Wednesday, March 18, 2015

Dr. Ring Tatsumi Fujinami Wrestlenomics

With the news that Tatsumi Fujinami will be inducted into the WWE Hall of Fame, now is a great time to look at some wrestlenomics for this pro-wrestling legend.

With a career that spans 70s, 80s, 90s, 00s, and 10s, few men demonstrated the longevity, influence or skill of Tatsumi Fujinami.

CageMatch has record of well over 3,500 matches which is certainly not even the entirety of his career.

He's wrestled with and against everyone from Antonio Inoki, Riki Choshu and Masahiro Chono to Fujiwara, Dick Murdoch, Bad News Allen, Gran Hamada and Andre the Giant. As you crunch his stats, an astounding range of names shows up - Barry Windham, Atlantis, Funaki, Harry Smith, Scott Norton, Vader, Hulk Hogan, Bill Eadie, Liger, Mistico, Sid Vicious, Nailz, Dynamite Kid, Tenzan, Tenyru, Ebessan and Iron Sheik. He's wrestled many people in the same family including the Guerreros (Chavo Sr, Mando, Hector, Eddy as Black Tiger), the Poffos (Randy, Lanny, Angelo) and the Smiths (Harry Smith, Davey Boy Smith).

He's a legend of New Japan Wrestling.

  • Between 1972-75 he had at least 516 NJPW matches.
  • Between 1978-94 he had at least 2,229 NJPW matches
  • Between 1996-2002 ahe had at least 409 matches and he returned in 2005 for 26 more NJPW matches.
Since 2006, he's been especially active in Dradition Pro_Wrestling and Real Japan Pro Wrestling along with Legend the Pro-Wrestling as well as stints in Inoki Genome Federation, Dramatic Dream Team and the occasional appearance for New Japan, Dragon Japan, All Japan, Toryumon Mexico, Osaka Pro, ZERO1, KAGEKI, FREEDOMS, WRESTLE-1, SMASH, Michinoku Pro and more.

Fujinami Record against Opponents

He's also a prolific tag-team wrestler.

If you subscribe to NJ World, I recommend you check out some of the links to some of Fujinami's best matches from the 1980s courtesy of the DVDVR Best of the 1980s New Japan list.

Who do you think will do the induction?

Wednesday, March 11, 2015

WWE CFO George Barrios at the Deutsche Bank 23rd Annual Media, Internet and Telecom Conference


This morning, WWE CFO and Chief Strategy Officer George Barrios spoke at the Deutsche Bank 23rd Annual Media, Internet and Telecom Conference in Palm Beach Florida.

A replay of the audio webcast is available here.

In terms of ground-breaking announcements, there really wasn't any.

As usual, the program began with Barrios walking through the latest version of the Investor Presentation. As always, he highlights that WWE is a "powerful global brand" with "multiple growth drivers". In particular, here are their important achievements:

(Barrios sounded exhausted on the call. Perhaps this was because the conference was in Florida and not in the greater NYC area. Either way, he seemed off his game as evidenced by things such as when he flubbed a line about WWE mobile gaming and talked about "WWE Scorecard" instead of "WWE Supercard".)

Barrios' message is almost always the same. He sells the "big five" for WWE. Those are:

  1. Powerful Global Brand
  2. Strong Competitive Position
  3. Content Rich Company
  4. Large Addressable Market
  5. Attractive Financial Profile


Regarding the TV agreements, Barrios did note that the top seven deals (US/UK/India/Canada/Mexico/Thailand/UAE) represented about 130 million dollars in existing TV Rights while the remaining 30 deals represented the final 47 million in existing TV Rights. His point was that "no single remaining deal has major value". When someone asked about whether they expected to stay with the same partners or engage in competitive bidding, Barrios noted that they stayed with their same partners for largest three deals (US/U.K./India) while in the case of Mexico, they did move to a new partner with Fox Sports Latin America.

