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World Wrestling Entertainment Inc (NYSE:WWE)
Q2 2020 Earnings Call
Jul 30, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

[Operator Instructions] Hello. And welcome to the webcast entitled WWE Second Quarter Earnings. [Operator Instructions] I will now turn the call over to Michael Weitz, SVP, Financial Planning and Investor Relations. Please go ahead, Michael.

Michael Weitz -- Senior Vice President of Financial Planning and Investor Relations

Thank you. And good morning -- good afternoon, everyone. Welcome to WWE second quarter 2020 earnings conference call. Leading today's discussion are Vince McMahon, our Chairman and CEO, as well as Frank Riddick, our Interim Chief Financial Officer. Their remarks will be followed by a Q&A session. We issued our second quarter earnings release earlier this afternoon and posted the release, our earnings presentation and other supporting materials 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. And additionally, the matters we will be discussing 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 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 afternoon, everyone. Thank you for joining us today. As you know, we generated strong financial results, so in a very challenging environment, driven by significant cost savings. And in spite of the current environment, we also created scripted, non scripted content for a multiple broadcast cable casting streaming partners. Taking advantage of the strong engagement on our digital platforms in terms of WWE Network, especially we set Wrestlemania viewership records with nearly 1 billion video views across digital and social platforms, that's up 20% from last year.

We successfully launched our free version of the WWE Network, which is designed to further engage fans with explosive content and of course convert viewers to subscribers. We preserve -- while we preserve the value of a premium content versus last year with the new free network, we achieved a 6% increase in WWE Network's paid subscribers through Q2. And of course we are constantly strengthening our leadership team and with the announcement of the hiring of Kristina Salen as our CFO. And we believe more than ever that we have the right team in place and it maybe not so much appropriate, but I'd like to thank Frank Riddick who stepped in from the Board, who is the Interim CFO, is doing extraordinary job.

Thank you, Frank. And I'll turn it over to you.

Frank A. Riddick -- Chief Financial Officer & Director

Thanks very much, Vince. There are several key topics which we would like to review today, including a discussion of our financial performance., liquidity in capital structure and our business outlook. We generated second quarter revenue of approximately $223 million and adjusted OIBDA of $73.5 million, which more than doubled from the prior year quarter. Significant growth in profit with lower revenue highlighted the reduction in expenses that we've been able to realize. Although government mandates associated with COVID-19 resulted in the cancellation of live events, we continue to produce content from our training center at a significantly lower cost, which helped offset the loss of tickets and venue merchandise sales.

During the quarter, revenue declined $45 million as the impact of our new U.S. distribution agreements was more than offset by the absence of live events ticket sales and the timing of our large-scale event in Saudi Arabia, which was held in the first quarter of this year as compared to the second quarter last year. Adjusted OIBDA however increased nearly $40 million, driven by lower production costs as well as reduced expenses stemming from the cost saving measures that we introduced in April. Growth in adjusted OIBDA also reflected a reduction in improved management incentive compensation that derive the from lower full-year 2020 performance expectations versus our incentive plan performance targets.

Coming into the quarter, we adapted our business to continue producing our televised programs Raw, SmackDown and NXT. Importantly, we also maintained our focus on furthering fan engagement by developing new content from multiple platforms. Highlights of this effort includes the production of Undertaker's Last Ride and Tales from the Deadman from the WWE network and the development of the new series The Quest for Lost Treasures, that builds on our partnership with A&E. We also completed the fifth season of Total Bellas, which achieved a 9% increase in viewers to nearly 1 million viewers per episode and announced the sixth seasons to premiere on E! in the fall. These examples are just the tip of the iceberg.

During the quarter, we produced more than 600 hours and WWE content garnered more than 1.4 billion hours of consumption across television, social and digital platforms. You should note, we transitioned the production of our televised programs to our training center and begin broadcasting without fans and incentives on March 13th.

Television ratings for Raw and SmackDown reflect the importance of a live audience to the excitement of our events. Since March 13, ratings for Raw and SmackDown have been down approximately 19% and 15% respectively, as compared to the preceding pre-COVID period this year. Of course, this decline also reflects the seasonal pattern post WrestleMania, media industry backers and channel performance. Despite the challenging environment during the quarter, Monday Night Raw and NXT ranked as the highest rated and third highest rated programs respectively on USA Network.

