Wednesday, June 24, 2015

Barrios at the Bernstein Future of Media Conference [transcript of remarks]

(I decided to just wrote down what George Barrios said at today's Bernstein Global Future of Media & Telecom Summit.
You can listen to the discussion youself at:
I will try and follow-up with my own comments at a later time. I skipped the ten minutes he just ran through his slide deck and concentrated on the less rehearsed and non-presentation portion of the conversation. I am not a trained transcriber so this is just an imperfect record of what was discussed.)

MODERATOR: Here we go again. Sitting next to me is George Barrios from WWE. Many of you are surely familiar with the company and the story. So happy to have them participate in this conference.

The future of media and try and identify companies that have been pioneers doing stuff in the field  that other people have been theorizing about, I'm not sure you can find a better example anywhere than WWE. What a great resource to talk about, learn from and consider investing.
BARRIOS: I thought we'd do some slides to set the context.
1. Talk about the Company Broadly
2. How we see the future and growth opportunity
I think it's important to look back and see where the company has been and where it thinks it's going. Over the last several years, we've been in investment mode. We're not theorizers. We've got a bias for action.It's a powerful global brand.

  • Pay-TV = Raw/SmackDown
  • Free VOD = Short-Form Content
  • Facebook Video = Exploding
  • WWE Network = Best content (most ardent fans)
We're not cord-cutters.  

MODERATOR: We're here talking about the future of Media. One of the big things that every investor is trying to calculate for themselves - this bundle Pay-TV system - is it sticky and going to be here forever, is it going to break apart next week? If you have an opinion on this, we'd love to hear it. Either way, how is WWE?
BARRIOS: First our view in the bundle. We think there is economic value to the consumer in the bundle. I'm not sure everyone has thought through the economic implications to the consumer.
I think the bundle in some shape or form stays. I think you're going to see more and more players providing the bundles.
I think you're going to a proliferation of bundle types (the proverbial "skinny bundle"). WE think it'll continue for awhile
We want to make sure our content is available and we are winning. Not just available but we are winning on all platforms we're playing.
We want to make sure we're connecting, energizing and entertaining our consumers. And if we do that, we don't have the visibility the eco-system looks like in five years, but if we do that, we'll be fine.

MODERATOR: As investors we have to think about winners and losers, placing your capital.

BARRIOS: I think we will be okay either way (whether the bundle stays or not). The most poignant example is the Network. For the first time ever, if you're a content owner of any scale, you can get into the home. You'll see a  Proliferation of direct-to-consumer offerings over the next five years. I think the Network has always been 99.9% offensive but There's a defensive element as well - if I'm wrong, and the bundle does crumble, I'm less as a hamstrung because I'm less hamstrung by that - I can bring the product to the consumer. And I have a global fan-base. The fundamental element we have is a global brand that loves our content. We have a great global brand, global audience, and now we can reach all of them.


MODERATOR: Of all of the things you're involved with, the WWE Network itself, is one that sticks out so obviously you've done and everyone is trying. You've had 15 months of experience of that. What can you share with us about that experience? I've got a long list. Here's things I've jotted down:

  • What can you tell us about subscriber acquisition, the pace of which subscribers ramp? 
  • The role of free trials in all of that? 
  • The cost to you to serve all of that and the content? 
  • The usage patterns - how much, what people are using? 
  • The cannibalization question? Is it happening or not? 
  • How you think about advertising on the service? 

That's 19 questions. I'm having to go through one by one.
We're thirsty for whatever you can share with us about running a direct-to-consumer over-the-top network.
BARRIOS: I think the most powerful and exciting thing for us is the amount of information that we're able to collect on how our users are interacting with our content are interacting with our long-form content. There have been a lot of ah-has. The 55 hours - that 53.5 hours - we had 10 hours of PPVs in the first quarter. That's our live premium content of PPV content - that's 10 of the 55 hours. That means 85% of the consumption on the Network, on average, was long-tail content. That's distributed - some did a lot more than 50 hours, some did less. Wow. 85% was not the "premium content". What's also interesting is because it's long-tail manifesting itself. All of that VOD content, it's not everybody watching everything, it's every person picking what they want to watch and experiencing it how they want to.  
We'll accelerate the amount of content we move from our library into the Network because we've been surprised how much VOD has been consumed. So that's one.
There's a lot of small things you learn about. When you look at all of the legends WWE has among their superstars, we've been surprised in some cases about who people have been trying to find on the Network. And I will tell you, without giving away too many of the secrets, that it's informed some of the programming we're doing today because we see the interest level. We're in the very early days of being able to mine that value. The real value will not just be Network data and Network consumption but when we're able to connect Network data with Ticket Data with Consumer Data and absolutely with Social Media data. And that's a tough thing to do so you won't see that overnight. But you can already see by the richness that we're able to extract today, as we're able to build that out it'll be powerful. 
This is more on the strategic side,  When you talk about the ramp-rate of subscriber acquisition, it's too early for us to really have too grand a perspective on what looks like. A couple of things I'll leave you with. When Netflix did announce their transformation, they were a 17M home business - that was their red-envelope business. When they launched the streaming business, they said they think it could be a 60-90M home business in the US. So After 18 quarters or so, they're about 65% of the way to the 60M. They have about 35M to 40M homes. They've gone from their 17 to 35 to 40.
If you look at WWE, and it's a strained analog, but I think something is there. We were about a million home pay-per-view business. And We said boy, and this is just our analysis, we think we could get to 3 to 4 million homes. Similar scale, in terms of the opportunity, 3 to 4x, our PPV business - Netflix was about 3 to 4x, their old DVD business. We were about 1.3M after five quarters - so that's about 40% of the way to three million. That actually looks like Netflix was at after about five quarters. I don't know what the ramp rate is going to be into the future. But if you look at some data and put some a little context around it with Netflix. 
The other thing we've said from ramp rate and we are a little different, you could argue a lot different from Netflix. We have a seasonality to our business. We have a year-long story arc and competitive elements to it that culminate around WrestleMania. So there's a possibility around us that instead of always seeing sequential growth, we'll have more of a seasonal year-over-year growth where the peaks & troughs are up year-over-year but you might have sequential declines because of that Super Bowl element. I think five years from now we'll be able to look back and see what the best fit curve would be.  I think those two elements are the Seasonality and We always say if you really want to understand the WWE Network, we would say to look at Netflix. I know we do but from a tactical standpoint and a strategic standpoint. 
And some of the other things you mentioned- We do currently have some advertising in the Network. Never in the linear stream, never in the live show. Only when you're watching VOD. It's a fairly light touch. We also have some good clients signed up.


