Source: Wrestling Observer Newsletter

– The final issue of WWE Magazine will be the October issue, which hits newsstands on September 16th. The magazine could possible continue with an outside publisher but WWE itself will no longer be producing it.

– We noted earlier today that WWE is planning a 7% decrease in staff as part of the ongoing budget cuts. According to The Wrestling Observer, reportedly around 55 people were let go from WWE headquarters today.

Vince McMahon and other senior members of WWE management will be hosting an earnings call from WWE headquarters in Stamford this morning at 11am. Below are highlights:

* SVP of Financial Planning & Investor Relations Michael Weitz kicks off the call. He will be joined by Vince McMahon and Chief Strategy & Financial Officer George Barrios.

* Vince takes over and says domestic attendance, TV ratings and the Network are their new key factors. Vince says attendance is up as are TV ratings. He says they consider 700,000 Network subscribers a strong number to build on. He mentions compelling program and new pricing options coming up. He hypes them launching the Network in 170 countries, beginning with a roll-out on August 12th. Vince also plugs the new TV & Network agreement with Roger Communications in Canada.

* Vince said they developed plans to improve their 2015 business outlook by several million dollars, including a 7% decrease in staffing. Vince said they are very optimistic about the future.

* Barrios takes over next and touts the WWE Network. He says 90% of subscribers access the Network at least once a week on an average of 2.5 devices. They expect a gradual increase in subscribers as awareness grows and technology expands.

* Barrios then talks about the international expansion of the Network. They’re planning on stepping up third-party advertising going into SummerSlam. He noted they’ve mostly relied on RAW and SmackDown to advertise the Network. They feel they can turn the 424,000 domestic WrestleMania buys into Network subscribers.

* WWE Rivalries and The Monday Night War will be added soon and will give a documentary style look at WWE history. They’re also working on new Network features like a “resume play” ability.

* WWE Network generated $19.4 million in subscription revenue based on the first subscriber count. This was offset by the decline in pay-per-view buys. He goes over other increases and decreases from the earnings report. Live attendance was down in part due to the stadium configuration of WrestleMania XXX, which caused lower attendance for that event. Excluding WrestleMania, average attendance is up. WWE Studios’ Scooby Doo, Road to Paloma and Oculus movies are performing in line with their expectations.

* He mentioned the 7% decrease in staffing that Vince mentioned earlier. He did not say when these cuts will be made.

* We go back to Weitz before taking investor questions. Vince is asked about Network pricing. Vince said as they grow and learn, they will possibly be presenting other pricing options.

* Barrios confirmed the Network being rolled out internationally will be identical to what we have in the United States. Apparently it will be English only until they get to other languages.

* They were asked about why they chose to go the new route with Rogers Communications on cable in Canada. Vince said Canadians look at things a bit differently. They’re happy with the deal but wouldn’t go into terms. Vince called it an offer they couldn’t turn down. They do plan on eventually launching an authenticated version of the app in Canada so it has the same look and feel that we have here. Rogers could have advertising on that authenticated app.

* They are still expecting just about full cannibalization of pay-per-view. There will be a few countries where that won’t be the case but not a significant amount.

* They were asked if they still expect 1 million domestic subscribers by the end of 2014. Barrios didn’t answer that directly but said from day one they’ve said they would be very happy if they hit that mark and said they still feel that way.

* The subscribers that are picked up through the Rogers deal in Canada will indeed be included in Network subscriber counts.

* We go back to Weitz to wrap up the call.

WWE issued the following:

ROGERS AND WWE ANNOUNCE LANDMARK TELEVISION AND WWE NETWORK AGREEMENT

TORONTO, July 31, 2014 – Rogers Communications and WWE (NYSE: WWE) today announced a historic 10-year broadcast and multimedia agreement, making Rogers the exclusive distributor of WWE’s flagship programming in Canada through 2024. The deal extends WWE’s current programming on Sportsnet 360 and includes the right to distribute WWE Network as a premium linear channel, with a preview beginning August 12.

