Feb 11, 2016
Operator
Hello, and welcome to the WWE Fourth Quarter Earnings Call. We have just a few announcements before we begin.
Please download the full slide via the Download Presentation button at the bottom of the webcast screen. Also at the bottom of your screen you will find a Help icon for technical assistance, and Enlarge Slides button, and you may ask a question at any time by typing your question into the question box located at the web interface and clicking submit.
[Operator Instructions]. As a reminder 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, Michael.
Michael Weitz
Thank you and good morning, everyone. Welcome to our fourth quarter earnings conference call.
Leading today’s discussion are Vince McMahon, our Chairman and CEO; and George Barrios, our Chief Strategy and Financial Officer. We issued our earnings release earlier this morning and have posted the release, our earnings presentation and other supporting materials on our website, ir.corporate.wwe.com.
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 been 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.
Vince McMahon
Good morning, everyone. As you all know we achieved revenue of $659 million for the year representing the highest tax rate in our entire history and a record performance across our businesses and actual revenue increased 46% of which we are pretty proud of.
As far as confidence is concerned, content on YouTube more than doubled that to a now viewed as much or a high probably in these settings as opposed to promotional, but it really is a monumental 8 billion views, naming us the number one sports channel on YouTube and one of these days the number one channel across the board. Social media engagements likewise increased substantially 50% to $790 million, which is the 6th most social brand in the world, combine that with the digital family, that's one huge awesome ecosystem for us as well as television ratings all combined.
Our network, WWE Network had nearly 1.3 million total subscribers at year end, that's a 56% increase year-over-year. Our network was recently made available in the Indian Subcontinent, Germany, Austria, Switzerland and Japan.
We debuted on the Network about 85 hours of new content during the quarter, with a new number of shows; Breaking Ground, NXT Takeover from London we shared live that. Interestingly and our subscribers consumed 188 hours of content in 2015 more than every cable network, so our audience obviously enjoys the network.
We are excited about the new tech content coming to the network as well, kind of one type was Edge & Christian’s Show That Totally Reeks of Awesomeness, where our [cap] WWE is going to be awesome in assets and March to WrestleMania is good and in general we are thrilled with our 2015 performance, although some investors apparently are not based on where we are valuation wise. Nonetheless we are thrilled with it and proud at the moment.
George?
George Barrios
Thanks, Vince. Several key topics which I’d like to review today.
These include management discussion of our financial performance, the progress of our strategic initiatives and our business outlook. As we ended the 2015, we communicated an overarching long-term objective to increase the monetization of our video content across multiple platforms.
Our strong financial performance throughout the past year demonstrates the successful execution of that strategy. As Vince mentioned, we generated revenue of $659 million representing the highest annual revenue in the company's history, with record revenue from the majority of our business segments; network, television, live events, vending merchandize, WWE shop.
Additionally our international revenues reached a record high of $170 million. While the significant increase in the revenue was driven by the growth of WWE Network and the realization of higher television rights fees, revenue in earnings growth also reflects a continued innovation across all of our segments.
In our view our financial results demonstrate how we are successfully transforming our business model and capitalizing on the strength of our brand, our diverse products and our global audience. I'd like to highlight some of our achievements, which are listed on Page 4 of the presentation.
During the year we enhanced our talent development, involving our developmental system NXT into a recognize global brand. We enhanced our television distribution completing new agreements in Singapore, Italy, Germany, Switzerland and Austria.
And in the U.S. we recently transitioned SmackDown to USA Network.
Since its move to USA, SmackDown has generated ratings 15% higher than the programming that was in its place at the same time last year. We also entered new markets for our live events such as Warsaw, Poland, Budapest, Hungary and Jeddah, Saudi Arabia.
In North America we managed a 9% increase in average effective ticket prices for our live events, which contributed to a $10 million increase in the profitability of our event operations. Among our consumer products we maintained a dominant position with the third highest only action property -- action figure property in the U.S.
and we extended our presence in the interactive gaming sector beyond the ring and beyond the console with more than 23 million downloads of our mobile games WWE Supercard and WWE Immortals. We also developed deeper partnerships with blue chip companies such as Coca-Cola and General Mills.
37 new advertisers were secured for WWE programming following NBCUniversal's upfront. And these were just a few examples of the extraordinary achievements of the WWE team.
Moreover we accomplished these feats while successfully executing our most important initiative growing WWE Network. Moving on Page 5.
In 2015, the Network segment generated revenue of $159 million, nearly doubled the average revenue of our legacy pay-per-view business and five years before Network launch, and approximately 70% more than the highest annual revenue in the history of that business. The growth of WWE Network has demonstrated our ability to transform a legacy transactional business into a global direct to consumer subscription business with high growth potential.