MODERATOR: For those of you who were here listening to John from Starz, he was talking about the future media company being defined in a whole new way. Using data and consumer products, segmenting markets and designing products, and then taking the feedback and designing services. Sounds like that's what you're doing.

BARRIOS: It is what we are doing. People are sometimes chuckling but over the last 18 months we're brought up a data science ability internally. Something everyone knows about the power of data but as we were getting ready, we knew for the first time. If you look at it, 90% of the WWE's business had always gone through an aggregator of some sort whether it was a pay-TV aggregator, the ticket aggregator. The only direct business we had was our shop business where we'd sell product direct to consumer. Nice little business. Now WWE's our second largest business. The WWE Network has gone from zero to the second largest business in 15 months, it's all about data collection. It's a capability that we're starting to build out. We're still in early days. Operationally, we're still running a direct to consumer business. If Netflix is a 9 or 10, we're probably a 2 or 3 fifteen months in. But we've shown we're able to punch above our weight and show muscle. Not just this kind of muscle. Two or three years, we'll be an 8 or a 9.


MODERATOR: Flexibility from Direct to consumer business, the ability to utilize the distribution capabilities globally.  You oughta have more options to enter more markets.
It's so global we've got subscribers in countries in places I didn't know. (Tells the Timor-Leste story.) If there's a broadband connection, we know we have access to that market. 
MODERATOR: They can find you and find a way to pay for the service. Or you could push it. How do you handicap that tradeoff between big markets - India, China - your brand is big in India? (India is our third largest market, today.) Do you put capital and marketing muscle? How do you think about those opportunities?
Constant testing. We're adding something to our analytics stack specifically on the advertising side to get more sophisticated on the third-party media. 
If you look at 2014 because the data is public. We had about 1.3M uniques who tried the service. We ended at the year at 815,000 subscribers. We spent about $16M in third-party media. The acquisitions, about $12-13, is pretty low, especially for a new service. The reason is because we have two massive platforms we can use. One is Raw and Smackdown. They're available around the world. If you watch Raw or SmackDown, you hear about the Network. Both as an offering but also a culmination of a storyline. Advertising the culmination - go see Battleground on the WWE Network. The other huge platform is all of that social media. Those 5B YouTube Views, 70% roughly,  is outside the US. So we have these two big global platforms to drive it which is why we don't nhave to spend what others do need to spend on the acquisition side. But time will tell. We're adding sophistication in the coming months to do that testing. We are a little different than a Netflix or HBO or other ala-cart services, in that we have a ubiquitous global platform to reach our consumers.


