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Hello and welcome to the webcast entitled WWE Second Quarter Earnings. We have just a few announcements before we begin [Operator Instructions]. Today’s call is being recorded.
I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead, sir.
Thank you and good morning, everyone. Welcome WWE second quarter 2019 earnings conference call. Leading today's discussion are Vince McMahon, our Chairman and CEO, as well as George Barrios, and Michelle Wilson, our Co-Presidents. Their remarks will be followed by a Q&A session.
We issued our earnings release earlier this morning and have posted the release, our earnings presentation and other supporting materials on our website at corporate.wwe.com/investors. Today's discussion will include forward-looking statements. These forward-looking statements reflect our current views, are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings. Actual results may differ materially and undue reliance should not be placed on them.
Additionally, the matters we will be discussing today may include non-GAAP financial measures. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website. Finally, as a reminder, today's conference call is being recorded and the replay will be available on our website later today.
At this time, it's my privilege to turn the call over to Vince.
Good morning, everyone. As you know our revenues are $269 million (sic) $268.9 million, it is what it is. We have completed our content distribution agreements and BT sport in the U.K, Latin America, Fox Sports and in China PP Sports.
We're excited about that and excited we can influence or they can influence as well, the ability to do localized content in addition to enhance the content that they currently have we’re in a more in-depth capacity. And importantly, so there is another way and a deeper way of reaching our audience and our new audience as well. Obviously, there's India and MENA [ph] And we are going to be close to announcing those deals very soon.
There is improvement with the key metrics over the quarter with television ratings, live event and digital consumption. One the things that we've done is hire 2 Executive Directors, one for Raw and 1 for SmackDown and in doing so, it allows me to look at a longer-range story – our standpoint and also spend more time on talent development and not get into the weeds as much as I had to do in the past. That is a really, really good thing for a long-term as well as short-term. Actually, we've seen a big result already.
In addition to that, we're excited about our future, particularly on Fox when the first week in October we debuted there it's really going to be awesome. As you know Fox broadcast reaches about 33% more homes where we are with U.S.A. So we're anxious and great promoters, and it's more of a notwithstanding public companies but it's more of a family-type situation in which we do very well in. Notwithstanding our relationship again with NBC U which is a deeper relationship as well.
So in any event we're really excited about our future in terms of where we're just - it's almost like another kick off for us. That's about all I have to say George.
Thanks, Vince. And thanks everyone for joining us today for a review of our Q2 financial performance, our progress on key strategic initiatives in our business outlook.
During the quarter we achieved adjusted OIBDA1 of $34.6 million, which exceeded our guidance primarily due to enhance revenue recognized in conjunction with our recent event in Saudi Arabia. That enhanced revenues is expected to reverse in connection with an anticipated fourth quarter event in that country.
To retain our second quarter financial results we made important progress on key strategic initiatives, as Vince mentioned we completed content distribution agreements in the UK, Latin America and China to prepare for the next phase of our WWE Network which initiated just yesterday. And we achieved improvements in our engagement metrics since April.
As a reminder in our first quarter earnings call we discussed our belief that our metrics were negatively impacted by the absence of several talents. I'd like to provide an update on these important measures before discussing our content distribution or the evolution of WWE Network.
As shown on page 3 of the presentation, domestic TV ratings for Raw which declined 14% in the first quarter 2019 improved to a year over year decline of 11% in June and that occurred despite a tough comparison to game 5 of the NBA championship on June 10.
Similarly domestic TV ratings for SmackDown which declined 13% in the first quarter improved to a 7% decline in June matching the aggregate ratings performance of the top 25 cable networks.
In addition, domestic TV ratings for Raw and SmackDown showed steady improvement throughout the quarter from April to June with June showing the best performance. You should also note that Raw’s TV ratings for the first four weeks in July through July 22 reflect an increase of 1% year over year. And this includes the ratings for the Raw reunion special this past Monday which were up 15% on a year over year basis. For the same four week period in July SmackDown TV ratings improved to a 2% year over year decline.
