Releases in the Transition Period. Revenues from Our Videogame Release in 2006 Was Reported in 2007. Licensing Cost of Revenue C
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releases in the transition period. Revenues from our videogame release in 2006 was reported in 2007. Licensing cost of revenue consists primarily of talent royalties and agent commissions paid to our licensing agents. The licensing profit contribution margin was 74% in both the eight month 2006 transition period and the twelve month fiscal 2006 period. In July 2006, we began publishing a new magazine titled WWE Magazine that replaced our two former magazines, Raw and SmackDown. Including magazine special issues, we published sixteen issues in the 2006 transition period as compared to thirty-two issues in fiscal 2006. The magazine publishing profit contribution margin was 20% in the eight month transition period as compared to 38% in the twelve month fiscal 2006 period. The decline in the profit contribution margin reflects our increased editorial and content costs associated with producing our new WWE Magazine. Home video revenue reflects the sale of approximately 3.3 million gross DVD units in the 2006 transition period as compared to 2.9 million gross units in fiscal 2006. Included in the successful titles released in the 2006 transition period was WrestleMania XXII, which shipped approximately 425,000 gross units, representing our largest selling DVD release in our history. The increase in home video costs is primarily due to the increased volume of home video sales in the transition period, reflecting higher duplication and distribution fees. The home video profit contribution margin was 50% in the 2006 transition period as compared to 56% in fiscal 2006, reflecting a decline in the sell- through percentage in the transition period. Digital Media The following chart provides performance results and key drivers for our Digital Media segment (dollars in millions, except average revenues per order): Revenues-Digital Media T 2006 2006 WWE.com .................................................................. $ 7.3 $ 9.7 WWEShop .................................................................. $ 13.0 $ 12.1 Average revenues per order (dollars) ........................................... $53.24 $53.42 Other . $ 0.4 $ 1.1 Total ....................................................................... $ 20.7 $ 22.9 Cost of Revenues-Digital Media T 2006 2006 WWE.com .................................................................. $ 4.3 $ 5.2 WWEShop .................................................................. 8.5 7.8 Other . 0.7 1.2 Total ....................................................................... $ 13.5 $ 14.2 Profit contribution margin . 35% 38% WWE.com revenue in the 2006 transition period reflects approximately $5.5 million in advertising revenues as compared to $7.3 million in fiscal 2006. Revenues for other internet based operations in the transition period, including webcasts of pay-per-view events, subscription based content and wireless content were $1.8 million as compared to $2.4 million in fiscal 2006. The WWE.com profit contribution margin was 41% in the 2006 transition period as compared to 46% in fiscal 2006. The reduction in the profit margin in the transition period reflects higher content based expenses. WWEShop revenue in the 2006 transition period reflects approximately 244,000 customer orders as compared to approximately 226,000 orders received in the twelve month period of fiscal 2006. The sale of exclusive WWEShop packages and an increase in the category offerings available on WWEShop contributed to the increase in the number of orders. The WWEShop profit contribution margin was 35% in the 2006 transition period as compared to 36% in fiscal 2006. WWE Studios During the eight month 2006 transition period we released two feature films, See No Evil and The Marine, to theaters in widespread distribution. See No Evil was released domestically in theaters in May 2006 and on DVD in November 2006. The Marine was released domestically in theaters in October 2006 and on DVD in January 2007. During the 2006 transition period we incurred approximately $16.9 million in capitalized production costs for our third feature film, The Condemned, which was released in April 2007. As of December 31, 2006 we had recorded approximately 30 CREATION DATE: 03/11/09 OUTPUT date: 03/11/09.