ring for several WWE Divas. The second half of Season 3 began airing in January 2015. Previous episodes of Seasons 1-2 also replayed on WWE Network.
NXT and WWE Superstars air on WWE Network and HULU domestically. Between them, they also air on television in over 170 counties internationally. NXT features development talent training to become WWE Superstars.
During 2014, the Company began airing webisodes of WWE Slam City™, an animated series on WWE.com and WWE Network. WWE Slam City™ is WWE’s original kids animated short-form series, which airs on NickSports and Nicktoons. The 26-episode series is comprised of two-minute shorts featuring WWE Superstars in an animated world.
Each year, more than 6,000 hours of WWE’s television programming can be seen in more than 170 countries and 35 languages around the world. Our broadcast partners include: BSkyB in the United Kingdom; Ten Sports in India, and J SPORTS in Japan, among many others. In January 2014, we announced the renewal of our agreement with BSkyB in the United Kingdom through 2019. During 2014, the Company signed seven deals that comprise significant amount of our total TV rights fees. These “top 7” totaled over $130 million in 2014 and are with partners in the U.S., U.K, India, Thailand, Canada, Mexico and Middle East region.
Television revenues were $176.7 million, $163.4 million and $140.9 million, representing 33%, 32% and 29% of total net revenues in 2014, 2013 and 2012, respectively.



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Home Entertainment
WWE distributes its content as home entertainment releases in both physical (DVD and Blu-ray) and digital formats. Content distributed through home entertainment channels has included themed compilations from the Company’s vast archives as well as releases of the Company’s pay-per-view events. WWE’s home entertainment titles are generally sold through retailers, such as Wal-Mart and Best Buy and via subscription and transactional on-demand outlets, such as iTunes, Amazon, Netflix and others. Outside the United States, third-party licensees distribute our home entertainment releases. Starting in January 2015, Warner Brothers Home Entertainment has become the distributor of our home entertainment products.
In 2014, we released 30 new home video productions globally and, in the U.S., shipped approximately 2.7 million DVD and Blu-ray units, including catalog titles released in prior years.
Home entertainment net revenues were $27.3 million, $24.3 million and $33.0 million, representing 5%, 5% and 7% of total net revenues in 2014, 2013 and 2012, respectively.
Digital Media  
WWE utilizes the Internet to promote our brands, create a community experience among our fans, market and distribute our content and digital products and sell online advertising. Our primary website, WWE.com, attracted an average of 20.7 million monthly unique visitors worldwide during 2014. These visitors viewed an average of more than 486.5 million pages and approximately 47.8 million video streams per month. WWE wallpapers, ringtones, voicetones, games and videos are available through our mobile partnerships.
WWE currently has regional websites spanning 50 countries worldwide, allowing fans to experience WWE in their native language with a concentration on local events and shows. Some of the countries in which we have regional websites include China, France, Germany, India, Japan, Poland, Portugal, Spain and Russia. Local sales agencies sell advertising on WWE.com in more than 35 countries.
WWE currently streams its video content on select video portals such as YouTube. During 2014, 3.9 billion videos of WWE content were viewed on YouTube garnering the Company advertising revenues attached to the content.
Total Digital Media net revenues were $20.9 million, $28.7 million and $25.7 million, representing 4%, 6% and 5% of total net revenues in 2014, 2013 and 2012, respectively.
Magazine Publishing
The magazine division of WWE published WWE Magazine, WWE Kids magazine and several special magazines. However, with the cost reduction initiatives implemented in September 2014, the magazine division was eliminated. The Company still produces special edition magazines from time to time.
Live Events
(represents 20%, 22% and 22% of our net revenues in 2014, 2013 and 2012, respectively)
Our broad and talented roster of Superstars, allows us to perform in numerous domestic markets and take advantage of the strong international demand for our events. Live events and television programming are our principal creative content and production activities. Our creative team develops compelling and complex characters and weaves them into dynamic storylines that combine physical and emotional elements. Storylines are usually played out in the ring and unfold on our weekly television shows, culminating in monthly marquis events distributed via pay-per-view and now also available on WWE Network.
In 2014, we produced 264 live events throughout North America, entertaining approximately 1.6 million fans at an average ticket price of $48.86. We hold many of our live events at major arenas across the country. In addition to providing content for our television and other programming, these events provide us with a real-time assessment of the popularity of our storylines and characters.


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     In 2014, we produced 54 live events internationally, reaching approximately 300,000 fans at an average ticket price of $75.81. These events were spread over several international tours throughout Europe, the Middle East, Asia, Latin America and Australia.
     Live events net revenues were $110.7 million, $113.1 million and $106.6 million, representing 20%, 22% and 22% of total net revenues in 2014, 2013 and 2012, respectively.
Consumer Products Division
(represents 14%, 15% and 17% of our net revenues in 2014, 2013 and 2012, respectively)
Licensing
We have established a worldwide licensing program using our marks and logos, copyrighted works and characters on a large variety of retail products, including toys, video games, apparel and books. Currently, we have relationships with more than 150 licensees worldwide that provide products for sale at major retailers. To maintain the distinctive style and quality of our intellectual property and brand, we retain creative approval over the design, packaging, advertising and promotional materials associated with these products.
Video games and toys are the largest components of our licensing program. We have a comprehensive, multi-year licensing agreement with Mattel, Inc. our master toy licensee, covering all global territories. In 2013, we entered into a new multi-year agreement with Take-Two Interactive Software, Inc. ("Take-Two") to publish future video games.
Music is an integral part of the entertainment experience surrounding WWE’s live events, television programs and pay-per-views. We compose and record most of our music, including our Superstar entrance themes, in our recording studio. In addition to our own composed music, we license music performed by popular artists. Music links the WWE brand to all media platforms including television, film, radio, video games, live events and other emerging digital technologies.
Licensing net revenues, including music, were $38.6 million, $43.6 million and $46.3 million, representing 7%, 9% and 10% of total net revenues in 2014, 2013 and 2012, respectively.
Venue Merchandise
Our venue merchandise business consists of the design, sourcing, marketing and distribution of numerous WWE-branded products such as t-shirts, caps and other novelty items, all of which feature our Superstars, Divas and/or logos. These items are offered for sale at our live events.
Venue merchandise net revenues were $19.3 million, $19.4 million and $18.8 million, representing 4% of total net revenues in each 2014, 2013 and 2012.
WWEShop
WWEShop is our e-commerce storefront. WWEShop processed approximately 426,000 orders during 2014 as compared to approximately 320,000 in 2013. The Company established a new relationship with Amazon UK to distribute orders via WWEEuroShop.com.
WWEShop net revenues were $20.2, $15.5 million and $14.8 million, representing 4% of total net revenues in 2014, and 3% of total revenues in 2013 and 2012, respectively.







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WWE Studios
(represents 2%, 2% and 2% of our net revenues in 2014, 2013 and 2012, respectively)
     WWE Studios oversees the Company’s participation in the production and global distribution of filmed entertainment content, which may include movies for theatrical, home entertainment, and/or television release. The Company believes its movie business, expands its brands, reaching new audiences, supporting the Company’s investment in its Superstar talent, and building a content library with lasting value.
In 2012, WWE Studios implemented a new business model, which focuses on the utilization of strategic partnerships, including production, distribution and acquisition relationships, to increase financial returns and mitigate risk. WWE utilizes its marketing and content platforms, especially its weekly presence on prime-time television, to support its movie projects.
In 2014 WWE Studios released seven films. Among the film projects, WWE Studios joined with Warner Brothers Animation to co-produce and co-finance Scooby Doo! WrestleMania Mystery and released several direct-to-home sequels with Lionsgate: Leprechaun Origins and See No Evil 2. Additionally, Jingle All the Way 2, a direct-to-home film, premiered on DVD then capped off USA Network's holiday WWE week programming event.
     WWE Studios net revenues were $10.9 million, $10.8 million and $7.9 million, representing 2%, 2% and 2% of total net revenues in 2014, 2013 and 2012, respectively.
     The Company has substantial capitalized film costs. The accounting for our film business in accordance with generally accepted accounting principles entails significant judgment used to develop estimates of expected future revenues from films. If expected revenue for one or more of our films does not materialize because audience demand does not meet expectations, our estimated revenues may not be sufficient to recoup our investment in the film. If actual revenues are lower than our estimated revenues or if costs are higher than expected, or if other conditions indicate our film assets may not be recoverable, we calculate the estimated fair value of the film. If the unamortized cost of the film is greater than the estimated fair value, we are required to record an impairment charge and write down the capitalized costs of the film to the estimated fair value. During the years ended December 31, 2014, 2013 and 2012, we recorded aggregate impairment charges of $1.5 million, $11.7 million and $1.2 million, respectively, relating to feature films. See Note 7 to the Consolidated Financial Statements included in this report for further discussion.
International
Revenues generated outside of North America across all our business segments were $116.4 million for 2014, $116.3 million for 2013 and $118.1 million for 2012. Revenues generated from international sources accounted for 21% of total revenues generated in 2014, 23% in 2013 and 24% in 2012. Revenues generated in the United Kingdom, our largest international market, were $40.5 million, $36.0 million and $34.0 million for 2014, 2013 and 2012, respectively.
See Note 19 to the Consolidated Financial Statements included in this report for additional information by segment and by geographic area.
Creative Development and Production
     Headed by our Chairman and Chief Executive Officer, Vincent K. McMahon, our creative team develops compelling and complex characters and weaves them into dynamic storylines that combine physical and emotional elements. Storylines are usually played out in the ring and unfold on our weekly television shows, culminating in our monthly marquis events. We voluntarily designate the suitability of each of our television shows using standard industry ratings, and all of our programming carries a PG rating, which is critical to maintaining the Company’s reputation for family friendly entertainment.
     Our success is due primarily to the continuing popularity of our Superstars and Divas. We currently have approximately 140 Superstars and Divas under exclusive contracts, ranging from multi-year guaranteed contracts with established Superstars to developmental contracts with our Superstars in training. Our Superstars and Divas are highly trained and motivated independent contractors, whose compensation is tied to the revenue that they help generate. We own the rights to substantially all of our characters and exclusively license the rights we do not own through agreements with our Superstars and Divas. We continually seek to identify, recruit and develop additional talent for our business.