Someone asked whether launching the WWE Network had any effect on the TV negotiations. At first Barrios tried to ignore the question just saying that "deals are behind us". When pressed for further comment, he just said that he "couldn't put words in their mouths. There wasn't a lot of discussion about it."

That's an interesting perspective and one that runs counter to what CEO Vince McMahon has publicly stated. In May 2014, right after the new NBCU deal was signed, Vince said on a conference call that he was "little disappointed" and that launching the WWE Network in February before they completed the domestic TV deal "definitely had a negative impact".


Of course, WWE is very proud of their over-the-top service. It's pretty much how and why they've started attending all of these conferences.

This was a graph they showed in the presentation, but it's a bit misleading. The 2014 numbers represent the number of paid subscribers at the end of the quarters (along with the post-WrestleMania number of 667,287). However, the 2015 number is a million subscribers (technically 1,000,648) but does not necessarily represent a "paid subscriber" number.

It's almost inevitable that Q1 2015 will average more than a million subscribers. But between a free month in February for new subscribers, the UK launch in early January (with extended-cancellation protections for "cooling-off period" and online forms), #cancelwwenetwork movements and anticipated WrestleMania swell, it's tough to know what the real number of WWE Network subscribers is.

Barrios did announce that WWE is expecting to launch WWE Network on "some new Smart TVs" this year.

WWE continues to push the narrative that the long-term goal for the WWE Network is 3-4 millions subscribers. What's their short-term goal? As usual, Barrios refused to give specifics. "We're not making any calls."

While WWE insists that they're going to announce WWE Network plans for "Italy, Germany, Japan, India, China, Thailand and Malaysia" this list of countries underlines two important points:

a) There's not many new geographies left for WWE to expand into. They already did the Domestic (February 2014), and International Launches (August 2014) and the U.K. Launch (January 2015).

b) It's highly questionable if WWE is really going to launch the WWE Netweork in a country such as China (strict censorship) or India (TV rights were quite valuable and may not want to upset their partner Ten Sports).

WWE continues to push the idea that there are hundreds of millions of households with "affinity for WWE" across the globe. This "tremendous appetite for WWE content" remains a popular talking point for the company, but a completely unproven strategy.  For instance, while WWE estimates there are 10 million WWE broadband homes in France and United Kingdom. However, France ranked #10 behind Chile, New Zealand, Ukraine, Mexico and Brazil for actual WWE Network subscribers according to an infogram that WWE produced. UK was #2. It seems that we're not really looking at apples-to-apples.


Barrios new favorite pitch is what I've termed his "India is the Future" speech.

The new TV deal in India for WWE is the third largest for individual television rights. Barrios noted that right now the monetization from the Indian market is "nearly 100% television rights" but he believes there is a big opportunity for WWE merchandising in that country.

While India boasts a large population and robust economy, broadband penetration is relatively low. However, Barrios notes that there's increasing mobile usage which often includes unique "download to go" features for Indian YouTube where a user can essentially go to an internet cafe, download videos and watch them later on their device while they are offline. Whether that sort of solution would work for WWE Network launch is completely unknown but that seems to be part of Barrios' India pitch.

How does WWE play overseas? Barrios said that "universal themes travel pretty well. Good. Bad."


As usual, the questions from the audience weren't that tough and Barrios sidestepped many of them. He was asked about social media, and how the company is planning to monetize the segment. Instead, he talked about YouTube and how revenue from YT has grown from "few hundred thousand dollars to few million dollars". That's all well and fine, but it absolutely ignores the real questions - does all of those Twitter followers and Nielsen Trending metrics really relate to any evidence that WWE is becoming more popular?

When he was asked about the fanbase demographics in the United States, Barrios said that they have "multi-generational viewing" and that means they "re-generate their fanbase".

In terms of the expensive investment from launching the WWE Network, Barrios insisted that they "have made the pivot" and that since 2014 was the all-time record for Revenue, the company is past the inflection point.

