World Wrestling Entertainment Inc

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Earnings Call Transcript 2020-Q3

[Operator]

Hello, everyone, and welcome to the WWE Third Quarter Earnings Webcast. We have just a few announcements before we begin. [Operator Instructions].

I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead.

[Michael Weitz, SVP, IR]

Thank you, and good afternoon, everyone. Welcome to WWE's Third Quarter 2020 Earnings Conference Call. Leading today's discussion are Vince McMahon, WWE's Chairman and CEO; Nick Khan, WWE's President and Chief Revenue Officer; Stephanie McMahon, WWE's Chief Brand Officer; and Kristina Salen, WWE's Chief Financial Officer. Their remarks will be followed by a Q&A session.

We issued our third quarter earnings release earlier this afternoon and have posted the release of our earnings presentation and other supporting materials on our website.

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. You should note that all financial comparisons are versus the year ago quarter, unless otherwise described.

Finally, as a reminder, today's conference call is being recorded, and the replay will be available on our website later this evening.

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

[Vincent McMahon, Co-Founder, Chairman & CEO]

Thank you, and good afternoon, everyone. I'll talk some generalities here as weigh into the specifics later on Kristina and Stephanie and everyone. But nonetheless, I think that I've never felt as confident as I currently do in terms of this -- of our new management. It's really extraordinary what this has done for the entire business and other executives and much further below.

There's a new spirit, a new vibrance. And I don't know if you find this anywhere, there's a view of optimism, not just for optimism stake, but when you look at where we're going to go in the future and use the resources that we have as well as other things like, this is a fun, exciting place to be. And of course, that new management team is, as you mentioned, Nick Khan, who is the President and, of course, CRO, Kristina Salen, new CFO, was mentioned and, of course, other individuals that are here, that have been here before, they now feel the same way. The interaction is reinvigorating, it really is.

And Stephanie, who's Head of Brand Management, does now have a enhancive position to enhance growth with Nick and others as well. And there are many other things going on here. But I just want to -- whether we're going through a whole bunch of numbers of stuff that you already have and going through the ThunderDome, COVID, and all those, I just want to say how I really feel about our new management team. And quite frankly, that's all that I say.

This is Nick.

[Michael Weitz, SVP, IR]

I'm going to turn it over to Nick Khan.

[Nick Khan, President & Chief Revenue Officer]

Thank very much, Vince. Thank you very much, Michael. As an introduction, I wanted to share some of my background and motivation with you, our analysts and investors. As a co-head of television at Creative Artists Agency, otherwise known as CAA, I had the good fortune of working with some of the top talent in the media business as well as the Southeastern conference, Tiger Woods and Phil Mickelson and their teams and putting together the head-to-head event a match, top rank boxing and, of course, WWE.

I was a practicing litigator prior to that, and perhaps more importantly, as a student, I was an usher at Wrestlemania IX in my hometown of Las Vegas.

WWE Studios. Let's talk about that first, if we could. We're in development of various new content. A few shows that were already announced and I'm going to announce to you here today that we happen to find really interesting. Total Bellas, season 6, premiering this November. A&E, a show currently titled The Quest for Lost WWE Treasurers, hosted by Paul Livek, otherwise known as HHH; and Stephanie McMahon, our Chief Brand Officer, who you will be hearing from shortly. This is a multi-episode order that will take viewers on the ultimate hunt to find some of WWE's most iconic, lost memorabilia. This deal furthers our relationship with Hearst Communications through A&E.

A&E has also ordered additional episodes of our soon-to-be-released documentary series, which features stand-alone documentaries on legendary superstars like Stone Cold Steve Austin, The Ultimate Warrior and many others.

If you recall, the Andre the Giant documentary from 2018 was not only the highest-rated sports documentary on HBO in the last 15 years, but was the highest-rated documentary on HBO in the last 15 years. Produced by WWE Studios in association with HBO Sports and executive producer, Bill Simmons, founder of The Ringer.

With that said, I'm happy to share with you that in a groundbreaking deal, we have sold a multipart documentary to Netflix on the life of none other than our very own Vince McMahon. By groundbreaking, I mean one of the highest budgeted docs in Netflix's history. Bill Simmons, as previously mentioned, will executive produce. Chris Smith, the amazing Director of Netflix' Fyre Festival documentary will direct and produce alongside WWE Studios.

As I mentioned when I first joined the company, it's rare to have an opportunity to work at a company that's not only legendary in what it has already accomplished, but also uniquely poised to expand across all lines of business to maximize current opportunities and find new paths to higher growth. This includes exploring an alternative strategic option for WWE Network, realizing greater economics from WWE's international markets and cultivating new business opportunities.