At quarter end WWE Network had nearly 1.3 million total subscribers representing an increase of 56% from the fourth quarter 2014. During the quarter we premiered more than 85 hours of original content on WWE Network, increased the Network's comprehensive on-demand library to more than 4,300 hours and continued to broaden its global distribution.
We recently made the Network available across the Indian Subcontinent, Germany, Austria, Switzerland and Japan. We continue to work on launch plans for our three remaining markets; China, Thailand and the Philippines.
At quarter end WWE Network have approximately 277,000 paid international subscribers representing 23% of paid subscribers worldwide. Recognizing the successful growth, WWE Network was identified by Parks Associates, as the fifth largest direct to consumer subscription service in the U.S.
ranking alongside Netflix, Amazon, Hulu and MLB.TV. Importantly the Network's content continue to drive viewer engagement.
Over the 2015 year WWE Network subscribers watched a total of 256 million hours of content representing an average of 188 hours per household. As shown on Page 6 of our presentation this puts WWE Network among the top cable and broadcast networks in terms of viewer hours per household, ranking behind only the broadcast networks of CBS, Univision, ABC and NBC.
In 2016, we expect to add more than 300 hours of original content to the Network's featured programming and more than 1,000 hours of our private content to the Network's VoD library. New original content coming in the Network include the live special March to WrestleMania on March 12th, holding anticipation in advance of our premier event WrestleMania on April 3rd.
Other highly awaited new shows include the animated series Camp WWE and Edge & Christian’s Show That Totally Reeks of Awesomeness, a comedic variety show featuring its titled Superstars. And of course the Network will also deliver new seasons or new episodes of highly successful programs such as Swerved, WWE 24 and Stone Cold Podcast.
We believe our content focus strategy for attracting and retaining subscribers will facilitate the expansion of WWE Network and provide a global platform for driving growth. To review our performance in the quarter, let's turn to Page 7 of our presentation, which shows our overall revenue and adjusted OIBDA contribution as compared to the prior year quarter.
Selling revenue increased across our businesses generating overall growth of 18% to over $156 million. Adverse changes in foreign exchange rates reduced revenue by about $2 million but did not have a material impact on our reported profit.
Our fourth quarter results included a $7.1 million on cash abandonment charge to write off the value of costs related to media center expansion project which were incurred several years ago. We have excluded this non cash item from our adjusted results.
For the quarter adjusted OIBDA increased approximately $6 million driven by the increased monetization of our network, television and digital content is reflected in our media division. Moving to Page 8 Network segment OIBDA increased $8.2 million reflecting strong growth in subscription revenue to $37.2 million as the Network's customer base increased 72% to an average of 1.237 million paid subscribers.
Profits from the licensing of television content increased $4.4 million primarily due to contractual increases associated with key distribution agreements, the largest of which became effective in the fourth quarter of 2014 and the first quarter of 2015. The increase in revenue was partially offset by the timing of Total Divas, which aired six new episodes during the fourth quarter 2015 than in the prior year quarter.
These episodes did not have a material impact on television profits in the prior year quarter. Profits from digital media increased $2.6 million primarily due to increased advertising revenue, which of course reinforces our view regarding the importance of social and digital platforms.
So on Page 9, live event profits increased $2.7 million from the performance of our events globally and also reflected the addition of an NXT tour in the U.K., the latter marked the first year in which NXT our showcase for developmental talent performed outside the U.S. On our events in North America we achieved a 9% increase in average attendance while managing a 13% increase in the average effective ticket price.
Reduced profits from home entertainment and increased corporate and other expenses partially offset our overall adjusted OIBDA growth. Changes in other areas of our business were largely offsetting and especially did not have a material impact on our overall results.
The reduction in home entertainment profit resulted from a decline in revenue attributable to a 34% decline in effective prices and the recognition of a $2.1 million guarantee in the prior year quarter associated with 2014 sales. Corporate and other expenses increased to nearly $53 million.
This includes the non cash abandonment charge of $7.1 million I described earlier. Excluding this non cash item the $7.1 million increase in corporate and other expenses was primarily due to a $4.1 million increase in accrued management incentive compensation based on the company's performance.
Our fourth quarter results contributed to full year adjusted OIBDA of $68.7 million a growth of $80.3 million from 2014 driven primarily by the revenue growth that we just described. Page 10 of the presentation shows selective elements of our capital structure.
As of December 31, 2015, WWE held just over $100 million in cash and short term investments. We estimate that WWE has approximately $200 million in debt capacity under the company's revolving credit facility.
In terms of free cash flow we generated $30 million of cash flow in 2015 representing an approximately $13 million decrease from the prior year. The decrease is primarily due to a $50 million advance in the prior year related to the renewal of our domestic television agreement.