Consumption of WWE content across digital platforms as measured by the number of viewers rose from a year over year increase of 15% percent in the first quarter, a growth at 38%. Finally, average attendance at the company's live events in North America which declined 12% in the first quarter improved to a decline of 4% in June and was down 2% for the second quarter.
We believe these favorable developments stem from the return of our talent, as well as the emergence of new storylines and superstars following a successful WrestleMania.
As we emphasized last quarter, we remain very excited about the debut of SmackDown Live on Fox on October 4th which marks the first time WWE will be available, live, 52 weeks a year on one of the 4 premier broadcast platforms.
In terms of our financial performance, adjusted OIBDA1declined approximately $9 million based on lower revenue from our Media and Live Events businesses, the impact of strategic investments to support our content creation, digitisation and localization strategies.
To discuss our business performance in the quarter, let's turn to page five of the presentation which is revenue operating income and adjusted OIBDA contribution by segment as compared to the prior year.
Looking at our Media segment, adjusted OIBDA declined $7 million with the escalation of core content rights fees was offset by a reduction in network subscription revenue and the impact of the aforementioned investments. The timing of original series that has fewer episodes delivered for programs such as Total Bellas contributed to a decline in media revenue but had a limited impact on the change in profits.
WWE network's average paid subscribers decreased 6% to approximately $1.69 million for the second quarter and we projected an 8% decline for the third quarter. Given the strength, we no longer expect to achieve record subscribers for 2019.
As we look ahead, our primary focus for WWE Network it is continued evolution. Late last night we initiated the transition of WWE Network to a new platform created and delivered in partnership with Endeavor Streaming and Massive Interactive. This new platform provide subscribers with a better user experience, more intuitive user interface, and much better discovery in search.
More importantly this new platform enables the introduction of new features that we've discussed previously, and experiences over time, including the addition of a free tier, a premium tier and the localization of the network into multiple languages. So we remain very excited about the long term opportunity of WWE Network.
[Technical Difficulty]
During the quarter. We also made progress on other critical strategic initiatives including our content distribution plans in key international markets. As both Vince and George mentioned we completed content licensing agreements with BT Sport in the U.K., Fox Sports in Latin America and PP Sports in China. We believe these partners provide both Raw and SmackDown with strong distribution to reach both current and new WWE fan household.
While producing the two highest rated programs on USA Network Monday Night RAW and SmackDown Live, we also continue to produce and develop other new original programs across platforms.
On television we launched a new season of Miz & Mrs. on USA network earlier this week. And we've renewed Total Bellas for a fifth season on each E!. On our direct to consumer network, we added more than 90 hours of original content, including live in room specials such as the Shields final chapter, and new talent documentaries such as WWE 24 the year of Ronda Rousey.
For social and digital platforms, we created over 200 hours of content including our UpUpDownDown YouTube feature of WWE Superstar Xavier Woods at E3. We also are developing a new unscripted series entitled entitled Fight Like a Girl for the mobile first platform Quibi and on live action family movie entitled The Main Event to premiere on Netflix in 2020. This new shows build upon the plans we've previously discussed for a weekly studio show on Fox Sports 1, which will debut this fall and we're also producing documentaries on our WWE Legends under the Amy biography banner, which will premiere in the first quarter of 2020.
Turning to our Live Events business as shown on Page 7 of our presentation, adjusted OIBDA from our Live Events declined $1.5 million primarily due to lower revenue from our international events. Outside North America, lower ticket sales reflected the staging off 6 fewer events and weaker performance as average attendance declined 14% to 4,900.
During the quarter, we continue to successfully stage large-scale events for our fans including WrestleMania, which attracted more than 82,000 fans to a sold-out MetLife Stadium and Super ShowDown in Jeddah, Saudi Arabia.
Further develop diverse talent base that supports such events, we held our largest-ever talent try out in China last week, which featured 40 participants. And finally, we announced that we were performing in China for 4 straight year with an event in Shanghai the Mercedes-Benz Arena this September.
In our consumer product segment, adjusted OIBDA declined slightly based on a $3.6 million reduction in revenue from the prior year quarter, primarily due to lower sales of merchandise on WWE Shop and lower royalties from the sale of toy products.