Let's discuss WWE Network for a moment. Even with potential partners impacted by COVID-19, conversations have resumed for alternative strategic options to our current model. We're currently unable to estimate when that alternative option will be completed, but we still believe in the potential for a transaction that enables WWE to reach a larger audience and realize a greater economic return.

In the interim, we continue to capitalize on the growth in digital consumption, promoting content sampling and subscription with a free version of WWE Network. Since the pandemic began, WWE subscriptions are up. Even with our marquee annual event WrestleMania being presented in a nontraditional way.

Notably, the third quarter marked an increase in network viewership and content consumption. 2.4 million total viewers watch content across all tiers, representing a 60% increase. And those viewers watched 37 million hours of content, which was an 8% increase. Perhaps more importantly, average paid subscribers to the network increased by 6% to $1.6 million.

To realize greater economics from WWE's international markets, we remain focused on developing localized content, which utilizes local talent and is produced in local language. We're excited to now be working with our content partner in India, Sony, on a 2021 event that will primarily feature our developing Indian superstars. That event will air in India on the Sony platforms and will also be distributed domestically in the United States. We believe partnerships like this are the best way to build engagement and to maximize the value of content for our international distribution partners and our fans.

In the current environment, we expect to invest in international at a measured pace, balancing near-term results and long-term growth objectives. WWE has demonstrated tremendous creativity in responding to today's unprecedented challenges. And in our view, we are well positioned to leverage the value of live content and growth in digital consumption.

In this context, we believe WWE can develop new content in distribution platforms, introduce new products and increase our returns from international markets. We look forward to sharing our progress on these objectives with you in the future.

Given the importance of WWE's brand strength for future success, I am pleased to introduce Forbes number two most influential marketing executive, Stephanie McMahon.

[Stephanie Levesque, Chief Brand Officer & Director]

Thank you, Nick, and thank you for embarrassing me by calling that out. I appreciate it. A lot of people ask me, what does a Chief Brand Officer really do. And while every company is different, my role here is to expand and strengthen WWE's brand by amplifying our presence across all media platforms, deepening engagement with our fan base, creating value for partners and driving revenue.

Everything we do begins with what we call the WWE Universe, comprised of our fans, employees, partners and superstars. We call it the WWE Universe because it is inclusive, like being a part of a giant community, which is especially important during times like these.

When the pandemic hit and sports leagues and content providers began to postpone and shut down, WWE became focused on not if, but how we were going to continue to deliver our in-ring content to our fans through our media partners. We needed to provide relief for our audience and escape from their fear and uncertainty and do our best to deliver on our mission of putting smiles on faces.

So WWE did what we do best, we pivoted and began to innovate. WrestleMania went from a sold-out Raymond James stadium in Tampa, Florida, with over 80,000 people to a 2-night event at our performance center with no one in attendance. Raw, Smackdown and NXT followed suit, and we began to test and learn in what was our new normal.

We experimented with audio techniques and cinematic style matches. We started to bring in some of our developmental talent to serve as an audience through flexiglass, but it wasn't good enough. After many months, we found a way to bring the spectacle back to WWE.

On August 21, we launched what we call WWE ThunderDome. We returned to an arena setting and took up residency at the Amway Center in Orlando, Florida. We partnered with the famous group to bring nearly 1,000 live virtual fans back to our show. We're using pyrotechnics, laser displays, augmented reality and drone cameras in ways we never have before, making Raw and Smackdown feel alive again. And we have seen a lift in the ratings of 6% for Raw and 12% for Smackdown as compared to the prior 4 weeks without fans.

Additionally, we made an investment in WWE's performance center, transforming the location into the capital wrestling center, a nod to my grandfather's organization and a new location to shoot in-ring content. The CWC launched on October 4 for NXT's live special Takeover 31.

Also, as a part of the localization strategy Nick referenced earlier, we were able to bring back the NXT UK brand with our partners at BT Sports, shooting out of their state-of-the-art studio from Queen Elizabeth Olympic Park in London in the U.K.

It's incredible to watch production teams from Orlando, Stanford and London, all working simultaneously connected through technology and innovation to create this show. And as more and more people started to gravitate to streaming platforms, we adjusted our digital posting strategy to incorporate new original content, longer matches versus clips, and resurfaced high-performing historical content across YouTube, Facebook and WWE Network, resulting in increased digital views of 28% excluding the impact of geographical restrictions in India.

We recently surpassed 50 billion views on YouTube, making WWE the fifth most viewed YouTube channel in the world. And we've partnered with new and upcoming platforms, most notably TikTok, where we are the second most popular sports brand behind the NBA.