When someone from the audience noted that, "Particularly good plots have spiked business." He wondered if "Anything may drastically increase the viewership?" Barrios just said that since they produce 52 weeks of content each year, things are going to naturally ebb & flow. Furthermore, "We have a lot talented writers.Vince is a key part of that. Paul Levesque is key part of that. They assure me it's just gonna get better."

In general, the audience didn't know that much about wrestling. Someone said, "I don't know when the Royal Rumble was. Was the one million number announced after that?" There was an odd discussion whether Barrios tried to explain that only the PPVs go directly on the Network, Raw & SmackDown show up after the VOD blackout window (typically 30 days) and the other 230 live events are not televised. Someone else tried to point out that there was only a few marque events - Royal Rumble, SummerSlam, WrestleMania, Survivor Series. (Barrios' favorite word is calling them "tentpoles".) However, Barrios shot back, "We have 12 events a year!" Obviously, this avoids the real conversation about how big of a decline in subscribers should WWE expect after WrestleMania.

In closing, enjoy the Barrios Bingo Card.

Thursday, March 05, 2015

Latest Articles, Demand at $9.99 and WrestleMania

It's been a few weeks since I gave a round-up of all of the pieces I've been publishing:
Obviously, Wall Street's reaction to WWE potential with WWE Network subscriptions has been very positive. The stock price has shot up more than four dollars from $12.76 (2/5) to $17.15 (3/5).

Yesterday, I looked at the "demand curve" for non-WrestleMania WWE PPVs if the price was dropped to $9.99. I used the last 13 fiscal years of data, but as a discussion with Keith Harris pointed out, if I drop FY2002 (which was the tail-end of the Attitude era), the projected demand drop from nearly 2 million to only 642,000. (Considering that WWE had over 700k paid subscribers for Q3/Q4 2014, it demonstrates just how "rough" this analysis really is.)

As for what's going to happen at WrestleMania for WWE Network subscriber levels, it's anyone's guess (and honestly, at this point that's what you're getting- a guess). On 2/20, I did an informal twitter poll  and came up with:
@mookieghana: So far, the average of responses has been 1,265,000 subs for WM. 10% buffer puts it as high as 1,391,500 subs and low as 1,138,500 subs.
Over on Seeking Alpha, Steven Borovay has been writing lots of articles about WWE. He published an article on March 2 which came up with estimates of between 1,167,848 to 1,335,048 for WWE Network subscriber count as of 3/31/15. Looks like we're both in the same ballpark. He assumes that there will be another Free promotion in May (I have my doubts) and that foreign expansion with drive additional growth (I am also skeptical unless a market like Germany or Italy adds OTT availability).

WWE certainly wants to announce as high a number as possible for 3/31 to impress the market, but it's very questionable how they intend to stem the loss of large quantities of subscribers in April/May/June. Until I see a quarter where there isn't massive churn, I am not convinced that just dropping the six-month commitment was sufficient in placating subscriber uneasiness. 

What are you thoughts? Hit me up on twitter (@mookieghana) or email (!

Monday, March 02, 2015

The relevance of Reddit

Reddit boasts a popular and large community of wrestling fans in their SquaredCircle subreddit.

With over 65,000 "Wredditors" and several thousand "in attendance" at any moment, it's a powerful forum for sharing content or discussing information. However, it's a very volatile crowd.

In trying to understand the difference between the wants (and hates) of the community and the reaction they have to news, I came across a very interesting piece of research by Ryan Carse ("Is Professional Wrestling Coverage a Form of Journalism?"). I wrote about this last July and had Ryan on my Wrestlenomics Radio podcast that month.