In contrast to our performance on television consumption of WWE content, on digital platforms such as YouTube and Facebook, increased 15% to 374 million hours and digital video views increased 10% and 9.9 billion in Q2 2020. And we estimate these figures would have been approximately 25% higher had we not agreed to geo-block certain WWE content on social media in India to support our TV licensing agreement in that country. Since March 13th, consumption by our paid-subscribers on WWE network as measured by digital video views increased approximately 55% in the quarter end, as measured on a year-over-year basis. As a reminder, WrestleMania which occurred in April, set viewership records with nearly 1 billion video views across platforms and generated the highest level weekend subscriber additions in our history.

Importantly, we capitalized on this environment to successfully launch the free version of the WWE network, which was designed to promote content sampling and ultimately paid-subscription. Paid subscribers at the end of the second quarter were up 6% from the prior-year quarter, making the first such increase since the fourth quarter of 2018. We believe these outcomes demonstrate our creativity in adapting our content production and marketing in these unprecedented times.

To review our business performance in the quarter. Let's turn to Page 4 of our presentation, which shows the revenue, operating income and adjusted OIBDA contribution by segment, as compared to the prior year. Looking at our Media segment, adjusted OIBDA increased $53 million, reflecting the impact of lower production costs. Revenue increased modestly as the escalation of domestic rights fees for our Raw and SmackDown programs were offset by the unfavorable timing of our Super ShowDown events. WWE networks average paid subscribers declined 1.5% from the prior-year quarter to approximately 1.66 million. Ending paid subscribers increased with higher-paid subscriber additions than in the prior-year quarter.

While executing the launch of the network's free version, we also made progress introducing a localized pricing in select international markets and in further developing into the networks advertising capabilities. We continue to believe in the viability of the alternative strategic options for the network as our potential partners have been impacted by COVID, these discussions have been extended. Currently, we are unable to estimate when an alternative option will be completed and still believe in the potential for a transformative transaction.

Turning to our Live Event business as shown on Page 6 of our presentation. Adjusted OIBDA from our live events declined $17.5 million based on a $47.8 million reduction in revenue. These declines were primarily due to the government-mandated cancellation and or relocation of events, which contributed to 76 fewer events than in the prior-year quarter. Until mid-March, we were unable -- able to hold arena and stadium based events in front of audiences. During the quarter, we held no such events.

At this time, we are not able to accurately predict when we will begin hosting fans in our venues, but intend to return to live events with an audience as quickly as we safely can. In our Consumer Product segment, higher sales of merchandise on our e-commerce site, WWE Shop nearly offset the absence of the venue-based merchandise sales. Adjusted OIBDA increased $1.9 million, primarily due to lower operating costs. During the quarter, the growth of our e-commerce business was supported by growth in our collectables category with the introduction of new design of six new title belts, such as Rock Brahma Bull title and the Triple H Signature Series title.

Royalties from the sale of license console and mobile games continue to benefit from recent industry growth trends. Video game revenue also reflected the licensing of WWE Superstars and IP for integration into popular titles including King of Fighters ALLSTARS. While the company's mobile games WWE SuperCard and WWE champions both generated more than 15% revenue growth from the prior-year quarter. We will expand our game portfolio with the launch of an arcade style game WWE 2K Battlegrounds in the fall of 2020.

Page 8 of our presentation shows selected elements of our capital structure. As of June 30, we held approximately $548 million in cash in short-term investments. This includes $200 million that we borrowed under our revolving credit facility to ensure we have the necessary capital to execute our strategy and deliver long-term value to our shareholders. In the second quarter, we generated approximately $68 million in free cash flow as compared to a $27 million use of cash in the second quarter of last year.

