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World Wrestling Entertainment Inc (WWE)
Q4Â 2018 Earnings Conference Call
Feb. 07, 2019, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Hello and welcome to the webcast entitled WWE Fourth Quarter Earnings. We have just a few announcements before we begin. First, please use the question mark icon in the upper right hand corner of your web console for technical assistance. The option to enlarge slides is located in the right on your slides with the arrows pointing in different direction. You may ask your question at any time by typing your question into the question box located on the web interface and clicking send. (Operator Instructions)
I will now turn the call over to Michael Weitz, SVP Financial Planning and Investor Relations. Please go ahead, sir.
Michael Weitz -- Senior Vice President Financial Planning and Investor Relations
Thank you, Amanda, and good morning everyone. Welcome to WWE's fourth quarter 2018 earnings call. Leading today's discussion are Vince McMahon, our Chairman and CEO; as well as George Barrios and Michelle Wilson, our Co-Presidents. Their remarks will be followed by a Q&A session. We issued two releases earlier this morning, one pertaining to our 2018 earnings and the second announcing a share repurchase program. These releases, our earnings presentation, other supporting materials have been posted on our website, corporate.wwe.com/investors.
Today's discussion will include forward-looking statements. These forward-looking statements reflect our current views are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings. Actual results may differ materially and undue reliance should not be placed on them.
Additionally, the matters we will be discussing today may include non-GAAP financial measures. Reconciliation of non-GAAP to GAAP information is set forth in our earnings release and presentation, which are available on our website. Finally, as a reminder, today's call is being recorded and the replay will be available on our website later today.
At this time, it's my privilege to turn the call over to Vince.
Vincent K. McMahon -- Chairman & Chief Executive Officer
Good morning, everyone. For the year, we achieved record revenue and profit as well demonstrating we continue to effectively execute our strategy. In other words, we know what we're doing.
Our international revenue surpassed $300 million for the first time in the history and of course always been one of our goals to achieve more international revenue we're getting there. Just a reminder, we completed our agreements with Fox in USA to provide much more powerful platform for broadening our audience and driving growth. It's not just that, it's also the promotion behind it, which we think will be exponential with both parties, which is going to help us, not just in terms of television, that's overall exposure. As you know everything else come behind that in terms of CPG, et cetera, et cetera.
Of course, we performed large-scale record breaking events; Greatest Royal Rumble, WWE Super Show-Down, which is in Australia, and actually it was like as the largest attendees we had for an event overseas in the past 25 years. It grew our WWE network with 8%, an increase in average paid subs to 1.65 million. We are focused on other deepening engagement in terms of production of content Miz & Mrs., which is a hit television series, featuring the Miz and his Wife, Michelle. And we delivered eight season, pretty much it is remarkable in eight season of a Total Divas, and the third season with Total Bellas. In addition to that, we also produced Evolution, which is an all-women's pay-per-view did quite well for us. And we have Mixed Match Challenge in which we did a second season on Facebook Watch. Generally speaking we're pleased with our performance. And we continue to transform WWE. And hopefully, we have another year of record breaking results. George?
George Barrios -- Co-President
Thanks, Vince. There are several key topics, which Michelle and I would like to review today, includes management discussion of our financial performance, the progress of key strategic initiatives and our business outlook.
As Vince said in 2018, we effectively executed our strategy to leverage our brand, increased the monetization of our content worldwide across multiple platforms. We generated record revenues for the fifth year in a row of $930 million. The international markets surpassing $300 million for the first time in our history. These results reflected higher content rights fees, increased advertising and sponsorship sales and the continued growth of our direct-to-consumer WWE Network. We achieved adjusted OIBDA, nearly $179 million, which is also a record that exceeded the high end of our guidance primarily due to some cost savings and timing of certain initiatives to shift that from the fourth quarter into the current year.
During the fourth quarter, our strong results reflected our ability to create captivating new content, brought new audience and drive performance based on economies of scale. In the period, we produced several spectacular large scale events such as Crown Jewel and Super Show-Down that had a meaningful impact on our results, as evident in our Media and Live Event segments. And accounted for a substantial share of our overall $23 million growth in adjusted OIBDA.
To review our business performance in the quarter, let's turn to Page five of the presentation, which shows revenue, operating income and adjusted OIBDA by segment as compared to the prior year.
Michelle D. Wilson -- Co-President
Looking at our Media segment, adjusted OIBDA increased $22.8 million based on the 40%, or a $58.9 million increase in revenue. Revenue growth was driven by the distribution of new content in international markets as George referenced and higher rights fees in core content agreements. The significant monetization of new content was -- in the core component of the quarter's other media and advertising revenue. Additionally, WWE Network added to the growth as the average paid subscribers increased 7% to nearly 1.6 million and contributed to subscriber growth of 8% for the full year.
The increased monetization of content reflected some important operational achievements. We produce approximately 425 hours of content, work to optimize our future distribution and capitalize on new opportunities to expand our audience across platforms. Extending our reach on television, we completed our eight successful season as Total Divas, as Vince mentioned with the ninth season plan for 2019. We also announced new seasons of both Total Bellas and Miz & Mrs., which is both rapidly gained a very loyal audience.