In order to reach new audiences, we need to expand outside of our ecosystem. In addition to some of the content Nick mentioned, we also have a pop culture strategy where we work to bring celebrities and influencers into our programming as well as casting our superstars outside of our programming. Some recent integrations in the quarter included Adam Sandler, Chris Hemsworth, Ken Chong, and just this past Monday, Matthew McConagha was a guest in the ThunderDome on Raw.

Most importantly, we need a reason to keep our audience coming back for more. In addition to compelling content, people want to invest their time and resources in a brand that has purpose and value. WWE continued to support our community partners with the resources they needed to help them deliver on their mission. We quickly transitioned from in-person events to virtual events, including hospital visits, career workshops through Zoom for Hire Heroes to support servicemen and women, virtual anti-bulling rallies with Boys & Girls Clubs of America and digital meet and greets for Wish kids through Make-a-Wish Foundation. We also produced content to support physical and mental health for Special Olympics athletes as well as kid power-up videos for the launch of UNICEF's Kid Power at Home platform. And during the month of September, we engaged our fan base, employees and superstars to raise money and awareness for pediatric cancer research through our partnerships with the V Foundation and Hyundai Hope On Wheels.

Speaking of partnerships as a final measurement of our brand strength, our advertising and sales revenue outpaced industry trends. Top global brands continued to partner with WWE throughout the year even during the challenges with COVID, highlighted by companies such as Coca-Cola, Cricket Wireless, Hyundai, Mars, Microsoft Studios, Papa John's and Unilever. And this month, we announced a major new partnership in the beer category with Constellation Brands, the largest beer import company in the United States, focusing on their Victoria, Corona and Modelo brands beginning next year.

In 2021 and beyond, we remain bullish about the opportunity to focus on long-term partnerships and capitalize on our unique ability to bring engagement, scale and reach with the ease of negotiating with one party, WWE.

And now I will turn the call over to our new Chief Financial Officer, Kristina Salen.

[Vincent McMahon, Co-Founder, Chairman & CEO]

Wow, I wouldn't want to follow that.

[Kristina Salen, CFO]

Thank you, Stephanie. I'll try. Hello to WWE shareholders. Today, I'll review WWE's financial performance, liquidity and capital structure and business outlook. As a reminder, all comparisons are versus the year ago quarter, unless I say otherwise. WWE generated third quarter revenue of $221.6 million, up 19% and adjusted OIBDA of $84.3 million, up more than 2x, both were driven primarily by higher rights fees from U.S. distribution agreements. Although government mandates continue to result in the cancellation of live events, WWE offset the absence of ticket sales with a reduction in event-related production expenses and other short-term cost savings.

During the quarter, WWE executed a reduction in force, resulting in severance expense of $5.5 million. Given the nonrecurring nature of this expense, it has been excluded from adjusted OIBDA.

To review the third quarter performance in more detail, let's turn to Page 3 of the presentation, which shows revenue, operating income and adjusted OIBDA contribution by segment. Looking at the WWE media segment, adjusted OIBDA increased approximately $60 million to $101.7 million, primarily due to higher domestic rights fees for Raw and Smackdown programs. Despite a challenging environment, WWE continued to produce a significant amount of content, more than 550 hours of programming for television, streaming and social digital platforms. As Stephanie mentioned, with the launch of WWE ThunderDome in August and the Capitol Wrestling Center in October, WWE continues to lead the sports and entertainment industry with innovative ways to safely recreate the interactive in-arena atmosphere that has been a staple of WWE events for decades. This investment in a large-scale virtual experience brings a high level of production excitement and, most importantly, brings our fans back into the show.

Although third quarter ratings for Raw and Smackdown declined 29% and 2%, respectively, they showed improvement from July to September. And they achieved this result despite unprecedented competition from the return of major sports, such as the NBA, NFL, MLB and including playoffs and Premier events, such as the Kentucky Derby and the Indy 500.

Meanwhile, while delivering Raw, Smackdown and NXT on television, WWE announced the continued second season of Miz & Mrs on USA Network and the sixth season of Total Bellas on E! And reaching beyond television, WWE also produced original content for social and digital platforms. In partnership with Hyundai, WWE launched DRIVE FOR BETTER series, which is posted on WWE's digital platform and Superstars social media channels. And WWE debuted the podcast Uncool with Alexa Bliss, which is available on all major audio streaming services.

Now let's turn to WWE's live event business on Page 5 of the presentation. Adjusted OIBDA from live events declined by $1.2 million to a loss of $4.1 million due to a $22.5 million decline in live event revenue. These declines were primarily due to the loss of ticket revenue resulting from the cancellation and/or relocation of events.