Resulting decline in cash flow was partially offset by improved operating performance and decreased spending on film production assets. Excluding the impact of the advance, net cash provided by operating activities increased approximately $45 million from 2014.
As we look forward our financial results over the past year demonstrate how we've initiated a transformation in our business model, while driving innovations across our product lines. That innovation capitalized on the power of our brand, which as indicated by our key metrics have continued to build on the remarkable strength.
In 2015 consumption of WWE content across YouTube, Facebook and wwe.com increased 120% to more than 9.9 billion views with more than 8 billion views on YouTube. WWE was the most followed sports channel on YouTube and the second most followed sports brand on all of Facebook.
WWE standard ads on social media increased 50% to 790 million engagements measured by likes, comments, shares and retweets. WWE was the most influential sports brand on Twitter and ranked sixth, as the 6th most social brand worldwide, alongside Disney, Times Warner and Google.
Regarding our expected Q1 performance; for this quarter we project average paid subscribers of approximately 1,280,000 with a range of plus or minus 2%. This would represent an approximate year-over-year increase of 38% in average paid subscribers.
As a reminder, WrestleMania will occur on April 3rd within the second quarter of this year, as compared to last year's event which occurred within the first quarter. Given that timing, the most significant subscriber additions within the quarter are expected to occur towards the latter part of March.
As such we are not expecting to have a significant impact on our first quarter subscriber average or our first quarter financial results. We also estimate first quarter 2016 adjusted OIBDA of approximately $15 million to $19 million.
The range of projected first quarter results reflects the year-over-year decline primarily due to the timing of WrestleMania and related event ticket sales and these events all grossed approximately $15 million last year. It also reflects an increase in accrued management incentive compensation.
Although we are not providing an estimate of quarter ended subscribers for the first quarter at this time, we will communicate an update on network subscriber levels on April 4th the day after WrestleMania. Over the past few years we placed increasing strategic emphasis on optimizing the value of our video content, developing digital and technology platforms and expanding our global presence.
Execution on these initiatives have been very, very strong. From 2010 to 2015 as shown on Page 13 of our presentation, revenue from the monetization of WWE content has increased at an average annual rate of 10% and now comprises 65% of our total revenue.
Similarly revenue generated on digital platform has increased at an average rate of 46% and now comprises approximately 30% of our revenue as compared to 6% back in 2010. And during this time our international revenue has increased approximately 26%.
The growth that we have managed in each of these areas reinforces the potential we see from continuing investments in content, technology and digital infrastructure and emerging markets. You should note that these investment decisions the Board has been making with a prism of driving long-term growth and shareholder value.
We believe that based on the unique power of our brands, we are well positioned to capitalize on a global multi-platform content strategy and optimizing outcomes. That concludes this portion of our call.
And I’ll now turn it back to Michael.
Michael Weitz
Thank you, George. Ashley, we are ready.
Please open the lines for questions.
Operator
Thank you. [Operator Instruction] And we will take our first question from Brandon Ross with BTIG.
Please go ahead.
Brandon Ross
In the quarter you added, what, 85 hours of original programming, but lost about 50,000 subs in the U.S. Can you talk to the engagement around that original programming and the role you believe it is playing and attracting and retaining subs?
And then secondly as far as potential bundling is concerned do you see opportunities for bundling the network with other OTT services, not just Hulu or what the Amazon is doing, but maybe with other more niche OTT offerings like the ML Band properties or Crunchyroll or stuff like that? Thanks.
George Barrios
Sure. Yes I think the first thing on the engagements, the message that's really important to us is how much consumption we have on the Network, so that was the 188 hours that we averaged that Vince mentioned and it's been strong all year.
As it gets to specific programming, obviously we look at how the show does in terms of engagement, we know that different subscribers enjoy different shows and we want to entertain and engage them all. But so far we've been really, really happy with our original programming.
As far as the bundling brand and I think it's still early days. You mentioned a couple of examples that have cropped up but we have discussions all the time with the players you mentioned both some of the big players as well as some of the more niche players that you referenced.
So we are obviously open to all ideas as long as it makes sense for our audience, for our shareholders. So we will continue that dialog but nothing to announce.
Brandon Ross
Great, thank you.
Operator
Our next question comes from Eric Katz with Wells Fargo.
Eric Katz
Good morning, guys. Just want to clear up the OIBDA guide for Q1, looks like it's $15 million to $19 million and The Street seems to a bit higher, maybe close to double that.
And I know you mentioned there is the timing of WrestleMania and related event ticket sales that maybe shifting. Just wanted to clarify that maybe we are not capturing that $15 million, is actually in Q2 rather than Q1?