Consider these graphs from his paper:

As I noted in December in a post on the Wrestling Observer/F4W message board:
I thought it was fascinating that:
a) 89% of the respondents said they were between 18 and 34 years old.
b) 96% of the respondents said they were male
c) 97% of the respondents say they read news about pro-wrestling BUT only 2% say they subscribe to the Wrestling Observer yet 71% of the respondents consider the Wrestling Observer to be reputable/very reputable (with less than 5% considering it as not reputable).
Compare that to WWE Viewer Demographics: ... phics.htmlWWE only estimates 23% of their audience is in the 18-34 years old and only 65% is male.

When I realized how skewed the SquaredCircle reddit is suddenly things made a lot more sense. That's not to suggest that we're not "skewed" here either, but it helps to understand the difference between representing the average WWE viewer and the person who is posting on these boards (this board included).
I know that adecorativedrop asked the question in January at reddit, "Why do only 2% read the WON but 71% consider it reputable?" but didn't get much response short of "we're cheap" and "it gets reported at other places for free".

Vince McMahon loves to decry that "vocal minority" (mistranscribed as "local minority") is the source of rumpus such as the backlash against Roman Reigns and the #cancelwwenetwork hashtag. In same ways, he's right that there are large segments of the viewing audience which are underrepresented in places like reddit, pro wrestling message boards and so forth. Whether it's better that the tail wags the dog or vice versa remains a larger discussion.

I do think back to what Dave Meltzer wrote in the March 2, 2015 issue on the Wrestling Observer Newsletter:
Really, I’d rather somebody wrote a book from start-to-finish rather than readers who have no real understanding of book writing trying to force changes so the little sidekick who is supposed to be a bit player gets the girl and not the handsome lead who the whole book was built around.
I learned long ago that a good promoter listens to the fans, and a great promoter completely manipulates the fans. But the idea is that both make the fans want not what they tell the promoter they want, but what the promoter wants in the first place, because he has a better grasp than they do about business.
Ultimately, there's got to be a sense that WWE (namely Vince McMahon) really understands what he wants in the first place and what he accomplishes when he gets it. It's been a difficult two years as the Daniel Bryan plans have revealed the reluctance to change direction, but also the challenges poised by major rising stars (Reigns & Bryan) being injured in the middle of their big ascension.

Monday, February 09, 2015

A dribble of $WWE Stock Analysis

Here is the $WWE stock against their annual average (by calendar year). You can see how huge that crest & fall for 2014 was driven by the exceptional expectations around the domestic TV rights deal (which ultimately didn't deliver as high as WWE or analysts hoped) and the initial enthusiasm about the viability of the WWE Network.

I was curious what happens in the quarter after WWE announces their fiscal results, namely - what happens in the post-WM quarter?

It's a very mixed bag. Some years we're up. Some years we're down. (Keep in mind that this chart has been time changed so that we're looking at the period following the release of results. So, we're actually in Q3 CY 2014 right now because the Q4 CY 2014 results hasn't been released yet.)

I also took a quick look at what your index would look like if you bought $WWE stock and wanted to hold it less than a year. This doesn't include stock splits or dividends or the fancy jazz that a real analysis would include. It's just a quick look at the average price in a month, and how that compares for the next 12 months.

For this chart, I excluded 1999-2000 and all of 2014. I felt that those two periods had a lot of distortion going on with them.

I'm very surprised to see December up for every month. Maybe I screwed something up.