The increase was driven by stronger operating performance, improved working capital and to a lesser extent lower cap insurers. The spread of COVID-19 and related government mandates have impacted our business as we've been directed to cancel, postpone or relocate our live events since mid-March. To date, we've been able to offset the loss of ticket and merchandise sales at our live events by reducing operating expenses across all areas of our business, highlighted by the introduction of a new model for producing content. To mitigate further potential risk to our financial performance, we evaluated our operations in implementing a comprehensive set of short-term cost reductions and cash flow improvement actions. To enhance WWE's liquidity we deferred spending on the company's new headquarters temporarily suspended to reverse the stock under our $500 million program [Technical Issues] $200 million from our revolving credit facility.

For 2020, we reduced capital expenditures for -- by approximately a $140 million and now estimate total capital expenditures of $40 to $50 million for the year. We're continuing to adapt our business to the changing environment with the focus on enhancing the production of content and furthering fan engagement. Currently, we're evaluating the personal requirements to meet these objectives as well as potential investments to support our long-term growth strategy. As we drive further innovation, we intend to just demonstrate financial discipline balancing near-term performance and our long-term growth objectives. We may resume our $500 million stock-repurchase program, which was temporarily suspended in April.

As a reminder, we view our stock repurchase program as a vehicle to return excess capital to shareholders at the consideration of available investment opportunities. WWE stock purchases under the plan will be executed opportunistically, that is, when the repurchase price is below, WWE's intrinsic value is conservatively estimated by management. Subject to WWE's business outlook and liquidity and when the returns of share repurchases compare favorably to other capital allocation alternatives.

Going forward, potential impact of COVID-19 on our business, which could be material remains uncertain. Accordingly, we previously withdrew our full-year 2020 guidance and based on the sustained economic uncertainties, we are not reinstating guidance at this time. As I indicated last quarter, we continue to believe that our growth prospects remain strong and that WWE is well positioned to take full advantage of the changing media landscape and the rising value of live sports content over the long-term. We're focused on developing new content for global distribution platforms and increasing audience engagement in new and exciting ways. That concludes this portion of the call, and I'll now turn it back over to Mike.

Michael Weitz -- Senior Vice President of Financial Planning and Investor Relations

Thank you, Frank. Justin, we're ready for questions, please open the line.

Questions and Answers:

Operator

Well, thank you. [Operator Instructions] Our first question today comes from Curry Baker with Guggenheim Securities.

Curry Baker -- Guggenheim Securities -- Analyst

Hey. Good evening, guys. Thanks for the question. My first one is for Vince. The ratings have been soft recently, I think we all understand that COVID has impacted production and the product, how concerned are you about the ratings? Can you tell us what insight you guys have into what you believe is behind the softness? And what's the strategy to turn the ratings around both in the near term, given we have COVID constraints but also longer-term?

Vincent K. McMahon -- Chairman & Chief Executive Officer

As far as rating is concerned, are going to be more than any other sport. Surely, our audiences are the part of the program. Its audience interaction that always is a plus. It generally has an audience and I've had a -- it goes all the way back to the origination of this genre in terms of, yeah and boos. And the audiences is integral to our success and our television ratings, again because of interaction or lack thereof, not withstanding that, I think that we can have more compelling characters that are still A ranks. New characters coming into where we are right now, and more content that's not necessarily in the ring, but yeah, one that focuses on our personalities and their story outside of the ring.

Curry Baker -- Guggenheim Securities -- Analyst

Okay, thanks. And then I have one for, I think, Frank. You guys have been able to do a lot on the expense line here in the second quarter, should we expect similar cost savings and cost discipline to continue in the third and fourth quarter? It looks like we're still going to be working in a COVID world during those quarters as well or is there anything else to think about on the cost line, going forward?

Frank A. Riddick -- Chief Financial Officer & Director

Well, we continue to be well-disciplined in controlling costs, but going forward, to the extent that we restart live events, particularly in a COVID constrained environment, we will see likely some increase in cost, but we're being very cautious in the way that we are deciding to add cost and it will depend on what the environment is and what we're able to do, particularly around live events.

So, we have learned a lot through the COVID process and the COVID events and process we've used to analyze the business, then we have identified some things that will likely turn into permanent cost savings or differences in the way that we operate. At the same time, as I mentioned in my remarks, we are looking at some potential investments mindful of the long-term and we want to be well positioned to when the content rights come through renewal. So, at this point, we don't have to do forecast, as I said, because we're still trying to figure out exactly how this -- the COVID situation is going to unwind and the impact on our business.