Rogers will be the exclusive distribution partner of all WWE pay-per-view events throughout Canada and will sponsor an application to the CRTC to bring the popular WWE Network to Canada. Starting August 12, a preview of WWE Network content, including live WWE pay-per-view events, groundbreaking original series, live in-ring action, reality shows and a video-on-demand library, will be available on a subscription basis on Rogers Channel 512. Rogers will offer this WWE Network content preview subscription to all cable, satellite and IPTV providers across Canada.

Fans in Canada will receive more WWE programming than ever before through Rogers’ cable and digital assets. Highlights from the new deal also include national rights for Raw®, SmackDown® and Main Event® on Sportsnet 360, Sportsnet NOW and Rogers Anyplace TV.

“This landmark deal is a win-win for WWE fans in Canada,” said Scott Moore, President of NHL & Sportsnet, Rogers. “The premium WWE content offers our customers more of the programming they want, on any platform of their choosing. We are thrilled to continue our partnership with WWE, and deliver exclusive content to its passionate fan base in Canada for the next decade.”

“We are excited to expand our partnership with Rogers as we look for innovative ways to grow our brand and further the reach of our programming in Canada through their vast distribution channels and marketing platforms,” said Gerrit Meier, WWE Executive Vice President, International. “The structure of this new agreement demonstrates WWE’s commitment to growing our brand internationally through integrated partnerships as well as the flexibility we have in rolling out WWE Network around the world.”

Read more at http://www.wrestlinginc.com/wi/news/2014/0731/579554/wwe-and-rogers-announce-landmark-television-and-wwe-network-deal/#yWzjUTtplLfYgG4K.99

– Wall Street is reacting positively to the WWE earnings call announcement so far. Stock is currently up 9.02% and trading at $13.18 per share. WWE expected to lose between $15 and $18 million for the second quarter but they came in under that at $14.5 million.

– WWE also announced today that the international roll-out of the WWE Network will take place on August 12th, before SummerSlam. They will launch on August 12th in over 170 countries and territories, including Australia, New Zealand, Hong Kong, Singapore, Mexico, Spain and the Nordics, among others. The Network is expected to be live in the UK by October 2014. Plans for the Network in Italy, UAE, Germany, Japan, India, China, Thailand and Malaysia will be communicated at a later date.

– The Network will also launch on several Blu-ray players and smart TV’s in mid-August.

– WWE will continue to offer the $9.99 per month price point if you commit for 6 months but will also offer one month with no commitment for $19.99.

Source: F4WOnline – As noted, WWE announced 700,000 subscribers for the WWE Network this morning, barely up from the 667,000 they announced in April. It should be noted that the 700,000 count is as of June 30th.

An interesting note is that Bryan Alvarez said he received a text message from someone in WWE during the latest episode of Wrestling Observer Radio, which was recorded late last night, and that person said the subscriber count was 690,000. This could be an indication that WWE rounded up to 700,000, which isn’t a big deal.

WWE issued the following today. The full report can be found on their Corporate site at this link.

WWE(R) Reports 2014 Second Quarter Results and Improved 2015 Business Outlook

STAMFORD, Conn.–(BUSINESS WIRE)–

WWE (WWE) today announced financial results for its second quarter ended June 30, 2014. For the quarter, the Company reported a Net loss of $14.5 million, or $0.19 per share, compared to Net income of $5.2 million, or $0.07 per share, in the second quarter last year. Excluding items affecting comparability, adjusted Net loss was $13.5 million, or $0.18 per share in the current year quarter, compared to Net income of $5.2 million, or $0.07 per share, in the second quarter last year. WWE Network reached 700,000 subscribers at quarter end.

“WWE’s core business metrics remain strong, and WWE Network continues to be the single greatest opportunity to transform WWE’s business model. During the quarter, we developed plans to make WWE Network available globally starting August 12, and completed a long-term content deal in Canada with Rogers Communications,” stated Vince McMahon, Chairman and Chief Executive Officer. “Additionally, we identified efficiencies that will improve our 2015 OIBDA outlook by $30 million. Based on these initiatives, we are optimistic about our potential to drive long-term growth.”

