World Wrestling Entertainment, inc (WWE) Q2 2021 Earnings Call Transcript

World Wrestling Entertainment, inc (WWE)
Q2 2021 Earnings Call
Jul 29, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

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 -- SVP Financial Planning and Investor Relations

Thank you and good afternoon, everyone. Welcome to WWE second quarter 2021 earnings conference call. Leading today's discussion are Vince McMahon, WWE's Chairman and CEO; Nick Khan, WWE's President and Chief Revenue Officer; Stephanie McMahon, WWE's Chief Brand Officer; and Kristina Salen, WWE's Chief Financial Officer. Their remarks will be followed by a Q&A session.

We issued our second quarter earnings release earlier this afternoon and have posted the release, our earnings presentation and other supporting materials on our website. Today's discussion will include forward-looking statements. These 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. You should know that all comparisons are versus the year ago quarter unless otherwise described.

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 of the Board of Directors & Chief Executive Officer

Thank you, Michael. We generated solid second quarter financial results as we focused on fan engagement and increasing efficiency in our content production. We have positive trends in our OIBDA and the demand for our live event ticket sales as well as our television ratings and digital consumption. Live events that have aired through July 26 have been at closure at full capacity. We have advances for our live events that looked excellent including I might add SummerSlam,, which will be the largest SummerSlam event we've ever had here in the United States. Television ratings for our initial shows were up significantly. First-time we played before large crowd on July 16, it was up 42% increase in 18 to 49 demo, which was extraordinary, Raw of 15% as well. In the quarter, we implemented certain organizational changes that will also increase efficiency and our content production on the post event. I'll give you a little bit more information on that. Looking ahead, we believe we can take advantage of the evolving business environment as we always have crowd engagement developing business and will drive growth.

Do you want to go, Nick?

Nick Khan -- President & Chief Revenue Officer

Yes.

Vincent K. McMahon -- Chairman of the Board of Directors & Chief Executive Officer

All right. Go ahead.

Nick Khan -- President & Chief Revenue Officer

Thank you very much. Thanks, Vince. Appreciate it. And thank you everyone for calling in. Nice to speak with you all again. As always, we'd like to start with some industry perspective. In our last earnings call, we discussed how earlier this year the NFL, NHL and Major League Baseball realized substantial increases in the rights fees for their license programs even with lower linear television ratings. The NFL saw media rights increase of 79%, the NHL more than tripled its media rights AAV and Major League Baseball is getting a higher per game rate as part of its new Disney deal.

The second quarter was another busy quarter with deal activity. A number of rights holders closed media rights deals that saw substantial increases or their product, both in their home market, as well as in other territories. Also in this quarter, we saw a number of private equity firms invest in sports teams, primarily based on the assumption that there was growth opportunity yet to be realized for their media rights.

On today's call, I would like to briefly run through a few of these deals and outline how the economics reinforce our view that the marketplace, both domestic as well as international continues to place a premium on live content. Additionally, Steph and I would like to touch on the growth opportunity that exists in our sponsorship segment. We will end by updating all of you on a number of WWE deals from this quarter that have led to new revenue streams.

The top Spanish soccer division, La Liga, closed an eight-year deal with Disney in the United States with an estimated AAV of $175 million, which represents a 35% increase from their prior deal with ESPN. Wimbledon recently announced its 12-year extension with Disney in the U.S. and a three-year extension with the BBC in the U.K. Both deals saw significant increases.

Also in this quarter, private equity from RedBird Capital announced that it was acquiring a 15% stake in an Indian Premier League cricket team valuing the team between $250 million and $300 million. Part of the rationale for this investment stems from the rising value of media rights for live sports content globally. We're confident in saying this because we are seeing similar growth for our own international deals. Just last week, we renewed our deal in Australia with our partners at Foxtel securing an increase for package of rights in that territory. As we begin our efforts to license WWE Network internationally, we are encouraged by the trends we saw this quarter and are confident we will continue to see success as we engage with our partners internationally. More on that to come in the future.

As Vince mentioned at the top of the call, ratings are up across all of our shows following the return of live fans. Stephanie will provide more details on the ratings growth shortly. Allow us to discuss Peacock for a moment. Four months into the Peacock partnership, we are seeing the benefits of a streaming partnership with a platform that has broad distribution and continues to grow.

Since moving to Peacock, viewership of our pay-per-view events have increased with Backlash up 26%, Hell In A Cell up 25%, and Money In The Bank up 46% from the prior year performance on what was the stand-alone WWE Network. These viewership numbers are also up considerably from our pre-pandemic WWE Network numbers. As you recall, when we announced the Peacock deal, we said one of the key reasons for the partnership was to bring the WWE product to a wider audience than those subscribed to WWE Network. We expect viewership of WWE to continue to increase, particularly as Peacock rose its base of users.

We also wanted to discuss our return to live event touring with you. As many of you know, we made our return to live event touring on Friday, July 16 with SmackDown on FOX from Houston, Texas. One nuance to know here. This was not a return to live events for us. We held live events with fans via video screens throughout the pandemic, not one week of production missed. So, again, this is really our return to touring with live fans, felt great for the fans, for our Superstars and for our business.