Curry Baker -- Guggenheim Securities -- Analyst

Okay, thanks.

Operator

And our next question comes from Ben Swinburne with Morgan Stanley.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Thank you. I'm going to ask you about the network. You mentioned that there is nothing new to report on the strategic review, but how are you running the business today in terms of investing in new product, bringing new content or new international offerings, tiering etc.? You had a product pipeline for that product over the last few years before you started to talk about potentially offloading the right. I'm just wondering what you're doing today and what the plan is in terms of investing in that product and improving it in the event, you end up retaining it over the next couple of year. And if you're able to spend, what you want to spend on it in this environment or are you being a little more cautious around resource allocation?

Vincent K. McMahon -- Chairman & Chief Executive Officer

I mean, take us to Jayar Donlan, he'll give us a better answer. Other than I know there's been a, we continue to have a robust area of entertainment, but JR if you can answer on fourth, please.

Jayar Donlan -- Executive Vice President

Yeah, happy to, Vince. And first, I'd touch on the content piece that still we're obviously investing in content, and we've have had some really successful forays recently with things like Undertaker's Last Ride or Ruthless Aggression. We talk about the product roadmap, there are few things that have happened recently with localization, as we've localized price currency and the UI in a handful of LATAM markets, and we're also moving forward on advertising. So, we've developed that capability, we're still testing the user experience considering the economic value and essentially evaluating or just our general perspective on rolling out further capabilities.

Benjamin Swinburne -- Morgan Stanley -- Analyst

That's helpful. And I just didn't know if you guys had any update at this point on the Saudi event later this year. I think the expectation is, it probably is not going to happen, but I didn't know if there a decision has been made yet.

Vincent K. McMahon -- Chairman & Chief Executive Officer

Decision hasn't been made yet, although that based on where they are in their economy, I would doubt it.

Benjamin Swinburne -- Morgan Stanley -- Analyst

All right. Okay, thank you.

Operator

Thank you. Our next question will come from Eric Handler with MKM Partners.

Eric Handler -- MKM Partners -- Analyst

Yes. Good afternoon. And thank you for the question. Just sort of piggybacking on this last question. I wondered if you can give some perspective on the initial feedback for the free-tier launch of the WWE Network, and at what point do you expect to be able to layer in that advertising as well as going with alternative pricing for certain markets rather than straight $9.99 level.

Vincent K. McMahon -- Chairman & Chief Executive Officer

Well, we're going to JR for that answer as well. JR?

Jayar Donlan -- Executive Vice President

I'll take the pricing component first. So, it's. right, but I touched on we've done that in a couple of markets, already, and so what was the front-end of your question?

Eric Handler -- MKM Partners -- Analyst

Can you, can you give us some statistics around the success of the free-tier launch of the WWE Network and at what point do you think you'll be able to layer in that advertising component?

Jayar Donlan -- Executive Vice President

So, we've built to add tech capability right now and we're evaluating our philosophy around advertising. I would say the initial results on the free version are promising and again, the strategy being just encouraging sampling of the content and those KPIs that we're looking at are active users and how we convert those active users to the paid service, no specific metrics to share right now, I think we'll have more as we have more history with the free version, but again, the initial results are very encouraging.

Eric Handler -- MKM Partners -- Analyst

Great, thank you.

Operator

And our next question comes from Vasily Karasyov with Canonball Research.

Vasily Karasyov -- Cannonball Research -- Analyst

Thank you. Good afternoon. A couple of quick ones. I believe this was the first quarter when the Indian contract switched to the new pricing. So, can you please, A, Confirm that and tell us if this, the pricing increase or change in pricing in India contributed to year-on-year change in core content revenue. And then I have one about buyback. Thank you.

Frank A. Riddick -- Chief Financial Officer & Director

So, yes and we are under the new contract in this quarter and we don't disclose the specifics, but it did not have an effect on the New Year of it, period-to-period change in content revenue.