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Competition
     While we believe that we have a loyal fan base, the entertainment industry is highly competitive and subject to fluctuations in popularity, which are not easy to predict. For our live, television, pay-per-view and movie audiences and from business such as our new WWE Network, we will face competition from professional and college sports as well as from other forms of live, filmed, televised, streamed entertainment and other leisure activities. We compete with entertainment companies, professional and college sports leagues and other makers of branded apparel and merchandise. As we continue to expand into the highly competitive streamed media market, we will face increased competition from websites and mobile and other internet connected apps offering paid and free content. Many companies with whom we compete have greater financial resources than we do.
Trademarks and Copyrights
Intellectual property is material to all aspects of our operations, and we expend substantial cost and effort in an attempt to maintain and protect our intellectual property and to maintain compliance vis-à-vis other parties’ intellectual property. We have a large portfolio of registered and unregistered trademarks and service marks worldwide and maintain a large catalog of copyrighted works, including copyrights in our programming, music, photographs, books, magazines, films and apparel art. A principal focus of our efforts is to protect the intellectual property relating to our originally created characters portrayed by our performers, which encompasses images, likenesses, names and other identifying indicia of these characters. We also own a large number of internet website domain names and operate a network of developed, content-based sites, which facilitate and contribute to the exploitation of our intellectual property worldwide.
     We vigorously seek to enforce our intellectual property rights by, among other things, searching the internet to ascertain unauthorized use of our intellectual property, seizing goods that feature unauthorized use of our intellectual property and seeking restraining orders and/or damages in court against individuals or entities infringing our intellectual property rights. Our failure to curtail piracy, infringement or other unauthorized use of our intellectual property rights effectively, or our infringement of others’ intellectual property rights, could adversely affect our operating results.
Financial Information about Segments
     See Note 19 to Notes to Consolidated Financial Statements, which is included elsewhere in this Form 10-K, for financial information about each of our segments.
Employees
As of February 2015, we had approximately 761 employees. This headcount excludes our Superstars, who are independent contractors. Our in-house production staff is supplemented with contract personnel for our television production. We believe that our relationships with our employees are good. None of our employees are represented by a union.
Regulation
Live Events
     In various states in the United States and some foreign jurisdictions, athletic commissions and other applicable regulatory agencies require us to obtain licenses for promoters, medical clearances and/or other permits or licenses for performers and/or permits for events in order for us to promote and conduct our live events. If we fail to comply with the regulations of a particular jurisdiction, we may be prohibited from promoting and conducting our live events in that jurisdiction. The inability to present our live events over an extended period of time or in a number of jurisdictions could lead to a decline in the various revenue streams generated from our live events, which could adversely affect our operating results.
Television Programming
     The production of television programming by independent producers is not directly regulated by the federal or state governments, but the marketplace for television programming in the United States and internationally is substantially affected by government regulations applicable to, as well as social and political influences on, television stations, television networks and cable and satellite television systems and channels. We voluntarily designate the suitability of each of our television shows using standard industry


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ratings, and all of our programming carries a PG rating. Changes in governmental policy and private-sector perceptions could further restrict our program content and adversely affect our levels of viewership and operating results.
Available Information
     Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports, are available free of charge on our website at http://corporate.wwe.com as soon as reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission (“SEC”). Our reports are also available free of charge on the SEC’s website, http://www.sec.gov. The public may read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. None of the information on any of our websites is part of this Annual Report on Form 10-K. Our Corporate Governance Guidelines, Code of Business Conduct and charters of our Audit, Compensation and our Governance and Nominating Committees are also available on our website. A copy of any of these documents will be mailed to any stockholder without charge upon request to us at 1241 East Main Street, Stamford, CT 06902, Attn: Investor Relations Department.


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Item 1A. Risk Factors
There are inherent risks and uncertainties associated with our business that could adversely affect our operating performance and financial condition. Set forth below are descriptions of those risks and uncertainties that we currently believe to be material, but the risks and uncertainties described below are not the only risks and uncertainties that could affect our business. See the discussion under “Cautionary Statement for Purposes of the ‘Safe Harbor’ Provisions of the Private Securities Litigation Reform Act of 1995” in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in this Annual Report on Form 10-K.
The Company has spent, and will likely continue to spend, substantial amounts to produce content and infrastructure for distribution of content on our new WWE Network which launched domestically in early 2014 and began to be launched internationally in late 2014. We are still developing expertise in the digital distribution platforms that carry WWE Network on a subscription basis and could experience significant setbacks in such monetization efforts. If, for any of a number of reasons, we are unable to monetize this distribution platform successfully, these additional costs, and the loss of very significant revenue from other distribution platforms being displaced, could have a material adverse effect on our operating results.
Loss of Pay-Per-View Revenue. As part of the subscription to WWE Network, we are including programming that we historically offered through pay-per-view channels. On a pay-per-view basis, such programming resulted in worldwide revenues of $82.5 million for the year ended December 31, 2013; for the year ended December 31, 2014, pay-per-view revenues were $45.2 million. We believe this reduction was directly tied to our launch of WWE Network. Although we continued distributing this programming through certain pay-per-view channels after the launch of WWE Network, some previous distributors no longer carry such programming. If, for any number of reasons, our audience does not subscribe to WWE Network in sufficient numbers to generate adequate subscription revenues to offset or exceed the loss of pay-per-view revenue resulting from WWE Network, the resulting loss of revenue and profit could have a material adverse effect on our business and operating results.
Need to Attract, Retain and Replace Subscribers. We believe that WWE has a passionate fan base. However, the markets for entertainment video are intensely competitive and include many subscription, transactional and ad-supported models and vast amounts of pirated materials, all of which capture segments of the entertainment video market. This competition has increased significantly in the recent past, and the Company expects this competition to continue to grow. Many players that have entered this space have vastly greater financial and marketing resources than the Company as well as longer operating histories, large customer bases and strong brand recognition. These competitors may secure better terms from suppliers, aggressively price their offerings and devote more technology and marketing resources. Recent offerings include subscription digital services from Amazon, CBS, HBO, Nickelodeon and many others. There are also more experienced competitors for subscribers’ business such as Netflix and Hulu Plus. Other competitors include broadcast, cable and satellite television, many of which have so-called “TV everywhere” and “on demand” content, online movie and television content providers (both legal and illegal (pirated)), and DVD rentals and sales. Our ability to attract and retain subscribers to WWE Network will depend in part on our ability to provide a consistent high quality service that is perceived to constitute good value for the consumer’s entertainment dollars. We face competition with respect to service levels, content offerings, pricing and related features, which may adversely impact our ability to attract and retain these subscribers. In addition, subscribers are allowed to cancel their subscriptions at any time after a month and could do so for a number of reasons, including a perception that they do not use the service sufficiently, the need to cut household expenses, unsatisfactory content, including as a result of change in consumer tastes or otherwise, competitive entertainment at a lower price and customer service issues. This is commonly referred to as “churn.” Churn may be more pronounced in the periods following larger WWE events shown on WWE Network such as WrestleMania. We will need to add new subscribers to replace subscribers who cancel in order to grow our business. If we do not attract subscribers, if too many of our subscribers cancel our service, or if we are unable to attract new subscribers in sufficient numbers, our financial outlook, liquidity, business and operating results would be adversely affected.
Significant Initial and Ongoing Costs. Our new WWE Network has and will continue to require significant capital expenditures and operating costs. Capital expenditures result in increased amortization and depreciation and may require impairment charges if they do not provide adequate results. Any and all such costs, if not more than offset by revenues from WWE Network, could have a material adverse effect on our business and operating results.
Emerging Business. We believe that we entered the market for subscription digital streaming at a relatively early stage. We believe acceptance of this type of service is growing among users, that our fans are technologically sophisticated and that the market is not saturated. We could, however, find that we entered this business too early and that a number of our fans are unwilling to migrate to a digital network. Alternatively, we could find that we entered this business too late and that other players, who have greater experience and resources than we, have occupied the space in a manner that will create significant barriers to our success or there will be dominant competition in the market for this type of service going forward. Under either scenario, our ability to


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attract and retain subscribers will be adversely affected, which could have a material adverse effect on our business and operating results.
Reliance on Partners to Offer the Network. We offer subscribers the ability to receive streaming content through their PCs, Macs and other Internet-connected devices, including game consoles and mobile devices, such as tablets and mobile phones as well as smart televisions and Blu-ray players. We intend to continue to broaden our ability to stream programming to other platforms and partners. We rely on MLB Advanced Media ("MLBAM"), an outside contractor, to develop and supply significant portions of the technology and infrastructure to deliver our content and interact with the user. If we are not successful in maintaining our relationship with MLBAM or if we are not successful in entering into and maintaining relationships with platform providers, if the costs of maintaining these relationships increase materially, or if we encounter technological, licensing or other impediments to our streaming content, or if viewers migrate from our platforms to platforms we do not or cannot utilize, our ability to compete successfully could be adversely impacted. Agreements with our providers are typically relatively short term in duration and our business could be adversely affected if, upon expiration, a number of partners do not continue to provide access to our service or are unwilling to do so on terms acceptable to us. Certain platforms, such as Amazon and Apple, offer their own content as well as WWE Network and, therefore, may be disincentivized to promote and deliver WWE Network at the same level as provided for its own content.
Possible Disruption of Systems to be Utilized in Our Operations. Our reputation and ability to attract, retain and serve our subscribers will be dependent upon the reliable performance of our computer systems and those of third-parties that we utilize in our operations. Interruptions in these systems, or with the Internet in general, due to weather, natural disasters, terrorist attacks, power loss or other force majeure type events, could make our service unavailable or degraded or otherwise hinder our ability to deliver content, and we do not carry business interruption insurance. Delivery of audiovisual material over the Internet is done through a series of carriers with switch-overs between carriers, and any point of failure in this distribution chain would cause a disruption or degradation of our signal. Service disruption or degradation for any of the foregoing reasons could diminish the overall attractiveness of our subscription service to subscribers or cause us to spend money to credit subscribers affected by such disruption.
Our servers and those of third parties we will use in our operations are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions and could experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse, theft or release of proprietary, confidential, sensitive or otherwise valuable Company or subscriber data or information. Any attempt by hackers to disrupt our service or otherwise access our systems, if successful, could harm our business, be expensive to remedy, expose us to litigation and/or damage our reputation. Our insurance does not cover expenses related to such disruptions or unauthorized access.
Enhancements and modifications to WWE Network technology from time to time become commercially necessary, and these consume considerable resources in capital and operating expenditures. If we are unable to acquire, maintain and enhance the technology to manage the streaming of content to our subscribers in a timely and efficient manner either through an outside contractor, other third parties or ourselves, our ability to retain existing subscribers and to add new subscribers may be impaired. In addition, if our technology or that of third parties we utilize in our operations fails or otherwise operates improperly, our ability to attract and/or retain subscribers or add new subscribers may be impaired. Also, any harm to our subscribers' personal computers or other devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition.
Fires, floods, earthquakes, power losses, telecommunications failures, break-ins and similar events could damage systems and hardware used for our service or cause them to fail completely. As we do not maintain entirely redundant systems, a disrupting event could result in prolonged downtime of our operations for which we likely will not have adequate insurance coverage. Any such disrupting event could adversely affect our business.
Impact of Government Regulations. The adoption or modification of laws and regulations relating to the Internet or other areas of our business could limit or otherwise adversely affect the manner in which we plan to conduct our business. The growth and development of the market for online commerce may lead to more stringent consumer protection laws, which may impose additional burdens on us. If we are required to comply with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur additional expenses or alter our proposed business model. In addition, the delivery of WWE Network in international markets exposes us to multiple regulatory frameworks, the complexity of which may result in unintentional noncompliance which could adversely affect our business and operating results.
The adoption of any laws or regulations that adversely affect the growth, popularity or use of the Internet, including laws and/or court decisions that have the effect of limiting Internet neutrality, could limit the demand for our subscription service and increase our cost of doing business. In late 2010, the Federal Communications Commission (the “FCC”) adopted so-called net neutrality rules intended, in part, to prevent network operators from discriminating against legal traffic that transverse their networks. These rules were overturned by court ruling. The FCC has recently proposed rules to require Internet neutrality, including by