“As we expanded WWE Network to 700,000 subscribers, our earnings performance surpassed our guidance, which targeted a Net loss ranging from $15 million to $18 million. Our key metrics continued to show strength as average North American attendance increased 11%, representing the fourth consecutive quarter of year-over-year growth. Raw and SmackDown TV ratings increased 5% and 3%, respectively, marking SmackDown’s 7th quarter of growth among the past 8 quarters,” added George Barrios, Chief Strategy & Financial Officer. “We identified efficiencies across WWE, which include a 7% reduction in staff, and improved our 2015 OIBDA outlook by $30 million. We developed plans to make WWE Network available in over 170 countries, and entered a 10-year deal that provides for the WWE Network launch as a traditional a-la-carte Pay-TV channel in Canada and renews our television licensing agreement for Raw and SmackDown. The progress in our strategic initiatives reinforces our view that successful execution of our WWE Network strategy can generate meaningful economic returns.”

WWE Network Update

The quarter was highlighted by the ongoing ramp up of WWE Network, which attracted gross additions of 161,000 subscribers since WrestleMania on April 6th and ended the quarter at 700,000 subscribers, reflecting a net addition of 33,000 subscribers. To drive ongoing subscriber growth, the Company continues to execute a five-part strategy that includes making the network available in new geographies, creating new content, expanding distribution platforms, developing new features and enhancing its marketing. Critical aspects of this strategy include making WWE Network available in international markets and completing a new partnership with Rogers Communications, which provides the rights to distribute the network in Canada.

* Customer Engagement: Viewer data indicates that, on average, 91% of subscribers access the network at least once per week and use 2.5 devices to consume network content. Moreover, consumer research indicates that 90% of subscribers are satisfied with WWE Network (with 51% extremely satisfied and 39% somewhat satisfied).

* International Availability: The Company plans to make the U.S. version of WWE Network available on an over-the-top basis starting August 12th in over 170 countries and territories, including Australia, New Zealand, Hong Kong, Singapore, Mexico, Spain and the Nordics, among others. The network is expected to be live in the U.K. by October 2014. Plans for the network in Italy, UAE, Germany, Japan, India, China, Thailand and Malaysia will be communicated at a later date.

* Canada: The Company has entered into a new 10-year partnership with Rogers Communications, a leading media enterprise in Canada, under a landmark television programming and WWE Network agreement. The partnership facilitates the launch of WWE Network as a traditional a-la-carte Pay-TV channel in Rogers’ cable systems with a preview beginning August 12 and thereafter through other Pay-TV providers outside Rogers’ footprint. The partnership also renews Rogers’ license of the Raw and SmackDown television programs, and grants Rogers distribution rights to the Company’s pay-per-views.

* Consumer Marketing: To enhance awareness, additional marketing investment is planned around the popular SummerSlam pay-per-view event in August. The Company will also introduce new payment plans in August, including a $19.99 monthly plan (with no commitment) and an upfront one-time payment option for its existing $9.99 per month offering (with six month commitment).

* Other Developments: Content coming to WWE Network includes The Monday Night War and WWE Rivalries, the most recent addition to the network’s program schedule, both of which provide a documentary-style look at some of the greatest moments in WWE history. Expanding current distribution, WWE Network is launching on several smart TVs and Blu-ray players in mid-August. The Company also plans to deliver a new “resume play” feature later this year.

2014 and 2015 Business Outlook

Compared to its May 15 Business Outlook release, the Company has improved its 2015 OIBDA outlook by $30 million on a net basis at all WWE Network subscriber levels. The improvement primarily reflects a comprehensive evaluation of the Company’s operations, which identified measures to reduce costs across all of its business units, including a 7% reduction in staffing levels. As a result, the Company anticipates recording a one-time, pre-tax restructuring charge of approximately $4.5 million in the third quarter of 2014, comprised of severance and other costs. The Company also estimates a $10 million reduction in 2014 expenses (on an adjusted basis), and a corresponding increase in its 2014 Adjusted OIBDA.