Our streaming service WWE network, we expanded live in-ring content and original programming, which continued to drive viewer engagement. Among the network's most viewed programs during the quarter were international pay-per-view events, Super Show-Down and Crown Jewel. Our first all-in pay-per-view event evolution, as well as the newly launched weekly series, NXT UK.
On social and digital platforms, consumption of WWE content continued to increase dramatically. Over the year, digital video views increased 57% to 31.4 billion. And fans watch more than 1.2 billion hours of content on those platforms. That represents a 77% increase from last year.
Contributing to this growth, we produced approximately 165 hours of social and digital content, including the second season of Mixed Match Challenge on Facebook Watch.
In 2018, in total, we produced more than 1,600 hours of original content across platform, which generated consumption in the range of 6 billion hours. Over the year, we work to diversify our talent based and established our first performance center outside of the United States. Looking ahead, we expect to increase our production capabilities and deliver even more localized content for our international markets. We believe this will further engage and grow our global audience.
Turning back to our segment performance, adjusted OIBDA from consumer products increased from the prior year quarter, primarily due to a new FASB standard for revenue recognition. The adoption of that standard increased licensing revenue in the period by approximately $8 million. Excluding the impact of this change, adjusted OIBDA from the consumer products declined from the fourth quarter last year primarily due to lower sales of merchandise at our e-commerce site WWE Shop, and lower royalties from the sale of our toy products. Despite that result, we remain the number one action figure in the United States and the latest releases of our franchise video games, WWE 2K19 earned its highest Metacritic score since 2K began producing our game back in 2013.
During the quarter, we also continued to increase the penetration of our mobile game. At year-end, we had more than 100 million installed across our mobile game portfolio, which was led by WWE Champions and WWE Supercard. Also included our newest game WWE Mayhem. Lastly, following the successful launch of WWE Custom Tees, a new component of WWE Shop, which we described last quarter, we are now planning to extend the service to our international markets and we believe it will drive 2019 growth in e-commerce.
George Barrios -- Co-President
Going on Page eight of the presentation, revenue from Live Events, reflected the impact of holding several large scale international shows. WWE Super Show-Down featured the most extensive roster of WWE Superstars that ever appear in Australia, became the highest-attended event outside the US in the past 25 years, attracting more than 70,000 fans. Growth however was offset by the timing and performance of other events worldwide. Specifically, we staged 14 fewer events in the quarter, in part to accommodate these special events. Additionally, average attendance at our North American event declined 7% to approximately 5,000. Regarding our Live Events, I thought it would be helpful to provide broader context on our North American business.
Turning to Page nine of the presentation, I'd like to focus on three key points. First, over the past decade, total annual attendance at our North American events and revenues from ticket sales of those events as followed steadily increasing trend line. Second, of the 310 main roster Raw and SmackDown events in 2018, only a 113 of those were events where we created video content and monetize that media to content rights fees, first part of our WWE Network subscription service. And finally for those 113 events where we created and monetize video content, our quote-unquote TV and pay-per-view event, average attendance has generally been growing are stable.
Turning back to our overall results. The significant adjusted OIBDA growth in our Media segment in a one-time $11.3 million prior year charge with the adoption of the new tax act were the primary drivers of growth in net income. Additionally, fourth quarter net income benefited from $2.5 million unrealized gain due to mark-to-market adjustment of a marketable equity investment. You should note, that as the underlying market value of this investment fluctuates, WWE is exposed to future earnings volatility to the extent we continue to hold this investment.
Page 10 of our presentation shows selected elements of our capital structure. As of December 31st, 2018, WWE held approximately $360 million in cash and short-term investments. Additionally, we estimate approximately $100 million in debt capacity under the company's revolving credit facility. In 2018, we generated approximately $154 million in free cash flow, as compared to $72 million in the prior year, growth driven by improved operating performance. Partially offsetting this increase in free cash flow, we paid $51 million of payroll taxes associated with annual vesting of our equity awards. The scale of this amount, reflected as a financing activity in our cash flow statement, was due to the significant increase in our stock price.
In terms of our capital structure, we are committed to maintaining a strong balance sheet, providing adequate liquidity for deepening our global brand wealth through investments. As we look to the future, we believe that WWE will generate significant cash flow that enables us to pursue these objectives and return excess capital to shareholders. This morning, we announced that our Board of Directors has authorized a stock repurchase plan of up to $500 million. The authorization of a stock repurchase program underscores our commitment to the company's shareholders. The decision was supported by WWE strong financial performance demonstrates our confidence in the company's future.
The objectives of our capital deployment strategy are to maintain significant financial flexibility, provide adequate liquidity for investing in growth opportunities, and to return excess capital to shareholders. We plan to repurchase stock opportunistically, when the price is below WWE's intrinsic value as conservatively estimated by management, and the returns of share repurchases compared favorably to other capital allocation alternatives. In our view, we should keep this on the right path or continuing to build shareholder value.