Normally, we won't walk you through the specifics of events; however, today, allow me to give you a taste of how our live events are performing. On Friday, July 16 at the Toyota Center in Houston, Texas, we sold out. This event was the highest-grossing non-pay-per-view event in WWE history in Houston. Our merchandise sales for that night almost 50% greater than they were for our last event in Houston. Please keep in mind that these merchandise figures come off of a phenomenal e-commerce sales period throughout COVID.

Two nights later at Money In The Bank on Sunday, July 18 at Dickies Arena in Fort Worth, Texas, we sold out. This event was a highest-grossing non-WrestleMania event in WWE history in the Dallas-Fort Worth area. Our merchandise sales for that night, almost the 100% greater than they were for our last event in the area. These two arena sold out prior to John Cena surprise return at the end of the second show, the end of the Money In The Bank show that is. The very next night, Monday, July 19 at American Airlines in Dallas, just down the road from Fort Worth, with a highest paid attendance in Dallas in over three years, our merchandise sales for that night almost 50% greater than they were at our last 2019 event in the Dallas-Fort Worth area.

Our next live event, SmackDown, this past Friday from Cleveland. This event was our highest grossing non-pay-per-view gate in WWE history in Cleveland. Our merchandise sales for that night over 60% greater than they were at our last event in Cleveland. That same night, this past Friday, we also made our first-ever appearance for either our Raw or SmackDown brands at a music festival in the U.S. Rolling Loud, the preeminent hip-hop music festival, which was in Miami, over 230,000 paid attendees over the course of that three-day event, two WWE matches including our SmackDown women's champion, Bianca Belair coming off of her and Sasha Banks' ESPY win for best WWE moment in front of over 75,000 fans on Friday night, almost all under the age of 25. We saw strong merchandise sales there as well.

The next night, we held our first non-televised live event since the pandemic from Pittsburgh. This was the highest-grossing non-televised live event gate in WWE history in Pittsburgh, 95% of tickets sold. Our merchandise sales for that night, more than 25% greater than they were at our last event in Pittsburgh. And the night after that, another non-televised live event from Louisville, Kentucky. This was the highest-grossing event at the KFC Yum Center in WWE history and a highest paid attendance for a non-televised event in Louisville in over five years. Our merchandise sales for that night, more than 25% greater than they were at our last event in Louisville.

On Raw this past Monday, just three nights ago from Kansas City, Missouri. This is our highest grossing WWE non-pay-per-view event in Kansas City in 14 years. Our merchandise sales for that night were almost 50% greater than they were at our last Kansas City event. Also in the quarter, we added the ability to purchase merchandise via our app for in-venue pickup or to be shipped from the venue to any location you choose.

Also, as you may recall, as part of our 2021 Live Events Calendar, we announced that SummerSlam would be taking place for the first time from an NFL stadium, from Allegiant Stadium in Las Vegas on a Saturday night, August 21. Saturday is a new Night for us in terms of a pay-per-view event. Without a main event or even a card announced, we have sold over 40,000 of 45,000 tickets and we'll have a record gate for a non-WrestleMania event.

From Rolling Loud, which I previously mentioned, Bianca Belair also announced with Atlanta Hawks Superstar, Trae Young that we'll be having a New Year's Day pay-per-view this January 1, again, a Saturday from State Farm Arena in Atlanta, Georgia, Atlanta expects over 300,000 visitors for New Year's weekend. New Year's Eve is a Friday this year. The college football playoff championship games are on that New Year's Eve, December 31, Friday.

The NFL, which traditionally goes on Saturday nights, when the college football regular season has ended, is not going on Saturdays late season with its new 18-week regular season. So, we saw what we think as an opening on the sports calendar and we believe ticket sales and viewership will both be indicative of that. We look for us to announce the rest of our 2021 calendar and most of our 2022 pay-per-view calendar shortly.

Another area where we are growing and believe we will continue to grow as our sponsorship business, Stephanie and our global sales and sponsorship team have delivered over 20 new and existing sponsors so far in 2021 with many of them Blue Chip companies and executed on a number of innovative activations that really only can be done by WWE. We're bullish on this segment and we're confident brands looking for unique ways to reach consumers will see our record of success and seek us out.

One thing to note, we announced our first ever ring announcer competition on TikTok, sponsored by Pure Life Water where anyone can submit how they would announce one of our Superstars on their ring walk. The winners will be the ring announcers for match at SummerSlam. So far, there have been over 9 million views of the TikTok announcement and thousands of submissions. Stephanie will have more on sponsorship and a few other items shortly.

As we look ahead to SummerSlam, we're planning our second NFT drop leading into SummerSlam this time with John Cena. This follows our successful NFT launch with the Undertaker of WrestleMania. As you're all aware, NFTs trading cards, memorabilia, all incredibly popular right now. With our wholly owned intellectual property, we are uniquely positioned to capitalize on this growing business.

Last, we announced this past Monday that we partner with Jason Blum in Blumhouse on our first scripted dramatic mini series. The United States of America versus Vince McMahon, which will tell the story of the federal indictment of our Founder and CEO by the United States Attorney's Office in the Eastern District of New York. The 30th anniversary of that not-guilty verdict and acquittal was just last week. We're excited for this story to be told.

At this point, allow me to turn the call over to my colleague, Stephanie McMahon.

