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WWE profits up, ECW praised


STAMFORD, Conn. (Staff) -- World Wrestling Entertainment Inc. announced that its first-quarter results inched up by 1 percent on Thursday. For the average fan, however, the more interesting discussion came in the company's very public support for the new ECW brand.

Having just announced that ECW will stay on The Sci-Fi Channel until December 2007, Chief Executive Officer Linda McMahon was bullish on the brand's future.

"We're delighted that based on its popularity, the Sci-Fi Channel will continue to broadcast ECW television programs through December of 2007," McMahon said during a conference call with analysts. "Our experience to date reinforces our belief that there is strong consumer demand for this unique form of entertainment. Over time, the new ECW franchise should provide a vehicle to further utilize and develop new superstar talent, to increase our international touring capability, and to enhance revenue to this brand with additional pay-per-view events, home video, and other consumer products. We continue to expect that this new venture will achieve at least break-even results this calendar year, and should build value over the long-term."

Chief Financial Officer Michael Sileck said that it was business as planned at the live ECW shows as well. "These ECW events attracted an average attendance of approximately 1,000, at an average ticket price of $26, essentially in line with our launch plan."

As a whole for the WWE corporate entity, quarterly earnings rose to $11.3 million, or 16 cents per share, from $11.2 million, or 16 cents per share during the same period last year. Revenue fell 1 percent to $93.3 million, from $93.8 million a year ago.

Results reflect the absence of domestic cable advertising revenue, after a change in the company's distribution agreement with USA Network. Cable ad revenue was $8 million in the same quarter of 2005.

Also during the same period last year, WWE held one more pay-per-view event than in the 2006 quarter, which brought in $4.3 million in profit.

The details for the number of buys are as follows:

Event Q1 Transition 06 Q1 F06
Backlash 273,000
Judgment Day 231,000 236,000
ECW One Night Stand 280,000 268,000
Vengeance 313,000 320,000
Great American Bash 224,000 233,000
Prior events 166,000 115,000
Total 1,214,000 1,445,000

Revenue from live and televised events fell 10 percent to $64.4 million from $71.9 million a year ago. There were 86 events, including 2 international events, during the quarter as compared to 70 events, including 7 international events, during the same period last year. North American average attendance increased to approximately 5,300 in the current quarter as compared to 4,600 in the prior year quarter. International events generated approximately $0.3 million in the current quarter as compared to $5.7 million in the prior year quarter. The two events in the current quarter were performed in emerging territories in Latin America, while the seven events in the prior year quarter consisted of two tours that performed in well established markets, including Japan and the United Kingdom. WWE plans to continue to do many international tours, and will be focusing on growing the brand in Spain and Mexico.

The company said it expects earnings of 43 cents per share for fiscal 2006. WWE is shifting its financial reporting schedule to match the calendar year, and will issue a second-quarter report at the end of October followed by a year-end report in December.

The 71% growth in WWE home video sales was fueled primarily by the WrestleMania 22 DVD, which moved 345,000 copies and is now the best-selling DVD in WWE history.

"Our home video business delivered one of its best quarters in its history. For the first time, the business shipped more than 1.1 million units in a quarter, representing a 55% increase over last year," said McMahon.

"We feel very good about the momentum that we have. WrestleMania 22 was huge for us, and continues to sell," said Sileck, talking about the potential for new DVDs on Vince McMahon, Hulk Hogan and the history of the WWE World title.

Two specific new ventures were brought up during the conference call with analysts. McMahon mentioned the new, relaunched WWE magazine, with a more of a general lifestyle feel, and said that "early indicators suggest has been embraced by our fans." With the Diva Search and the wireless phone votes -- with several hundred thousand votes at approximately 50 cents a call, WWE sees potential growth there. "We believe this result demonstrates tremendous potential for this business," said McMahon.

Less positive was McMahon's response to a question about future projects for WWE Films. See No Evil, the division's first feature film, was released on May 19, 2006, and generated approximately $15.0 million in gross domestic box office receipts and is currently being shown internationally. McMahon said other things are in the works, but nothing has been green-lighted beyond The Condemned, which is in post-production in Australia for delivery to Lions Gate for summer 2007 distribution.

"We have two other scripts in development. We're not going forward just yet with those. We're polishing those scripts. Our strategy has not changed with our film department. I think we've been consistent and strong. We've kept our budgets low. We've had distributors in line before we started production," she said. "We don't want to just sit and not have things in the pipeline. We do want to plan for success, but we're conservative, being flexible enough also to react not as a positive a response as we expect. See No Evil did exactly what we thought it would do on its release domestically."

Analysts polled by Thomson Financial forecast a profit of 10 cents per share on revenue of $93 million.


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