Vasily Karasyov -- Cannonball Research -- Analyst

Thank you. And then about the buyback, I think in -- we know a lot of companies suspended, you're one of the first or first one that I heard of who says that you may resume, but can you give us a little more detail why you thought now would be a good time to do that and why you wanted to communicate it to the investors and also, did your criteria and sort of, approach change compared to how you can conducted your buybacks in 2019? Thank you very much.

Frank A. Riddick -- Chief Financial Officer & Director

Well, the approach in the analysis did not change. Of course, we suspended repurchases, so in buying stock, since they haven't bought any stock since April, I think, the reason we're -- we said that we may resume repurchases is based on our analysis, we think there may be an attractive opportunity and the same time, we generated very strong cash flow and feel very good about our liquidity position. Again, of course, final decisions on that haven't been made and subject to it if the business environment deteriorates or changes from here, we may not repurchase stock but we felt like things were going well enough that we should reinitiate the analysis and be prepared to buyback stock if the opportunity comes.

Vasily Karasyov -- Cannonball Research -- Analyst

Thank you very much.

Operator

And next will be Eric Katz with Wolfe Research.

Eric Katz -- Wolfe Research -- Analyst

Thank you. Good afternoon. So it looks like you ended the quarter with more paid network subs than your average for 2Q, which I believe you mentioned earlier, which is interesting, since you launched the free version on June 1st. So is there any particular reason that you noticed in the data?

Vincent K. McMahon -- Chairman & Chief Executive Officer

Okay. JR take that one, please.

Jayar Donlan -- Executive Vice President

There are a few things going on. I'm not going to touch on the specific on the free version, but obviously launching that is a contributor. But I just think in general, our promotion across our platform is we're doing new things across the digital and social ecosystem as well as with our TV partners, you would have been able to sample content on ESPN or FS1 driving back to the network. We talked about some of the compelling content we've had, everything from Undertakers Last Ride and we're an attraction business and we've had some really fantastic cinematic match attractions in our recent pay-per-views. And then the last piece would be, there to spend some macro industry factors, there's this just a general growth in digital viewing and some that's accelerated post COVID.

Eric Katz -- Wolfe Research -- Analyst

Thanks. I guess on that topic, is there a way to sort of maybe, understand like what percentage of the digital views increase was related to the free network. And then secondly, it's to your point on social and it like in your KPI metrics, this is the first time I can remember social media followers falling, was there a notable reason why maybe a one-off that was worth calling out? I don't know if I think I heard something a restriction in a certain market, I don't know if that's the reason.

Frank A. Riddick -- Chief Financial Officer & Director

So on the social media that the impact on viewership was affected by the Sony deal that we mentioned, we're geo-blocking certain content and those numbers are no longer showing up, particularly, user generated views.

Eric Katz -- Wolfe Research -- Analyst

Okay. And to how much of the digital views increases rates of the free network or is it just too early?

Frank A. Riddick -- Chief Financial Officer & Director

Right now we can't, it's too early to discriminate what's driving on the increased viewership. If viewership is up for paid subscribers as well as free subscribers. So, but we can't really split the percentages right now.

Vincent K. McMahon -- Chairman & Chief Executive Officer

Trying to say ourlook...

Eric Katz -- Wolfe Research -- Analyst

Maybe just...

Vincent K. McMahon -- Chairman & Chief Executive Officer

We didn't hurt ourselves by going to the free as opposed to a 30-day free trial. We have not hurt ourselves, it's that what we meant to say.

Eric Katz -- Wolfe Research -- Analyst

It's helpful. Maybe just one more if you don't mind. Look, we've seen cord cutting accelerate the pandemic, which has made it easier for streamers to acquire subs than just even six months ago. At the same time, we've talked about the ratings being a bit challenge, which is understandable with some stars on the sideline. But for someone on the outside looking in, it would seem like maybe you're negotiating leverage with potential a licenseor of the network could have potentially taking a hit while deals was on hold.

So maybe it will be helpful to understand what really stands out up in network to the licensors. And then what gives you sort of confidence this deal looks the same whether it's six, 12 months from now when the deal gets done, instead of maybe, coming in a bit lower than you initially expected?