Stephanie McMahon -- Chief Brand Officer

Thank you, Nick. This is an exciting time for our business. Although we don't know precisely what the future holds, the return to our live event touring positions us at an inflection point in terms of our potential fan engagement and financial performance. As Nick mentioned, we return to live event touring with fans in attendance on July 16 for the first time in well over a year.

As a smaller side, Triple H and I went outside to greet our fans in person before doors opened at the Toyota Center in Houston and the feeling was overwhelming. It was akin to a giant family reunion and we welcomed everyone home with open arms. And the energy and excitement has only picked up, especially with the return of one of our biggest superstars, John Cena, kicking off what we have branded the Summer of Cena, taking us into SummerSlam.

Our partners NBCU and Fox supported our return with different campaigns airing across their respective platforms and programing. From a production standpoint, WWE applied key learnings and techniques from producing virtual and physical television to upgrade our audio and visual experience, including the use of a 40-foot-tall by 80 foot wide state of the art curved LCD display for superstar entrances. In addition, we are utilizing Epic's Unreal Engine 3D creation tool to generate a wide variety of augmented reality elements and surroundings, bringing our superstars to life in ways we have never done before. Costs associated are on par with 2019 per episode costs on average and we have seen the results translate into linear viewership.

As Vince was mentioning earlier, the July 16 episode of SmackDown generated a 21% year-over-year increase in total viewers and a 42% increase in the coveted 18 to 49 demo. Similarly, the July 19 episode of Raw generated an 8% year-over-year increase in total viewers and a 15% increase in the 18 to 49 demo. Strong demand for live event tickets and the increase in television ratings builds upon favorable trends in key operating metrics evident in the second quarter.

During the quarter. TV viewership continued to remain stable, maintaining a trend that began when we transitioned out of the performance center and invested in WWE ThunderDome at the end of August. From that time to the end of the second quarter, Raw ratings have increased modestly and SmackDown ratings have increased 7%. Since the return of our live audience, however, Raw ratings are up 22% in the 18 to 49 demo and SmackDown ratings are up 20%.

In the quarter, digital consumption increased 5% to a quarterly record of 394 million hours and video views increased 13% to 11.2 billion as compared to a prior-year period that benefited from COVID-19 related viewing trends. The growth included a three-time increase in Facebook hours and a two-time increase in views as viewers demonstrated interest in current and past events.

WWE is also driving value outside of our in-ring programing. We saw solid performance for A&E's WWE biographies and Most Wanted Treasures series increasing A&E's Sunday night performance by 90% in the 18 to 49 demo and increasing total viewership by 21%. Whether it is with Hearst Communications via A&E, Fox, Comcast, Netflix or Facebook, WWE continues to make a positive impact for our partners. Additionally, WWE sales and sponsorship revenue increased 43% year-over-year.

As I mentioned during our last call, brands are looking for unique ways to engage with their consumers that goes well beyond generating impressions. WWE is perfectly positioned to do just that with an ability to create customized content experiences across multiple lines of business and utilize WWE superstars that resonate with target audiences.

A recent example includes a full on zombie invasion to promote Netflix's original production's Army of the Dead as the presenting partner of WrestleMania Backlash. The show opened with a cool video mashup of Army of the Dead and WWE storylines, narrated by WWE legend Dave Bautista who is also the star of the film, setting the tone for the night. Zombies randomly appeared in backstage scenes and popped up as a part of the virtual audience, only to then have zombies actually surround the ring and be a part of the action when Miz faced Damian priest. The results speak for themselves.

In addition to generating over 0.5 billion growth impressions, we saw 25 million content views across digital and social and three of the 14 trending topics from that night were directly tied to the integration. The cultural impact and disruption during and after WrestleMania Backlash played a significant role in the film's quicker sent to becoming one of the top 10 most-watched movies in Netflix history.

Coming off the heels of our fall 2020 partnership announcement with Credit One Bank, we officially launched the WWE Championship Credit Card this past June, giving card members the opportunity to show their affinity for WWE while earning cash back rewards on everyday purchases. Recognizing our ability to reach consumers, we recently completed a deal with Blue Triton brands, the corporate parent of Pure Life water, the official water of SummerSlam.

Pure Life is activating in multiple ways across WWE's portfolio tied to SummerSlam including sponsoring the aforementioned SummerSlam ring announcer TikTok challenge, providing product to WWE community partner events and sponsoring our summer slam after party, which we announced yesterday, will be hosted by celebrity and comedian, Tiffany Haddish in support of her foundation, the She Ready Foundation.

In the quarter, we also released our 2020 community impact report to nearly 5,000 global partners. The report highlighted our various initiatives through the pandemic including generating 12.5 million in kind media value and over 650 million impressions for our community partners as WWE continues to deliver on our mission of putting smiles on people's faces. In our view, WWE is well positioned to continue to elevate our brand, grow our business and engage new and existing consumers across media platforms.

And now, I'll turn the call over to our CFO, Kristina Salen.