Turning to our outlook. In 2019, we expect to achieve another year of record revenue of approximately $1 billion, previously committed, we are targeting adjusted OIBDA of at least $200 million, which would also be an all-time record. We believe in increasing the engagement of our fans over the next few years will enhance WWE's brands nearby strengthening our ability to optimize the value of our content. Given what we believe the potential magnitude of this opportunity is, and its importance to our long-term growth, we will continue to invest in content, digitization and deepening our global footprint. The areas of investment for 2019 will include our talent, developing a wider range of content, including localized content, developing the next iteration of WWE Network, and leveraging data to improve all areas of our business. In 2019, as we have in the past, we will continue to balance current earnings growth with investments that strengthen engagement and drive long-term value.
To note that net income in 2019 could be impacted by changes in the value of the marketable equity investments, I mentioned. Additionally, we anticipate an effective tax rate of approximately 25% before factoring in the impact of any discrete items, including the impact of the recent share appreciation on the vesting of share-based compensation.
We've previously discussed the step up in capital expenditures that build out our content production infrastructure. That spending was delayed in 2018, as our workplace strategy continued to evolve. Total capital expenditures are now estimated at $70 million to $90 million for 2019 with continued spending in 2020 above the historic range of approximately 4% to 7% of revenue. And we'll provide further guidance when the related client and timeline have been finalized.
For the first quarter of 2019, we estimate adjusted OIBDA of $9 million to $14 million. This range as well as expected performance through third quarter represent a year-over-year decline at higher rights fees were offset by increases in fixed costs, including the timing of strategic investments. Achieving our targeted full year 2019 results assumed the substantial revenue increase which should generate adjusted OIBDA of at least $100 million in the fourth quarter. Importantly, our new distribution agreements in the US, which become effective in the fourth quarter give us significant visibility into that expectation and into the strong year-over-year growth that we anticipate in every quarter of 2020.
Additionally we're projecting average paid subscribers to WWE Network of approximately 1.5 million for the first quarter. As you know, since the launch of WWE Network, we've issued a release and held a conference call to report network sublevels following WrestleMania. Given the success of WWE Network, we no longer believes such a call provides useful information to investors. Based on these factors and frankly extremely short time period between WrestleMania and our first quarter earnings call, we don't plan on issuing a release or hosting a call, the day after WrestleMania.
In conclusion, in 2019, we'll continue to focus on determining our distribution strategy in various international markets. And we expect to complete this work and provide additional perspective on our plans toward the first -- end of the first half of 2019. We'll also continue to work on developing the next iteration of WWE Network, creating new content, localized content and continuing with leverage data and new digital products. We believe these strategic initiatives will further engage (Technical Difficulty) deepen the mode around our business. Our execution in the context of the ongoing media industry trends will create the foundation for sustainable long-term growth and increases in shareholder value.
That concludes this portion of the call. And I'll now turn it back to Michael.
Michael Weitz -- Senior Vice President Financial Planning and Investor Relations
Amanda, please open the lines for questions.
Questions and Answers:
Operator
Okay. (Operator Instructions) We will take our first question from Ben Swinburne with Morgan Stanley. Please go ahead.
Benjamin Swinburne -- Morgan Stanley -- Analyst
Thank you. Good morning, everybody. Couple of questions, George. Could you talk a little bit about the investments you're making in 2019. Any help in quantifying sort of the incremental spending that you're highlighting in the press release that you would call strategic. And should we expect that to be fairly linear through the year. Since you guys obviously have a very back-end loaded EBITDA expectation. And then secondly, I guess, I have to ask since I'm the first on the call, any update on the UK process, which is now has gone beyond your at least initial suggested timeline for us to expect a result about?
George A. Barrios -- Co-President & Director
Yeah. So, Ben, on the first part on the investments, think about it this way. If you look at our core fixed cost base in 2018, kind of where we started the year that tends to grow 3% to 4% annually. You kind of apply that, a little bit higher rate on compensation, which is frankly the biggest chunk of our cost back. Throughout the year -- and it gets to the timing questions, which I'll get to, but toward the end of the year, third quarter, and then into the fourth quarter, we began ramping up some of those strategic investments. So I'll talk a little bit about what they are, but that's when they started to get the full-year impact in 2019. So the comp -- the compares in Q1, which I talked about the decline in OIBDA, and then they soften a little bit in Q2, little bit more in Q3, and then by Q4, the year-over-year comps actually even out. So you don't have the investment impact at this point. I'll say, as we go through the year, as you know, we have a forecast, we started the year with, it gets updated just about daily. So, we will tune any further investments depending on what we see. So, if we're moving revenue at a faster clip than we anticipate, we may put some additional investments in the fourth quarter, but all geared toward hitting that $200 million in OIBDA for the year.