The rate of WWE Network subscriber adoption is a critical determinant of the Company’s projected future financial performance. The table below outlines ranges of potential Company performance at different subscriber levels in both 2014 and 2015 (Reconciliation of Operating Income to Adjusted OIBDA can be found in the Supplemental Information included in this release).

Basis of Presentation

During the first quarter of 2014, the Company launched WWE Network, which changed the way that certain content is delivered to our customers. In conjunction with this change, management reevaluated the way it manages and reports the business. The launch of WWE Network coupled with the continued convergence within the media landscape, has resulted in a change in the Company’s management reporting to its chief operating decision maker. These changes necessitated a change in the Company’s segment reporting to align with management’s operational view. The Company now classifies its operations into ten reportable segments, which include the following: Network (which includes our pay-per-view business), Television, Home Entertainment and Digital Media, individual segments that comprise the Media Division; Live Events; Licensing, Venue Merchandise, WWEShop, individual segments that comprise the Consumer Products Division; WWE Studios and Corporate and Other.

Comparability of Results

In the current year quarter, the Company recorded a $1.6 million adjustment to reduce the carrying value of the old Corporate Aircraft to its estimated fair value in conjunction with the anticipated sale of this asset. OIBDA results for the six months ended June 30, 2013 included a $4.7 million film impairment charge and an approximate $3.4 million positive impact from the transition of the Company’s video game to a new licensee in 2013. In order to facilitate an analysis of financial results on a comparable basis, where noted, the Company’s results have been adjusted to exclude these items. (See Schedule of Adjustments in Supplemental Information).

Three Months Ended June 30, 2014 – Results by Region and Business Segment

Revenues of $156.3 million increased 3% from the prior year quarter due to growth in North America. North American revenues increased 4% driven primarily by an increase in Media Division revenues as the ramp up in WWE Network subscription revenue was partially offset by lower revenue from the Company’s Pay-Per-View, Home Entertainment and Digital Media businesses. Revenues from the Company’s Live Events also declined due to the location of WrestleMania and the staging of eleven fewer events in North America. Revenues from outside North America were essentially flat to the prior year quarter.

Media Division

Revenues from the Company’s Media division increased 7% to $97.7 million with growth driven by the ramp up of WWE Network and increased television licensing fees. Growth from the Company’s Network and Television segments was partially offset by lower Home Entertainment and Digital Media revenue as described below.

* Network revenues, which include revenue generated by WWE Network, pay-per-view and video-on-demand, increased 13% to $43.3 million from $38.2 million in the prior year quarter as the ramp up of subscribers and subscription revenue more than offset a decline in pay-per-view revenue.

* WWE Network generated $19.4 million in subscription revenue based on an average of 665,000 paid subscribers over the quarter at a price of $9.99 per month. WWE Network had 700,000 paid subscribers at June 30, 2014 as compared to approximately 667,000 paid subscribers on April 6, following the broadcast of WrestleMania.

* Network subscription revenue of $19.4 million was partially offset by a $13.2 million decline in pay-per-view revenue. Pay-per-view revenue declined 36% to $23.8 million, driven by an overall 32% decline in buys for the Company’s pay-per-view events and a 6% decline in revenue per buy to $22.51. There were four pay-per-view events in the current year quarter as compared to three events in the prior year quarter. On a comparable basis, pay-per-view buys declined 41% reflecting the availability of pay-per-view events in the U.S. on WWE Network and weaker performance in several international markets. Revenue per buy declined 6% reflecting a higher proportion of buys from international markets (43% versus 33% in the prior year quarter).

* Television revenues increased 13% to $43.8 million from $38.7 million in the prior year quarter primarily due to the second season production and monetization of Total Divas and, to a lesser extent, contractual increases for existing programs. Total Divas (Season 1) debuted in the third quarter 2013.

* Home Entertainment net revenues decreased to $5.4 million from $7.1 million in the prior year quarter reflecting a 40% decline in units shipped, which was partially offset by an increase in the average effective price. The decline in unit shipments reflected reduced shipments of WWE’s catalog titles, which are typically characterized by lower prices and profit margins than new releases. As a result, new releases comprised approximately 70% of total units shipped as compared to 45% in the prior year quarter. Primarily reflecting this change in product mix, the average effective price increased 27% to $13.49. (On a year-to-date basis, average pricing is essentially flat as compared to the prior year period.)