Kristina Salen -- Chief Financial Officer

Thank you. Stephanie and hello to WWE shareholders. Today, I'll discuss WWE's financial performance. As a reminder, all comparisons are versus the year ago quarter unless I say otherwise. In the second quarter, WWE generated solid financial results as we focused on driving fan engagement, strengthening our organization and increasing efficiency in our content production. Total WWE revenue was $265.6 million, an increase of 19% reflecting the increased monetization of content across platforms, including growth from the staging of WrestleMania with ticketed fans in attendance.

Adjusted OIBDA declined 7% with $68.1 million, primarily due to higher television production expenses associated with the staging of WWE ThunderDome and to a lesser extent WrestleMania at Raymond James Stadium, both of which were produced in our performance center a year ago. In addition, adjusted OIBDA was impacted by increased personnel expenses as our employees fully returned from furlough by the end of 2020.

Finally, during the quarter, we combine WWE's television, digital and studio teams into one organization for a more unified content strategy and more streamlined content production. The related severance expense of $8.1 million dollars has been excluded from adjusted OIBDA as a material non-recurring item.

To review the second quarter performance in more detail, let's turn to Slide 3 of the presentation, which shows revenue, operating income and adjusted OIBDA contributions by segment. Looking at the WWE Media segment adjusted OIBDA was $86.2 million, a decline of 5% as increased revenue and profit from WWE's licensing agreement with Peacock and the escalation of core content rights fees were more than offset by increased production expenses.

Despite what continue to be a challenging environment, WWE produced a significant amount of content, more than 680 hours in the quarter across television, streaming and social platforms. At the start of the quarter, we transitioned WWE's ThunderDome from Tropicana Field in St. Petersburg, Florida, Florida to the Yuengling Center in Tampa Bay. Recall that in the second quarter of 2020, we were producing a BareBones Production out of our performance center in Orlando.

While our operating results continue to be impacted by the year-over-year increase in production expenses, associated with live streaming nearly 1,000 live virtual fans into our show, we also continue to achieve greater production efficiencies relative to our own expectations. With the return to touring in July, we expect that production expenses for Raw and SmackDown will continue to decline on a sequential quarter basis, approximating their average per episode costs in 2019. This is a tremendous feat from our television production team, which created the award winning ThunderDome environment using state-of-the-art technology, all while producing shows every single week throughout the pandemic with a constant eye on efficiency.

Now let's turn to WWE's live event business on Slide 5 of the presentation. Live events adjusted OIBDA was $1.1 million, increasing $5.3 million due to an 8 times increase in revenue with the staging of WrestleMania. This premiere event entertained ticketed fans and an audience of over 50,000. Recall that in the year ago quarter, we staged no live events with ticketed fans.

As we have said, we are thrilled by the return of regular ticketed events. Currently, for our announced return schedule, we anticipate ticket demand and profit per event that is least on par with 2019. The improved performance reflects heightened consumer demand and a more analytics efficiency-oriented approach by our Live Events team in the scheduling, routing and staging of our events.

Looking at WWE's Consumer Products segment on Slide 6 of the presentation, adjusted OIBDA was $8.4 million, growing 4% due to a change in product mix as higher royalties from the sales of license toys and increased merchandise sales at our WrestleMania venue were nearly offset by lower e-commerce. The modest decline in sales on our e-commerce site, WWE Shop, reflected a tough comparison to strong COVID-related sales in the prior year quarter. As a reminder, in the second quarter last year and in each quarter through year-end 2020, growth in e-commerce revenue nearly offset the absence of venue merchandise revenue due to the cancellation of live events.

In previous earning calls, we have discussed how the introduction of new products such as new toys, title belts and mobile games has generated growth in WWE's Consumer Products business. This quarter, I'd like to focus on how we're applying technology to enhance product sales. During the quarter, we introduced a new branded app at WrestleMania for pre-ordering merchandise. The app enables our fans to order merchandise before as well as during the event and to pick up merchandise at a specific location within the venue. This means that at key upcoming events such as SummerSlam, we can expand the sales window and increase sales volumes without significantly increasing the number of transaction sites.

Now let's turn to WWE's overall cash generation, as shown on Slide 7 of the presentation. During the quarter WWE generated approximately $13 million in free cash flow, declining $54 million primarily due to the timing of collections associated with network revenue and to a lesser extent lower operating performance. During the second quarter, WWE returned approximately $28 million of capital to shareholders including $19 million in share repurchases and $9 million in dividends paid. To-date, more than $177 million of stock has been repurchased, representing approximately 35% of the authorization under our $500 million repurchase program. As of June 30, 2021, WWE held approximately $443 million in cash and short-term investments. Debt totaled $220 million including $198 million associated with WWE's convertible notes. The company has not drawn down on its revolving line of credit and estimates relative debt capacity of approximately $200 million.

And finally, a word on WWE's business outlook. In January, WWE issued adjusted OIBDA guidance of $270 million to $305 million for the full year 2021. During the second quarter, key performance metrics demonstrated positive trends and we continue to realize better than expected television production efficiencies, stronger sponsorship sales and heightened demand for live events. However, we are not adjusting full year 2021 guidance at this time given ongoing caution regarding the potential impact of COVID-19 and its variance on WWE's operations.

For the third quarter 2021, we estimate adjusted OIBDA will decline. Incremental profits from the return to live event touring and the growth of content rights fees will be more than offset by increased television production and other operating expenses. As a reminder, the majority of the third quarter of 2020, we remained in our performance center in Orlando, Florida, the site where we have the lowest production costs. We did not move into WWE's ThunderDome until the end of August 2020.