And as we talked about on the prepared remarks, it really is on those areas of continuing to drive content, especially the localization of our current content and essentially the local content in some of our key international markets. We just think that's a big addition to the fly wheel that we built. We'll continue to invest in digital products and digitization kind of with large -- the network being kind of one of the largest manifestations of that. And we'll continue to put more people -- more kind of functional roles in our key markets in India and the Middle East, in China and Latin America. So that's what we're going to do. As we said again in the prepared remarks, we think there's a long tale for us in the monetization of content, both in the US and outside the US, and we think the opportunities, we'll make sure, we'll take advantage of.
In terms of the rights renewal process outside the US, obviously there's a lot of key markets that we're still working on, UK, India, China, Latin America, the Middle East. We'll announce those as the deals get done or shortly thereafter. We will not update the economics on any single region, what we will do is, update the total core content licensing revenue that we expect. So we can see what the outcome is in total for the portfolio, but no individual market. As opposed to the announcement around the UK, you rightly mentioned back in 2017, we have said, we thought, we did complete the UK agreement toward the back half of 2018. It hasn't happened. So, I think it's fair to say that all the agreements will be completed substantively by the middle of the year. And so we'll announce those as they get done. We're not going to put a specific date on any one agreement at this point.
Benjamin Swinburne -- Morgan Stanley -- Analyst
Thank you very much.
George Barrios -- Co-President
Okay.
Operator
We'll take our next question from Curry Baker with Guggenheim Securities.
Curry Baker -- Guggenheim Securities -- Analyst
Hey, thanks for the question. I want on content. The second season of Mixed Match Challenge wrapped up in December. Can you provide us any update on the metrics you've gotten from having two seasons on the Facebook Watch platform. And then there has not been a renewal for the third season. So how are you thinking about the incremental content deals going forward? Does a fixed hours of content each week makes sense? And if so, where you in the process of maybe rolling out a third hour of SmackDown or anything like that?
Michelle D. Wilson -- Co-President
So, Curry, hi. It's Michelle. See on Facebook, as I mentioned on the last call, I think it's both pieces of Mixed Match Challenge have been a great learning experience for WWE on our side, around driving viewership on the Facebook Watch platform. Again the metrics are the same that we follow all of our content, which is times viewed. So again, we were pleased with what we've learned and we've learned a lot about how to produce short-form content for Facebook. They work with us very closely in terms of how to drive our fans from our large footprint in Facebook around our talent and the WWE pages to the Watch tab. So again, I think, it was a great experiment for us and we've learned a lot. So again, I'll let George to comment on kind of the six hour and what our plans are for that, but that's pretty much it on Facebook.
George A. Barrios -- Co-President & Director
Yeah, Curry, and the second part of the question, just to give content, because I know you notice, but for everyone on the call. So for a long time, we've created six hours of Live Event in-ring content on Mondays and Tuesdays. Two hours of Raw, two hours of SmackDown and previously ECW, NXT main event Superstars. Obviously a few years ago, we moved to three hours for Raw and two hours for SmackDown. That six hour, if you will as you referred to it continued to be things like Mondays Main Event. This past year it was 205 live and WWE Network, it was Mixed Match Challenge, which Michelle just spoke about. So, yeah, we need to look at that obviously the Live Event content is valuable and like every piece of content, whether is Miz & Maryse or Raw or SmackDown or NXT, we have to think about what's the best platform for that content. Is it on a Reebok (ph) platform, is it in the pay-TV bundle, is in our direct-to-consumer. So we're doing that evaluation now. And once we've finalized that decision will let everyone know.
Curry Baker -- Guggenheim Securities -- Analyst
Okay, thanks guys.
Operator
We'll take our next question from David Karnovsky with JPMorgan.
David Karnovsky -- JP Morgan -- Analyst
Hi, thanks for taking my questions. For both your revenue and OIBDA guide in 2019, does that currently include any large international events like Saudi Arabia, WWE Super Showdown. And then just to clarify, are you expecting or it declines in each of the first three quarters, or just over that period in total?
George Barrios -- Co-President
Yes, on the first one, as you know, we announced a 10-year deals into a major event in the Middle East. So that's in there. I'm not going to comment on any other events that are kind of in our forecast. We don't get into that level of granular detail. And with regards to Ben's question, your second part David is the investment element in the timing of that is most pronounced in the first quarter, a little bit less in the second quarter, but probably decline there as well. And then similarly by the third quarter it begins to abate somewhat, but potentially kind of flat to down in the third quarter as well. And then the fourth quarter will be a significant increase, as the US rights deal comes into play. And at this point, we're expecting at least $100 million of adjusted OIBDA in that quarter.
David Karnovsky -- JP Morgan -- Analyst
Okay. And then you've mentioned investing in your talent base in 2019, and we've seen in the recent months in your wrestling promotion announce. Just wondering how this is potentially impacting the market for talent and whether you're exceeding more cost inflation there than normal? Thanks.
George Barrios -- Co-President
Yeah, too early to talk. Everybody talk about the specifics of that. From our perspective, we think, we are the premier global organization and greatest wrestlers in the world. Want to be in the bridge platform. So we have a lot of confidence and ability to manage that.
David Karnovsky -- JP Morgan -- Analyst
Okay, thanks.