As a key initiative of our consumer products business, we continue to expand our mobile game portfolio with the launch of WWE Universe. The game was developed in partnership with Glu Mobile, a more key publisher known for its popular Tap Sports Baseball game franchise.
As we launch the game, we continue to increase the penetration of our mobile games. At quarter end, we had nearly 115 million installs across our entire mobile game portfolio. Additionally, in collaboration with Mattel, we secured premium merchandising space at Walmart's and supported that placement with retailtainment [ph] activity in 1,300 stores over a 4-week span.
On Page 9 of our presentation, it shows selected element of our capital structure, as of June 30, 2019, WWE had approximately $296 million in cash and short-term investments and we estimate that we have approximately $200 million in debt capacity under our revolving credit agreement.
In the quarter, we had negative free cash flow of $27.5 million as compared to $66.4 million in the prior year. The change was predominately due to the timing impact of our recent event in Saudi Arabia on working capital. This year's event was held in June and last year's event was held earlier in the quarter in April.
To a lesser extent, the change of free cash flow also reflected a $12.1 million increase in capital expenditures, the majority of which was related to the execution of our workplace plan and lower operating performance.
For the third quarter 2019, we estimated adjusted OIBDA of $17 million to $22 million. This range and result represent a year-over-year decline in adjusted OIBDA primarily due to increased fixed cost, including the impact of strategic investments, as well as lower WWE Network revenue, which more than offset the escalation of core content right fees.
For the full year, we continue to target record revenue of approximately $1 billion and adjusted OIBDA of at least $200 million. This guidance assumes continued improvement in our engagement metrics, a second large-scale event in the MENA region and the completion of the media rights deal in the MENA region.
We believe we have agreements and principles with the Saudi - in principle with the Saudi General Sports Authority on the broad terms for the latter 2 items. However, this understanding is nonbinding. It is possible that either both of these business developments do not occur on expected terms and/or the engagement does not improve as assumed.
We evaluated this potential outcomes and currently believe that most likely downside to our adjusted OIBDA would be approximately $10 million to $20 million, below our current outlook.
Our full year guidance reflects strong fourth quarter results. Substantial revenue growth from both our new content distribution agreements in the U.S. which we become effective in the period and the aforementioned media rights deal in the MENA region.
As you know, we're in the process of finalizing our distribution plans for Raw and SmackDown in 2 international markets, India and the Middle East. As we stated in our last earnings call, we expect to finalize these plans later this year and once we have added visibility for 2020 and the rest of our business, provide additional perspective on our long-term strategy, key initiatives, 2020 financial performance and a longer-term business outlook.
We believe in the context of the ongoing media industry trend that we are well positioned to leverage our focus on content, digitization and globalization to drive long-term growth and shareholder value.
That concludes this portion of our call and I'll now turn it back to Michael.
Thank you, George. Alan, please open the lines for questions.
Yes, sir. Thank you. [Operator Instructions] We'll take our first question from Curry Baker with Guggenheim. We'll take our first question from Laura Martin with Needham.
Hi, guys. Thanks for taking the question. I appreciate it. So this $10 million to $20 million lower based on - it sounds like some of that is on the Saudi Arabia. Could you remind us what's going on in Saudi Arabia under the deal terms because I remember you sort of came up last quarter 2 and why that's having such a big impact?
And then also could you talk about free cash flow lower by $100 million this year? Was that related to the working capital and what's your free cash flow outlook for the rest of the year, please?
So we just had an event on June 7. That event was part of the 10-year agreement that we've signed and Laura what we're saying is right now in our forecast, which is what depends our guidelines, our guidance is our internal forecast, we are assuming that will do a second event in the region and that we will also complete a media rights deal in the region. And if those 2 comes to fruition, we believe we will hit our $200 million.
And what we're saying on the downside is, if some combination, not the ultimate downside case but our best estimate downside case around either both development coming to fruition or the engagement not improving to the level we expect it to, we estimate to most likely downside it to $10 million to $20 million.