Row Labels Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Avg
1999      24.00      22.54      16.40            20.20
2000      15.28      11.92      14.50      15.31      17.24      17.72      21.24      19.98      20.36      14.93      14.30      14.42            16.45
2001      18.91      16.03      12.75      13.30      13.21      12.61      13.76      11.74      11.61      11.35      11.95      12.74            13.32
2002      13.71      13.50      15.10      14.79      14.89      13.84      11.08        9.93        9.25        7.66        8.33        8.46            11.68
2003        8.17        8.14        7.89        8.33        9.28      10.06        9.81        9.74      10.19      10.69      11.31      12.33             9.68
2004      13.59      13.40      13.38      14.80      12.42      12.85      12.73      12.04      12.14      12.21      12.72      11.97            12.85
2005      12.31      12.37      12.30      11.59      10.53      10.41      12.00      12.29      12.94      12.68      13.06      14.61            12.25
2006      14.87      15.03      16.63      17.08      17.84      17.03      16.66      15.97      16.85      16.76      16.08      16.53            16.46
2007      16.19      16.15      15.87      16.62      17.91      17.09      16.07      14.63      14.83      15.24      15.10      14.89            15.88
2008      14.30      16.58      18.28      18.57      16.68      15.79      15.97      16.11      15.76      14.38      12.00      11.28            15.48
2009      10.46        9.47      10.55      11.31      11.62      13.02      12.94      14.24      14.16      13.81      15.34      15.69            12.76
2010      16.06      16.29      17.49      17.88      16.80      16.27      15.98      14.57      13.99      13.81      13.86      14.29            15.60
2011      13.44      12.27      12.66      11.73      10.39        9.65        9.92        9.38        9.12        9.98        9.86        9.75            10.66
2012        9.57        9.60        8.91        8.14        8.38        7.70        7.77        8.33        8.61        8.20        7.99        8.01             8.43
2013        8.19        8.53        8.66        8.91        9.29        9.87      10.82      10.10      10.04      11.37      13.66      15.04            10.38
2014      18.96      23.27      29.14      22.78      15.02      11.50      12.14      14.11      14.47      13.60      12.36      11.62            16.50
2015      11.15      12.64            11.44

It is remarkable that with the exception of 2004 and 2008, the Dec vs. Nov number was average of +4% and between -1% and +12%. 

But all of this is just someone playing with a couple numbers from Yahoo Finance with little stock financial training. I would take it with an enormous grain of salt.

Sunday, February 01, 2015

Chapter 1 - The annual report - and what underlies it (The Economist's Guide to Analysing Companies) $WWE

"The annual report- and what underlies it"

What is accounting?

As we learn (pg 10) the 1966 American Accounting Association defines accounting as, "process of identifying, measuring and communicating economic information to permit informed judgments and decision by users of the information."

We're going to be looking at the WWE Annual Report.


There's an interesting part of page 13 in the "Ownership and management". Noting that in private companies "members of the family act as directors" while a public company is supposed to have a clear separation of the owners of the company and its shareholders. Obviously, in the WWE where the McMahon family controlled 43,797,830 Class B shares (there were six total owners as in the 2013 Annual Report) with ten votes while the 8,206 holders of 31,349,734 Class B shares only get one vote. The McMahon's control the voting rights. As noted in the Annual Report:
A substantial number of shares are eligible for sale by Mr. McMahon and members of his family or trusts established for their benefit, and the sale of those shares could lower our stock price. All of the issued and outstanding shares of Class B common stock are held by Vincent McMahon and other members of the McMahon family and trusts set up for these family members. Sales of substantial amounts of these shares, or the perception that such sales could occur, may lower the prevailing market price of our Class A common stock. If any sales or transfers of Class B common stock were to occur to persons outside of the McMahon family, the shares would automatically convert into Class A common stock.
There's a concept in the UK of "stewardship" (or "Accountability") which is the directors' relationship with their shareholders. Typically, we call a "controlling shareholder" someone who is holding more than "20% of a company's shares". In fact, WWE must disclose anyone who owns more than "3% of a company's equity shares" in the annual report.