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proposing to regulate consumer Internet service as a public utility. No assurances can be given that these proposed rules will be adopted or, if adopted, what final form the rules will take or that they would withstand litigation if brought. To the extent that network operators engage in discriminatory practices, our business could be adversely impacted. As we expand internationally, government regulation concerning the Internet, and in particular, net neutrality, may be nascent or non-existent. Within such a regulatory environment, coupled with potentially significant political and economic power of local network operators, we could experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business. Similarly, to the extent that network operators implement usage based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers (such as through tiered access or pricing), due to the heavy bandwidth use of audio/visual content we could incur greater operating expenses and our subscriber acquisition and retention could be negatively impacted.
Most network operators that provide consumers access to the Internet also provide consumers audiovisual programming. As a result, these companies have an incentive to use their network infrastructure in a manner adverse to our success. To the extent they provide preferential treatment to their data or otherwise implement discriminatory network management practices, WWE Network could be negatively impacted. In international markets these same incentives apply, and consumer demand, regulatory oversight and competition may not be as strong of a check on these practices as they are in domestic markets.
Privacy concerns. We collect and utilize data supplied by our fans including WWE Network subscribers. We currently face certain legal obligations regarding the manner in which we treat such information. Increased regulation of data utilization practices that limit our ability to use collected data could have an adverse effect on our business. If we were to disclose or use data about our subscribers in a manner that is objectionable to them or is contrary to applicable law, our business reputation could be adversely affected. We could also face potential legal claims that could impact our operating results. As our business evolves and as we expand internationally, we will become subject to increasingly complex additional restrictions on our treatment of customer information.
We are subject to intellectual property risks. From time to time, third parties allege that we have violated their intellectual property rights. In connection with WWE Network, if we are unable to obtain sufficient rights, successfully defend our use, or otherwise alter our business practices on a timely basis in response to claims against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our business could be adversely affected. Many companies are devoting significant resources to developing patents that potentially affect aspects of streaming services. For example, there are numerous patents that broadly claim means and methods of conducting business on the Internet and we have been named in lawsuits and other claims alleging that we violated patents in connection with various aspects of our business. We have not searched patents relative to our technology. Defending ourselves against intellectual property claims, whether they are with or without merit, can result in costly litigation and diversion of personnel. It also may result in our inability to use technology as currently configured for our current business and/or for WWE Network. As a result of a dispute, we may have to develop non-infringing technology, enter into royalty or licensing agreements, adjust our merchandising or marketing activities or take other actions to resolve the claims which may be costly or unavailable on terms acceptable to us.
We intend to spend significant amounts on marketing, including promotional offerings, to attract, retain and renew subscribers, but access to suitable marketing channels might not be available. If companies we plan to use to promote WWE Network believe that we could negatively impact their business, decide that they want to enter similar businesses or wish to support our competitors, we may not be given access to such marketing channels. We may decide not to use certain marketing sources or activities if they are perceived to be ineffective. If adequate marketing channels are not available for any of the foregoing reasons, or for any other reasons, our ability to attract new subscribers may be adversely affected.
We may be liable for fraudulent payment transactions. Even when the associated financial institution approves the payment of fees for WWE Network subscribers, from time to time, fraudulent payment methods are used to obtain the service. We do not carry insurance for these fraudulent transactions.
If we are not able to manage change and growth, our business could be adversely affected. We are expanding our operations internationally and scaling our streaming service to enable anticipated growth in both members and features related to our service. As we expand internationally, we will be subject to varying consumer customs and practices, and to differing legal and regulatory environments. If we are not able to manage this growing complexity, including improving, refining or revising our systems and operational practices, business may be adversely affected.
Our failure to maintain or renew key television agreements and other licenses could adversely affect our ability to distribute our television programming or other of our goods and services, which could adversely affect our operating results.
Our television programming is distributed by cable, satellite and broadcast networks. Because a large portion of our revenues are generated, directly and indirectly, from this distribution of our programming, any failure to maintain (such as due to a breach or alleged breach by either party) or renew arrangements with distributors and platforms, the failure of distributors or platforms


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to continue to provide services to us or the failure to enter into new distribution opportunities on terms favorable to us could adversely affect our financial outlook, liquidity, business and operating results. We regularly engage in negotiations relating to substantial agreements covering the distribution of our television programming by carriers located in the United States and abroad. Over the past several years we have expanded our relationship with NBC Universal ("NBCU") and they currently distribute the vast majority of our domestic television programming through several of its cable networks. Many of our other goods and services, such as our toys, video games and home video offerings are manufactured and sold by other parties under licenses of our intellectual property or distribution agreements. Our inability for any of the reasons set forth in these Risk Factors to maintain and/or renew these agreements on terms favorable to us could adversely affect our financial outlook, liquidity, business and/or operating results.
Our failure to continue to build and maintain our brand of entertainment could adversely affect our operating results.
We must continue to build and maintain our strong brand identity to attract and retain fans who have a number of entertainment choices. The creation, marketing and distribution of live and televised entertainment, including our WWE Network programming, that our fans value and enjoy is at the core of our business. The production of compelling live and televised content is critical to our ability to generate revenues across our media platforms and product outlets. Also important are effective consumer communications, such as marketing, customer service and public relations. If our efforts to create compelling services and goods and/or otherwise promote and maintain our brand, services and merchandise are not successful, our ability to attract and retain fans may be adversely affected. Such a result would likely lead to a decline in our television ratings, attendance at our live events the number of WWE Network subscribers, or otherwise impact our sales of goods and services, which would adversely affect our operating results.
Our failure to retain or continue to recruit key performers could lead to a decline in the appeal of our storylines and the popularity of our brand of entertainment, which could adversely affect our operating results.
    Our success depends, in large part, upon our ability to recruit, train and retain athletic performers who have the physical presence, acting ability and charisma to portray characters in our live events and televised programming. We cannot guarantee that we will be able to continue to identify, train and retain these performers. Additionally, throughout our history performers from time to time have stopped working for us for any number of reasons, and we cannot guarantee that we will be able to retain our current performers during the terms of their contracts or when their contracts expire. Our failure to attract and retain key performers, an increase in the costs required to attract and retain such performers, or a serious or untimely injury to, or the death of, or unexpected or premature loss or retirement for any reason of, any of our key performers could lead to a decline in the appeal of our storylines and the popularity of our brand of entertainment, which could adversely affect our operating results.
A decline in the popularity of our brand of sports entertainment, including as a result of changes in the social and political climate, could adversely affect our business.
Our operations are affected by consumer tastes and entertainment trends, which are unpredictable and subject to change and may be affected by changes in the social and political climate. Our programming is created to evoke a passionate response from our fans. Changes in our fans’ tastes or a material change in the perceptions of our business partners, including our distributors and licensees, whether as a result of the social and political climate or otherwise, could adversely affect our operating results.
The unexpected loss of the services of Vincent K. McMahon could adversely affect our ability to create popular characters and creative storylines or could otherwise adversely affect our operating results.
    In addition to serving as Chairman of our Board of Directors and Chief Executive Officer, Mr. McMahon leads the creative team that develops the storylines and the characters for our televised programming and live events. Mr. McMahon, from time to time, has also been an important member of our cast of performers. The loss of Mr. McMahon due to unexpected retirement, disability, death or other unexpected termination for any reason could have a material adverse effect on our ability to create popular characters and creative storylines or could otherwise adversely affect our operating results.
Changes in the regulatory atmosphere and related private sector initiatives could adversely affect our television business.
    While the production of television programming by independent producers is not directly regulated by the federal or state governments in the United States, the marketplace for television programming in the United States is affected significantly by government regulations applicable to, as well as social and political influences on, television stations, television networks and cable and satellite television systems and channels. We voluntarily designate the suitability of each of our television shows using standard industry ratings, and all of our programming currently has a PG rating. Domestic and foreign governmental and private-sector initiatives relating to the content of media programming are announced from time to time. Any failure by us to meet these governmental policies and private-sector expectations could restrict our program content and adversely affect our levels of viewership and operating results.


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The markets in which we operate are intensely competitive, rapidly changing and increasingly fragmented, and we may not be able to compete effectively, especially against competitors with greater financial resources or marketplace presence, which could adversely affect our operating results.
We face competition for our audiences from professional and college sports, as well as from other forms of live and televised, streamed and filmed entertainment and other leisure activities in a rapidly changing and increasingly fragmented marketplace. The manner in which audio/video content is distributed and viewed is constantly changing. Changes in technology require Company resources including personnel, capital and operating expenses. For instance, as television delivery moves to 4K technology, the Company could face higher costs of delivering its televised content. While we attempt to distribute our content across all platforms, our failure to continue to do so effectively (including, for example only, our emphasizing a distribution platform that in time lessens in importance or becomes obsolete or our loss of, or other inability to procure, carriage on an important platform) could adversely affect our operating results. If other providers of entertainment video address the changes in consumer viewing habits in a manner that is better able to meet content distributor and consumer needs and expectations, our business could be adversely affected. For the sale of our consumer products, we compete with entertainment companies, professional and college sports leagues and other makers of branded apparel and merchandise. Many of the companies with whom we compete have greater financial resources than we do.
Our failure to compete effectively could result in a significant loss of viewers, subscribers, venues, distribution channels or performers and fewer entertainment and advertising dollars spent on our form of sports entertainment, any of which could adversely affect our operating results.
    We face uncertainties associated with international markets, which could adversely affect our operating results and impair our business strategy.
We are consistently negotiating and entering into new licenses and renewals and extensions of existing agreements for our products and services including television programming, in international markets. In late 2014, we began the rollout of WWE Network in international markets. Cultural norms and regulatory frameworks vary in the markets in which we operate and our products' nonconformance to local norms or applicable law, regulations or licensing requirements could affect our sales, viewership and success in the markets. Our production of live events overseas subjects us to the risks involved in foreign travel and local regulations, including regulations requiring us to obtain visas for our performers. In addition, these live events and the licensing of our television and consumer products in international markets expose us to some degree of currency risk. International operations may be subject to political instability inherent in varying degrees in those markets. Other risks relating to foreign operations include difficulties and costs associated with staffing and managing foreign operations, management distraction, compliance with U.S. and international laws relating to bribery, less favorable foreign intellectual property laws, foreign currency risks and laws relating to repatriation of funds, lower levels of Internet availability and complexity of VAT and other local tax laws as well as data protection and other regulatory matters. These risks could adversely affect our operating results and impair our ability to pursue our business strategy as it relates to international markets.
We may be prohibited from promoting and conducting our live events if we do not comply with applicable regulations, which could lead to a decline in the various revenue streams generated from our live events, which could adversely affect our operating results.
    In the United States and some foreign jurisdictions, athletic commissions and other applicable regulatory agencies require us to obtain licenses for promoters, medical clearances and/or other permits or licenses for performers and/or permits for events in order for us to promote and conduct our live events. In the event that we fail to comply with the regulations of a particular jurisdiction, we may be prohibited from promoting and conducting our live events in that jurisdiction. The inability to present our live events over an extended period of time or in a number of jurisdictions could lead to a decline in the various revenue streams generated from our live events, which could adversely affect our operating results.
    Because we depend upon our intellectual property rights, our inability to protect those rights, or our infringement of others’ intellectual property rights, could adversely affect our business.
    Intellectual property is material to all aspects of our business. Our inability to protect our large portfolio of trademarks, service marks, copyrighted material and characters, trade names and other intellectual property rights from piracy, counterfeiting or other unauthorized use could negatively affect our business materially. We expend substantial cost and effort in an attempt to maintain and protect our intellectual property and to maintain compliance vis-à-vis other parties’ intellectual property. We have a large portfolio of registered and unregistered trademarks and service marks worldwide and maintain a large catalog of copyrighted works, including copyrights to our television programming, music, photographs, books, magazines and apparel art. A principal focus of our efforts is to protect the intellectual property relating to our originally created characters portrayed by our performers, which encompasses images, likenesses, names and other identifying indicia of these characters. We also own a large number of Internet website domain names and operate a network of developed, content-based sites, which facilitate and contribute to the