On the free cash flow side in the quarter, because of the timing of the event in the accounts receivable, our collection of that because it happened so much later in the quarter. Last year, the MENA event happened on April 27 so we collected in the second quarter. So we didn't have an outstanding AR at the end of the quarter. This time, we expect to collect in the third quarter, which is why we see that reverse.
While we don't give forward-looking free cash flow guidance, what we will say is we expect another $30 million to $40 million in CapEx in the second half of the year. The reversal in the AR that I mentioned and, obviously, because of the improved performance in the fourth quarter, we expect positive free cash flow year-over-year.
Super, helpful. Thanks, guys. Thank you.
Next we'll go to Curry Baker with Guggenheim Securities.
Thanks for the question. I have 2. So first on your 500 million share repurchase authorization. You weren't very active in the quarter I think you needed like 900,000. Can you maybe help us think about how you think about repurchases in the back half of the year given where share prices now I think you want to be opportunistic? And then I have one more in India? Thanks.
Curry, we said before to the extent we do repurchase on variety of factors, first and foremost. We evaluate intrinsic value of the business and future cash flows, we apply margin safety. We also look at the liquidity and capital needs of the business. How we feel over markets stat. The regulatory compliance requirements we have to comply with any other corporate considerations we have so that what goes into it in Q2 after evaluating all that we were in the market for about 12,000 shares average price of 74 like you said about thousand million and we'll continue to evaluate that – back of the year and will have what we been the improvement. But were not going to give any guidance on that.
Okay. On India, I know you can't really speak to negotiations at this point, but could you maybe provide us with any incremental color you have just on how TV ratings there an AVOD consumption tracking? And then also just on the market in India broadly, can you speak to the overall state of the pay television market there as well as any specifics in terms of competitive dynamic sort of demand for content specifically WW E! content India?
I really don't want to get into characterizing discussions that are ongoing. So I'm going to stay away from that. Our general belief is that over the next 10 years, the India media and entertainment sector is going to grow fairly significantly. And so our focus is how we deepen the brand over the long term and Vince mentioned, localization, localized content. India certainly had the top of the list potentially on doing that.
Okay. Can you provide just consumption data there just in terms of what you're seeing how consumption is tracking in the first half of the year? Is there anything you can provide?
I don't want to start talking about internal data and market just given where we are. I think there are reports out there on the India media and entertainment sector. I read one recently by EY, I think it came out in April or May and you got a sense of who's consuming what, what's being consumed and the long-term outlook at least from EY's perspective. But ultimately, I don't want to talk about our internal data just given where we are in early discussions.
The next question from Vasily Curcio with Cannonball Research.
Since we are getting closer to Q4 in 2020, I was wondering if you could comment on this massive if I was trying to extrapolate from what's implied by Q4 for 2020. If I would just to take what's implied by your guidance, take out at this MENA agreements and annualize that number and add Saudi Arabia events to that, would that be a decent back-of-the-envelope approximation of what EBITDA should look like for 2020? And if I'm wrong, we're am I going wrong here?
I'm sorry, but I'm not going to get into try to architect the 2020 model on this call. When we're ready to talk about 2020 in the future, we'll give our review of that, but I'm uncomfortable getting into that right now.
Okay. But if I asked this question, Q4 is closer to the run rate of quarter. There will be no such pronounced seasonality quarter-to-quarter starting in 2020 because of the media rights deal kicking in. Would that be correct?
I think a lot of it will depend on how we choose to invest in the future and something we're still evaluating. So again, I don't want to start talking about what how the best calculate 2020 or what's an applicable trend. We're going to stay away from 2020 right now.
We'll next we'll go to David Karnofsky with JPMorgan.
Executive directors can you just comment on why now? What's the right time for this move and just maybe expand a bit on what the responsibility would be and how much latitude will be given in the process?
Why now question is a logical one. I can't personally be in the weeds any longer and we have these 2 individuals who have a longer range of point of view and d developmental point the of view. Both of these individuals have extensive backgrounds in the business from various aspects and with the organizational aspects that they have and the depth of talent, executive talent we now attract is going to be really good for our business. And how much latitude they will have, that's again it allows me to have a broader overview of things and escape from just getting on the weeds. So they'll have a lot of latitude.