* Digital Media net revenues were $5.2 million compared to $7.4 million in the prior year quarter. The decline reflected lower monetization of the Company’s pay-per-view webcasts viaWWE.com, as these events became available in the U.S. on WWE Network, as well as lower advertising across various platforms.

Live Events

Live Event revenues decreased 3% to $40.3 million from $41.6 million in the prior year quarter primarily due to the location of WrestleMania, and the staging of fewer events in North America. These factors were partially offset by the impact of higher average ticket prices in the Company’s international markets.

* The Company staged 77 events in the current quarter as compared to 87 events in the prior year quarter. There were 54 events held in North America this quarter versus 65 in the prior year quarter, and 23 events held in international markets versus 22 events in the prior year quarter.

* North American events generated revenues of $27.5 million as compared to $30.1 million in the prior year quarter. The 9% decline was primarily due to lower attendance at WrestleMania because of stadium configuration. The impact of staging of 11 fewer events in North America was nearly offset by increases in average attendance and ticket prices. Excluding WrestleMania, average attendance increased 13% to 6,000 fans and average ticket price increased 7% to $44.18 predominantly due to changes in venue mix.

* International live events generated revenues of $10.8 million as compared to $10.0 million in the prior year quarter. The 8% revenue growth was due to an 11% increase in average ticket price to $75.38 and the staging of one additional international event versus the prior year quarter. Partially offsetting this growth, average attendance declined 8% to 6,100 fans. The changes in average attendance and ticket prices were predominantly due to changes in country mix.

Consumer Products Division

Revenues from Consumer Products businesses were $16.0 million as compared to $16.6 million in the prior year quarter, primarily due to the decline in the Company’s licensing business as described below.

* Licensing revenues were $5.5 million as compared to $6.7 million in the prior year quarter, primarily driven by lower sales and effective pricing of our franchise video game.

* Venue Merchandise revenues decreased 6% to $6.5 million from $6.9 million in the prior year quarter primarily due to a 7% decline in total attendance at the Company’s North American events.

* WWEShop revenues increased 33% to $4.0 million from $3.0 million in the prior year quarter driven by a 29% increase in the volume of online merchandise orders to more than 81,000 orders globally. Orders increased primarily due to mobile shop optimization and a new distribution model in the U.K. utilizing Amazon. The average revenue per order declined 3% to $49.47 from the prior year quarter.

WWE Studios

WWE Studios revenue decreased to $1.7 million from $2.1 million in the prior year quarter due primarily to the timing of results from the Company’s portfolio of movies. Revenue recognized in the current year quarter was primarily associated with our 2013 slate of film releases. WWE Studios’ movie portfolio generated a loss of $0.2 million in the quarter compared to a loss of $0.4 million in the prior year quarter. Recent movies, such as Scooby Doo! WrestleMania Mystery (direct-to-DVD),Oculus (theatrical), and Road to Paloma (direct-to-DVD) released in March, April, and July 2014, respectively, have shown performances that are in-line with expectations.

Corporate and Other

Corporate and Other expenses increased $8.4 million to $42.0 million from the prior year quarter. As defined, these expenses include corporate overhead and certain expenses related to sales, marketing, and talent development costs, which have not been allocated to specific segments. The increase in Corporate and Other expense during the quarter was driven by a $2.5 million increase in professional fees, a $2.3 million increase in salary and benefit costs, and increased marketing expenses to support key content and brand initiatives, including the expansion of the Company’s international infrastructure, talent development and brand marketing.