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exploitation of our intellectual property worldwide. Our failure to curtail piracy, infringement or other unauthorized use of our intellectual property rights effectively, or our infringement of others’ intellectual property rights, could adversely affect our relationships with the companies that distribute our goods and services and/or otherwise adversely affect our business, financial condition and operating results.
While we generally own the intellectual property in our content, we generally do not own any intellectual property relating to the distribution of this content. From time to time, third parties allege that we have violated their intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use, develop non-infringing technology or otherwise alter our business practices on a timely basis in response to claims against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our business and competitive position may be adversely affected. Many companies are devoting significant resources to developing patents that could potentially affect many aspects of our business. There are numerous patents that broadly claim means and methods of conducting business on the Internet. We have not searched patents relative to our technology. Defending ourselves against intellectual property claims, whether they are with or without merit or are determined in our favor, results in costly litigation and diversion of technical and management personnel. It also may result in our inability to use our current or future technologies and could significantly impact our ability to market our services or merchandise our products. As a result of a dispute, we may have to develop non-infringing technology, enter into royalty or licensing agreements, adjust our merchandising or marketing activities or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.
Our distribution mechanisms for our goods and services are increasingly complex across various distribution platforms, various geographical areas and timing windows.
Our inadvertent grant of inconsistent rights or allegations of such inconsistent grants could result in claims of breach of our distribution agreements or licenses and/or litigation which could adversely impact our operations.
    We could incur substantial liability in the event of accidents or injuries occurring during our physically demanding events.
    We hold numerous live events each year. This schedule exposes our performers and our employees who are involved in the production of those events to the risk of travel and performance-related accidents, the consequences of which are not fully covered by insurance. The physical nature of our events exposes our performers to the risk of serious injury or death. Although our performers, as independent contractors, are responsible for maintaining their own health, disability and life insurance, we self-insure medical costs for our performers for injuries that they incur while performing. We also self-insure a substantial portion of any other liability that we could incur relating to such injuries. Liability to us resulting from any death or serious injury sustained by one of our performers while performing, to the extent not covered by our insurance, could adversely affect our business, financial condition and operating results. As noted below, we have recently been named as a defendant in litigation claiming that professional wrestling as currently and historically performed by us has resulted in significant injuries to our performers including, but not limited to, chronic traumatic encephalopathy of "CTE".
    Our live events entail other risks inherent in public live events, which could lead to disruptions to our business as well as liability to other parties, any of which could adversely affect our financial condition or results of operations.
    We hold numerous live events each year, both domestically and internationally. Certain risks are inherent in large events of this type as well as the travel to and from them. Although we believe we take appropriate safety and financial precautions in connection with our events, possible difficulties could occur including air and land travel interruption or accidents, the spread of illness, injuries resulting from building problems, pyrotechnics or other equipment malfunction, terrorism or other violence, local labor strikes and other "force majeure" type events. These issues could result in canceled events and other disruptions to our business for which we do not carry business interruption insurance, or could result in liability to other parties. Any of these risks could adversely affect our business, financial condition and/or results of operations.
    We continue to face certain risks relating to our feature film business, which could result in higher production costs and asset impairment charges, which could adversely affect our financial condition or our results of operations.
    We have substantial capitalized film costs. The accounting for our film business in accordance with generally accepted accounting principles entails significant judgment used to develop estimates of expected future revenues from films. If expected revenue from one or more of our films does not materialize because audience demand does not meet expectations, our estimated revenues may not be sufficient to recoup our investment in the film. If actual revenues are lower than our estimated revenues or if costs are higher than expected, we may be required to record an impairment charge and write down the capitalized costs of the film. No assurance can be given that we will not record additional impairment charges in future periods. In addition capitalized film costs are reflected net of certain production tax incentives granted by various governmental authorities. Our ability to realize these credits may be limited by changes in the legislation governing the incentives and/or the economic environment. The inability to realize these credits would have the effect of increasing our overall production costs.


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    In addition to the risks noted above relating to WWE Network, we could face a variety of risks if we expand into other new and complementary businesses and/or make certain investments.
    We have entered into new or complementary businesses and made investments in other companies in the past and plan to continue to do so in the future. Risks of expansion may include, among other risks: potential diversion of management’s attention and other resources, including available cash, from our existing businesses; unanticipated liabilities or contingencies; reduced earnings due to increased amortization, impairment charges and other costs; competition from other companies with more experience in such businesses; and possible additional regulatory requirements and compliance costs which could affect our business, financial condition and operating results.
    We face various risks relating to our computer systems and online operations, which could have a negative impact on our financial condition or our results of operations.
    The Company faces the risk of a security breach or disruption, whether through external cyber intrusion or from persons with access to systems inside our organization. Although the Company makes significant efforts to maintain the security of its computer systems, and has implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that these security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging or that the Company would be promptly aware of them. The Company and certain of its third party service providers receive personal information through web services including WWE Network. In many instances this information is subject to the Company's privacy policies. Personal information received by our service providers includes credit card information in certain instances, most notably WWE Network and WWEShop, the Company's internet retail operations. The Company expends significant effort to ensure compliance with its privacy policy and to ensure that our service providers safeguard credit card information including contractually requiring those providers to remain compliant with applicable PCI Data Security Standards. However, a significant security breach or other disruption involving the Company's or its one or more of its service providers’ computer systems could disrupt the proper functioning of these systems and therefore the Company's operations (for which we likely will not carry sufficient insurance); result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information; require significant management attention and resources to remedy the damages that could result; and subject the Company to litigation or damage to its reputation. Any or all of these could have a negative impact on our financial condition or results of operations.
    A decline in general economic conditions or disruption of financial markets may, among other things, reduce the discretionary income of consumers or erode advertising markets, which could adversely affect our business.
    Our operations are affected by general economic conditions, which affect consumers’ disposable income. The demand for entertainment and leisure activities tends to be highly sensitive to the level of consumers’ disposable income. Declines in general economic conditions could reduce the level of discretionary income that our fans and potential fans have to spend on our live and televised entertainment, including WWE Network, and consumer products, which could adversely affect our revenues. Volatility and disruption of financial markets could limit our clients’, licensees’ and distributors’ ability to obtain adequate financing to maintain operations and result in a decrease in sales volume that could have a negative impact on our business, financial condition and results of operations. Our television partners derive revenues from the sale of advertising. We also sell advertising directly on our website, on WWE Network and, depending upon the distribution methods used to monetize additional content, we may have additional advertising to sell. Softness in the advertising markets, due to a weak economic environment or otherwise, could adversely affect our revenues or the financial viability of our distributors.
    Our accounts receivable represent a significant portion of our current assets and relate principally to a limited number of distributors and licensees, increasing our exposure to bad debts and could potentially have a material adverse effect on our results of operations.
    A substantial portion of our accounts receivable are from distributors of our Network, pay-per-view, television and home video programming and licensees who produce consumer products containing our intellectual property. The concentration of our accounts receivable across a limited number of distributors subjects us to individual credit risk with respect to such parties. These parties may become insolvent or declare bankruptcy, rendering collection impossible. Certain of the parties are located overseas which can make collections more difficult or economically unfeasible. Additionally, adverse changes in general economic conditions and/or contraction in global credit markets could precipitate liquidity problems among our debtors, including our key distributors and/or licensees. This could increase our exposure to losses from bad debts and have a material adverse effect on our business, financial condition and results of operations.
    Our ability to access our revolving credit facility may be limited due to certain financial covenants and restrictions.
    We have never borrowed under our revolving credit facility. We currently have access to funds under the facility, if needed, however during 2015 this access may be unavailable due to certain financial covenants unless an amendment is agreed upon. As a result, this credit facility may need to be amended or may be terminated by the Company, in which case we may or may not seek


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to replace it. No assurance can be given that an amendment or suitable replacement will be available or economically viable. Whether or not the facility is available, and whether or not, if unavailable, it is replaced, we believe we have sufficient liquidity for our operating needs and payment of our dividend for 2015. If we are incorrect in this assessment of our liquidity and are unable to obtain adequate capital, our business, financial condition, liquidity and operating results could be materially adversely affected.
    We could incur substantial liabilities if litigation is resolved unfavorably.
The Company has been named as a defendant in two recent lawsuits seeking class action status alleging, among other things, violations of federal securities laws based on certain statements relating to the negotiation of WWE’s domestic television license.  The Company strongly disputes the merit of these lawsuits and intends to vigorously defend itself against them. The adverse outcome and/or settlement of either of these lawsuits could result in significant expense to the Company, which could have a material adverse impact on our business and/or our operating results.
The Company has also been named as a defendant in two recent lawsuits seeking class action status alleging, among other things, that performers have received traumatic brain injuries and may have CTE. The Company strongly disputes the merit of this type of case and intends to move to dismiss both lawsuits and, if not dismissed, will oppose class certification . This type of litigation is expected to be costly, and by its nature the outcome of litigation is difficult to assess and quantify. In this regard, due to the long time periods claimed to be involved in these cases, the Company’s insurance coverage for them is unclear, and no insurer is currently providing the Company defense costs. The adverse outcome and/or settlement of this litigation could result in significant expense to the Company, which could have a material adverse impact on our business and/or our operating results.
    In the ordinary course of business we become subject to various other complaints and litigation matters. The outcome of such litigation is inherently difficult to assess and quantify, and the defense against such claims or actions can be costly and time consuming for management. Any adverse judgment in such other litigation significantly in excess of our insurance coverage could adversely affect our financial condition or results of operations.
    Failure to meet market expectations for our financial performance could adversely affect the market price and volatility of our stock.
    We believe that the price of our stock generally reflects high market expectations for our future operating results. Any failure to meet or delay in meeting these expectations, including as a result of the failure of WWE Network to achieve expectations or as a result of any of the other events, conditions and/or circumstances set forth in these Risk Factors could cause the market price of our stock to decline.
    Through his beneficial ownership of a majority of our Class B common stock, Mr. McMahon can exercise control over our affairs, and his interests may conflict with the holders of our Class A common stock.
    We have Class A common stock and Class B common stock. The holders of Class A common stock generally have rights identical to holders of Class B common stock, except that holders of Class A common stock are entitled to one vote per share, and holders of Class B common stock are entitled to ten votes per share. Holders of both classes of common stock generally will vote together as a single class on all matters presented to stockholders for their vote or approval, except as otherwise required by applicable Delaware law.
    A substantial majority of the issued and outstanding shares of Class B common stock is owned beneficially by Vincent K. McMahon. Mr. McMahon controls a majority of the voting power of the issued and outstanding shares of our common stock. Through his beneficial ownership of a substantial majority of our Class B common stock, Mr. McMahon effectively can exercise control over our affairs, and his interest could conflict with the holders of our Class A common stock. The voting power of Mr. McMahon through his ownership of our Class B common stock could discourage or preclude others from initiating potential mergers, takeovers or other change of control transactions. As a result, the market price of our Class A common stock could decline.
The Company’s dividend distributions have in recent years represented a return of capital for tax purposes, and shareholders as a result will recognize an increased capital gain upon a subsequent sale of the Company’s Common Stock.
The Company’s aggregate dividend distributions paid in 2014 and 2013 were in excess of its current and accumulated earnings and profits calculated under applicable Internal Revenue Code (“IRC”) provisions. Under the IRC, distributions in excess of both the Company’s current earnings and profits and the Company’s accumulated earnings and profits constitute a return of capital and reduce the stockholder’s adjusted tax basis in its Common Stock. If a stockholder’s adjusted basis in its Common Stock is reduced to zero, these excess distributions thereafter constitute a capital gain to the stockholder.


18



Our dividend is significant and is affected by a number of factors.
Our Board of Directors regularly evaluates the Company’s Common Stock dividend policy and determines the dividend rate each quarter. The level of dividends, if any, will continue to be influenced by many factors, including, among other things, our liquidity and historical and projected cash flow, our strategic plan (including alternative uses of capital), our financial results and condition, contractual and legal restrictions on the payment of dividends (including under our revolving credit facility), general economic and competitive conditions and such other factors as our Board of Directors may consider relevant from time to time. All of these factors are subject to the various contingences listed in the other risk factors included in this Form 10-K. We cannot assure our stockholders that dividends will be paid in the future, or that, if paid, dividends will be at the same amount or with the same frequency as in the past. Any reduction in our dividend payments could have a negative effect on our stock price.
A substantial number of shares are eligible for sale by Mr. McMahon and members of his family or trusts established for their benefit, and the sale of those shares could lower our stock price.
All of the issued and outstanding shares of Class B common stock are held by Vincent McMahon and other members of the McMahon family and trusts set up for these family members. Sales of substantial amounts of these shares, or the perception that such sales could occur, may lower the prevailing market price of our Class A common stock. If any sales or transfers of Class B common stock were to occur to persons outside of the McMahon family, the shares would automatically convert into Class A common stock.
Our Class A common stock is volatile and has a relatively small public "float."
The price at which our common stock has traded has fluctuated significantly, especially in the past year. The price may continue to be volatile due to a number of factors beyond our direct control, including our number of WWE network subscribers, operating results (especially where different from the expectations of securities analysts, investors and the financial community), market volatility in general and short interest in our stock. Given the dynamic nature of our business and all other factors that indirectly limit the predictability of the future, any of our forecasts may differ materially from actual results which could cause a decline in the trading price of our common stock.
    Historically, as a result of our relatively small public float, our Class A common stock has been less liquid than the common stock of companies with broader public ownership, and the trading prices for our Class A common stock have been more volatile than generally may be the case for more widely-held common stock. Among other things, trading of a relatively small volume of our Class A common stock may have a greater impact on the trading price of our Class A common stock than would be the case if our public float were larger.
Item 1B. Unresolved Staff Comments
     None.