Okay. Shifting a bit, on the Saudi event, George, can you clarify on what's actually reversing here? Does this mean that some revenue you thought that's coming in Q4 ended up being part of Q2 event?
Yes. Something like that, David. Again our forecast guidance, we made a forecast around what we thought the event would generate and there's a reversal of that moving original expectation for Q2 into Q4 and vice versa. So.
Okay and just one more if I can, regarding the future outlook I think back at Q4 earnings, you had stated that given the investment cadence, OIBDA would be potentially flat to down. Just trying to understand the change relative to today's guide and whether that potentially reflects a shift or maybe overall increase in your investment spend?
I think it's a couple of things. Number one, some of the engagement metrics that we've seen trickle into Q3, so it's a little bit lower, we believe. And then there is an impact on the investment side both some of the year-over-year lapping as well as I mentioned in the prepared remarks, we've made additional investments into our content creation, our digitization strategy, our localization. So that we thought it's important to do now and we've done that. So that's what's driving that change that you referenced.
Next question comes from the line of Eric Handler with MKM Partners.
Wonder if you could talk a little bit about WWE Network relaunch, how long will it take do you think before we start to see the tiered pricing? How long before we see some additional foreign languages being introduced or increase localization efforts?
I think the cadence will be the free-tier first, which we're really excited about, paid tier, premium tier, second, and then our first additional language we believe after that. I think you'll start seeing things this year around that and probably all 3 gets done within the next 12 months or so depending on how the rollout goes, but you begin to see those business this year.
Great. And just as a follow-up. With regards to the international TV deals that are done. I know you don't want to talk the economic value of those deals but maybe you could talk about maybe some of the reasons why you went with BT and structurally, some of the differences may be based on the tiers that you're going to be on or just how it increases reach both in Latin America and the U.K?
Look, ultimately, we make our choices based on evaluating the market, evaluating potential partners and coming up conclusion on the balance between economics, reach and engagement. And all 3 cases given the current market dynamics, we feel not really good where we ended up. I don't want to talk about specific clauses and agreements, but I would say generally, overall in across all 3., we've been able to from scope of rights perspective, get more flexibility to what we think is (inaudible) as Vince touched all-in his remarks. So we really excited, I don't want to get into specifics again because some of this is confidential.
[Operator Instructions] Next question comes from the line of Ben Swinburne with Morgan Stanley.
I have 2 questions. There's been a lot of press written about sort of the state of the product or state of the content, variety of article recently about some of the engagement in ratings trends. You guys sound pretty optimistic that you've turned a corner and I know George you've caveated the guidance around continued improvement. I'm just wondering if you could spend a couple of more minutes talking about how you see the state of storylines and the product on the screen currently relative to the past 2, 3 quarters where it's been moving in the wrong direction just to see if we can address some of the controversy that's out there? And then I just want to ask following up on the network. Do you think some of the network the subscriber trends have been impacted by your transition in platform, in other words, I don't know if you maybe had less product innovation or marketing behind it because you been waiting to move off of the out of these new platforms or if you think it's more chalked up to the content cycle.
As far as the content is concerned, I'll address that. We have definitely turned the corner and again as I've mentioned, we have Executive Directors with each brand now. They're going to grow in a more in-depth I think notwithstanding that, we spent more time on storylines, good ones, and also talent development. It's a combination of a lot of things on the things as far as coming together and what I guess, I'll call it relaunch in terms of our content.
And then Ben to your question on the network. I think it would be factually correct to say that as we put our engineering resources over the last 12 months, the design and as this creates this new experiences that we're rolling out now that meant there was less time in resources to innovate on the what will be now the legacy platform. So you could argue that may be that has some impact. However, from our perspective, we think the major impact was in related to engagement metrics that didn't translate at the same level of year-over-year growth around WrestleMania that we've seen in the past. And just as you know, subscription businesses are driven by both the gross adds in the retention and for us, our biggest gross add moment as you'd expect is around WrestleMania. So if that doesn't perform if it's down year-over-year that's just the mathematical repercussions into the forward time period. So we think it was more of that. But to your point and it's hard to parse it all out, there's no doubt all you have to do is look at the iOS or Android version (inaudible) we've done a lot of updates in the network for about 12 months because we have to make choices, we have limited resources and those engineering resources have been really around creating and developing a new platform, which we are really excited about.