Operating Income Before Depreciation and Amortization (OIBDA)

OIBDA results declined to a loss of $14.6 million from income of $14.9 million in the prior year quarter. The approximate $30 million decline was driven by the ramp up of WWE Network, investment across WWE to support key content and brand initiatives, and profit declines in several other WWE businesses. The ramp up of WWE Network resulted in a $15.5 million reduction in OIBDA as the growth in subscribers and subscription revenue was more than offset by the loss of pay-per-view revenue and increased programming, customer service and marketing costs. Investment in WWE’s content and brand initiatives resulted in an $8.4 million increase in Corporate and Other expenses (as described above). In addition, the overall decrease in OIBDA reflected lower revenue from the Company’s video game licensing, webcast pay-per-view events and live events. Based on the increased investment and changes in business mix during the quarter, the Company’s OIBDA margin was (9)% in the current year quarter as compared to 10% in the prior year quarter.

Depreciation and Amortization

Depreciation and amortization expense totaled $7.9 million for the current year quarter as compared to $6.1 million in the prior year quarter. Depreciation and amortization expense in both the current and prior year periods derived from investment in assets to support the Company’s content initiatives, including efforts to launch WWE Network. The current year quarter includes an adjustment of $1.6 million to adjust the carrying value of the old Corporate Aircraft to our estimate of its fair value, in conjunction with the anticipated sale of this asset.

Investment Income, Interest and Other Expense, Net

Investment income, interest and other expense, net yielded expense of $0.3 million compared to $0.4 million in the prior year quarter.

Effective tax rate

In the current year quarter, the effective tax rate was 36% as compared to 38% in the prior year quarter. The current year quarter effective tax rate approximates the Company’s expected effective tax rate. Due to the losses incurred during the current quarter, the Company recorded an associated tax benefit, which it believes it will be able to utilize in future periods.

Summary Results for the Six Months Ended June 30, 2014

Total revenues for the six months ended June 30, 2014 were $281.9 million as compared to $276.3 million in the prior year period. Operating loss for the current year period was $34.7 million versus income $14.9 million in the prior year period. Net loss was $22.5 million, or $0.30 per share, as compared to net income of $8.2 million, or $0.11 per share, in the prior year period. OIBDA was a negative $21.8 million for the current six month period as compared to positive $26.2 million in the prior year period.

Excluding items that impacted comparability on a year-over-year basis, Adjusted Operating loss was $33.1 million compared to income of $16.2 million in the prior year period, and Adjusted Net loss was $21.5 million, or $0.29 per share, compared to Net income of $9.1 million, or $0.12 per share, in the prior year period.

Six Months Ended June 30, 2014 – Results by Region and Business Segment

Revenues increased 2% to $281.9 million as growth from North America was partially offset by declines from WWE’s international markets. Revenues from North America increased 4% primarily due to the launch of WWE Network, the licensing of new television content and contractual increases for existing programs, and an increase in the average attendance and pricing of live events, as well as higher Studios revenues related to prior year releases. These increases were partially offset by reduced pay-per-view revenues, reflecting the availability of pay-per-view events in the U.S. on WWE Network, and the absence of a prior year benefit related to the transition to a new video game licensee, Take-Two Interactive. Revenues from outside North America declined 4% primarily due to lower video game licensing revenues, a reduction in the average attendance and number of international live events and lower pay-per-view revenues. There was no significant impact from changes in foreign exchange rates in the current year period.

Media Division

Revenues from the Company’s Media Division increased 9% to $173.5 million primarily driven by the launch and ramp up of WWE Network as well as from increased television and home entertainment revenue. Revenue growth was partially offset by lower pay-per-view (included in the Network segment) and Digital Media revenue as our video content became available on WWE Network.

Live Events

Live Event revenues were $62.0 million as compared to $62.6 million in the prior year period primarily due to lower attendance at WrestleMania (because of stadium configuration) and the staging of 10 fewer events. These factors were partially offset by increases in average attendance and effective price across the Company’s other events.

Consumer Products Division

Revenues from Consumer Products businesses were $39.2 million for the current year period as compared to $49.2 million in the prior year period, representing a decrease of 20%. The decrease was primarily driven by the transition to a new video game partner, Take-Two Interactive, lower sales and contractual changes in the Company’s video game licensing agreement. Additionally, Venue merchandise sales decreased primarily due to a decline in per-capita merchandise sales at domestic events. Partially offsetting these declines was increased revenue from WWEShop, which benefited from mobile shop optimization and a new distribution model in the U.K. utilizing Amazon.