Frank A. Riddick -- Chief Financial Officer & Director

Well, I think it's obviously as we talked about, we're continuing to invest in the network and driving further subscribers and engagement, building very compelling content, which makes it attractive to potential partners, the other part is just the way with what the addition of streaming services with a number of entities, Disney, Comcast, etc., we believe that there is WWE product would be very attractive for some of those platform. So what is in the overall macro trends as you mentioned, we are seeing increases in streaming and we're seeing some changes in some of the limited streaming properties that are not doing well, so they're going to be clear winners and losers and we certainly think that the WWE content would be valuable one of those ones winners.

Eric Katz -- Wolfe Research -- Analyst

That's helpful. Thank you.

Operator

Thank you. Our next question comes from Brandon Ross with LightShed Partners.

Brandon Ross -- LightShed Partners -- Analyst

Hello, everyone. Thanks for taking the questions. I have some follow-ups on the ratings issues that were identified a little earlier. First, why do you think -- these are for Vince. Why do you think AEW and NXT have bounced back better from the initial COVID shock than Raw and SmackDown? And then based on your commentary last quarter, it seems you have a strategy for fixing Raw that indicated patients in "getting over" some newer talent. Did you abandon that plan in firing Heyman and more broadly, why did you fire Heyman? And lastly, given Paul's recent relative success with NXT, do you think he could be of help on Raw and or SmackDown in an elevated role? Thank you.

Vincent K. McMahon -- Chairman & Chief Executive Officer

That was a lot.

Brandon Ross -- LightShed Partners -- Analyst

Sorry. I -- we could break it down if you want. But just first, why do you think AEW and NXT have bounced back better from the initial COVID shock than Raw and SmackDown?

Vincent K. McMahon -- Chairman & Chief Executive Officer

Both are new. Something that's new and what have you and it's up to us to make Raw and SmackDown feel more useful, that is where we're going and I just -- as far as continuing on, I said what was new in building character is, you always have to build characters and constantly. And seems to me that, as far as all of that helping out on Raw and SmackDown, that happens. It's all hands on deck in terms of all that we do as far as Paul Heyman is concerned, you did far -- very good job in terms of creativity. Okay and then lastly, maybe if you guys could speak a little bit to the role you foresee Kristina having. Will see have her hand in company strategy or stick to a more traditional CFO duties? In other words, is she going to have sort of the George and Michelle type role or just be a straight CFO?

Frank A. Riddick -- Chief Financial Officer & Director

No. She is going to have as George did and as I have, in the interim position, strategy and data reporting to her. So it is a broad CFO role including strategy. The Michelle position really had nothing to do with finance, so that's...

Brandon Ross -- LightShed Partners -- Analyst

Fair enough. Yeah. Thank you, guys. [Technical Issues]

Operator

Thank you. Our next question comes from Steven Cahall with Wells Fargo.

Steven Cahall -- Wells Fargo -- Analyst

Thanks. Sorry to beat maybe a dying horse here on ratings, but I was just wondering if you could speak a little bit to periods in the past when you've seen some rating softness and how long it took to rebuild viewership? I think right now there's maybe a concern that some of those viewers have found new streaming services because we've seen such strong sub growth in that part of the market and would just love to hear what you think the timing is to recapture that audience. Is this something that gets done in month or does it take years? Then a couple of follow-ups.

Vincent K. McMahon -- Chairman & Chief Executive Officer

It just takes months. I mean, I -- again the key here is to be in front of an audience and that's the maintain thing. To get in front of audience, they're like a third third person in the ring, so to speak and right away you get action-reaction. We were able to shoot through it, the audience and we shoot be audience a lot more than any sport because there are such an integral part to what we do. So, I would like to think it's months away.

Steven Cahall -- Wells Fargo -- Analyst

Yeah. Okay, and then it looks like core content rights were down just a touch sequentially. I think you've talked in the past that international is coming down a little bit and U.S. is growing. Should we think about that trending down sequentially kind of each year and then, stepping up in the fourth quarter or will we start to see that grow sequentially from here because of some of the recent contracts that might have been renewed?