Let's look at the current WWE Board of Directors is:
  • Vince McMahon - Chairman of the Board & CEO of WWE.
  • Stuart Goldfarb - "President of Fullbridge - provider of an accelerated, rigorous business education program" and formerly "President and CEO of - marketer of DTC subscription products/Internet search marketing agency" (which went bankrupt). According Forbes, he earned about $108k for WWE BOD work in 2013. He was an NBC VP many years ago.
  • Patricia Gottesman - She was "CEO of Crimson Hexagon- a social media monitoring and analysis company" and previous to that a 29-year executive at Cablevision. According to Forbes, she earned about $103k for being on the WWE BOD in 2013.
  • David Kenin - His claim to fame was as EVP for Crown Media where he was in charge of programming for the Hallmark Channel. He also had experience as former President of CBS Sports and EVP at USA Network. According to Forbes, he earned about $116k for being on the WWE BOD in 2013.
  • Joseph Perkins - Perkins joined the board of directors back in 1999. He was a longtime associate of the WWF/WWE dating back to the 1970s where he was a director of syndication. He's the oldest member of the WWE Board of Directors (78). According to Forbes, he earned about $108k for his work on the WWE BOD in 2013.
  • Frank Riddick - Mr. Riddick is the executive chairman of Shale-Inland and former CEO of JMC Steel Group. According to Forbes, he earned about $125k for being on the WWE BOD in 2013.
  • Jeffrey Speed - a former EVP/CFO for Six Flags, Mr. Speed also brings extensive work history from time at the Walt Disney Company and public accounting firm PWC. According to Forbes, he earned about $117k for his work on the WWE BOD in 2013. 
  • Laureen Ong - the newest member of the WWE BOD, Ms. Ong was elected to the WWE BOD in July 2014. Her background is 30 years in the Cable industry with experience as President of the Travel Channel, launching the National Geographic Channel and working as the COO for Hong Kong's STAR Group Limited which "develops, produces, and broadcasts satellite television programs and contents in nine languages and across 59 channels in Asia."
It's a very cable/satellite-heavy BOD. Pretty much everyone, except for Mr. Riddick and Mr. Speed came from the Television industry. Mr. Speed's connections to both Walt Disney and Six Flags seem cohesive with the entertainment space which WWE plays in. Riddick is the outlier, but I think there is a connection.

I'd guess that Riddick's connection to the WWE Board was probably through former BOD member Michael Solomon. Both men have served on the Geeknet board of directors.  Geeknet is owner of popular online retailer Thinkgeek. According to Bloomberg, Solomon was on the Geeknet BOD from March 2010 to March 2014 and served on the WWE BOD from August 2001 to November 2010. Meanwhile, Riddick has been on the Geeknet BOD (and continues to serve) since August 2010.

It's interesting to go back a few years, and you'll see other familiar names on the WWE Board of Directors. Back in 2005, the WWE BOD included Lowell Weicker (former US Senator 1970-1988 and former CT Governor 1991-1995), David Kenin (still on the BOD, joined in 1999), Joseph Perkins (still on the BOD, joined in 1999), Michael Solomon (joined in 2001, left in 2010) and most interestingly, Robert Bowman.

Why is Robert Bowman so interesting? He's the CEO of MLB Advanced Media. That's the company who provides the backbone for the WWE Network. I think it's interesting when you read an interview with Bowman about the WWE Network to recognize that Bowman's relationship with Vince McMahon dates back many years. He joined the WWE Board of Directors in September 2003.

What's missing? While TV rights has traditionally been the lifeblood for the WWE, in this changing media landscape, I would expect that there could be greater guidance from people who have more experience with over-the-top and digital media services. It's telling that most of the people on WWE's Board of Directors come from terrestrial television programming. It would seem that those with "internet company" are still traditional TV executives at heart.


As for the timing of when the annual report must be issued, I learned that "companies with assets over $75M must file a 10-K report within 60 days of the year end" (page 16). And that WWE must have a "detailed segment analysis by product and/or geographic area, including the naming of any customer accounting for many than 10% of revenues."