George Barrios -- Co-President
Okay.
Operator
We'll take our next question from Brandon Ross with BTIG.
Brandon Ross -- BTIG -- Analyst
Hi, thanks for taking the questions. You have content deals in progress that I believe will impact 2019, including China and Mexico, I think. How are these embedded in your 2019 guide? And what progress has been made there? And then on the China market, what specifically are you seeing there? How is your progress and popularity changed since the last TV deal that you got there? Thanks.
George Barrios -- Co-President
Sure. So, yes, you're right, there's some deals are expired during the year. So the outcome of those will impact 2019. As far as, what's embedded in the guide is our best estimates of where those deals will turn out. Obviously, in some, we have better visibility than others. So because of the timing of the discussions. But in all, we have some level of visibility at this point. So the conversations continue. They're frankly, not that a similar market-by-market, little bit kind of where you are in the conversation might differ, just because of the timing, but otherwise everything continues a pace and a lot of pieces and so on in everyone's passport. So which is a good thing. And then Michelle can touch on.
Michelle D. Wilson -- Co-President
On China, as a reminder to everyone, our content is distributed there on it with a digital-first strategy with PP Sport. And again, we've seen our consumption of both Raw and SmackDown, and again what's great about that partnership we are delivering Raw and SmackDown live in Mandarin, and so that is obviously been great to driving our viewership and our families in that market. So consumption on Raw and SmackDown continues to grow well in that market. We are pleased with the growth. Again what's nice about digital and social, as you can grow that pretty quickly. As most of you know, we had a strategy where we put some social media, content producers on the ground in that market, that's also grow in our social media footprint significantly. As George mentioned, we are one of our primary focus is putting investments into the market and China is one of them where we can do more localized content that means highlights and clips and how we tell the story Raw and SmackDown a social platforms being in Mandarin. And right now, we are just scratching the surface of that. We believe long-term that will continue to grow our families in China. So again, we're happy with the growth and we expected to continue as we engage our fans deeper with localized content.
Brandon Ross -- BTIG -- Analyst
Thank you.
Operator
We'll take our next question from Eric Handler with MKM Partners.
Eric Handler -- MKM Partners -- Analyst
Thank you very much, and good morning. Two questions for you. First, George a bit of a modeling question. When you look at these investments, particularly what we're going to see in the first quarter, is that going to impact more the Media division line? Is that going to impact more on the corporate line, where we're going to see these investments show up?
George Barrios -- Co-President
Yeah, you'll see more on the media side, as well as -- as you know, we allocate some of the -- our cost as well. Back to the segments, the cost that we feel appropriately belong in the segments, because they're closer to the end customer. So some of those costs as well. But yeah, primarily, just because of the scale of the media business, so they're (ph) predominantly there.
Eric Handler -- MKM Partners -- Analyst
Okay. And then a question for Paul, if he is there, if he is not, whoever chooses. The other day, thanks to the magical power of the Internet there was picture of Paul, making a presentation and behind him was a map of the world and forward-looking, thinking about where future performance centers can go and we had one in Latin America and Asia and five different places, I think it was. How close are we to? I know, you just opened up the UK center. But as you think about more localization of product how close are we to actually seeing these performance centers start getting opened in various other regions?
George Barrios -- Co-President
Yeah. And I think to give in a little bit broader context, Vince in the discussion the other day said something, I thought was really impactful. And that is it -- in the next five years to 10 years, our ability to develop local content could be as valuable as the western content that we today export Raw and SmackDown. So, when we talk about this performance and the center strategy, gambling strategy globally. It has multiple points: it has -- number one, it gives us a greater pipeline of talent; number two, it allows us in the short-term to monetize; and then number three, get to that longer-term vision, that Vince mentioned. So for us, the question is, how? How and when? And you saw the UK was, I would describe on kind of on a light scale, if Orlando is on the heavy scale, replicating that UK's more on the light scale, and that's the beginning. So we'll see over time, because we're going to learn. I think that's one of the thing culturally the organization does really well. It starts off small, it learns, it grows quicker and quicker and quicker. Before you know it, you've got this huge overnight success. So that will be the approach we take with the PC model. I saw that picture Paul too, he looked (inaudible) on that.
Eric Handler -- MKM Partners -- Analyst
And then just one last follow-up, if I could. With the share buyback, I'm just curious what drove your decision to do a buyback rather than, let's say, increase the dividend at this time.
George Barrios -- Co-President
Yeah. So, obviously, the first question was, what do we see in terms of free cash flow. We have today a lot of confidence in that over the next several years. And then we evaluated a variety of models. And we just thought that the ability to balance to maintain the strength of the balance sheet and given us the flexibility around that, reacting the new assumptions that will have both about external environment, our own internal operations. We just thought authorizing a buyback program just gave us a lot more flexibility.
Eric Handler -- MKM Partners -- Analyst
Great. Thank you.
Operator
We'll take our next question from Vasily Karasyov with Cannonball Research.