Frank A. Riddick -- Chief Financial Officer & Director

Well, I think to the impacts in the quarter are as you said talk about smaller deals in international markets, which are really challenged by COVID right now, so I think some of what you're seeing is, it is what's happened because of the environment around the world in media, particularly with smaller partners and smaller markets. Overall, it hasn't been material to to our company and we don't have any -- for the rest of the year, there are no major renewals coming off. So, I wouldn't expect big changes in this line item.

Steven Cahall -- Wells Fargo -- Analyst

Great. And then the last one from me. Could you maybe just speak to incremental margin, does revenue does start to come back, when you can shoot in front of a live audience? I think, in addition to just like travel expense, there is some talent cost as they sell more consumer products that come back, so as we start to see revenue rebounding, how do we think about incremental margins on that red line [Technical Issues]

Frank A. Riddick -- Chief Financial Officer & Director

Well, I think I'll just at a high level overall, as I alluded to in talking about the reentry in the live events. So simply, given the complexity as we come out of the COVID, and it's going to be very much market-by-market, there's likely to be limitations, that situation is changing quite rapidly almost city-by-city. So, I think we expected margins will decline because expenses are going to go up in the short-term, now that -- we think that will at some point, your guess is as good as mine, it will return to normal, but no doubt we're benefiting greatly from the way that we're producing the product today and when we go back to touring live events. Costs are going to go up, so margins will likely get compressed on, but at some point we'll get back to full audience events at some point, and then it will be only our full venue merchandise and full ticket revenue, we would expect them to stabilize back where they were at that point, but again that's very difficult to say when, given the uncertainties in the environment.

Steven Cahall -- Wells Fargo -- Analyst

Yeah. Thanks a lot.

Operator

Thank you. Our next question comes from John Belton with Evercore.

John Belton -- Evercore Inc. -- Analyst

Hi. Thanks. I just wanted to ask in another way on the expense area, so it looks like your immediate segment operating expenses were down about $50 million year-over-year in the quarter. So, just trying to see if you could help kind of bucket exactly where that's coming from. You used to talk about three areas of investment at your for your media business, those were localization of content, digitization of WWE Network in some international investments. Seems like you're still kind of making those, but you're getting a lot of expense savings, so I just wanted to see, if you could give any color on that and then I have a quick follow-up after that.

Frank A. Riddick -- Chief Financial Officer & Director

Most of the expense came -- savings is coming from production costs is as I mentioned because the way we're producing being the show at the Performance Center, also in general expenses, operating expenses across the company in both the fixed area and in other areas because of the cost saving actions. I mean, we're continuing to invest in content. The one thing that has been slowed down just because of the environment is significant investments in developing some PC and an international market, for example, those have slowed down, but the content investments have continued and we're just benefiting from the cost reduction actions in the lower cost of putting on the show because it's not touring, it's in one location.

John Belton -- Evercore Inc. -- Analyst

Got it. And second question is just looks like there is a small acquisition, you guys did this month, wondering if you have any comments on that. And more broadly about the M&A opportunities you're seeing. I would assume that there is some assets coming for sale in the current environment, so just kind of your thoughts on that as well.

Frank A. Riddick -- Chief Financial Officer & Director

Hey, John. We had trouble hearing the first part of your question, would you mind repeating that?

John Belton -- Evercore Inc. -- Analyst

Yes. It's just on this small acquisition, it looks you announced earlier this month of EVOLVE Wrestling, any comments on that and then thoughts on the M&A environment were broadly for you?

Frank A. Riddick -- Chief Financial Officer & Director

Well, the EVOLVE was a content purchase deal, it's very straightforward and very-very small in size in terms of investment. Right now, we're not actively looking at any M&A opportunities, hopefully they will come along. We are actively -- we do have investments in certain new technologies and new areas and we're looking for opportunities, but there is nothing [Technical Issues] there.

John Belton -- Evercore Inc. -- Analyst

Got it. All right. Thanks, everyone.

Operator

Thank you. Our next question comes from David Karnovsky with JP Morgan.