19



Item 2. Properties
     We have executive offices, television and music recording studios, post-production operations and warehouses at locations in or near Stamford, Connecticut. We also have sales offices in New York, Orlando, Atlanta and Chicago and have international offices in London, Tokyo, Shanghai, Mumbai, Munich, Mexico, Singapore, and Dubai. We own two of the buildings in which our executive and administrative offices, our television and music recording studios and our production operations are located. We lease space for our sales offices, WWE Studios office and other facilities.
  Our principal properties consist of the following:
 
 
 
 
 
 
 
 
 
Facility
 
Location
 
Square Feet
 
Owned/Leased
 
Expiration Date of Lease
Corporate offices
 
Stamford, CT
 
114,300

 
Owned
 
Warehouse space
 
Norwalk, CT
 
121,500

 
Leased
 
January 2020
Production facility
 
Stamford, CT
 
90,000

 
Owned
 
Corporate offices and production facilities
 
Stamford, CT
 
41,400

 
Leased
 
Various through September 2016
Training Facility
 
Orlando, FL
 
39,000

 
Leased
 
November 2017
Sales offices
 
Various
 
27,900

 
Leased
 
Various through October 2022
WWE Studios office
 
Los Angeles, CA
 
11,100

 
Leased
 
April 2020
Warehouse space
 
Stamford, CT
 
5,600

 
Leased
 
May 2015
Studio space
 
Stamford, CT
 
2,500

 
Leased
 
July 2015
All of the facilities listed above are utilized in our Media Division, in Live Events and in our Consumer Products Division, with the exception of the WWE Studios office in Los Angeles, which focuses on our WWE Studios segment.
Item 3. Legal Proceedings
On July 26, 2014, the Company received notice of a lawsuit filed in the United States District Court for the District of Connecticut, entitled Warren Ganues and Dominic Varriale, on behalf of themselves and all others similarly situated, v. World Wrestling Entertainment, Inc., Vincent K. McMahon and George A. Barrios, alleging violations of federal securities laws based on certain statements relating to the negotiation of WWE’s domestic television license.  The complaint seeks certain unspecified damages.  A nearly identical lawsuit was filed one month later entitled Curtis Swanson, on behalf of himself and all others similarly situated, v. World Wrestling Entertainment, Inc., Vincent K. McMahon and George A. Barrios.  Both lawsuits are purported securities class actions subject to the Private Securities Litigation Reform Act of 1995 (“PSLRA”).  On September 23-24, five putative plaintiffs filed motions to be appointed lead plaintiff and to consolidate the two cases pursuant to the PSLRA.  Following a hearing on October 29, 2014, the Court issued an order dated November 5, 2014 appointing Mohsin Ansari as Lead Plaintiff and consolidating the two actions.  On January 5, 2015, the Lead Plaintiff filed an amended complaint.  Among other things, the amended complaint adds Stephanie McMahon Levesque and Michelle D. Wilson as named defendants.  While these lawsuits are in the early stages, the Company believes the claims are without merit and intends to vigorously defend itself against them.
On October 23, 2014, a purported class action lawsuit was filed in the United States District Court for the District of Oregon, entitled William Albert Haynes III, on behalf of himself and others similarly situated, v. World Wrestling Entertainment, Inc., and on January 16, 2015 a purported class action lawsuit was filed in the United States District Court for the Eastern District of Pennsylvania, entitled Evan Singleton and Vito LoGrasso,  individually and on behalf of all others similarly situated, v. World Wrestling Entertainment, Inc., both alleging that the Company ignored, downplayed, and/or failed to disclose the risks associated with traumatic brain injuries suffered by WWE’s performers.  These suits both seek unspecified actual, compensatory and punitive damages and injunctive relief, including ordering medical monitoring.  The Company believes the claims are without merit and intends to vigorously defend itself against them.


20



In addition to the foregoing, we are involved in several other suits and claims that we consider to be in the ordinary course of our business. By its nature, the outcome of litigation is not known but the Company does not currently expect its pending litigation to have a material adverse effect on our financial condition, results of operations or liquidity. We may from time to time become a party to other legal proceedings.
Item 4. Mine Safety Disclosures
     Not Applicable



21



PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    Our Class A common stock trades on the New York Stock Exchange, under the symbol "WWE".
     The following table sets forth the high and the low sale prices per share of our Class A common stock as reported by the New York Stock Exchange and the dividends declared per share of Class A and Class B common stock for the periods indicated:
Fiscal Year 2014
 
 
Quarter Ended
 
 
 
 
March 31
 
June 30
 
September 30
 
December 31
 
Full Year
Class A common stock price per share:
 
 
 
 
 
 
 
 
 
 
High
 
$
31.98

 
$
30.39

 
$
15.88

 
$
14.68

 
$
31.98

Low
 
$
15.31

 
$
10.55

 
$
11.40

 
$
10.76

 
$
10.55

Class A dividends declared per share
 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.48

Class B dividends declared per share
 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.48

Fiscal Year 2013
 
 
Quarter Ended
 
 
 
 
March 31
 
June 30
 
September 30
 
December 31
 
Full Year
Class A common stock price per share:
 
 
 
 
 
 
 
 
 
 
High
 
$
8.90

 
$
10.33

 
$
11.33

 
$
16.94

 
$
16.94

Low
 
$
7.91

 
$
8.56

 
$
9.62

 
$
10.15

 
$
7.91

Class A dividends declared per share
 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.48

Class B dividends declared per share
 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.12

 
$
0.48

There were 8,069 holders of record of Class A common stock and five holders of record of Class B common stock on February 13, 2015. Vincent K. McMahon, Chairman of the Board of Directors and Chief Executive Officer, controls a substantial majority of the voting power of the issued and outstanding shares of our common stock, and as a result can effectively exercise control over our affairs.
Our Class B common stock is fully convertible into Class A common stock, on a one for one basis, at any time at the option of the holder. The two classes are entitled to equal per share dividends and distributions and vote together as a class with each share of Class B entitled to ten votes and each share of Class A entitled to one vote, except when separate class voting is required by applicable law. If, at any time, any shares of Class B common stock are beneficially owned by any person other than Vincent McMahon, Linda McMahon, any descendant of either of them, any entity which is wholly owned and is controlled by any combination of such persons or any trust, all the beneficiaries of which are any combination of such persons, each of those shares will automatically convert into shares of Class A common stock.
Our Board of Directors regularly evaluates the Company’s Common Stock dividend policy and determines the dividend rate each quarter. The level of dividends will continue to be influenced by many factors, including, among other things, our liquidity and historical and projected cash flow, our strategic plan (including alternative uses of capital), our financial results and condition, contractual and legal restrictions on the payment of dividends (including under our revolving credit facility), general economic and competitive conditions and such other factors as our Board of Directors may consider relevant from time to time. We cannot assure our stockholders that dividends will be paid in the future, or that, if paid, dividends will be at the same amount or with the same frequency as in the past. Any reduction in our dividend payments could have a negative effect on our stock price.
In September 2011, the Company entered into a $200 million senior unsecured revolving credit facility which was amended and restated in April 2013, and further amended on May 1, 2014 ("the Credit Facility"). The Company has never had any borrowings


22



under the Credit Facility and as of December 31, 2014, we are in compliance with the provisions of the Credit Facility and are not restricted from paying dividends to our stockholders. The Credit Facility restricts our ability to pay dividends if a default or event of default has occurred and is continuing thereunder. During 2015, we may be unable to meet certain of the Credit Facility's covenants, in which case we would need to get an appropriate waiver or amendment or terminate the facility entirely so that there would be no default or event of default. If terminated, we may or may not seek to replace the revolving credit facility. No assurance can be given that an amendment or a suitable replacement will be available or economically viable. Whether or not the facility is available, and whether or not, if unavailable, it is replaced, we believe we have sufficient liquidity for our operating needs and payment of our dividend for 2015.
Cumulative Total Return Chart
Set forth below is a line graph comparing, for the period commencing December 31, 2009 and ended December 31, 2014, the cumulative total return on our Class A common stock compared to the cumulative total return of the Russell 2000 Index and S&P Movies and Entertainment Index, a published industry index. The graph assumes the investment of $100 at the close of trading as of December 31, 2009 in our Class A common stock, the Russell 2000 Index and the S&P Movies and Entertainment Index and the reinvestment of all dividends.
 
Period Ending
Index
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
World Wrestling Entertainment, Inc.
100.00

101.83

71.22

63.85

140.55

108.12

Russell 2000
100.00

126.86

121.56

141.43

196.34

205.95

S&P Movies & Entertainment
100.00

116.74

129.98

175.01

272.25

320.76




23



Item 6. Selected Financial Data
The following selected consolidated financial data has been derived from our consolidated financial statements. You should read the selected financial data in conjunction with our consolidated financial statements and related notes and the information set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this report.
Financial Highlights: (in millions, except per share data)
 
 
For the year ended December 31,    
 
 
2014 (1)
 
2013 (2)
 
2012 (3)
 
2011 (4)
 
2010 
Net revenues
 
$
542.6

 
$
508.0

 
$
484.0

 
$
483.9

 
$
477.7

Operating (loss) income
 
$
(42.2
)
 
$
5.9

 
$
43.2

 
$
37.0

 
$
82.3

Net (loss) income
 
$
(30.1
)
 
$
2.8

 
$
31.4

 
$
24.8

 
$
53.5

(Loss) Earnings per share, basic
 
$
(0.40
)
 
$
0.04

 
$
0.42

 
$
0.33

 
$
0.72

(Loss) Earnings per share, diluted
 
$
(0.40
)
 
$
0.04

 
$
0.42

 
$
0.33

 
$
0.71

Dividends declared per Class A share
 
$
0.48

 
$
0.48

 
$
0.48

 
$
0.72

 
$
1.44

Dividends declared per Class B share
 
$
0.48

 
$
0.48

 
$
0.48

 
$
0.60

 
$
0.96

 
 
As of December 31,
 
 
2014
 
2013
 
2012
 
2011
 
2010
Cash, cash equivalents and short-term investments
 
$
115.4

 
$
109.4

 
$
152.4

 
$
155.8

 
$
166.9

Total assets
 
$
382.6

 
$
378.5

 
$
381.4

 
$
378.6

 
$
415.7

Total debt
 
$
25.9

 
$
29.6

 
$

 
$
1.6

 
$
2.8

Total stockholders’ equity
 
$
205.9

 
$
265.9

 
$
294.7

 
$
295.1

 
$
316.7

____________________
(1)
Operating income includes impairment charges on our feature films of $1.5 million (See Note 7 to the Consolidated Financial Statements) and $4.2 million in restructuring charges of which $2.4 million relates to severance and other costs and $1.8 million relates to the impairment of gamification assets and is included in depreciation and amortization expense. Operating income also includes a $1.6 million adjustment to reduce the carrying value of the old corporate aircraft to its estimated fair value and is included in depreciation expense. Net income includes a $4.0 million impairment of an equity investment and is included in other expense.
(2)
Operating income includes impairment charges on our feature films of $11.7 million (See Note 7 to the Consolidated Financial Statements) and $10.7 million associated with our emerging content and distribution efforts, including WWE Network, partially offset by the positive impact of $3.4 million resulting from the transition of our video game to a new licensee.
(3)
Operating income includes $8.2 million of costs incurred associated with our emerging content and distribution efforts, including WWE Network, offset by the impact of a $4.4 million tax benefit relating to previously unrecognized tax benefits.
(4)
Operating income includes impairment charges on our feature films of $23.4 million and $4.0 million associated with our emerging content and distribution efforts, including WWE Network. Results for 2011 do not include amounts for management incentive compensation since the Company did not meet performance targets.