Vasily Karasyov -- Cannonball Research -- Analyst
Thank you. Good morning. I have a couple. George, you just mentioned your confidence in free cash flow generation. I think this year your EBITDA to free cash flow conversion was around 90%, and that's up from 53% last year. Can you tell us what kind of level we should expect now in the next three years? What's the right kind of assumption? And then I have a question on advertising and sponsorship.
George A. Barrios -- Co-President & Director
Yeah, I'm going to stay away from your question on free cash flow conversion. I think there are some things we need to lock down before we can comment on that, we do want to get the international renewals completed. We want to have a little bit more visibility on our workplace strategy, the timing of that, we'll stay away from that. I also will say, we have -- when you look at our cash flow annually, there are timing elements around that, I tend to myself, look at it two year or three-year average, especially the working capital changes. But I'm not going to peg a specific conversion number at this point for the reasons I mentioned.
Vasily Karasyov -- Cannonball Research -- Analyst
Okay. The second question is about advertising and sponsorship revenue accelerating in Q4 and for the full year in the Media segment. So my question is, a) should we expect this lumpiness in terms of growth rates in 2019 to continue? And then would it be fair to assume that the incremental margin for this revenue stream as close to like 85%, 90%? Thank you.
George A. Barrios -- Co-President & Director
There are two things. It's lumpy by the nature. So we're not going to get into quarter-over-quarter guide. And then on the margin, it depends on a lot of instance, our digital assets are part of that. And within that, specifically our relationship with YouTube. And so the way we record the revenue and attendant COGS, depends on whether it's sold by us or sold by them. So I don't want to get into all mechanics of that. I think it's fair to say it's very, very profitable revenue, 80%, 90%. So, I wouldn't say it's at that level, again because of this mix issue.
Vasily Karasyov -- Cannonball Research -- Analyst
Thank you.
Operator
We'll take our next question from Eric Katz with Wolfe Research.
Eric Katz -- Wolfe Research -- Analyst
Thanks, good morning all. Nice to see a stock up in this tape. So well done. You've been able to find a number of incremental opportunities over the last few years whether Saudi Arabia, Facebook, or in your TV shows. Is there anything you can tell us about potentially new opportunities or areas of interest you're looking into for 2019 and beyond. And sort of in that vein? Any thoughts of putting some NXT content on Fox?
George A. Barrios -- Co-President & Director
Yeah. So on the first part, I think, Vince mentioned on the last call, again it gets to the culture of the company has kind of continuous reimagination of itself. And we have a pretty robust process, Eric of evaluating both organic and inorganic opportunities. It's just reading what Michelle earlier this morning. So yeah, there is a lot on the pipeline. We're not going to talk about what those are. But I will say it's really rigorous. We've got a real focus on return profile. On some cases, that return is over multiple years, because our ability to monetize content for example might be driven by contractual agreement. But I will say it's a really rigorous process around what the return threshold is on the investments. You had another one?
Eric Handler -- MKM Partners -- Analyst
With regard to potentially playing NXT on Fox?
George A. Barrios -- Co-President & Director
Right. Yeah, it look, I think we've talked about it a little bit earlier. The main thing, and it's -- there's two big changes that it really happened over the last 10 years. Number one, WWE has become predominantly a Media company. Over 70% of its revenue in 2018 was from media. As opposed to from tickets or products. So that's a fundamental shift in the last 10 years. And that percentage will probably grow, as we hit the fourth quarter of this year. And then (inaudible) the business model is almost inverted. The second thing along with that is the monetization of the media now comes across multiple platforms. 10 years ago, what was being monetized was really one choice, and usually you're with a limited partner set. Today we have multiple platforms, some of which we control ourselves. The question we have for everything, including NXT is, what is the best way for that content? And you take the prism of our fans -- where are our fans consuming. What piece of content and tailored to which part of our fan group, because everyone has different appetite for different thing. And then obviously monetization, both direct monetization and indirect, the promotional element. So all of that goes into the -- those are the prisms we look at. And so NXT is no different. We have the same discussions. And sometimes, there's constructive debate internally around that because it's not an easy call. So that's a long way to (Multiple Speakers).
Eric Handler -- MKM Partners -- Analyst
Yeah, just you're starting that, do you know what the awareness is, of NXT content beyond those who are on the network?
George A. Barrios -- Co-President & Director
Yeah, look, if you think about the building of that brand and the second most -- if you think, WWE Network is a bundle of contents, you're always thinking about what the incremental value of any unit in a bundle. It's the second -- in our view it's the second most valuable unit in our bundle behind the pay-per-view. So it has significant value there for us. And if you look at -- when we do a takeover it's trending globally, right.
Michelle D. Wilson -- Co-President
And we just did, and for those of you who were watching the Super Bowl and following social media simultaneously, there's a interest of NXT is significant on social media following. So, we -- Paul and his team did have time, which was brought back from 20 years ago, which took place in NXT match during the half time Super Bowl and it trended worldwide and Veedol (ph) allowed the top advertisers trending and at the same time. So, when you talk about awareness, when you can drive global trends during the Super Bowl around NXT as a brand, I think that speaks volumes to the awareness of that brand. So again, those social metrics tend to be a very good indicator around awareness. And again trending worldwide is not an easy thing to accomplish on Super Bowl Sunday.