WWE Studios

WWE Studios revenue increased to $6.1 million from $4.0 million in the prior year period primarily due to the strong performance of The Call, which was released theatrically in March 2013. WWE Studios’ movie portfolio generated income of $1.4 million compared to a loss of 5.4 million in the prior year quarter, which included $4.7 million in film impairment charges. Excluding the impact of prior-year film impairment charges, WWE Studios generated income of $1.4 million compared to an adjusted loss of $0.7 million.

Corporate and Other

Corporate and Other expenses increased $13.2 million to $79.9 million from the prior year period. As defined, these expenses include corporate overhead and certain expenses related to sales, marketing, and talent development costs, which have not been allocated to specific segments. The increase in Corporate and Other expense was driven by a $5.0 million increase in professional fees, a $4.0 million increase in salary and benefit costs, and increased marketing expenses to support key content and brand initiatives, including the expansion of the Company’s international infrastructure, talent development and brand marketing.

Operating Income Before Depreciation and Amortization (OIBDA)

OIBDA was a negative $21.8 million in the current year period as compared to positive $26.2 million in the prior year period. The decline in OIBDA was primarily due to current year increases in staff-related, programming, customer service, and marketing expense due, in part, to the launch of WWE Network and a prior year benefit related to the transition to Take-Two from THQ. These factors were partially offset by improved film performance and the recognition of a minimum guarantee from our home entertainment partner. Based on the impact increased investment and resulting changes in business mix, the Company’s OIBDA margin was (8)% in the first six months of 2014 as compared to 9% in the prior year period. Excluding the impact of film impairments and video game transition, Adjusted OIBDA was a negative $21.8 million in the period as compared to positive $27.5 million in the prior year period, and the Adjusted OIBDA margin was (8)% in the current period as compared to 10% in the prior year period. (See Schedules of Adjustments in Supplemental Information).

Depreciation and amortization

Depreciation and amortization expense totaled $12.9 million for the current year period as compared to $11.3 million in the prior year period. The increase in depreciation and amortization expense derives from investment in assets to support the Company’s content-related initiatives. The current year expense includes an adjustment of $1.6 million to adjust the carrying value of the old Corporate Aircraft to our estimate of its fair value, in conjunction with the anticipated sale of this asset.

Investment Income, Interest and Other Expense, Net

Investment income, interest and other expense, net yielded an expense of $0.6 million compared to an expense of $1.7 million in the prior year period, reflecting lower realized foreign exchange losses as compared to the prior year period.

Effective tax rate

In the current year period, the effective tax rate was 36% as compared to 38% in the prior year period. The current year period effective tax rate approximates the Company’s expected effective tax rate. The current year includes a tax benefit associated with the Company’s operating loss. The Company believes it will be able to utilize these benefits in future periods.

Cash Flows & Liquidity

Cash flows used in operating activities were $4.7 million in the current year first half of 2014. The use of cash was driven by the Company’s operating loss, including expenditures to launch WWE Network and associated content development, as well as spending to produce feature films.

Purchases of property and equipment and other assets declined by $6.9 million from the prior year period.

As of June 30, 2014, the Company held $79.0 million in cash and short-term investments and currently estimates debt capacity under the Company’s revolving line of credit to be approximately $120 million.

Here are updated WWE pay-per-view buys after today’s announcement. Also, please note that all of the pay-per-views listed below aired on the WWE Network.

* WrestleMania XXX drew 690,000 buys, down from 1,039,000 last year

* Extreme Rules drew 108,000 buys, down from 231,000 last year

* Payback drew 67,000 buys, down from 186,000 last year

* Money In the Bank did 122,000 buys, down from 199,000 last year

Source: Wrestling Observer Newsletter

– We noted before that WWE Network subscribers who pay with PayPal are able to stop payment or cancel their payments before the six month commitment is up. This likely isn’t hurting the Network much as less than 5% of Network subscribers are paying via PayPal.

– Apparently WrestleMania payoffs were sent out this past week and people who expected to get screwed, given their unhappiness over video game royalties, said that was not the case and the payoffs were better than they expected.