So, beginning in the fourth quarter of 2021, we expect more favorable year-over-year comparisons of television production expenses, as well as sustained profit from our return to touring. However, given the ongoing uncertainty regarding the potential impact of COVID-19 and its variants, we are not receiving more specific quarterly guidance at this time.

Finally, turning to WWE's capital expenditures. As mentioned last quarter, we anticipate spending on the Company's new headquarters as we restart this project in the second half of 2021. For 2021, we've estimated total capex of $85 million to $105 million to begin construction as well as to enhance WWE's production and technology infrastructure. The increase in capital expenditures for 2021 reflects the acceleration of certain construction spends, as the overall cost of construction has not materially increased.

The total net cost of the Company's new headquarters through completion and net of tenant incentive tax credits and other capital offsets is estimated within a range of $160 million to $180 million. In the second quarter, WWE generated solid financial results as we prepared for WWE's return to live event touring. Positive trends in WWE's key performance metrics and expectations of sustained performance, reinforce our belief that continued innovation can enhance WWE fan engagement and drive the value of our content and products.

That concludes our remarks and I'll turn it back to Michael.

Michael Weitz -- SVP Financial Planning and Investor Relations

Thank you, Kristina. Operator. Keith, we're ready for questions. Please open the line.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll take our first question from David Karnovsky with J.P. Morgan. Please go ahead.

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

Thank you. Nick, you've been really accurate with your predictions on the sports rights, landscapes and including college conference, news we saw this week. As you noted, soccer rights have generally seen an uptick in value as they're utilized by streaming. I'd love your perspective on what's driving this and maybe where you believe the value proposition of WWE is similar?

Nick Khan -- President & Chief Revenue Officer

Hey, John, just, so I can repeat it back to you, is a little shaky audio on this end. You're asking about the soccer rights? Am I correct?

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

Sure. Just how you view WWE is similar and the value proposition to streaming?

Nick Khan -- President & Chief Revenue Officer

I think there's a couple of things, soccer/international football as we know, the number one sport globally. We see the global positives for our brand, certainly not equal to soccer, but appealing on the scale that soccer has been appealing to many, many different countries. So, even if you look at La Liga rights deal, which I've referenced that's a significant deal for a property that takes place almost exclusively out of the United States. So, there's an audience now, as we know, as of 15 to 20 years ago, the world was flat. We think soccer is a beneficiary of that. We think we're a beneficiary of that. We think there's going to be more of those types of deals out there.

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

Okay and then just maybe for Kristina. Can you say how many international events are embedded in your guidance, are they at the higher or lower end, has this shifted at all from last quarter? And at the start of the year, I think you had said, the pandemic was sort of the 15% to 20% overall impact to the guide, I'm curious to know if those figures would kind of roughly hold at this point?

Kristina Salen -- Chief Financial Officer

Sure. I think we haven't released that number of total events we expect for 2021 specifically. We have said that our guidance does include large scale international events as well. I can't tell you the forecasting of the level of events for the second half of 2021 to be at or below what we had in the second half of 2019. Right now, we have about 35 events on sale through the end of September and as Nick mentioned, we'll be announcing the remainder of our second half 2021 schedule shortly. And those events will go on sale. [Speech Overlap]

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

I'm sorry, go ahead. Sure. it was just at the beginning of the year, you had kind of called out a 15% and 20% impact to the guidance in the pandemic. Just curious if you have an update on those figures or if that is still roughly in the ballpark?

Kristina Salen -- Chief Financial Officer

I think that's roughly in the ballpark and again that was based on 2019, making assumptions about what the expectation would have been from 2019 into 2020. So, it's purely a forecasted number as opposed to an actual number, but yes, we haven't changed what we thought the impact in 2020 was.

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

Thank you.

Operator

We'll take our next question from Curry Baker with Guggenheim Securities. Please go ahead.

Curry Baker -- Guggenheim Securities -- Analyst

Hey, thanks for the question. So, on sponsorship, I was wondering if you guys could maybe help us size, what you see the opportunity is over the next two to three years? I don't know if you can put brackets around it, but maybe help us think the areas for increased monetization on sponsorship and maybe the ultimate opportunity there? That would be great.

Stephanie McMahon -- Chief Brand Officer

Absolutely and thank you, Curry, this is Steph. It's tough to give projections in terms of just how much we believe this business can grow, but we do believe that there is significant upside. We have already seen it tracking and we have the opportunity now to really fully engage with Peacock across sponsorship as more opportunities open up later in the year and also across digital and social. There is a ton of opportunities for us from the content production standpoint and really to bring our sales and sponsorship partners throughout all of our lines of business. So, we do look to see a continued positive trend.

Curry Baker -- Guggenheim Securities -- Analyst

Great, thanks. And then one quick one, might be from Nick. Is there any update on the MENA TV rights deal? Are you guys still in conversations or just anything new to add there?

Nick Khan -- President & Chief Revenue Officer

Yes. By the way, curry. I think last time it was a four-pound compound question, which I think we answered completely. So, we appreciate you breaking them up the way did this stock.