And also is there incremental investments that you have mentioned before for tax and the infrastructure build on India and China maybe in there as well, maybe it's front weighted in the first half of the year?
George Barrios
Yes. I wouldn't say it is front weighted, but I do think you start -- the compares are tougher.
I think some of those investments started towards the latter half of 2015, so the compares get easier on the expense side versus the first half of the year, so that's one element. But the reason we obviously called out the timing of WrestleMania and the impact is to remind everyone so that they can adjust accordingly.
Eric Katz
Okay. And then secondly I think you guys had the Royal Rumble early in the quarter, is there any update you can give there?
What kind of retention you are seeing or just any qualitative comments?
George Barrios
Well, I don't want to get into specific numbers but if you -- we came out of the fourth quarter at 1.217 million, we're guiding average paid at 1.280 million for Q1. So you obviously were expecting some pretty good growth in the quarter and obviously some of that's informed by the fact that we're 40% through the first quarter, so we got those results.
So we feel good about where we are which is why we felt comfortable giving the guidance that we're giving for that type of growth.
Eric Katz
Okay. And last question for Vince.
WrestleMania, you guys have a lot of talent injured right now. I'm just kind of curious how you plug the holes in the roster to make it a stronger event?
Thank you.
Vince McMahon
By being creative. We'll have an awesome WrestleMania and it will be very attractive to our audience just as attractive as last year's.
Eric Katz
Thank you.
Operator
Our next question comes from Laura Martin with Needham, please go ahead.
Laura Martin
Vince, I want to start with you on this content. When you look at the 85 hours of original content can you remind us of the building blocks of how much of that is series that will then continue in the subsequent quarters and how much is events where when you say you're going to do 300 hours of original you're actually starting over from scratch with a clean sheet of pay-per-view, which I think is harder than just continuing a series where you already have the original content, a lot of the scenes established like in this year's fourth quarter?
Can you remind us of that?
George Barrios
Yes, Laura, if you think about the 300 hours there is a big block of the pay-per-views, obviously that's around 40, NXT does about 60. We do some other interim shows and live pre-shows before RAW, that will do a show called Superstars on the network, live pre-shows that's another about 100 and so then you're left with some of those series like Swerved or Camp WWE and that's in the 30 to 50 range.
That's basically how the buckets work.
Laura Martin
Okay, so that 30 to 50, if I'm looking at Vince's slide where he's talking about Breaking Ground and Live from Madison Square Garden, NXT Takeover: London. That 35 to 50 is like half of those 85 hours that Vince referred to in his slide, do I have that right?
George Barrios
Roughly, yes. What happens -- not half the 85, half of the 300.
The 85 was one quarter, so I'm talking about the full year.
Laura Martin
Okay, not half of the quarter. I see, okay, all right.
And then from you, George I was interested in India. You guys launched on November 3rd and I was just wondering, what the actual sub number was in India?
What impact did it have?
George Barrios
We're not going to talk about specific sub levels but as we mentioned before, we view India over the long term. Today on OTT service at 9.99, the pay-per-views are not staying dated in India because of our current partner deal that we have there.
So for us launching a network in India is more about the long term.
Laura Martin
Okay, and then SnapChat, so we got a couple of big announcements during the earnings season of sort of traditional media companies doing deals with SnapChat's Discover and given how important social is to you guys and the revenue coming out of social and the marketing platform provides are you talking to other platforms other than YouTube about extending the WWE e-brand to sort of competitive social platforms?
George Barrios
So look, I don't want to pat us on the back too much Laura but when you have the numbers that we have, not just on YouTube but on Facebook, we're the 6th most social brand in the world and I think the top four or five are Disney, Times Warner and Google, Viacom. Any product that anyone is using whether it's on SnapChat, Twitter, Facebook or YouTube, they call us because we're dominant on all of them.
So the answer to the question is a simple, yes. If there's a social platform out there and if it's video focused we're one of the first folks they call.
Laura Martin
Thank you very much.
Operator
And now we have Dan Moore with CJS Securities.
Vijay Gowda
Hi good morning this is actually Vijay Gowda for Dan Moore. So first question relates to the number of subscribers you would estimate that you added last year for WrestleMania specifically and what factors might cause that to be higher or lower this time around?
George Barrios
Obviously as you know we hit our high point, 1.3 million subscribers and obviously that drove a lot of the year-over-year growth throughout the year. So it's a unique event for us and we expect it again to drive significant growth.
We're not going to talk about what that number is. We don't have a lot of data points yet for WrestleMania, only two, but we're expecting some significant growth again.
Vijay Gowda
And I know you're reluctant to talk about subscribers going forward, but if I look backwards what portion of the, 1.217 million total subs at the end of Q4 were subscribers that paid for WrestleMania a year ago?