24



Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with the audited consolidated financial statements and related notes included elsewhere in this report.
Background
     The following analysis outlines all material activities contained within each of our reportable segments.
Media Division:
Network
Revenues consist principally of subscriptions to WWE Network, fees for viewing our pay-per-view and video-on-demand programming, and advertising fees.
Television
Revenues consist principally of television rights fees and advertising.
Home Entertainment
Revenues consist principally of sales of WWE produced content via home entertainment platforms, including DVD, Blu-Ray, subscription and transactional on-demand outlets.
Digital Media
Revenues consist principally of advertising sales on our websites and third party websites including YouTube, sales of various broadband and mobile content and magazine publishing. The Company discontinued the magazine publishing business in August 2014.

Live Events
Revenues consist principally of ticket sales and travel packages for live events.

Consumer Products Division:
Licensing
Revenues consist principally of royalties or license fees related to various WWE themed products such as video games, toys and apparel.
Venue Merchandise
Revenues consist of sales of merchandise at our live events.
WWEShop
Revenues consist of sales of merchandise on our website through our WWEShop internet storefront.

WWE Studios
Revenues consist of amounts earned from the investing in producing and/or distributing of filmed entertainment.

Corporate & Other
Revenues consist of amounts earned from talent appearances. Expenses include corporate overhead and certain expenses related to sales and marketing, including our international offices, and talent development functions.

In our prior reports filed with the Securities Exchange Commission ("SEC") through fiscal year 2013, we presented five reportable segments: Live and Televised Entertainment, Consumer Products, Digital Media, WWE Studios and Unallocated Corporate and Other. Effective January 1, 2014, we now present ten reportable segments. Information presented for the twelve months ended December 31, 2013 and 2012 included in the audited consolidated financial statements herein and elsewhere in this Annual Report has been recast to reflect our new segment presentation. See Note 19, Segment Information, for further details on our reportable segments. Such revisions have no impact on our consolidated financial condition, results of operations or cash flows for the periods presented.



25



Results of Operations
The Company presents OIBDA as the primary measure of segment profit (loss). The Company believes the presentation of OIBDA is relevant and useful for investors because it allows investors to view our segment performance in the same manner as the primary method used by management to evaluate segment performance and make decisions about allocating resources. The Company defines OIBDA as operating income before depreciation and amortization, excluding feature film and television production asset amortization and impairments, as well as the amortization of costs related to content delivery and technology utilized for our WWE Network.

OIBDA is a non-GAAP financial measure and may be different than similarly-titled non-GAAP financial measures used by other companies. A limitation of OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in generating revenues for our business. OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to OIBDA. See Note 19, Segment Information in the accompanying Consolidated Financial Statements for a reconciliation of OIBDA to operating income for the periods presented.
We do not allocate certain costs included in OIBDA of our Corporate and Other segment to the other reportable segments. Corporate and Other expense primarily includes corporate overhead and certain expenses related to sales and marketing, including our international offices, and talent development functions, including costs associated with our WWE Performance Center. These costs benefit the Company as a whole and are therefore not allocated. Revenues from transactions between our operating segments are not material.



26



Results of Operations
Year Ended December 31, 2014 compared to Year Ended December 31, 2013
(dollars in millions)
Summary
Net Revenues
 
2014
 
2013
 
increase
(decrease)
Media Division
 
$
339.9

 
$
302.7

 
12
 %
Live Events
 
110.7

 
113.1

 
(2
)%
Consumer Products Division
 
78.1

 
78.5

 
(1
)%
WWE Studios
 
10.9

 
10.8

 
1
 %
Corporate & Other
 
3.0

 
2.9

 
3
 %
Total
 
542.6

 
508.0

 
7
 %
 
 
 
 
 
 
 
OIBDA
 
 
 
 
 
 
Media Division
 
75.4

 
98.4

 
(23
)%
Live Events
 
27.8

 
30.8

 
(10
)%
Consumer Products Division
 
32.2

 
41.2

 
(22
)%
WWE Studios
 
0.5

 
(12.7
)
 
(104
)%
Corporate & Other
 
(151.4
)
 
(127.3
)
 
19
 %
Total
 
(15.5
)
 
30.4

 
(151
)%
OIBDA as a percentage of revenues
 
(3
)%
 
6
%
 


 
 
 
 
 
 
 
Depreciation and amortization
 
26.7

 
24.5

 
9
 %
Operating (loss) income
 
(42.2
)
 
5.9

 
(815
)%
Loss on equity investment
 
(4.0
)
 

 
(100
)%
Investment and other expense, net
 
(3.1
)
 
(1.3
)
 
138
 %
(Loss) income before income taxes
 
(49.3
)
 
4.6

 
(1,172
)%
(Benefit) provision for income taxes
 
(19.2
)
 
1.8

 
(1,167
)%
Net (loss) income
 
$
(30.1
)
 
$
2.8

 
(1,175
)%
Our Media division revenues increased 12% driven by the impact of the launch of our WWE Network and increased revenue associated with certain key television distribution agreements. Our Live Events segment revenues declined by 2% due to decreased stadium capacity and ticket prices at WrestleMania due to the venue location and the staging of eleven fewer international events. Our Consumer Products division experienced a 1% decline in revenues, primarily driven by lower licensing revenues from our video games. Our WWE Studios segment increased slightly by $0.1 million.
The comparability of our results for 2014 were impacted by $4.2 million in restructuring charges of which $2.4 million relates to severance and other costs and is included in Corporate and Other Expense with $0.3 million included in our Digital Media Segment, and $1.8 million relates to the impairment of gamification assets and is included in Depreciation and amortization expense. The current year results also include a $4.0 million impairment of an equity investment which is included in Loss on equity investments and a $1.6 million adjustment to reduce the carrying value of the old corporate aircraft to its estimated fair value, included in Depreciation and amortization expense. Lastly, our results for 2014 were impacted by $1.5 million of impairment charges related to our film portfolio. In 2013, our results were impacted by $11.7 million of impairment charges related to our film portfolio and an approximate $3.4 million positive impact from the transition of our video game business to a new licensee.


27



Media Division
The following tables present the performance results for our segments within our Media division (dollars in millions, except where noted):
Revenues-Media Division
 
2014
 
2013
 
increase
(decrease)
Network
 
$
115.0

 
$
86.3

 
33
 %
Subscriptions
 
$
69.5

 
N/A

 
 
Pay-per-view
 
$
45.2

 
$
82.5

 
(45
)%
WWE Classics On Demand(a)  
 
$
0.3

 
$
3.8

 
(92
)%
Monthly subscription price (dollars)(b)                                                    
 
$
9.99

 
N/A

 
 
Number of paid subscribers at period end 
 
816,000

 
N/A

 
 
    Domestic
 
772,000

 
N/A

 
 
    International
 
44,000

 
N/A

 
 
Number of average paid subscribers (c)
 
567,000

 
N/A

 
 
Number of pay-per-view events
 
12

 
12

 
 %
Number of buys from pay-per-view events
 
2,292,000
 
3,838,000
 
(40
)%
Average revenue per buy (dollars)
 
$
19.55

 
$
21.41

 
(9
)%
Pay-per-view domestic retail price, excluding WrestleMania (dollars)
 
$
44.95

 
$
44.95

 
 %
     Pay-per-view domestic retail price WrestleMania (dollars)
 
$
59.95

 
$
59.95

 
 %
Television
 
$
176.7

 
$
163.4

 
8
 %
Home Entertainment
 
$
27.3

 
$
24.3

 
12
 %
Gross units shipped
 
2,674,400

 
3,987,200

 
(33
)%
Digital Media
 
$
20.9

 
$
28.7

 
(27
)%
Total
 
$
339.9

 
$
302.7

 
12
 %
 
 
 
 
 
 
 
Television Ratings
 
 
 
 
 
 
       Average weekly household ratings for RAW
 
3.4

 
3.4

 
 %
       Average weekly household ratings for SmackDown
 
2.3

 
2.2

 
5
 %
       Average weekly household ratings for WWE Main Event
 
1.0

 
0.9

 
11
 %
       Average weekly household ratings for Total Divas (E!)
 
1.3

 
1.4

 
(7
)%
OIBDA-Media Division
 
2014
 
2013
 
increase
(decrease)
Network
 
$
(1.8
)
 
$
27.9

 
(106
)%
Television
 
61.9

 
56.1

 
10
 %
Home Entertainment
 
15.0

 
8.8

 
70
 %
Digital Media
 
0.3

 
5.6

 
(95
)%
Total
 
$
75.4

 
$
98.4

 
(23
)%
OIBDA as a percentage of revenues
 
22
%
 
33
%
 
 
____________________
(a) This service was discontinued in January 2014.
(b) This is our pricing for our domestic subscribers at December 31, 2014. In certain international territories, subscribers can access the network by other means and/or subscription pricing may vary.
(c) Average subscribers shown for 2014 represent the average level of subscribers for the year ended December 31, 2014 although WWE Network did not launch in the U.S. until February 24, 2014.


28



Network revenues, which include revenues generated by WWE Network, pay-per-view and video-on-demand, increased by $28.7 million in 2014 as compared to 2013. WWE Network is a 24/7 streaming network that provides access to live and scheduled programming, including all 12 of WWE’s live pay-per-view events, as well as access to its comprehensive video-on-demand library. WWE Network, which launched on February 24, 2014, accounted for $69.5 million in new digital subscription revenues in the current year with approximately 567,000 average paid subscribers for the year ended December 31, 2014. During the year ended December 31, 2014, WWE Network had approximately 1,490,000 gross additions to its subscriber base, offset by churn of 674,000 subscribers. Gross additions include unique new subscribers and win-backs (subscribers that previously churned out and subsequently renewed their subscription). The subscription pricing at December 31, 2014 to WWE Network is $9.99 per month with a one month commitment period. The $69.5 million of revenues generated by WWE Network in the current year was partially offset by the decline in pay-per-view revenue of $37.3 million due primarily to a 40% decline in total pay-per-view buys primarily attributable to WWE Network's launch. Additionally, the average revenue per buy declined by 9% to approximately $19.55 per buy due to a higher portion of pay-per-view buys coming from international markets in which have lower effective pricing. In addition, video-on-demand revenues decreased by $3.5 million due to the cessation of our Classics On Demand offering in January 2014 in anticipation of the launch of WWE Network in February.  Total Network OIBDA as a percentage of revenues decreased to a loss of 2% in 2014 as compared to a profit of 32% in 2013 driven mainly by the costs associated with the launch and ongoing support of our WWE Network. In support of WWE Network, we incurred $14 million in additional programming and production costs. Additionally, advertising and promotion expense increased $16 million in support of WWE Network's launch and subscriber acquisition efforts and we spent approximately $13 million in customer service costs associated with WWE Network.
Television revenues, which include revenues generated from television rights fees and advertising, increased by $13.3 million in 2014 as compared to 2013.  Television rights fees in the current year include approximately $8.0 million in incremental revenue associated with the execution of certain key television distribution agreements, many of which were entered into in the later half of the year. Rights fees were also positively impacted by the production and licensing of new programs, most notably Total Divas, which commenced in late 2013. The television OIBDA as a percentage of revenues was essentially flat in the periods at approximately 35%.

Home entertainment revenues, which include revenues generated from the sale of WWE produced content via home entertainment platforms such as DVD and Blu-Ray discs and digital downloads, increased by $3.0 million in 2014 as compared to 2013.  This increase was due in part to the recognition of $4.6 million in minimum guarantees received from our home video distributor. This increase was offset by a decrease in DVD and Blu-Ray revenue which fell by $1.7 million, due to a 33% decline in shipments to 2.7 million units. Home entertainment OIBDA as a percentage of revenues increased to 55% in 2014 compared to 36% in 2013 driven by the recognition of minimum guarantees and the lack of associated variable costs.
Digital media revenues, which include revenues generated from WWE.com and from our magazine publishing business, decreased by $7.8 million in 2014 as compared to 2013. WWE.com revenues decreased by $4.8 million in the current year compared to the prior year due to lower advertising across various platforms as well as lower monetization of the Company's pay-per-view webcasts via WWE.com as these events became available on WWE Network. Publishing revenues decreased by $3.0 million primarily due to decreased sell rates and the discontinuation of our print WWE magazine business in the third quarter of 2014. Digital media OIBDA as a percentage of revenues decreased to 1% in 2014 from 20% in 2013 driven by the decline in digital advertising and pay-per-view buy revenue, the discontinuation of our publishing business and a relatively fixed cost structure.