Curry Baker -- Guggenheim Securities -- Analyst

Getting more concise. Yes.

Nick Khan -- President & Chief Revenue Officer

Yes. Thank you. Thank you. On the MENA rights, Vince and myself, others are still deep into it. We remain optimistic on the entire situation and I hope to have some good news shortly.

Curry Baker -- Guggenheim Securities -- Analyst

Great, thanks guys.

Nick Khan -- President & Chief Revenue Officer

Thank you.

Operator

We'll take our next question from Eric Handler with MKM Partners. Please go ahead.

Eric Handler -- MKM Partners -- Analyst

Thanks. Good evening, and appreciate the question. Nick, we'll start with you. Wondering if you could talk a little bit more about your out of ring TV production plans, specifically as you move forward with this, how many -- you have a goal of how many hours you're looking to create with different programs? Are you pre-selling these, so you don't have any financial risks and are you looking at these as profit centers rather than just promotional tools?

Nick Khan -- President & Chief Revenue Officer

Yes, we. Thanks for the question, Eric. Yes to all of that at the end, meaning profit center, promotional vehicle, brand extension. I think we see scripted and unscripted television as all of that stuff went through the ratings on the A&E eight-part series and on the memorabilia show there. Look for more of that from us. The unscripted telling of the stories of many WWE superstars as we referenced with the scripted series, the dramatic series based on the part of fan's life. Look for more from us in the scripted space that we're already out to the marketplace with and hopefully we'll have good news on soon.

Eric Handler -- MKM Partners -- Analyst

Great and then Kristina, just a question for you on the new headquarters move. How are you looking at the capex cadence as you look into 2022? When does that start to decline and then the previous plan was to sell the existing headquarters and the off-site production facility that you had in Stamford? Is that still a goal and how much could that offset some of the capex increase?

Kristina Salen -- Chief Financial Officer

Sure thing, Eric. And just to add a little bit to Nick's comments and to put a finer point on it, we don't -- our expectation is not to take financial risks in the way that a studio would or -- a television studio would or a movie studio would with regard to production expenses on our -- out of ring content. With regards to HQ, I think a great way to look at it is our budget has not changed, just the pacing of it has changed, so we've pulled forward expenses that we thought we would be making in 2022. We're making them in 2021 primarily because of supply chain. I'm sure it's not lost to anyone on the call, that supply chains are a bit backed up and so in order to meet our timeline, we need to order some material sooner, so that they arrive on time when we need them in 2022.

We anticipate right now moving in to our new HQ in fourth quarter of '22. We've already broken ground in June. We're very excited for that and so that means that as we move through '22, we'll see capex start to taper down. And also in part because we've pulled forward some of that '22 capex into '21. And with regard to your question, yes, we own -- we're very fortunate to own three buildings here in Stamford that house, our corporate headquarters, our television production and our digital production studios and our anticipation is in -- once we've moved in to sell these buildings and there is a tremendous amount of demand for Stamford commercial real estate. So, we're confident about our ability to sell those buildings in the future. Does that answer your questions, Eric?

Eric Handler -- MKM Partners -- Analyst

Perfectly. Thank you very much.

Kristina Salen -- Chief Financial Officer

You're welcome.

Operator

We'll take our next question from Brandon Ross with LightShed Partners. Please go ahead.

Brandon Ross -- LightShed Partners -- Analyst

Thanks. First just kind of a follow-up to Curry's question on sponsorship. So, I just wanted to drill down on the timing of when you expect to start to see real growth? I think in Q2, sponsorship was down very slightly compared to 2019. With the return to touring, should we see that step function up right away or does that kind of come in time as you explore new opportunities? And then I have a follow-up.

Kristina Salen -- Chief Financial Officer

Thank you. Brandon. So, in terms of sales and sponsorship, the return to live events absolutely increases the excitement and energy with our fans, the opportunity to engage. Of course, there is the financial upside as well, but that has not stopped us from growing the sales and sponsorship business, again up 43% year-over-year. And yes, that is due to a COVID time period, but we've seen significant increases across our business and we expect to continue to see that growth throughout the end of the year and moving forward obviously.

Brandon Ross -- LightShed Partners -- Analyst

Great. And then I guess one for Vince, AEW seems to be making some significant investments in their roster and has gained in viewership, especially in the demo. I was wondering how you currently view them as a competitor and do you feel you need to counter their investment with investment -- additional investment in your own roster since you could eventually be competing for media rights or could it be a situation like we saw back in the day where rising tide to lift all boats?

Vincent K. McMahon -- Chairman of the Board of Directors & Chief Executive Officer

Well, certainly not a situation of rising tide because that was when Ted Turner was coming after us with all of the Time Warner's assets as well, that was a different situation. AEW is where they are. I don't really know what their plans are, I don't know what our plans are. I don’t consider them a competition. In the way, I would consider WCW back in the day, anywhere near close to that. And I'm not so sure what their investments are, as far as their talent is concerned, but perhaps we can give them some more time.

Nick Khan -- President & Chief Revenue Officer

Brandon, I can add one thing to that, if that's OK. This is Nick speaking.

Brandon Ross -- LightShed Partners -- Analyst

Sure.