George Barrios
We're not going to get into that level of detail. But I think if you just look at the numbers, we were able to consolidate quite a few subscribers from that inflow from WrestleMania which drove the year-over-year growth but we're not going to get into kind of that level of detail.
Vijay Gowda
Sure one more from me and I'll hop back in the queue. Can you describe some of the more recent incentives and promotions you're using to drive new subscribers and is the one month free still effective?
Are there other incentives you might be using or ones that are being considered?
George Barrios
Vince mentioned a lot of the "incentives" around the creative and messaging to our fans, both prospective fans and current subscribers or those that might be inactive about the great content on the network. As far as you know "pricing or packaging promotions" the only thing we do is the one month free and obviously we kept it in effect, so from our perspective it's working.
Vijay Gowda
Okay, thanks very much.
Operator
And next we have Jamie Clement with Macquarie. Please go ahead.
Jamie Clement
Good morning. George, are you noticing any real strong correlation week-in week-out between your television ratings and network subs or on the flip side churn?
George Barrios
I wouldn’t say kind of a granular correlation, I think, but when you look at us, for us it's an ecosystem of content. It's on TV every week we are SmackDown, its 24/7 social digital and then you go really, really deep on the network, that's 188 hour average which in itself is stunning.
So there is a correlation when everything is working. It works well together.
But as not at the granular level of one week's rating has an impact on that week's churn at that level, that we don’t see.
Jamie Clement
Okay. And George with respect to the abandonment charge of $7.1 million, I was little bit puzzled by some of the language in the press release.
Is the idea of doing a major project with respect to television production that kind of thing, is that back on the table now?
George Barrios
So in essence Jamie, as you remember back in, and it's going back a little, but that was in 2008, we had announced that we were looking at a media center because we had outgrown our current production and we ended up hitting the kind of the financial prices and at that point we pulled back as we think it was the right time. Through the ensuing years we only thought at some point we've got to deal with this space issue in some way, shape or form and those plans would be useful if and when we decided a media center was the right solution.
What started to happen here over the last couple of years is a real fundamental change in the operations and primarily driven by the scale of the network. And now after two years of operating what we've decided is, if we were ever to build a media center those plans probably are no longer relevant.
But we don’t have any plans right now Jamie to do media center, certainly not in 2016.
Jamie Clement
Okay very good. Thank you very much.
Operator
Our next question comes from Mike Hickey with The Benchmark Company.
Mike Hickey
Hey, guys nice quarter. Thanks for taking my questions.
Curious on that your TV ratings I think it's four straight quarters now of year-over-year declines in ratings. Look like Q4 is pretty significant.
I always sort of considered your TV business sort of your life blood, so just curious how we should think about the ratings reductions and what implications it you may have for you over the medium to long-term? Thank you.
And I have a follow up.
Vince McMahon
As far as the ratings are concerned, numbers are down but not as much as the networks in general that we are on. I think you see a decline in a lot of the networks in general because people are not watching television as much and some capacity is online or things of that nature.
So George mentioned the ecosystem, it's extremely important for us to be able to do television as well as and television is sort of the old media, and not that it is not important to us, it's extremely important. When you add in all the YouTube you have, all the digital you have, and all the social, our audience is consuming our product in the way that they want to and when they want to and that's important for us to be able to do that.
So it's not just about television ratings anymore. We are not fully [indiscernible].
We are not like looking at it that way of old school. We are looking at it from the standpoint of a total ecosystem which as you can see is extremely strong for us.
It was not just about television ratings which we used to before new media, you used to live and die by it.
Mike Hickey
Kind of fair enough. Thanks Vince.
Also curious on if you could update us or remind us your OIBDA view for 2016? I know it is sort of just a hypothetical exercise, George before, but now with the sort of I guess global economic uncertainty as a more -- you are seeing relevant consideration of a lot of companies how you are thinking about that?
And also how your business is trending historically in recessionary environments? Thank you.
George Barrios
So we are not going to give any full year guidance and don’t feel the need to update what you refer to as the kind of the hypothetical that we've talked about last year. So we feel comfortable with that hypothetical.
It's a good indication of where the business proceeds at that level of sub growth. In recessionary environment I think when we look back historically which we've done depends on the level of employment impact.
So if you looked at the 2000 recession which had very limited employment impact, WWE had very limited economic impact. I think when you saw the 2008 through 2009 or through 2010 was a little bit more of an impact for us given the employment.
So I think it will be -- it's the comfort nature of the recession and the depth of it. But we've done -- I would describe it we have been fairly recession resistant generally speaking but certainly we are not immune to something significant if it would impact the jobs fronts.