WWE has broken down their geographic distribution of revenues for several years. For instance, as I noted in my piece about the UK/Ireland launch of the WWE Network:

YearNorth AmericaUnited KingdomRemainingTotal
2013 Q4 - 2014 Q3$406.3$38.8$75.3$520.5
(There's a clear trend where WWE has pulled back from an growing revenue in Latin America in recent years. From FY2004-2006, international tour attendance was 9000+/show. Now it has dropped in recent years to at/lower than domestic attendance - 6,000/show. Interestingly, we've seeing revenue growth from new geographies such as India, Thailand and the Middle East for new TV rights contracts.)

I do wonder about the definition of "customer". For instance, NBCU pays WWE a lot for TV rights for television programming on their channels: Total Divas (E!), Raw (USA) and SmackDown (SyFy). Between Q4 2013 and Q3 2014, domestic TV rights was about $109M which would represent over 20% of the total net revenue for WWE. The vast majority of it came from a single company (NBCUniversarl - a division of Comcast Corporation) with the remainder being Main Event revenue (ION TV, which stopped broadcasting domestically on April 2, 2014).

There's a lot more I could comment about from chapter 1, but I'd like to focus on a interesting paragraph on page 52: "Pro-Forma figures".

Vouse writes:
When faced with uncertainty, poor performance, or the need to hide incompetence or fraud, directors may be attracted to presenting "pro-forma" figures in their reports to investors... If the terms "adjusted", "normalised", or "underlying" are used in the review of a company's performance, be on your guard. Examples of such measures may be found in the use of EBITDA. A company showing a loss in its published income statement could produce a positive EBITDA figure. If the discussion of performance management choose to use a measure other than one firmly based on the reported financial figures and GAAP, a clear explanation must be provided.
This section really struck me because WWE has a nasty habit of reshuffling divisions, and changing how they like to account their profits. Today, it's "OIBDA" - operating income before depreciation and amortization. As the costs for WWE Network have mounted, WWE has been under intense pressure to demonstrate that the service is meeting their internal (ever-changing) expectations and that it's capable of turning a profit (and eventually exceeding the previous revenue stream generated by traditional pay-per-view).

Here's how WWE explains their choice of OIBDA:
The Company presents OIBDA as the primary measure of segment profit (loss). The Company believes the presentation of OIBDA is relevant and useful for investors because it allows investors to view our segment performance in the same manner as the primary method used by management to evaluate performance and make decisions about allocating resources. The Company defines OIBDA as operating income before depreciation and amortization, excluding feature film amortization and film impairments. OIBDA is a non-GAAP financial measure and may be different than similarly-titled non-GAAP financial measures used by other companies. A limitation of OIBDA is that it excludes depreciation and amortization, which represents the periodic charge for certain fixed assets and intangible assets used in generating revenues for our business. OIBDA should not be regarded as an alternative to operating income or net income as an indicator of operating performance, or to the statement of cash flows as a measure of liquidity, nor should it be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. We believe that operating income is the most directly comparable GAAP financial measure to OIBDA. See Note 18, Segment Information in the accompanying Consolidated Financial Statements for a reconciliation of OIBDA to operating income for the periods presented.
I'm not an accountant or a experienced investor. I can't speak about the decision to use OIBDA by WWE but I do think it's an important reason why there is significant differences in interpretation when it comes to establishing what WWE's new "break-even" point is for the WWE Network. It's especially interesting to see how much the Depreciation and Amortization for the "Live and Televised Entertainment" division is changing between 2013 ($6,657,000) and 2014 (where it seems to be $28,000,000 for just the WWE Network).

As WWE notes in the latest 10-Q filing:
Overall depreciation expense in the current year was higher due to depreciation expense related to the Company's recent investments in property and equipment to support our emerging content distribution efforts, including our WWE Network.
OIBDA doesn't include Depreciation and Amortization so those large costs aren't being included in the WWE Network calculations. Suddenly, Vause's  warning about pro-forma figures is ringing in my ears.


Saturday, January 31, 2015

The Economist's Guide to Analysing Companies (Mookie's wrestlenomics journey to understand $WWE)

One thing I've struggled with is trying to figure out what to do with this blog.