Until mid-March, WWE held arena and stadium-based events in front of ticketed audiences. During the third quarter, however, WWE held no such events. At this time, it is challenging to predict when ticketed live events will return, but our intention is to return as quickly and safely as possible. Looking at WWE's Consumer Products segment on Page 6 of the presentation, adjusted OIBDA increased $1.60 million to $5.6 million due to higher sales of merchandise on WWE Shop, the e-commerce sites as well as higher sales of video games and toys. Notably, the increase in e-commerce offset the absence of venue merchandise sales.

During the third quarter, WWE continued to introduce new products, expanded video game portfolio and develop partnerships across product categories. The strong e-commerce business was driven by the release of 6 new title belts, including the Ric Flair Signature Series and by the launch of 2 targeted sites, WWE Legends and UpUpDownDown.

Licensing revenue reflected a 25% sales increase from the franchise game, WWE 2K20 and continue to benefit from the build-out of WWE's video game and toy portfolios. WWE partnership partnered with Wargaming to launch World of Tanks: SummerSlam and with Take-Two to launch WWE 2K Battlegrounds. WWE also partnered with Metal to release WWE Slambulance!, which immediately became a top WWE product at Target and Amazon.

Now let's turn to WWE's capital structure, as shown on Page 7 of the presentation. As of September 30, 2020, WWE held approximately $638 million in cash and short-term investments. This includes $200 million borrowed under WWE's revolving credit facility to ensure the necessary capital to execute the company's strategy and deliver long-term value to our shareholders. In the third quarter, WWE generated approximately $111 million in free cash flow, an increase of $127 million. This increase was driven by improved working capital and the timing of collections associated with large-scale international events, stronger operating performance and, to a lesser extent, lower capital expenditures.

And finally, a word on WWE's business outlook. The spread of COVID-19 and the related government mandates have directed WWE to cancel, postpone or relocate live events since mid-March. WWE is continuing to adapt the business to the changing environment by investing to enhance content production value and deepen fan engagement, with examples of this being the creation of WWE ThunderDome and Capitol Wrestling Center. With regard to fourth quarter performance, WWE anticipates that fourth quarter 2020 adjusted OIBDA will be below third quarter 2020 results. WWE anticipates $40 million to $45 million in incremental fourth quarter expenses versus the third quarter. This is due to $22 million to $27 million from, one, incremental production expenses associated with the creation of WWE ThunderDome and Capitol Wrestling Center; and two, incremental personnel expenses associated with employees returning from furlough. Both of these are expected to continue in the coming year.

Also contributing to the incremental increase in expenses is that WWE booked $18 million in production incentives in the third quarter 2020. This is typical timing for the incentives. Additionally, fourth quarter 2020 adjusted OIBDA will likely be below fourth quarter 2019 results based on the absence of an event in Saudi Arabia, the absence of ticketed live events and, to a lesser degree, increases in other fixed costs. WWE is currently developing its 2021 operating and financial plan and continues to evaluate the personnel requirements and potential investments needed to support WWE's long-term strategy.

Going forward, the potential impact of COVID-19 on WWE's business, which could be material, remains uncertain. Based on the sustained economic uncertainties, WWE is not reinstating full year 2020 guidance at this time. Given the lack of visibility, WWE did not buy back any stock in the third quarter under its $500 million stock repurchase program, but may resume activity on an opportunistic basis in the future.

WWE continues to have significant long-term opportunities. As Nick stated, we believe WWE can develop new content and distribution platforms, introduce new products and increase returns from international markets, and we look forward to sharing progress on these strategies with you in the future.

That concludes this portion of our call, and I'll turn it back to Michael for questions.

[Michael Weitz, SVP, IR]

Thank you, Kristina. Christy, we're ready now. Please open the lines for questions.

[Operator]

[Operator Instructions]. And we'll go first to Curry Baker from Guggenheim Securities.

[Curry Baker, Guggenheim Securities]

First, maybe one on the ratings. Obviously, we all see that the ratings remain under pressure for both Raw and Smackdown. I think we all understand the impact of COVID just on the product generally. But can you give us any concrete plans you guys have going forward to improve ratings? And I guess for investors, just clearly lay out the strategy going forward to improve ratings.

And separately, thinking longer term, if ratings remain at or below current levels, do you think this impacts the overall value of the rights heading into the next contract renewal cycle?

[Vincent McMahon, Co-Founder, Chairman & CEO]

Firstly, consider this, when you look at television ratings in and of themselves, that's what they are. With us, it's one of our many measures. When you look at in total, everyone who looks at WWE through the course of the year, well, when you get into that quarter of the year, et cetera, et cetera, we have far more fans now than we have ever had.

So when you look at television ratings, it is what it is. It's not to say we don't want to increase them, of course, we do. But aside from that, our total audience is much bigger, so you can't just like hang a hat on, okay, ratings are down.