29




Live Events
The following tables present the performance results and key drivers for our Live Events segment (dollars in millions, except where noted):
Revenues- Live Events
 
2014
 
2013
 
increase
 (decrease)
Live events
 
$
108.5

 
$
111.5

 
(3
)%
North America
 
$
81.8

 
$
81.4

 
 %
International
 
$
26.7

 
$
30.1

 
(11
)%
Total live event attendance
 
1,931,000

 
1,924,100

 
 %
Number of North American events
 
264

 
256

 
3
 %
Average North American attendance
 
6,000

 
6,000

 
 %
Average North American ticket price (dollars)
 
$
48.86

 
$
48.63

 
 %
Number of international events
 
54

 
65

 
(17
)%
Average international attendance
 
6,200

 
5,900

 
5
 %
Average international ticket price (dollars)
 
$
75.81

 
$
74.13

 
2
 %
Travel packages
 
2.2

 
1.6

 
38
 %
Total
 
$
110.7

 
$
113.1

 
(2
)%
 
 
 
 
 
 
 
OIBDA-Live Events
 
2014
 
2013
 
increase
(decrease)
Live events
 
$
27.0

 
$
30.1

 
(10
)%
Travel packages
 
0.8

 
0.7

 
14
 %
Total
 
$
27.8

 
$
30.8

 
(10
)%
OIBDA as a percentage of revenues
 
25
%
 
27
%
 
 
Live events revenues, which include revenues from ticket sales and travel packages, decreased by $2.4 million in 2014 as compared to 2013. Revenues from our North America live events business increased by $0.4 million, primarily due to the staging of eight additional events in the current year which more than offset the decline in revenue associated with WrestleMania 30 this year, which experienced decreased attendance as a result of stadium capacity and configuration issues. Overall total average attendance and average ticket prices remained flat. Our international live events business decreased $3.4 million, primarily driven by eleven fewer events held, which was offset, in part, by an increase in average ticket prices and to a lesser extent average attendance in the current year as compared to the prior year. Live events OIBDA as a percentage of revenues decreased to 25% in 2014 compared to 27% in 2013 driven primarily by higher employee related expenses. 


30



Consumer Products Division
The following tables present the performance results and key drivers for our Consumer Products division (dollars in millions, except where noted):
Revenues-Consumer Products Division
 
2014
 
2013
 
increase
 (decrease)
Licensing
 
$
38.6

 
$
43.6

 
(11
)%
Venue merchandise
 
19.3

 
19.4

 
(1
)%
Domestic per capita spending (dollars)
 
$
9.58

 
$
10.24

 
(6
)%
WWEShop
 
20.2

 
15.5

 
30
 %
Average WWEShop revenues per order (dollars)
 
$
47.46

 
$
48.10

 
(1
)%
Total
 
$
78.1

 
$
78.5

 
(1
)%
 
 
 
 
 
 

OIBDA-Consumer Products Division
 
2014
 
2013
 
increase
 (decrease)
Licensing
 
$
21.0

 
$
31.3

 
(33
)%
Venue merchandise
 
7.7

 
7.5

 
3
 %
WWEShop
 
3.5

 
2.4

 
46
 %
Total
 
$
32.2

 
$
41.2

 
(22
)%
OIBDA as a percentage of revenues
 
41
%
 
52
%
 
 
Licensing revenues decreased by $5.0 million in 2014 as compared to 2013. In the current year, increased video game receipts of $4.6 million were offset by the absence of a one time benefit associated with the termination of our previous video game license recorded in 2013 and lower toy royalties in the current year compared to prior year. Licensing OIBDA as a percentage of revenues decreased in 2014 to 54% compared to 72% in 2013. The OIBDA margin in the prior year reflected a positive benefit associated with the recognition of the advance received from THQ.
Venue merchandise revenues decreased by $0.1 million in 2014 as compared to 2013 primarily due to a 6% decline in per capita merchandise spend at our domestic events to $9.58 in the current year. The venue merchandise OIBDA as a percentage of revenues increased to 40% in 2014 from 39% in 2013 driven by product mix.
WWEShop revenues increased by $4.7 million in 2014 compared to 2013, based on a 33% increase in the volume of online merchandise sales to approximately 426,000 orders. Orders increased primarily due to mobile shop optimization and a distribution strategy in the UK utilizing Amazon UK. The average revenue per order decreased 1% to $47.46 in the current year. WWEShop OIBDA as a percentage of revenues increased to 17% in 2014 as compared to 15% in 2013.


31



WWE Studios
The following table provides detailed information on our WWE Studios’ segment (dollars in millions):
 
 
 
 
 
 
Feature
Film
Production Assets-net as of Dec 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Year Ended December 31,
 
 
Release
 
Production
 
 
Inception to-date
 
Revenue
 
OIBDA
Title  
 
Date
 
 Costs*
 
 
Revenue
 
OIBDA
 
2014
 
2013
 
2014
 
2013
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jingle All the Way 2
 
Dec. 2014
 
$
1.6

 
$
1.6

 
$

 
$

 
$

 
$ N/A

 
$

 
$ N/A

Queens of the Ring
 
Nov. 2014
 

 

 

 

 

 
    N/A

 

 
N/A

See No Evil 2
 
Oct. 2014
 
1.1

 
1.1

 

 

 

 
   N/A

 

 
N/A

Leprechaun: Origins
 
Aug. 2014
 
1.0

 
1.0

 

 

 

 
   N/A

 

 
N/A

Road to Paloma
 
July 2014
 

 

 
0.2

 
0.1

 
0.2

 
   N/A

 
0.1

 
N/A

Oculus
 
Apr. 2014
 
3.0

 
1.7

 

 
(1.3
)
 

 
   N/A

 
(1.3
)
 
N/A

Scooby Doo! WrestleMania Mystery
 
Mar. 2014
 
1.2

 
0.6

 
1.9

 
1.2

 
1.9

 
   N/A

 
1.2

 
N/A

 
 
 
 
7.9

 
6.0

 
2.1

 

 
2.1

 

 

 

2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Christmas Bounty
 
Nov. 2013
 
3.7

 
0.1

 
4.1

 
0.5

 

 
4.1

 
$
(0.1
)
 
0.6

12Rounds 2: Reloaded
 
June 2013
 
1.4

 
0.8

 
1.3

 
0.7

 
1.3

 

 
0.7

 
$

No One Lives
 
May 2013
 
2.2

 
0.1

 
1.0

 
(1.0
)
 
0.1

 
0.9

 
(0.2
)
 
(0.8
)
The Call
 
Mar. 2013
 
1.0

 
0.4

 
4.1

 
3.5

 
3.8

 
0.3

 
3.2

 
0.3

Dead Man Down
 
Mar. 2013
 
5.8

 
1.0

 

 
(4.7
)
 

 

 

 
(4.7
)
The Marine 3: Homefront
 
Mar. 2013
 
1.5

 
0.8

 
1.4

 
0.7

 
1.3

 
0.1

 
0.7

 

 
 
 
 
15.6

 
3.2

 
11.9

 
(0.3
)
 
6.5

 
5.4

 
4.3

 
(4.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Prior Releases
 
 
 
116.3

 
2.9

 
104.0

 
(30.4
)
 
2.3

 
5.4

 
1.0

 
(4.6
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Completed but not released
 
3.9

 
3.9

 

 

 

 

 

 

In production
 
 
 
10.0

 
10.0

 

 

 

 

 

 

In development
 
 
 
0.5

 
0.5

 

 
(4.4
)
 

 

 
(0.3
)
 

Sub-total
 
 
 
$
146.3

 
$
26.5


$
118.0


$
(35.1
)

$
10.9


$
10.8


$
5.0


$
(9.2
)
Selling, General & Administrative Expenses
 
 
 
 
 
 
 


 


 
 
 
 
 
(4.5
)
 
(3.5
)
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
0.5

 
$
(12.7
)
____________________
* Production costs are presented net of the associated benefit of production incentives.
 During 2014, we released one feature film via theatrical distribution, Oculus, and five films direct to DVD, Scooby Doo! WrestleMania Mystery, Leprechaun: Origins, See No Evil 2, Queens of the Ring and Jingle All the Way 2. The Company entered into an agreement to co-distribute the feature film Road to Paloma. This film was released via a limited theatrical release and on DVD in July 2014. During 2013, we released three feature films via theatrical distribution, No One Lives, Dead Man Down and The Call, two films, 12 Rounds 2: Reloaded and The Marine 3: Homefront direct to DVD and one made-for-television movie, Christmas Bounty.


32



Third-party distributors control the distribution and marketing of co-distributed films, and as a result, we recognize revenue on a net basis after the third-party distributor recoups distribution fees and expenses and results are reported to us. Results are typically reported to us in quarters subsequent to the initial release of these films.
WWE Studios revenues increased $0.1 million in 2014 as compared to 2013. The increase in revenue is driven by the timing of our film releases. In the current year, we recognized $3.8 million in revenue from our film, The Call, which was released in 2013. WWE Studios OIBDA increased $13.2 million in 2014 as compared to 2013, due in part to the profitability of The Call and reduced impairment charges. The Company recorded $1.5 of impairment charges in 2014 as compared to $11.7 million recorded in 2013.
At December 31, 2014, the Company had $26.5 million (net of accumulated amortization and impairment charges) of feature film production assets capitalized on its Consolidated Balance Sheet of which $12.1 million is for films in-release, $10.0 million is for films in production and the remaining $4.4 million is for films that are completed, pending release, or developmental projects. We review and revise estimates of ultimate revenue and participation costs at the end of each reporting quarter to reflect the most current information available. If estimates for a film’s ultimate revenue are revised and indicate a significant decline in a film’s profitability or if events or circumstances change that would indicate we should assess whether the fair value of a film is less than its unamortized film costs, we calculate the film's estimated fair value using a discounted cash flows model. If fair value is less than unamortized cost, the film asset is written down to fair value.
Revenues- Corporate & Other
(dollars in millions )
 
2014
 
2013
 
increase
(decrease)
Other
 
$
3.0

 
$
2.9

 
3
%
Other revenues include revenues associated with talent appearances and were consistent in both periods presented.
OIBDA- Corporate & Other
(dollars in millions )
 
2014
 
2013
 
increase
(decrease)
Corporate & Other
 
$
(151.4
)
 
$
(127.3
)
 
19
%

  Corporate & Other Expenses
The following table presents the amounts and percent change of certain significant corporate and other expenses (dollars in millions):
 
 
2014
 
2013
 
increase (decrease)
Staff related
 
$
53.9

 
$
48.4

 
11
 %
Management incentive compensation
 
12.4

 
7.0

 
77
 %
Legal, accounting and other professional
 
22.3

 
15.7

 
42
 %
Travel and entertainment expenses
 
6.1

 
5.1

 
20
 %
Advertising, marketing and promotion
 
9.5

 
8.4

 
13
 %
Corporate insurance
 
3.7

 
4.0

 
(8
)%
Bad debt expense
 
1.2

 

 
100
 %
All other
 
45.3

 
41.6

 
9
 %
Total corporate & other expenses
 
$
154.4

 
$
130.2

 
19
 %
Corporate & Other as a percentage of net revenues
 
28
%
 
26
%
 
 
Corporate and other expenses primarily include corporate overhead and certain expenses related to our sales and marketing, including our international offices, and talent development functions, including costs associated with our WWE Performance Center. These costs benefit the Company as a whole and are therefore not allocated to individual businesses. Corporate and other expenses increased by $24.2 million or 19% in 2014 compared to 2013. This is primarily due to increases in professional fees of $6.6 million related to strategic initiatives, talent development and international expansion, management incentive compensation of $5.4 million reflecting amounts expected to be paid based on the Company's operating performance, and staff related expenses of $5.5 million primarily to support talent development and other strategic objectives. Staff related expenses in the current year include $2.0 million in severance associated with our restructuring plan.