Mike Hickey
Thanks George. Best of luck guys.
Operator
Our next question comes from Brad Safalow with PAA Research.
Brad Safalow
Thanks for taking my questions. Just a couple of quick ones then a more [benign] question.
First can you tell us what the NXT revenues were for the year? Just want to understand how much -- how significant that business has become.
I know it's small but maybe it contributed as much as a percent of revenue growth for the year. Can you give us some color on that?
George Barrios
No. We're not going to talk about kind of specific product lines, as we give a lot of visibility for a lot of revenue streams.
What we're really thrilled about is the engagement we've seen both at the live event on the Network and have a great social presence too as we trend globally on Twitter during 2015 for NXT. So we're really psyched about it.
But we're not going to get into the revenue numbers.
Brad Safalow
Outside of that, can you really speak to live events for NXT, let's say outside of [wholesale] and what that might be for 2016?
George Barrios
We're going to continue to expand them. I've mentioned on the prepared remarks that we have now, for the first time ever went outside the U.S.
So we did something in Japan in the middle of the year and then we did a small tour in the U.K. in December.
So we're going to continue to push that forward, we're excited about it.
Brad Safalow
Okay, and then just on the international sub side for the Network, obviously you had some significant launches, can you at least speak to what are the top five countries in terms of subscribers? I think I have a sense for it but I just would be curious if you could provide that detail.
George Barrios
Yes. For us the U.K.
was a terrific market, if you remember last January when we launched in U.K. that drove a good increase.
Got good sub levels in Canada. Outside of that I'll say that we have got in the Top 10 a nice mix of countries for us.
Brad Safalow
Okay. And then what's the budget for investment in TV production and film this year?
George Barrios
On the -- from a guidance standpoint we're not going to talk about any free cash flow guidance for the full year. We've given the quarter guidance.
As we progress through the year we'll be able to get a little bit more visibility obviously for the full year. But we'll do more seasons with Divas in 2016, so that'll show up on the balance sheet.
But it gets amortized fairly quickly. And similarly on the TV production those get amortized fairly quickly as well for the most part.
Brad Safalow
Okay and then Vince just to your comments that you just made, obviously you guys have had a phenomenal success on YouTube, I think you're at 9.7 million subs. That's up from I think 6 million just a year ago.
And you're talking to the consumption that obviously have changed and still you can go and watch a significant percentage of the content on RAW in a consolidated manner. One of the questions I have is, is there a -- how would you describe the tension between the NBCUniversal and what they're paying you for RAW and SmackDown and what you're providing to Google and or YouTube?
And obviously there's a huge gap from a monetary perspective, how do you see that playing out over the next couple of years and what kind of leverage can you exert on your digital distribution partners?
Vince McMahon
Well, I think it's again, it's a combination of valuation. I think one thing that for me NBCU standpoint is, it's generally speaking we are live programming.
That has tremendous value. So I think going forward we're going to be even more valuable to NBCU in terms of RAW, SmackDown and whatever else we do.
And again it goes back into that whole huge ecosystem and I think that again just based on sheer volume alone and sheer popularity, we're poised to take advantage in that, not just in terms of promotion from a financial standpoint. So, I think that as we continue on we're going to be more and more valuable to everybody.
Brad Safalow
Okay, it'll be interesting, thank you.
Vince McMahon
Sure will.
Operator
[Operator Instructions] We'll take our next question from Rob Routh with FBN Securities.
Rob Routh
Yes, good morning. A quick question sort of on demand programming.
You mentioned that you had 1000 hours to on demand from archival content. I'm just curious, if once you do that how many more hours do you have in the archive that you could add, and how long before the on demand product will be your entire library?
George Barrios
You know we talked about that we have a library with over a 150,000 hours, not sure all 150 will make it through on to Network, but Rob we've got a long way to go in our ability to take good content from our library and put it on to the Network.
Rob Routh
Okay. Is it safe to assume the cost to do that is diminimus to you?
George Barrios
Relatively speaking, yes.
Rob Routh
Great. And then just one other question.
Given the dividend that you paid, the balance sheet that you have, the growth that you see moving forward and where your stock is in this meltdown that we see, is there any point at which management will consider repurchasing shares or putting a buyback in place? I assume that would be a good use of your capital given where the equity is and where probably it's going to go and the dividend, just curious if that's ever crossed your mind.
George Barrios
I think you have to put in context of the scale of the dividend payout, which as you know is very high relative to earnings. But it's something the Board regularly discusses is that the right return of capital approach.
Rob Routh
Great, thank you very much.
Operator
And we have a follow up question with Jamie Clement with Macquarie.