The sort of things that I typically post here could be random whims (Mookieghana 400) or calculation metrics (WON HOF Ballot) or information that I want to archive (Buyrates 2006-2014).

I enjoy writing about pro-wrestling, pro-wrestling stats and the financials of pro-wrestling.

Recently, when I've discovered that I can get paid for my articles, I often try to do that when I can dedicate the time to write & publish a piece.

My background is in Economics, Mathematics, Microsoft Excel, Apple //e BASIC. I'm not a professional writer. But one thing I learned from improv comedy was that you become a professional when you're doing something that people are interested in, and part of that process is getting paid to do it.

That's one reason that my stuff ends up being scattered across many website - Bleacher Report, SeekingAlpha, Voices of Wrestling, WhatCulture and F4W/WON - different audiences for different subjects. Before I record a Wrestlenomics Radio podcast, I often write up talking points, facts, and conclusions. Sometimes those mini-pieces end up here.

I've spent a lot of time examining WWE's annual reports. A lot. 

I've studied their press releases. I've dissected their balance sheet. I've studied their quaterly key performance indicators.

Still, there's a lot of questions I have. How can correlate their current (and projected future) performance to their stock price? What exactly is their break-even point for the WWE Network? How successful or unsuccessful have their various segments been? And so forth.

WWE doesn't always make it easy. They've switched from reporting on Cost of Revenues to Profits to Operating Income to OIBDA. They've reorganized segments and they've discarded projects and launched other complex investments. It's a lot of work just to produce a clean seven years of like-to-like revenues.

I've been trying to figure out how to better answer these questions.
Jason on Twitter suggested Damodaran's class at Stern which has been a great starting point.

Today my buddy Adam and I hunted around Magers & Quinn Bookstore for a good reference and came across Bob Vause's "Guide to Analysing Companies" presented by The Economist. As someone who greatly respects the Economist magazine and has often read and subscribed, it seemed like just the right thing.

Wow. What a find!

So, I'm going to see what I can learn from this book. And I think this blog might be a good place to capture what I'm processing.


Financial analysis is as much an art as it is a science.

Never judge a company on the basis of one year's figures... Never judge a company in isolation.

Future expectations of a company's performance outweight its historical track record in determining its stock price

Importantly, Vause notes that "If you cannot understanding what the company does.. it is not a failure of your analytic ability but someone practising corporate legerdemain."
skillful use of one's hands when performing conjuring tricks.
synonyms: sleight of hand, conjuring, magic, wizardry
I really like that phrase "corporate legerdemain". That's a terrific way to discuss WWE's balance sheet.

The real challenge is pinpointing what industry is appropriate to compare WWE against -- are they an Entertainment rights company? Are they a live events company? Are they are TV/Media company?

This is something I'm going to need to think a lot more about. How much show their performance be weighted against competitors who also dabble in the same areas?

Here's Google Finance's comparison companies for WWE:
  • Time Warner (media and entertainment company) 
  • 21st Century Fox (global media and entertainment company) 
  • Walt Disney Company (diversified worldwide entertainment company) 
  • Comcast (media and technology company for Cable and NBCU) 
  • Mattel (designs/manufacturers/markets toys) 
  • Manchester United (operations of professional sports team) 
  • Madison Square Garden (integrated sports, entertainment and media business company) 
  • Take-Two Interactive (developer/publisher/marketer of interactive entertainment) 
  • DirecTV (provider of digital television entertainment) 
  • SFX Entertainment (producer of live events and entertainment content focused on electronic music culture) 
It's considered a "Cyclical Consumer Goods & Services" company in the Entertainment industry.
The Cyclical Consumer Goods & Services economic sector consists of companies engaged in the production of automobiles, homebuilding, household goods, textiles and apparel, as well as hotel, casino, leisure, media and retail operations and services.
What a strange hodgepodge! Cars & Casinos! Textiles & Wrestling!