Now without question, we have to have a mothership, and we do in terms of Raw and Smackdown. And from there, clips and comments and other video and so forth, you take it to the next week or the next year or whatever. So it's that -- we're never off the air. It's a Monday Night, and then right into where is we're going back to Friday Night back to Monday Night as well as Sunday pay per views.

But nonetheless, it's fine to say ratings are down and it's just that wouldn't give you that bit of color from us in terms of the overall viewpoint. As far as rating is getting higher, we are doing everything we can. We -- as far as the ThunderDome is concerned, that's been received very well by our fans, brought more back.

Again, it's better writing, better execution and talent that people are interested in. So it's -- that's pretty basic. And Nick, do you want to hit them on the rights?

[Nick Khan, President & Chief Revenue Officer]

Absolutely. This is Nick. In terms of the rights, as Vince pointed out, linear television has lost eyeballs. Viewership has not. So consumption of content across many, many parties is up significantly. Consumption -- excuse me, of content for us, as Vince mentioned, is up significantly. So we're confident in being in the marketplace that our rights are going to continue to go up.

If you look at some of the head-to-head ratings since COVID hit, head to head against the Stanley Cup finals on network TV, our ratings exceeded theirs in the demographic. We went up against the Lakers and Lebron on 1 or 2 occasions. We had a ratings increase week-to-week on that. So we're confident in where the product is going, and we're confident that the marketplace understands that.

[Curry Baker, Guggenheim Securities]

Okay. And then maybe one final question on the MENA television rights. Is there any update there? Are you guys still talking to the Saudis or other parties regarding getting a deal for the MENA region? And if so, can you frame any expectations or time line?

[Vincent McMahon, Co-Founder, Chairman & CEO]

We're still in contact with them on that basis. And concerning our rights, we're still negotiating. And I sure as well don't want to put a time line, when is it really going to happen. But it will happen one day, I don't know when that is.

[Operator]

We'll take our next question from David Karnovsky with JPMorgan.

[David Karnovsky, JPMorgan Chase & Co.]

Nick, I was hoping maybe you could elaborate a little bit on what you mean for potential strategic alternatives for the Network. We get some tail on outright sale to service and maybe give some of the content. And do you envision doing something that would impact the Network on a global basis? Or would this just be on the domestic side?

[Nick Khan, President & Chief Revenue Officer]

Everything you said outside of a sale of the network is what we're looking at. So it would be a licensing of the network. As we know, there are a number of streamers now domestically and abroad. Everyone is looking for subs that will travel. We believe, and it seems like the media marketplace believes that we have those. So we are now in constant dialogue with companies domestically and globally about potentially licensing the network to them.

[David Karnovsky, JPMorgan Chase & Co.]

Okay. And then the other thing you discussed in your prepared remarks was just monetizing international regions better and something maybe you could elaborate on this a little. Would this refer primarily to your core content rights, or would this be something like replicating the Saudi agreement but in other regions?

[Nick Khan, President & Chief Revenue Officer]

Your call is a little muffled on this end. I think I heard it correctly. It's more along the lines of what we mentioned we're doing with Sony in India. The globalized local content as some would say, glocal content. So it's not simply streaming our U.S. content out internationally. We're doing that. It's developing local content for the international territories, for their fans to embrace on an even closer basis.

[Operator]

And we'll go next to David Beckel from Berenberg Capital Markets.

[David Beckel, Berenberg]

I had a question about the free version of the Network. I was wondering if you could share any initial data on viewership or hours watched. And maybe it sounds like you won't potentially be pursuing an advertising deal given the strategic review. But if you could update us on plans for advertising, that would be great. And then I have a quick follow-up.

[Nick Khan, President & Chief Revenue Officer]

Sure. This is Nick. The -- I think some of the numbers that I mentioned when I was chatting earlier about hours spent on WWE network, some of that is due to the free tier, where people can sample the product, which has proven out to lead to new subscribers. So we're happy with the free tier. There are no immediate plans of making it a combo AVOD, SVOD type situation. It's a subscription model with a free tier for now. Certainly, things can change in the future, but that's not the immediate plan.

[Stephanie Levesque, Chief Brand Officer & Director]

And from an advertising perspective, we are in the process of testing various technology to allow us to bring ads in, in whatever strategic way we want to use them.

[David Beckel, Berenberg]

That's helpful. And just as a quick follow-up. On the top of strategic review. I know data is really important to you guys. Is that something you plan to preserve in a strategic partnership going forward?

[Nick Khan, President & Chief Revenue Officer]

Yes. Very important to us. 100%. Thank you.