Next we'll go to Marci Ryvicker with Wolfe Research.
I have 2 clarification questions. First of all, I thought the issue was the buyback that you have material non-information public information related to all of international deals and that's why you can buy back stock. So can you just talk about that? And then secondly, we're getting asked during the call about cost saving because I think everyone was expecting you to lap the big increases coming into the second half of the year.
Yes, I don't want to comment specifically on your question around MMPI. I'll say what I'd said around when I responded to Curry on regulatory requirements are part of the valuation on whether or not to execute within the buyback program. On the cost side, I mentioned that before earlier in the year, we had expected that the overlap of 2018 investments and the comp would get easier as we move through the year in the third and fourth quarter, which is it does. However, we chosen to make some additional investments based on our view that it will create more value than delaying them. So that's why you saw the change, something we've decided to do.
Next we'll go to Eric Katz also with Wolfe Research.
So 1 housekeeping thing. As far as Q4 1 timers are nonrecurrings. We have I guess the U.S. deal, the Saudi deal and the Saudi event. Is there anything else that we should be aware of?
Well, the deal in China, the deal in Latin America, the year-over-year impact (inaudible) which is why didn't call them out and I just think generally the engagement trend and the impact of those engagement have on the more transactional areas of our business, which includes our digital advertising or Consumer Products businesses. So we didn't call out each independent line item but if you think about the transactional side of the business being more impacted by the day-to-day, that's why we need those engagement metrics at the minimum stabilize or continue to improve to a point where there back where they were first half of last year.
Okay. And then just coming back to the engagement a bit more. Clearly, we are addressing head-on with the big hires. Can you talk a little bit about the intended direction of the content going forward because if it's going to be a bit agent edgier, I'm just kind of curious of how your partners feel especially Fox because that's probably stricter from broadcast?
We're going to be a bit edgier but still remain in the PG environment. We've just come anywhere close actually to go into another level. So that will be something will do in terms of direction of content, more controversy, better storylines, et cetera. But at the same time, we're not going to go back to the bold attitude era and we're not going to do blood and guts and things of that nature such as being done on perhaps a new potential competitor. We're just not going to go back to that gory that we graduated from. And again, a more sophisticated product. Again attracting much better writers and attracting better management things of that nature. So again, I feel really good about it.
One more. There are some rumors out there that there could be somewhere content coming to one of your partners. I know you can discuss any negotiations but just (inaudible) can be something that comes to television. Is there a thought process on whether you'd rather keep that on the network or a scenario or that could come to television?
Okay. I think we said this before, create 1,500 hours of content across a variety of different genres, including about over 300 in ring content. And for every piece of content, we need to evaluate what's the best platform. Wasn't that long ago that if you wanted that content seen by someone you have 1 choice, you have to find multiple partners around the world to reach any audience. Today, you can still do that. You can go direct and have it supported by advertising and reach after world's population. Or you can do a direct and have it supported free subscription advertising. So that's to your question applies to everything. And we've got always (inaudible), we're trading a lot of things like economics, engagement, reach, reaching new audiences. So it applies to everything including NXT. We're not going to talk about NXT's specifically about it's a constant discussion probably what we spent the most amount of time internally talking about is what content to create and what's the place best place for it.
We'll go to Alan Gould with Loop Capital.
I have 2 questions. First, can you give us some sense on how much promotion Fox is going to do once the programming goes in October 4. I assume at least Thursday night football we'll promote Friday night's wrestling, et cetera. And secondly, on Indian Mid East, can you just give us some sense when those deals expire. I'm assuming they have not expired yet or I assume content is still on both markets.