Jamie Clement
George, looking at the investment spending that you all laid out roughly three months ago for 2016. As we think about investment spending, multiyear in the networks, is that the kind of number 2017, 2018 does that number go up?
Does it stay about the same? Does it go down?
How should we be thinking about that?
George Barrios
Jamie, it will depend on the results we see from it and kind of how they manifest themselves through this year. A lot of the growth that we've seen, reasonably we've had record revenue this year we feel is from the investments we made in previous years.
And as you know, our largest revenue stream grows in kind of a lumpy manner because it's based on contract renewal. So sometimes the investments you are making today in the brand in global infrastructure the payout can take a few years to get back.
But we think of it in the long-term. So specifically on 2017 and 2018, don’t know yet.
We will have to see how we feel about the way things are working in 2016.
Jamie Clement
Okay, fair enough. Thank you very much.
Operator
We have a follow up question from Brandon Ross with BTIG. Please go ahead.
Brandon Ross
Hi, guys. Couple of more.
You have more digital engagements than almost any creator in the world, almost all of that engagement is happening on third party platforms like YouTube and Facebook. Is there a way to make the WWE App more of the destination for free digital content to keep fans closer to the Network subscribe button on mobile?
And also Vince touched on the outperformance of your programming relative to the rest of the cable and NXT is clearly becoming more successful on the Network and starting too as a live business. What are your thoughts around the possibility of licensing NXT content to traditional media beyond Hulu as a revenue opportunity and to increase the profile of that content?
Thanks.
George Barrios
Look on the first plan about our owned and operated whether it's our dotcom site and the app obviously that's an important part of our strategy. Our apps have been downloaded now more than 25 million times.
So it is important. But we are also cognizant of the power of broadly distributed and engaging platforms like YouTube and Facebook, so it's [intention] there and will manage it.
But we got to continue to invest in our owned and operated. We are going to continue to invest on our mobile web and in WWE App and you will see the manifestation of that over time.
As far as NXT, I'll broaden the question. I think for a long time we are going to have the really great situation of creating content and deciding where the best place is for that content.
Is it within the payTV ecosystem, is it within the social and digitally ecosystem, or is it on our own network? So I think that's a decision we are going to be making about NXT and everything else for a long time to come and it's a good problem to have because we are powerful on all of the platforms.
And I'll remind you specifically on NXT, today [subs] get licensed in some markets, so domestically it's only available on WWE Network. There are some markets in the world where we actually have licensed into the payTV ecosystem so that should give you a sense is that we are learning to be flexible.
It's just really about what's the best place for each piece of content.
Brandon Ross
Great, thank you.
Operator
And we have Laura Martin with Needham. Please go ahead.
Laura Martin
Yes. Maybe a couple more.
George can you remind us what international markets you are not in yet and what are any of those ones you might roll out in 2016?
George Barrios
Yes. There is only three left; China, Thailand and the Philippines.
I think you will hear from us over the next 12 months in at least one or two of those if not all ready.
Laura Martin
Okay, great. That's helpful.
And then the free cash flow was $45 million on same-store basis, if we exclude last year's $50 million payment. When you think about that trajectory which is the really lovely upward type trajectory is there any reason to think that when we are modeling next year that that trajectory would not continue or can we continue that trajectory?
George Barrios
All of that. I think the trajectory would be influenced a lot by our full year operating performance and so we haven't given guidance there.
But people can use their judgment over that. We talked about the hypothetical in the last quarter call about whatever that might be.
After OIBDA we are fairly simple to model. We've always said that we will spend on a net basis, let's say roughly $20 million of film, some years less, some years more but that's what the average is.
And if you looked over the last 10 years or so our CapEx has averaged about 4% of revenue which means it is a reasonable target. Sometimes it will be little lower sometimes a little more.
And then we are almost a full tax payer when you look at our effective tax rate. So again we are not going to give guidance but we've talked about conceptually about both kind of those levers.
And then the operating performance will be what the operating performance will be, we are not going to give full year guidance right now.
Laura Martin
Okay that's perfect. Okay that's very helpful on the free cash flow calculation.
And then can you tell us -- can you give us an update on when you look at the OTT deal and just OTT and you look at that 188 hours. Could you break out what's happening with trends in viewing of the library versus viewing of originals versus viewing of the live events?
George Barrios
Yes I guess the way I would say as you would think about the pay-per-views, we do about 37 hours of pay-per-views during the year and so at most they could be about roughly 20% of that 188 right. It's 37 hours, everyone watches year around, roughly 20%.
So 80% is the combination of what's in our library as well as of the new shows we are producing. And we've talked about before, if you look at it from a kind of an analysis ratings perspective, if you wanted to use that as the way to think about it our pay-per-views do the best, original shows are second and then the library is third.