[Operator]

And we'll go next to Vasily Karasyov from Cannonball Research.

[Vasily Karasyov, Cannonball Research]

My question is about the media segment. So a year ago, the company gave guidance -- the old management team, I would say, gave guidance for an increase in cost. So the estimates went down. And then at that point, we also didn't know the outcome of the Indian TV rights renegotiations, then COVID happened and so on. So I was wondering if you could tell us how much confidence you have in the cost structure that's implied by the Q4 for future years.

And now that we pretty much know the top line more or less, much better than a year ago, at least, do you see this segment as a segment with stable margins, slightly declining, slightly growing margins? Any kind of color on that trajectory, of course, in a normalized non-COVID environment, that would be super-helpful.

[Kristina Salen, CFO]

Thanks for your question. It's Kristina. I'll take a stab at answering it. I think as you think about our expense base going forward, there are two things as it pertains to media events that you should consider. Obviously, outside of media events, the most important thing to consider is the return of live events and touring.

But within the media segment, it's about the reset of the short-term cost savings with regard to furlough, but also ancillary expenses that come into media because of the return-to-live event touring. And most importantly, as we think strategically, it's about perhaps shifting expenses or maybe even investing a little bit further, as we adjust WWE's business model to focus on content production, on new platforms, to focus on digital and then any other investments to support key strategic initiatives within that localized content, for example, comes to mind.

So we're not -- we're still in the process of going through our 2021 operating and financial plans. But those are some of the things that we're thinking about and that we would encourage you to think about as we think about the reset of 2021.

[Vasily Karasyov, Cannonball Research]

And one for Nick, if I may. I think in your prepared remarks, Nick, you said that the approach to spending internationally will be -- I think the exact wording was something like more balanced versus the potential rewards. So I just wanted to make sure I'm understanding that correctly. Is that a departure? Or is it a change to the previous philosophy in terms of spending internationally? Or is it still the same? And if you could just give us a couple of points of what the difference is?

[Nick Khan, President & Chief Revenue Officer]

We simply want to be surgical and strategic with it. So for the Indian Superstar event that we're doing with Sony in 2021, we look at all angles on that. We have to make sure it's the right talent that will resonate in India. We have to make sure that the cost structure of the event is something that will resonate for our business and Sony's business. So it's simply taking a deep dive into each and every one of these events. There will be more of them and making sure that it makes sense for all parties involved.

[Operator]

And next, we'll go to Brandon Ross from LightShed Partners.

[Brandon Ross, LightShed Partners]

I have a couple for Nick, especially since you're a sports rights expert and I know you said earlier in response to Curry's question that you think about for WWE total viewership, but a lot of your profitability, I would say, is reliant on the greater television ecosystem. And I wanted to get your perspective on what you think is going on with ratings, not just for the WWE, but for sports more broadly?

And does that and kind of the broader TV ecosystem pressures impact how you think about who you're going to partner with in the future and how you potentially need to adapt WWE's content? And then I have a follow-up.

[Nick Khan, President & Chief Revenue Officer]

Thanks for the question, Brandon. I think there's a couple of things. I think if you look at the structure of the traditional conglomerates, if you will, so remove the fang for a moment. If you look at the traditional conglomerates, they're all getting there in terms of the recent corporate structural changes. It certainly appears to us that many of these structures are realizing it's about content first, where we put it second. As long as we put into place that the consumers can easily access it.

So would it be so shocking to you, to me, to anyone, who's following this stuff, if Disney in their reorg is looking at, "Well, hey, wait a second, we have great intellectual property. We have great films. We have great sports rights. If we put that all into one package, could we be competitive and beat a company like Netflix?" They probably are thinking that.

If you look at NBC Universal's reorg, it's sort of indicating the same thing. So the most important thing to us in addition to our fans on the business side is that our current partners remain happy with the product. While we all look at the landscape about where the business is going to be in 3 to 5 years from now. I think we all see where it seems to be going. Let's see if it gets there. If it's a streaming-first world, we're prepared for it.

[Brandon Ross, LightShed Partners]

Great. And then I all wanted to get your view on the core content rights internationally, which was a bit of a disappointment last time. Where do you see the biggest opportunities? And what do you think it's going to take to significantly grow international rights?

Is it simply the fangs, which you just mentioned, becoming engaged? And I guess, since you worked on sports rights deals in the past, where do you think the fangs are in terms of their interest for the type of programming that you have?

[Nick Khan, President & Chief Revenue Officer]

So I think we've all seen with Amazon, certainly an appetite for the NFL. We've also seen them sampling internationally, specifically with tennis in the U.K. It's certainly an indicator to me, if you look at some of their recent executive hires. We don't believe that you make those hires unless you're going to get more -- unless you're going to go deeper into the live business.