Eric Handler -- MKM Partners -- Analyst
Certainly better than the Halftime Show. Thanks guys.
Operator
We'll take our next question from Laura Martin with Needham.
Laura Martin -- Needham -- Analyst
Hi, there. I'd love to see, if we can get since (inaudible). So Vince, you got a stable SVOD environment for the last couple of years where you guys have grown the WWE Network. And now in this year we're going to get AT&T, Disney, NBC, lots of SVOD new entrants, as well as a lot of a AVOD (ph) new entrants. And I'm interested in your point of view about how many SVOD services do you think the average household is going to take and whether you think these new competitors, big competitors with a lot of marketing dollars and three avails sitting behind them are going to affect the OTT growth and you're viewing in general (ph)?
Vincent K. McMahon -- Chairman & Chief Executive Officer
Well, first of all, there is nothing in a world like WWE, whether it's Disney they have, what their platforms, and well, that works for you, if all of those works. But nonetheless you know this is -- it's not really a niche type situation, but it's a very unique form of -- you can't get it anywhere else. All right. And that's you know really a tremendous advantage that we have over everything else. And again, the nimble nature of what we can do as an extension of all of this. So we can fit in, into a bundle, we can fit into just our network, there's so many ramifications on those -- that we can be a part of a number of things, we can be a separate, combination of all the above. I think that we fit in very well, in terms of who we are, and then the unique nature of our product and the demand for it. So, I think it's a plus, not in terms of being. Ireland, Ireland is a good industry in this respect.
Laura Martin -- Needham -- Analyst
Okay.
Michelle D. Wilson -- Co-President
Laura, the other thing I would add to that, we've had a lot of discussions around each of those streaming services. And you know, we were absent in 2014, and I think our value proposition has continued to be very strong. We survey our subscribers regularly, and we constantly hear the value that we deliver in the content that we're putting out. As George mentioned, on the next iteration of WWE Network, if we're doing for that a reason and making that investment to ensure that we continue to deliver a great product, the best user experience and great content. So we feel good about our streaming service relative to the other choices that consumers have.
Laura Martin -- Needham -- Analyst
Okay. Ronda Rousey again, Vince, I don't know, if you're willing to -- this is well, maybe controversial for you. But Ronda Rousey was an experiment. She built her brand on a different platform. She brought it with her to WWE. I see that you put the Evolution ad, which is awesome on the financial outlook page, which is the Wall Street key page. And I'm just wondering, if she leaves, under this hypothetical question, let's say Ronda Rousey leaves the WWE, does that damage the WWE franchise? And does that make the experiment a worthy experiment to bring in people from that has built around elsewhere in the WWE will they remain in fact and exit and hurt the WWE brand? I'm curious as to that experiment you're learnings from this Ronda Rousey experiment?
Vincent K. McMahon -- Chairman & Chief Executive Officer
Will, again, we can bring people from the outside into our agreement, it can be just a one-off type thing because then our audience realizes that's not going to -- we're seeing the (inaudible) as far as their enjoyment of what we do. But nonetheless bringing Ronda then gave us more visibility in terms of the initiative of reaching more women. And when you do something like that, it allows you to not just use Ronda's platform from a different nature to come into WWE. Ronda ourself becomes a brand of WWE. She's a different Ronada, than what you saw before in terms of UFC and things of that nature. So -- and when you put talent, rogue talent, so to speak up against Ronda, Ronda can help us make talent. And she is doing just that. And she knows how to do it, she is one of the brightest people we've ever done business with. And the fact that she is adapted to the WWE culture so fast, it really is truly an amazing salute to her as an athlete and as a human being. So the Rondas will come in and out and when they do, as long as we know what those dates are, you plan around it. The unfortunate aspect of sometimes in our business is that we -- our performers are not cartoons, they get hurt. And this year leading up to where we are now we're at a number of injuries. And when you have injuries and I mean, there's a bunch of the Roman Reigns being a principal among them. And even John Cena, not an injury type thing. We thought we're going to have John more over part of our programming than we do, John got blessing, he's making more movies. And even John I would think would say jeez, I thought, I was going to spend more time with what I love to do, which is WWE. It's the only thing coming in and out. So it's not really part of our storyline. So you lose John, you lose Roman Reigns. In addition to that, we've got injuries Sasha Banks, Becky Lynch, one of our top female performers. Kevin Owens is a champions name, Bray Wyatt, Charlotte Flair, Alexa Bliss, Braun Strowman, Dean Ambrose and (inaudble) from our new tag team Jason Jordan, Fandango, Big Show, Seth Rollins. We had all these injuries, which is really unusual for us. And their characters you know, if you're writing a soap opera and all of a sudden your main character wasn't there in the middle of production, what do you do? Well, you very nimbly change the storyline. But it's not as good as the original one, sometimes it's better, because we're pretty good at it. But those are things that we're faced with, one of the reasons why television ratings have dropped. And one of the reasons, obviously from a lighter than standpoint, that's dropped too, because you don't have your favorites on television. Obviously we can't see them in a lighter than. So we're wide open, Ronda has done an extraordinary job. There will be other individuals coming from different areas that will join us on a long-term basis. It will help us as well. Hope that answers.