David Karnovsky -- J.P. Morgan -- Analyst

Hi. Thank you. And as you kind of just talked about, I think prior to the pandemic, international expansion for your core brands and NXT also is one of the areas, where your investments spend was focused. Can you just kind of discuss a little bit about how you're thinking about this now in light of the global disruption we continue to see and whether this is still a key long-term opportunity for you?

Frank A. Riddick -- Chief Financial Officer & Director

Well, certainly a key long-term opportunity, we believe in it and we believe that we have a large audience outside of the United States that we can take advantage of. I think the Indian deal is an example of that and the viewership we get over there. Just the uncertainty right now and the fact that it's a little bit -- there is no compelling reason to move forward on those at this point in time, but as we get out of the COVID situation and certainly will, just don't know when, that opportunity is still there and we still believe in that, both with the other potential to have Performance Centers with our media partners and network growth of the Network, we see continued opportunity.

David Karnovsky -- J.P. Morgan -- Analyst

Okay. And then, I mean it's been mentioned several times on this call, the importance of a live audience, but in absence of being able to run on normal torn operation, are there any kind of interim solutions, you might consider to the Performance Center? Is it's feasible at some point to kind of switch production to a single location, maybe outside with some kind of audience?

Vincent K. McMahon -- Chairman & Chief Executive Officer

We're looking into all those alternatives constantly.

David Karnovsky -- J.P. Morgan -- Analyst

Okay. Thank you

Operator

And our next question comes from Bernie McTernan with Rosenblatt Securities.

Bernie McTernan -- Rosenblatt Securities -- Analyst

Great, thanks for taking the question. Just returning to cost here, and I know you hit on that with live events returning, cost should be returning as well, but there should be some sort of revenue offset, so when live events do return, do you expect that to be a drag on the EBITDA as well?

Frank A. Riddick -- Chief Financial Officer & Director

Well, I think initially, it seems that from what we're, looks like the way that this is going to evolve, the venues and the amount of people you have put in the venues and the cost of doing social distancing and other factors for all the events, would not allow us to fully recoup the incremental cost through venue merchandising and ticketing. All of that is highly uncertain, both as to when and where we'll be able to do those events, what the size of the audience can be, what the appetite of the consumer will be to come to those events. And so I think, it would be prudent in saying initially, we know if we go back and we think we certainly want to go back as quickly as we can, as we said, it is likely that there'll be some drag on the profit margins, because of that.

Bernie McTernan -- Rosenblatt Securities -- Analyst

Got it. And then just one follow-up. Do you expect that with the live events still will go back to a 100% live events right away or will there be some sort of hybrid approach in the interim?

Frank A. Riddick -- Chief Financial Officer & Director

What we believe is, it's going to be a phased approach because that's what we're hearing from the various locales and venues, so it will be phased, and probably will be in parts of the Country, and it certainly won't be any -- what it was last three cones of initiative.

Bernie McTernan -- Rosenblatt Securities -- Analyst

Got it. Thank you.

Operator

Thank you. And that does conclude the Question-&-Answer session. I'll now turn the conference back over to you.

Michael Weitz -- Senior Vice President of Financial Planning and Investor Relations

Thank you, everyone. We appreciate you listening to the call today. If you have any questions, please do not hesitate to contact me, Michael Weitz or Michael Guido in our Investor Relations forum. Thank you.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Michael Weitz -- Senior Vice President of Financial Planning and Investor Relations

Vincent K. McMahon -- Chairman & Chief Executive Officer

Frank A. Riddick -- Chief Financial Officer & Director

Jayar Donlan -- Executive Vice President

Curry Baker -- Guggenheim Securities -- Analyst

Benjamin Swinburne -- Morgan Stanley -- Analyst

Eric Handler -- MKM Partners -- Analyst

Vasily Karasyov -- Cannonball Research -- Analyst

Eric Katz -- Wolfe Research -- Analyst

Brandon Ross -- LightShed Partners -- Analyst

Steven Cahall -- Wells Fargo -- Analyst

John Belton -- Evercore Inc. -- Analyst

David Karnovsky -- J.P. Morgan -- Analyst

Bernie McTernan -- Rosenblatt Securities -- Analyst

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