If you look at Netflix's model, if, in fact, Disney is contemplating whatever they might be contemplating and NBC Universal, the same thing. If you're Netflix, you're sitting there saying, "Okay, we can continue to put out fresh content that registers, perhaps on a weekly basis, but we haven't yet tested live." So are they looking at testing live? Do they look to test it globally or internationally first, so they can make a few mistakes as it seems that Amazon did with tennis?

They're all getting there, if they're not there already. So we're going to be therer with them, again, with our current partners in mind first, but as the business continues to shift and Peacock becomes more of a priority for NBC Universal and with Fox's recent acquisition.

Again, it's all going there. So yes, our anticipation is that the fangs, if they're not all there, the great majority of them are going to be there in the not-too-distant future in terms of live.

[Operator]

And next, we'll go to Steven Cahall from Wells Fargo.

[Steven Cahall, Wells Fargo Securities]

I just wanted to revisit the OpEx guidance. So maybe just first, can you clarify that most of that $40 million to $45 million is going to be at the media segment? And then should we think about that as kind of the new run rate for OpEx before special events, like something you might do in Saudi Arabia or India? I think, if so, it kind of implies that media OpEx is going to be running about $150 million over 2019 levels. So just curious if I'm thinking about that correctly.

And then my second question is kind of connected, which is that it sounds like some of this is going into content production. You're a media company, content is the lifeblood. When we think about that, is this content that you're producing, that you've already got revenue booked for? Is this prospective new content that you want to produce for the network that might be tied into some of the transformative transactions you're looking at? I just kind of want some more clarity on that content production piece since it could be a pretty big piece of OpEx going forward.

[Kristina Salen, CFO]

Sure thing. I'll let Nick answer the content production sourcing part, but first, I'll address your OpEx question. I think, first and foremost, when you think about that $40 million to $45 million and that $22 million to $27 million in incremental expenses. Remember, yes, in part, it's due to increase in production expenses related to ThunderDome and Capital, but it's also associated with the return of employees from furlough. And by the end of the year, we anticipate that nearly all of the employees, who were furloughed, and roughly 25% of our employee base was furloughed, we estimate that the majority of the -- nearly all of them will be back by the end of the year. And so to answer you explicitly then, no, the majority of it will not be in just in media -- the media segment.

More importantly, I'll go back to a comment that I made earlier in the Q&A. It's -- when we think about live events, having clarity around when live events will come back, how many live events we do in a year and what the capacity of those live events will be will give us a much clearer picture with regard to operating expenses.

As I said in my opening remarks, the lack of live event revenue has been offset by the lack of live event expenses. And those expenses may come back, and I say may because we have very little clarity on that at this moment, but those live event expenses may come back at lower revenue because of limited -- more limited capacity constraints due to COVID. So when we think about expenses moving into 2021, we have to consider that as well. And I'll turn it over to Nick to answer the second part about content sourcing.

[Nick Khan, President & Chief Revenue Officer]

Thank you. In terms of the content sourcing, as we all know, it all comes down to intellectual property. We think we have a treasure trove of it here. So it's how do we develop that content, monetize it properly, where it serves the audience and expands the audience at the same time. We think we've made a few good bets. We'll see soon if it pays off.

[Steven Cahall, Wells Fargo Securities]

Great. And then just one quick follow-up. I was wondering if that ratings improvement you talked about since the change of the Performance Center, has that continued into October? I would just love to know if that trend line has kind of continued as planned.

[Nick Khan, President & Chief Revenue Officer]

Yes. Thank you. This is Nick again. Our ratings have held consistent since the cluttered fall season began, with all of the other leagues and sports coming back into play. Our ratings have held consistent across the board in October, yes.

[Operator]

We'll go next to Eric Katz from Wolfe Research.

[Eric Katz, Wolfe Research]

Well, it's good to hear some new voice on the call and congrats to Nick and Kristina for joining. I want to talk on some of the revenue opportunities in the pipeline here. I just want to spend a little more time on the expenses. But first, I want to make sure I heard this correctly on 2021. Was the comment that 2021 OIBDA is likely lower than 2020? And if so, within that, are you assuming no Saudi events in 2021 and no live events for all 2021 or maybe half of it? Any color there?

[Kristina Salen, CFO]

I'm sorry, just to be clear, we made no comment about 2021 OIBDA.

[Eric Katz, Wolfe Research]

Okay, okay. Is there any assumption on Saudi events at all for next year, 1 or 2 or no comment?

[Kristina Salen, CFO]

As I said, and I'm sure you can appreciate, given that Nick and I are about 90 days in the seat. We're very diligently working on the 2021 operating and financial plan with the executive team. And we -- it's our full intention to speak about our strategic focus for 2021 when we meet with you next.