I'll take the Fox question. As Vince mentioned, we are extremely excited about the opportunity to partner with Fox. In terms of exactly what they're going to do for any of you that have been watching NASCAR or any of the other broadcast that Fox has been doing. They're already promoting SmackDown through integration into their current broadcast they're already doing that. What I will say that, that will be dialed up significantly as we get into the month of September. Obviously, as we talked about in the past, they put together 1 of the strongest promotional plans I've seen in my time in terms of leveraging their Thursday night football packages, what they have with baseball, again what they do with NASCAR. So on their Sports side, absolutely in every major sports broadcast that they have, WWE SmackDown will be promoted. In addition to that, they obviously have a strong programming on the entertainment side. So it won't be exclusive to just Fox Sports, it will also be their entertainment programming as well. They're doing some really besides just kind of the traditional promotion with(inaudible) , if you will, they're also looking to integrate us into their programming organically whether it's the Messinger or some of the other shows that they have coming out. So again, I'm not going to get into the specific detail around the economic value of what they're promoting but suffice it to say, that it is significant and to Vince's point earlier, given the number of households they reach, this is 35% higher than what we do on USA Network partnered with that level of promotion is the reason why we're really excited coupled with where storyline is going that we see this as a real opportunity come October.
At the same time as far as promotion is concerned, we've been led to believe as well that NBC is going to up their promotional efforts and they can equal Fox. But again, they do now are in a more competitive situation obviously and wanted to do much better with Raw.
And Alan, on the questions all-in now, the current agreement expires at the end of this year. In the Middle East, our Pay TV agreement has been terminated but our free-to-air agreement continues to be in place. And as a reminder, YouTube all of YouTube has some highest per capita consumption in the world in that region. So we're pretty good at activating using the digital channels and continue to be pretty aggressive on that right now.
[Operator Instructions] we'll next go to Laura Martin with Needham.
So Vince, one of the things you said last quarter was that content that your storylines in your content loss of talent was affecting ratings and while the ratings got better in the quarter we still have negative comp in not only ratings but live event attendance and that's affecting consumer products. And you're like the best business I cover and my question to you is at what point do you decide that investing this extra money and hiring extra writers actually doesn't solve the problem because the problem is structurally shrinking ratings for the past that linear platform and the fact that there's more competitors coming to entertainment programming over-the-top. So what point do you stop spending extra money trying to get the ratings up because they actually can't go up. What metrics are you looking for?
As far as competition is concerned, competition is good for everyone. I think that's generally the case. Although again, we're hoping that to the extent that they are competition that they don't continue on blood and guts and gory things that they have been doing. And I can't imagine, I can't speak for it but I can't imagine they would put up with that. But nonetheless as far as investment is concerned, into the product in the content, it's not one of the sizable type things. It's just one of the restructuring and more of utilization. Yes, bringing in new faces, new blood, different kinds of ideas and connections and so forth. So again, it's just not 1 (inaudible), it's a combination of what will happen in the future. So again I'm bullish on all of that. When you look at not just television ratings but metrics from social and digital, it really is a new way of promoting notwithstanding the fact we are going to continue to build the mothership as it were withdrawn SmackDown. So again from an investment standpoint, that's where we should obviously invest your dollar but it's not sizable at all.
And I'll add to what Vince said is how we think about opportunity in the size of the opportunity. It is important. If you don't think there's enough upside that might change your perspective on investing. And you're right, we also believe there's going to be continued competition because there's going to be fragmentation, more and more content. Our belief right now is that if you have the scale to cut through the clutter, i.e. you are an absolute basis you may be getting a slightly less share of the pie but if you were cutting through the clutter that you have an economic opportunity. And we continue to be in the U.S. one of the top deliverers of live eyeballs on a consistent basis even with the declines, we're still in the top. Other than the NFL, broadcast and cable, we are in that next year with the NBA and Baseball, for example. We believe that content is going to continue to get more valuable because it will be harder and harder to cut through the clutter. And so we do think it makes sense to invest, to maintain that position.
Alan, do we have more questions on the line.
No, sir. We have no further questions.
Thank you, everyone. We appreciate you listening to the call today. If you have any questions, please do not hesitate to reach out to us. Thank you.
That does conclude today's conference. We thank everyone again for their participation.+