Nick Khan -- President & Chief Revenue Officer

I think the way we look at these situations, we're -- it's sort of like a horse race where the horse has blinders on. We're looking straight ahead at our lane and making sure that we stay in the front of the pack. At the same time, everything is our competition. So, someone had a line a couple of weeks ago that we all chuckled about and agreed with, sleep is our competition. Right, if it was up to us, people could be up 24 hours a day watching content from different content providers, hopefully, including ours. So, we don't look at any organization, particularly as competition, yet we see everything as competitive with what we are trying to do in terms of eyeballs.

Brandon Ross -- LightShed Partners -- Analyst

I think it was Reed Hastings, who said that Netflix competed with sleep.

Vincent K. McMahon -- Chairman of the Board of Directors & Chief Executive Officer

Exactly, right.

Brandon Ross -- LightShed Partners -- Analyst

Thank you guys very much for the answers.

Operator

We'll take our next question from Ben Swinburne with Morgan Stanley. Please go ahead.

Ben Swinburne -- Morgan Stanley -- Analyst

Hi, good afternoon. Kristina, I wanted to come back to your comments about production -- TV production efficiencies, which have been I think better than expected for a number of quarters and you also talked about live event profitability being strong looking forward compared to say 2019. When you put all that together, it seems like the expense outlook is both good and getting more predictable. And so I guess I had a couple of questions along those lines. One is, is the lack of an increase in full-year guidance around uncertainty largely a revenue comment or are there still questions about expenses that you're -- you guys are thinking through?

And then number two, longer term, as we try to think about earnings power for the company, are you now at a point where when the revenue's rebase back to where they were, you can sort of talk about margins relative to what we saw in prior periods because you've got it now a little more confidence and visibility into the company's ability to produce at a certain cost level, etc.? I'd love any context you could share on that?

Kristina Salen -- Chief Financial Officer

Sure thing, Ben. Thank you for the thoughtful question. I think starting with the last part to first about our long-term earnings power. As I mentioned in my comments, as we exit the year, as we move into the fourth quarter, we will see the full power so to speak, the efficiencies that we've seen in television production expenses on a year-over-year basis. And that we expect to continue as we move into 2022. We are also -- as we mentioned, as we look at live touring -- live event touring, we are at level expense wise that are similar to 2019, again some -- exiting the year -- if we were able to exit the year at that level, it will set us up very well for earnings power in '22.

I think from a guidance perspective, I think it's really just about where we are in this -- I don't want to say post pandemic because it doesn't necessarily feel fully post, but where we are right now in terms of pandemic recovery, are mix related walking through each of our live events that we've held, live events with ticketed fans. The performance has been ahead of our expectations. We are so excited with the ticket sales, the merchandise sales, and we're very hopeful that they will continue as we move through the year -- the rest of the year.

We haven't yet announced the rest of our 2021 schedule, when those events go on sale. When we look at the general pandemic recovery environment, we'll have a much better sense of what third quarter and fourth quarter will look like. So, it just feels right at this moment where we are in pandemic, recovery fits and starts that we want to see a few more months of activity.

Ben Swinburne -- Morgan Stanley -- Analyst

That makes sense. Thanks so much.

Kristina Salen -- Chief Financial Officer

Thanks, Ben.

Operator

We'll take our next question from Steven Cahall with Wells Fargo. Please go ahead.

Steven Cahall -- Wells Fargo -- Analyst

Thanks, Kristina one for you and then a bigger picture one for, Nick. Maybe first Kristina just to follow-up on Ben's question. So, as we're thinking about media opex. I know you've got a lot of costs coming back as you get to normal, but then you've got this reduction in the per episode cost. So, sequentially as we kind of move through the back of the year, how should we think about media opex over that period? And then, Nick, maybe one difference with the other sports leagues and their rights is just the sheer number of hours that they often provide the networks, between the live games and the shoulder programing and the highlights and the post seasons and what that means for advertisers. It's just a lot of tonnage. So, how do you think about positioning your content to make sure that you provide enough volume to networks to kind of go for those big price ups like you're sort of alluding to? And you talked about some of those scripted content, but should we just think about the portfolio as adding hours over time? Thanks.

Kristina Salen -- Chief Financial Officer

Thanks Steve for your question. I'll start with -- with TV and media opex as we move through the year. The reorg that we mentioned in our comments and in our press release was really about creating a unified content strategy and finding more -- even more efficiencies in our content production. So, we previously had three organizations, TV production, digital content production and studio production. And there are a decent amount of redundancies in terms of activity and expenditures across the three. We only made those changes at the end of May, so really deep into the second quarter. So, we'll start to see those efficiencies in the third quarter and really start to home in the fourth quarter.

So, I'm optimistic about continued sequential opportunity in what I would call media production opex. As it pertains to the per episode costs that I've referenced in the past, as we look at Raw and SmackDown, for example, we're now as I mentioned at or very close to 2019 level. So, well, I expect there to be continued sequential improvement as we move through the year because of the efficiencies in combining these three organizations. There was a step function between the first quarter and second quarter that's not as visible yet and it will be even more visible in the third and very visible in the fourth quarter on a per episode basis, on a year from a year -- year-over-year comparison perspective. Does that answer your question, Steve?

Steven Cahall -- Wells Fargo -- Analyst

It does.