[Eric Katz, Wolfe Research]

Okay. And with regard to the incremental expenses for 4Q, it would appear that about half of that's for the ThunderDome. If you're bringing back the furloughed workers, which I believe you said before, somewhere in the neighborhood of $4 million per month in cuts previously announced, so does that assume that you'll be the Amway Center for all of 4Q because I believe there's some press reports at your contracts for the Amway Center through the end of November? Some of that might be related to when the NBA restarts. And if so, would you guys go back to the Performance Center? Do you have a backup location to set up ThunderDome again? How do you approach that?

[Kristina Salen, CFO]

Our assumption is that we'll be in some sort of center like the Amway Center for the foreseeable future, meaning through 2020 and likely into 2021. And given the fact that there aren't many live events occurring in the United States or anywhere in the world right now, there are lots of places for us to go. So it's not a concern of ours.

[Eric Katz, Wolfe Research]

Okay. Maybe just one last one. On the $18 million in production incentives for 4Q, can you give a little more color on exactly what those are? And is any of that sort of recurring into next year?

[Kristina Salen, CFO]

These are production incentives, not the actual amount, but the production incentives themselves. We receive from -- primarily from the state of Connecticut, but from other states as well with regard to, quite frankly, the production of content. We have received them every third quarter for multiple quarters. In this particular quarter, we felt compelled to call them out because relative to what's occurring in adjusted OIBDA in the fourth quarter. But it occurs every quarter -- sorry, every third quarter for multiple quarters.

[Operator]

And next, we'll go to John Belton from Evercore.

[John Belton, Evercore ISI]

Just a couple on NXT. So separate from the Raw and Smackdown ratings, it looks like NXT has held up pretty well. Wondering, first off, if you can provide an update on when your agreement with USA Network expires for NXT. And now that you've got about a year of distributing NXT through the linear TV under your belt, you can compare monetization there versus on the WWE Network. Any thoughts about how you might plan to distribute NXT longer term?

[Nick Khan, President & Chief Revenue Officer]

A couple of things on that. Number one, congratulations to the entire team, Paul, his team, WWE team on the ratings last night for NXT, which were particularly strong. We've seen an increase in subscribership on the Network even with the absence of NXT on the Network. So we're comfortable with our position there. We're enjoying our relationship with USA. We think that platform has led to many eyeballs seeing our new talent.

In terms of the length of the deal, we typically don't talk about those things unless our partners are on board with us discussing it, but it's a certainly long-enough term deal where we feel that we have a long runway for Paul and team to continue to grow that product the way that they have.

[John Belton, Evercore ISI]

And any learnings from what's been working with the NXT content that maybe isn't working for Raw and Smackdown?

[Nick Khan, President & Chief Revenue Officer]

I mean I think from my point of view, it seems to be working with a cluttered fall schedule across the board. So like Vince said earlier, we always want the best writing. We always want the best talent. To do that consistently, 52 weeks a year, is always going to be a challenge for our company, but I think it's a challenge that we've always lived up to. So we feel good about all 3 products and that all continue to head in the right direction.

[Operator]

Next, we'll go to John Healy from Northcoast Research.

[John Healy, Northcoast Research Partners]

This may be an unfair question, but I'll ask it anyway. I remember when the COVID pandemic started, watching a press conference with President Trump. He mentioned you, Vince, as being one of the people he was going to rely on to give us some feedback about sports and how it could come back and when it could come back.

So given your position as the leader in the industry and live entertainment, what is it that you and leadership are needing to see or want to see before you begin to say, "Hey, we are going to let fans back into the setting where they can consume our products." So I'm just trying to understand kind of mentally, as a leader, what you're trying to see before you say, we're going to go for it.

[Vincent McMahon, Co-Founder, Chairman & CEO]

A couple of things on that. If you recall, I was a part of a panel. Moreover, it was a conference call with Roger Goodell, et cetera, et cetera, and Amazon that one as well. That's to the extend of -- although if you're looking at with that, what is the current one? I don't know. I really don't -- I would suggest it obviously, when COVID lets up and when it is safe for our fans to come in and safe for our performers. I mean that's just all I can tell you in terms of when.

[Michael Weitz, SVP, IR]

Sorry, we're going to stop the call right now. Please, if you have further questions, follow-up with your IR department, Michael Weitz and Michael Guido, we'll be happy to talk with you.

[Vincent McMahon, Co-Founder, Chairman & CEO]

Thank you, all.

[Michael Weitz, SVP, IR]

Thank you.

[Operator]

And that does conclude our call for today. Thank you for your participation. You may now disconnect.