And we always like to say, we have talked about the library before, not everyone watches every piece of content on the library but every piece of content gets watched by someone which is why it's so effective and drives a lot of engagements.
Laura Martin
So your point would be it’s the hours are going to be different from that, meaning even though the per unit demand of the library is less than the original, in aggregate because the library is so much bigger than the original hours it actually might make up the majority of total viewing of that 188 hours right?
George Barrios
That's right, the math being with the math is. It makes up a pretty good chunk of that, that's right.
Laura Martin
Okay, so it sounds like maybe 50% of viewing is library, because you just said that 20% was the pay-per-view now?
George Barrios
I said 25% is the pay-per-view and we'll leave it at that.
Laura Martin
All right good, that's very helpful, thank you.
Operator
Our next question comes from Brad Safalow with PAA Research.
Bradley Safalow
Hi, just a quick, a couple of quick follow ups. One, when does the TV rights deal in India change so that the pay-per-views will go back to the Network?
George Barrios
We don't like commenting on the specifics of deals we have.
Bradley Safalow
I guess you kind of referenced it that I guess, it having a little bit of…
George Barrios
We don’t like to comment and any one can -- all you have to do ask someone in India and you know that’s it been out what day and date so that's publically available information. Kind of how the rights work and when they return to us that's not, so I'd like to stay away from that.
Bradley Safalow
Okay, fair enough. And then just on Japan, you guys haven't talked too much about that market obviously has a long tradition of a large wrestling fan base.
I know you guys have signed some talent from new Japan. If you had to rank the potential for growth both from TV rights fees and network subs in Japan, is it certainly now an increased strategic focus for WWE or is this more just normal course hiring compelling talent in terms of creative?
George Barrios
I would say, I hate the term normal course, is we're working so hard as it is, but I wouldn't put Japan in the same group as I would put India, China, the Middle East and maybe Latin America. It's a great market for us as you mentioned and perhaps from a talent perspective a really good market, but that's how we think about Japan.
Bradley Safalow
Okay, thanks.
Operator
[Operator Instructions] We will take our next question from Eric Katz with Wells Fargo.
Eric Katz
Hey, just a quick follow up, a direct question on the guide. So I think your subs getting hit because there's maybe the perception that the Q1 OIBDA is light and maybe the full year is different.
I know you guys gave sort of a soft guide of 70% to 85% on the last quarter. So has that 70% to 85% changed at all?
And then secondly I think some people are curious on why you guys decided to go with an average paid subs guidance as opposed to quarter ending? Just any clarification on that as well.
Thank you.
George Barrios
Again, like I mentioned before Eric, it's what we said back on the last call was that we looked at Netflix's growth over its first few years and they were around 20% to 25%, so for us we will consider that excellent performance and if that's the growth we showed year-over-year we'd end up in that range of 70% to 85%. Now obviously we have a whole a lot of business around that, the Network is big and growing but it's less than 30% of the total WWE.
So it's going to -- everything else being equal, but yes, we still feel comfortable that that range works at that level of subscriber growth. And similarly as we mentioned on the average versus a period end, the period end it's really -- WrestleMania's going to be big for us and it's hard to kind of predict on the last day of March what that number is going to be.
That gets a little bit tougher. We know it will start to see a real pick up as we get closer to April 1st, so picking one, that one number at the end of the quarter seemed like an unreasonable thing to do.
The average you have a full 90 days, we're already about 40% through that 90 days. So the -- however that comes in towards the end will have less of an impact on the average.
Obviously it really will impact the average for Q2, what the ultimate growth is in terms of WrestleMania subs. So that's why we went with the average.
Eric Katz
So, I guess to be consistent would you guys continue with average because I think the inconsistency is a little troubling for investors to switch back and forth?
George Barrios
Look, I think that's a fair point. I think for us being only two years and in the case of WrestleMania having only two data points, we had to make the trade off of do not say anything about guidance and just say look it's so unique that we're not going to talk about that period number or can we give something.
And we thought we wanted to air towards the latter. As far as how we'll talk about it into the future, some of it's going to be determined about things like this, and over time I think we'll get more and more comfortable at doing a period end number.
But WrestleMania is unique for us. It's very unique in a lot of ways and especially off the Network and we just don't have enough data points yet.
We only have two.
Eric Katz
I think most models are driving up the average, so we appreciate the guide with the average this quarter, thanks a lot guys.
Operator
And there are no further questions. I would like to turn the conference back over to our presenters for any additional or closing comments.
George Barrios
Thank you everyone, we appreciate you listening today. If you have any questions please do not hesitate to reach out to us, Michael Weitz or Laura Kiernan.
Thank you.
Operator
And that does concludes today’s presentation. Thank you for your participation.