33



Depreciation and Amortization
(dollars in millions)
 
 
2014
 
2013
 
increase (decrease)
Depreciation and amortization
 
$
26.7

 
$
24.5

 
9
%

Depreciation expense in the current year includes a benefit of $1.5 million from the recognition of an infrastructure tax credit. This credit was used to reduce the carrying value of the assets as of their in-service date and consequently the adjustment to depreciation expense reflects the revised amount incurred to date. This credit was received in the current year but related to assets placed in service in prior years. Additionally, the current year balance includes an adjustment of $1.6 million to reduce the carrying value of our old corporate aircraft to its estimated fair value and an impairment charge of $1.8 million related to a change in business strategy related to our gamification platform. Overall, depreciation expense in the current year was higher due to depreciation expense related to the Company's recent investment in property and equipment to support our emerging content distribution efforts, including our WWE Network.
Investment Income, Interest Expense and Other Expense, Net
(dollars in millions)
 
 
2014
 
2013
 
increase (decrease)
Loss on equity investment
 
$
(4.0
)
 
$

 
(100
)%
Investment income, interest expense and other expense, net
 
$
(3.1
)
 
$
(1.3
)
 
138
 %
Due to a change in our ownership interest in a cost method investment, we recorded an impairment charge of $4.0 million in 2014, for the excess of the carrying value over its estimated fair value. Investment income, interest and other expense, net yielded an expense of $3.1 million in 2014 as compared to $1.3 million in 2013. The increase in net expense primarily related to translation losses incurred in the current period as a result of fluctuations in foreign currency exchange rates.
Income Taxes
(dollars in millions)
 
 
2014
 
2013
 
increase (decrease)
(Benefit from) provision for income taxes
 
$
(19.2
)
 
$
1.8

 
(1,167
)%
Effective tax rate
 
39
%
 
39
%
 
 

The Company recorded a tax benefit of $19.2 million associated with our operating loss in 2014. The Company currently believes this benefit is realizable and has not recorded a valuation allowance against the related deferred tax assets. If it becomes more likely than not that the Company will not realize these benefits, a valuation allowance would be recorded with a corresponding charge to our income tax provision.



34



Year Ended December 31, 2013 compared to Year Ended December 31, 2012
(dollars in millions)
Summary
Net Revenues
 
2013
 
2012
 
increase(decrease)
Media Division
 
$
302.7

 
$
287.3

 
5
 %
Live Events
 
113.1

 
106.6

 
6
 %
Consumer Products Division
 
78.5

 
79.9

 
(2
)%
WWE Studios
 
10.8

 
7.9

 
37
 %
Corporate & Other
 
2.9

 
2.3

 
26
 %
Total
 
508.0

 
484.0

 
5
 %
 
 
 
 
 
 
 
OIBDA
 
 
 
 
 
 
Media Division
 
98.4

 
117.0

 
(16
)%
Live Events
 
30.8

 
27.0

 
14
 %
Consumer Products Division
 
41.2

 
41.1

 
 %
WWE Studios
 
(12.7
)
 
(5.5
)
 
131
 %
Corporate & Other
 
(127.3
)
 
(116.4
)
 
9
 %
Total
 
30.4

 
63.2

 
(52
)%
OIBDA as a percentage of revenues
 
6
%
 
13
%
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
24.5

 
20.0

 
23
 %
Operating income
 
5.9

 
43.2

 
(86
)%
Investment and other expense net
 
(1.3
)
 
(0.5
)
 
160
 %
Income before income taxes
 
4.6

 
42.7

 
(89
)%
Provision for income taxes
 
1.8

 
11.3

 
(84
)%
Net income
 
$
2.8

 
$
31.4

 
(91
)%

The comparability of our results for 2013 was impacted by $11.7 million of impairment charges related to our film portfolio, including $4.7 million and $0.9 million, for Dead Man Down and No One Lives, respectively, which were 2013 releases and $6.1 million from previously released films and an approximate $3.4 million positive impact from the transition of our video game business to a new licensee. In 2012, our results were impacted by a $1.2 million impairment charge related to our two feature films, Bending the Rules and Barricade, and the recognition of a $4.4 million benefit due to previously unrecognized tax benefits.
Our Media division revenues increased by 5% primarily due to the increased revenues in television rights business. Our Live Events segment revenues increased by 6% reflecting increased revenues from our North America events. Our Consumer Products division segment experienced a 2% decline in revenues, primarily driven by a $2.7 million decrease in our licensing business. Our WWE Studios segment experienced a 37% increase in revenues due in part to the November 2013 release of Christmas Bounty, a made-for-television production, and from our movie portfolio.



35



Media Division
The following tables present the performance results for our segments within our Media division (dollars in millions, except where noted):
Revenues-Media Division
 
2013
 
2012
 
increase
(decrease)
Network
 
$
86.3

 
$
87.7

 
(2
)%
Pay-per-view
 
$
82.5

 
$
83.6

 
(1
)%
WWE Classics On Demand
 
$
3.8

 
$
4.1

 
(7
)%
Number of pay-per-view events
 
12

 
12

 
 %
Number of buys from pay-per-view events
 
3,838,000
 
4,023,000
 
(5
)%
Average revenue per buy (dollars)
 
$
21.41

 
$
20.60

 
4
 %
Pay-per-view domestic retail price, excluding WrestleMania (dollars)
 
$
44.95

 
$
44.95

 
 %
     Pay-per-view domestic retail price WrestleMania (dollars)
 
$
59.95

 
$
54.95

 
9
 %
Television
 
163.4

 
140.9

 
16
 %
Home Entertainment
 
24.3

 
33.0

 
(26
)%
Gross units shipped
 
3,987,200

 
3,775,800

 
6
 %
Digital Media
 
28.7

 
25.7

 
12
 %
Total
 
$
302.7

 
$
287.3

 
5
 %
 
 
 
 
 
 
 
Television Ratings
 
 
 
 
 
 
       Average weekly household ratings for RAW
 
3.4

 
3.3

 
3
 %
       Average weekly household ratings for SmackDown
 
2.2

 
2.1

 
5
 %
       Average weekly household ratings for WWE Main Event
 
0.9

 
0.8

 
13
 %
       Average weekly household ratings for Total Divas (E!)
 
1.4

 
N/A

 


OIBDA-Media Division
 
2013
 
2012
 
increase
(decrease)
Network
 
$
27.9

 
$
41.3

 
(32
)%
Television
 
56.1

 
51.6

 
9
 %
Home Entertainment
 
8.8

 
15.4

 
(43
)%
Digital Media
 
5.6

 
8.7

 
(36
)%
Total
 
$
98.4

 
$
117.0

 
(16
)%
OIBDA as a percentage of revenues
 
33
%
 
41
%
 
 
Network revenues, which include revenues generated by pay-per-view and video-on-demand, decreased by $1.4 million in 2013 period as compared 2012.  Pay-per-view revenues decreased by $1.1 million from 2012, primarily as result of a 5% decline in the number of pay-per-view buys in 2013. This decrease was partially offset by a 4% increase in average revenue per buy from 2012 due, in part, to an increase in the domestic retail price charged for viewing WrestleMania and higher retail prices charged for viewing our events in high definition. Video-on-demand revenues decreased slightly by $0.3 million. Network OIBDA as a percentage of revenues decreased to 32% in 2013 from 47% in 2012 due primarily to an additional $5.1 million in talent related expenses.
Television revenues, which include revenues generated from television rights fees and advertising, increased by $22.5 million in 2013 as compared to 2012. Domestically, television rights fees increased by $17.0 million, primarily due to the production and licensing of new programs. During the third quarter of 2013, we debuted a new television series, Total Divas, which is carried on the E! Network. In addition, 2013 includes the full year impact of programing introduced in 2012, particularly, an additional hour of RAW to the USA Network, as well as rights fees for an original series, WWE Main Event on the ION Television Network. The television OIBDA as a percentage of revenues decreased to 34% from 37% in 2012 primarily due to increased production costs.
Home entertainment revenues decreased by $8.7 million, or 26%, in 2013 as compared to 2012. Domestic home entertainment revenue fell approximately $6.4 million, or 23%, as a 6% increase in shipments to 4.0 million units was more than offset by lower


36



sell-through rates and a 13% decline in the average price per unit to $9.60 reflecting a shift in product mix and retail demand for lower priced product. Additionally, we released 28 titles in 2013 compared to 35 titles in 2012.
Revenue from our international home entertainment activities declined by approximately $2.3 million reflecting lower sales in Canada and the transition to a new licensee in the EMEA region. Home entertainment OIBDA as a percentage of revenues decreased to 36% in 2013 compared to 47% in 2012 due to lower sell-through rates and higher talent expenses.
Digital media revenues, which include revenues generated from WWE.com and from our magazine publishing business, increased by $3.0 million in 2013 as compared to 2012.  WWE.com revenues increased by $3.3 million in 2013 as compared to 2012 due to the incremental impact of the Company's launch of digital distribution of our pay-per-view events across several new platforms and higher sales of advertising across various digital platforms. Magazine publishing revenues decreased by $0.3 million in 2013 as compared to 2012. Net units sold decreased by 8% driven by weaker newsstand demand and lower subscription revenue for the WWE Kids magazine reflecting, in part, the continued overall decline in the magazine publishing industry. We published twelve issues of WWE Magazine, ten issues of WWE Kids magazine and three special issues both in 2013 and in 2012. Digital media OIBDA as a percentage of revenues decreased to 20% in 2013 from 34% in 2012 due to hiring of new personnel to support digital content initiatives.
Live Events
The following tables present the performance results and key drivers for our Live Events segment (dollars in millions, except where noted):
Revenues- Live Events
 
2013
 
2012
 
increase (decrease)
Live events
 
$
111.5

 
$
103.7

 
8
 %
North America
 
$
81.4

 
$
72.1

 
13
 %
International
 
$
30.1

 
$
31.6

 
(5
)%
Total live event attendance
 
1,924,100

 
1,854,100

 
4
 %
Number of North American events
 
256

 
248

 
3
 %
Average North American attendance
 
6,000

 
5,900

 
2
 %
Average North American ticket price (dollars)
 
$
48.63

 
$
45.39

 
7
 %
Number of international events
 
65

 
66

 
(2
)%
Average international attendance
 
5,900

 
6,000

 
(2
)%
Average international ticket price (dollars)
 
$
74.13

 
$
74.15

 
 %
Travel packages
 
1.6

 
2.9

 
(45
)%
Total
 
$
113.1

 
$
106.6

 
6
 %
 
 
 
 
 
 
 
OIBDA-Live Events
 
2013
 
2012
 
increase (decrease)
Live events
 
$
30.1

 
$
26.5

 
14
 %
Travel packages
 
0.7

 
0.5

 
40
 %
Total
 
$
30.8

 
$
27.0

 
14
 %
OIBDA as a percentage of revenues
 
27
%
 
25
%
 
 
Live events revenues, which include revenues from ticket sales and travel packages, increased by $6.5 million in 2013 as compared to 2012. Revenues from our North America live events business increased $9.3 million, or 13%, due in part to a strong performance of our annual WrestleMania event which contributed $3.6 million in incremental ticket revenue in 2013. In addition, we held eight more events and experienced a 7% increase in average ticket prices in 2013 as compared to 2012. Our international live events business decreased $1.5 million in 2013 primarily due to lower attendance and a decrease in average ticket prices partially offset by stronger attendance at the events held during our European tour in 2013 and higher average ticket prices from the tour in Abu Dhabi. The decrease in average attendance was predominantly due to venue mix. The live events OIBDA as a percentage of revenues increased to 27% in 2013 from 25% in 2012.



37




Consumer Products Division
The following tables present the performance results and key drivers for our Consumer Products division (dollars in millions, except where noted):
Revenues-Consumer Products Division
 
2013
 
2012
 
increase (decrease)
Licensing