Nick Khan -- President & Chief Revenue Officer

I can jump in now on the second part. In terms of the tonnage, keep in mind what you already know, Steven, we got 52 weeks a year, at least seven hours a week on our pay-per-view weeks at an additional three to five hours there and by the way, we're always desirous of developing new content in ring and out of ring, scripted, unscripted as we talked about and as you've asked about. So, we think the tonnage requirement, especially with the consistency of the 52-week schedule gives us, I think just off the top of my head, it's almost an exclusive position in the marketplace. No other sports entertainment property can go like that. We do, I'd like to think we do it well and certainly there's more of it to come.

Steven Cahall -- Wells Fargo -- Analyst

Great, thanks.

Nick Khan -- President & Chief Revenue Officer

Thank you.

Operator

We'll take our next question from David Joyce with Barclays. Please go ahead.

David Joyce -- Barclays -- Analyst

Thank you. A couple from me please. First and thinking about the global opportunity set, just recently it was announced that Univision is investing in Combate Global, so I was wondering what you're seeing in terms of combat sports evolution or do you think there will be mergers of various sports or outright acquisitions or joint ventures, will it just be a way to maybe have some crossover events to expand your fan exposure and engagement? And then separately, it was announced today that Peacock will be available on the Sky platform for free in Europe. I was just wondering, are you able to tag along with that yet or do you still have some other agreements that have to expire first in those regions? Thank you.

Nick Khan -- President & Chief Revenue Officer

Thank you, David. This is Nick. I think I can address those for you. A couple of things on it. In terms of Univision and the Wade-Davis Group buying a part of Combate, Wade has shown a disposition to MMA. We really think he was the champion of Viacom buying Bellator when they did that and he was at Viacom. So, I'm not sure that we see any consolidation in the MMA space. I'm sure the UFC guys like their market share position. Viacom is putting what it's putting into Bellator and Combate we just talked about.

It sort of feels like the business model that Vince and company at that time built out of let's have one big global territory in quote/unquote Wrestling at that time. The WWE is the model that ultimately the Fertitas and Dana White follow, whether it was intentional or not intentional to develop one global MMA product in the UFC. You've not seen boxing do that yet, it's still splintered with different factions all over the place. Eventually, somebody hopefully comes along and does it there. But I'm not sure that we're going to see any consolidation in that space.

And the second part of the question, just back to the Univision part, look we like any new entrant into the combat space that's well financed. That's a good thing, we think for everybody. In the M&A space, all of a sudden it goes from 2/3 to 3/4 in the boxing space, again, all over the map there. In our space, we think again we're uniquely positioned with what has been built already and what we're going to continue to build.

Last part of it, the Peacock international situation. It so happens that we're at a good moment in time that all or almost all of the U.S. media conglomerates are looking to go internationally some globally soon and fast. So, with a turnkey existing product, we obviously already have substantial business with Comcast, but with all of these entities. Again, a turnkey product if they want shows in Germany, they don't have to send production trucks over there and license out the rights to something. With us again, you do a deal with us and it comes automatically. So, we're optimistic on it. We're in the middle of a number of things there and let's see what we have in the next couple of months.

David Joyce -- Barclays -- Analyst

All right, thank you, Nick.

Operator

We'll take our next question from Alan Gould with Loop Capital. Please go ahead.

Alan Gould -- Loop Capital -- Analyst

Yes, thank you for taking the question. Two, one for Kristina, one for Nick. Kristina, can you just confirm that there is a plan that the guidance assumes it'll be one large scale format this year?

Kristina Salen -- Chief Financial Officer

Our guidance does assume that there will be a large scale international event.

Alan Gould -- Loop Capital -- Analyst

Okay. And for Nick, what do you -- strategically, what do you see as the next big step function increase in revenue and value. And the big one obviously was the renegotiation of the U.S. TV rights a few years ago. Is the next big move -- when you start doing combined linear digital deals, is it sponsorship, what strategically do you see as the next big opportunity?

Nick Khan -- President & Chief Revenue Officer

International media rights, sales and sponsorship as you identified, scripted and unscripted television as we've talked about.

Alan Gould -- Loop Capital -- Analyst

Thank you.

Nick Khan -- President & Chief Revenue Officer

Thank you.

Michael Weitz -- SVP Financial Planning and Investor Relations

Thanks everyone. We appreciate you listening to the call today. If you have any questions, as always, please don't hesitate to contact me, Michael Weitz or Michael Guido @wwecorp. Thank you.

Operator

[Operator Instructions]

Duration: 61 minutes

Call participants:

Michael Weitz -- SVP Financial Planning and Investor Relations

Vincent K. McMahon -- Chairman of the Board of Directors & Chief Executive Officer

Nick Khan -- President & Chief Revenue Officer

Stephanie McMahon -- Chief Brand Officer

Kristina Salen -- Chief Financial Officer

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

Curry Baker -- Guggenheim Securities -- Analyst

Eric Handler -- MKM Partners -- Analyst

Brandon Ross -- LightShed Partners -- Analyst

Ben Swinburne -- Morgan Stanley -- Analyst

Steven Cahall -- Wells Fargo -- Analyst

David Joyce -- Barclays -- Analyst

Alan Gould -- Loop Capital -- Analyst

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