Laura Martin -- Needham -- Analyst
And that answers my third question too, which was about the attendance drop it sounds like some of these injuries occurred the storylines in the content. So that it's not secular you think next year if everybody's healthy, it sounds like you think attendance might kick back up again.
Vincent K. McMahon -- Chairman & Chief Executive Officer
Great.
Laura Martin -- Needham -- Analyst
Okay. Thanks very much. Very helpful. Thank you.
Operator
(Operator Instructions) We will take our next question from Evan Wingren with KeyBanc Capital Markets.
Evan Wingren -- KeyBanc Capital Markets -- Analyst
Thanks. Just a quick one on subs. The growth that you're guiding to for the first quarter implies a bit of a deceleration. Is that something that you're seeing in the numbers from Royal Rumble and just sort of wondering. Can you give a bit of color on kind of what you're seeing in terms of gross adds and churns at a high level kind of inter-quarter? Thanks.
George Barrios -- Co-President
Sure, I mean, first, specific obviously, it's context. WWE Network is one of the most powerful engagement mechanisms we have with our most-passionate fans. It's also our second largest revenue stream incredibly profitable. So we're all thrilled with the performance. I'm telling, I mean, we don't really worry about quarter-to-quarter that much been in the subscription business not long enough. We understand that there are some quarters will be worse than others, and it's really about the long-term on the platform. And we're not going to comment on kind of those specific events obviously.
Evan Wingren -- KeyBanc Capital Markets -- Analyst
Makes sense. Thanks.
Operator
We'll take our last question from Alan Gould with Loop Capital.
Alan Gould -- Loop Capital -- Analyst
Thank you for taking the question. Two questions please. In the release you talk about the next iteration of the WWE Network service. Can you give us a little -- can you give us a little more detail on that. Is it going to be a service with more Live Events at a higher price. And secondly with respect to CapEx, you said you've delayed plans, but it's still $70 million to $90 million which is a multiple of what it was this year. Could you explain that a little bit.
George Barrios -- Co-President
I'm not going to get into too much detail on the service. We've got a big revealed plan. But what -- we've talked about that there's repaying that we think we can do. First of all, it's an award-winning service right now, right. The second largest sports as far as service in the world. It won multiple awards on usability and functionality, our fans will love it. So we're thrilled. But we know we can do better. I think, we can do better in three ways. Number one, we integrate what is a treasure trove free video into the service that exists today on multiple platforms that we think we can do something pretty wonderful with that. Number two, we think we can create an opportunity where when you are connecting with us across any one of our digital businesses. We can bring that all together for you as of course today, you've got kind of separate touch points. And then number three, today, well, the services available around the world it's only in English. And we think there's an opportunity to go deeper into the local market. So that won't all happen at once you start seeing it roll out sometime this year, and it will come in phases. But that's really what the next iteration. And then we're really excited to share with folks here in the near future.
On the CapEx, yeah, we talked about the timing because earlier in 2018, we guided toward our historical percent of revenue on CapEx have been 4% to 7%. We said 2018, we expected to be beyond that and it wasn't to your point. So that was the delay into 2019. So, we'll be a little bit more specifics on the exact plan, but as we've said for now 18 months, the company has grown and it's easy opportunities into the future, our workplace strategies to reflect that. So we're kind of putting the final crossing pieces and guiding eyes on that. But that's what's the timing referred to 2018 and to 2019.
Alan Gould -- Loop Capital -- Analyst
Okay. Thanks, George.
Operator
At this time, there is no more phone questions, I'd like to turn the call back over to our presenters for any additional or closing remarks.
Vincent K. McMahon -- Chairman & Chief Executive Officer
Thank you, everybody. We appreciate you listening to the call today. If you have any questions, don't hesitate to contact us.
Operator
This concludes today's call. Thank you for your participation. You may now disconnect.
Duration: 53 minutes
Call participants:
Michael Weitz -- Senior Vice President Financial Planning and Investor Relations
Vincent K. McMahon -- Chairman & Chief Executive Officer
George Barrios -- Co-President
Michelle D. Wilson -- Co-President
Benjamin Swinburne -- Morgan Stanley -- Analyst
George A. Barrios -- Co-President & Director
Curry Baker -- Guggenheim Securities -- Analyst
David Karnovsky -- JP Morgan -- Analyst
Brandon Ross -- BTIG -- Analyst
Eric Handler -- MKM Partners -- Analyst
Vasily Karasyov -- Cannonball Research -- Analyst
Eric Katz -- Wolfe Research -- Analyst
Laura Martin -- Needham -- Analyst
Evan Wingren -- KeyBanc Capital Markets -- Analyst
Alan Gould -- Loop Capital -- Analyst
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