Three questions from audience member:
1) Who is the best of all time: Verne Gagne, Hulk Hogan, or your personal favorite?
2) Talk a little bit about viewership - 1.3M views. For your main event, what's the CPM for advertising on that versus CPM on TV versus CPM on YouTube?
3) For your OTT product/direct product, it's $9.99 a month. Why was that price point chosen?
BARRIOS: Yes, so I'll take them in reverse order.
The price point - a lot of boring analytic work went into before launch, testing different product descriptions in the marketplace. So, research. A lot of conjoin analysis to understand at the elasticity at different price points - so on and so forth. There was a lot of science to come up with a range and the $9.99 was within the range. And then the art was we thought the sub-$10 price point was a just powerful marketing message - a tremendous amount of value. But, to kind of get the range, it the traditional in-market research and the ability to do conjoin analysis and try to get understanding elasticity. And when I talk about conjoined I was talking about price but also what the offering was - there was different offering tested not just the one in the market now.
The CPMs was a lot trickier. The traditional content is bundled with core programming with pay TV. We don't have direct access to that information. I would be guessing at what CPMs are. I think if you, at least in the US, googled Chris McCumber, who is the president of USA, and Raw is their #1 Show and SmackDown is being moved from SyFy to USA to make USA a juggernaut. I think if you googled his comments about WWE, he'd say very favorable things about what they've been able to achieve with our content. We love driving value for our partners.
YouTube, I think what you've seen if you went over the long arc of time, you've seen CPMs get more and more healthy. I think for our business, if you drilled down, as the mix of video views continues to shift and more and more of the views coming from international markets, some with not developed advertising markets, you get a mix.. It's certainly lower than traditional pay-TV on a market-by-market basis, but growing. It's certainly lower, but growing.
And finally on The Network - it's too early to tell. What do you think on a CPM basis? I think because you're going to have a very targeted audience with a lot of rich data. I think over the long arc of time. The ability to micro-target. But that's supposition. We don't have enough experience.
My favorite? Ricky the Steamboat Dragon. So I'm dating myself. Today I like "Shawn .. uh... Rollins". John will kill me now.

MODERATOR: I know some of your talent is listening. That was a very dangerous comment to make. You think investors are tough. I wouldn't want to face your stars and explain why I didn't pick them.

BARRIOS: It's not just what they're big. It's that they're too practiced and tearing you up on the mic so they could be kind of harsh.

MODERATOR: I'm sure I could learn something.


MODERATOR: Back to the Network itself, sorry to keep harping on that, but it's just so interesting. (Us too.) The role of advertising. Just more broadly. You've got 53 hours per user. You've got love when Subscribers are using and get a lot of satisfaction out of your product and the more they use it, the happier they are. Should be low churn. Should be good value. Hooray. But you're never going to get more than $9.99. But they don't pay more when they use more. Well you could raise the price. You could throw some advertising in there and monetize. And get paid for using the service so much more. On the other hand, you don't want to turn them off on the service and fill with clutter.I don't think there's much advertising on there at much right now. There's not much advertising on there now?

BARRIOS: It's pretty light. It's in the VOD. Every 4 or 5 plays of an asset, you'll be served a pre-roll.
MODERATOR: Are you tip-toeing your way in until someone rejects? Is it not a priority? Just trying to get the service launched?

BARRIOS: Two points of context for that specific question. There are different services doing different things. You have Netflix with no advertising and Hulu that does. You see both models working in the marketplace. Hulu is much smaller, but still 9M subscribers is still an incredible number. You have different models in the marketplace. 
I think people who are familiar with Raw and SmackDown would say, you guys are pretty good at advertising within the show, and other ways to engage with the content, you'll definitely hear about our new action figure and you'll hear about WWE Network, and new music offerings we have, you'll hear about it but you'll be entertained. We thought it could work. There is a tension about how much because it's a paid service. That's why it's such a light touch.
I think pover time you're going to see us do things that don't feel like advertising. Integration. Product placement. And we know how to do that so well. As the advertising model matures on the network, we'll be able to do things like that. However, you shouldn't take our eye off the ball. The Network's economic model is subscriptions. Advertising from a financial standpoint would be a nice addition, but at the core it's subscriptions, that's where the economics are going to come from.

MODERATOR: At the risk of answering a question you are most sick of answering, especially a year ago. Let's hit it. I know some people are thinking it. This whole Cannibalization question. Especially when you were renegotiating your licensing fees and launching a network at the same time. Now we're a year into that. We can all go google what USA had to say about the audiences. You've got to be studying it, right? You've got your PPVs and your Television audience. Is there evidence of cannibliazation? Is this really all-additive? There's got to be some -yes, no?

BARRIOS: Great question. I think on the PPV - without a doubt. We went eyes very wide open. And if you look at it today, WrestleMania did 100k domestic. It's not being offered by the Satellites. If you gross that up, on a PPV basis, your It used to be 800 or 900 homes domestically. So you've seen 75% cannibalization already. Personally, I'm shocked that we had 100,000 people paying $60 instead of paying $9.99 but not everyone has broadband. Not everyone made me comfortable to OTT, direct to consumer. To us, very comfortable. Part of our business model and thinking. 
The biggeer question with Raw and Smackdown, we've always said it's hard for us to think about use case from the consumer that results in cannibalization that Raw and Smackdown, which is watched live. Raw is live and SmackDown is taped. But  90% of those shows are watched live. That people are going to say, I'm not going to watch the core content, but I'm going to watch the PPV events and VOD.
The argument didn't make sense. If you're going to make engaged with the brand, you're going to be engaged with the core program with the storyline. That's happening every week. If you looked at the USA's actual experience, and their desire to double-down even more with WWE. We never bought into the argument and it was just fear. 
We definitely don't think there's cannibalization. We'll go to the YouTube as well. We believe different content can live in different places. So Short-form content on free VOD like YouTube. Core Content, Live  on traditional pay TV. The whole WWE experience direct to consumer, amplified by the social connections. We think a rising tide lifts all boats. So far, we've been proven right.

Wednesday, June 17, 2015

On BTIG Research initiating BUY/$25 price target for $WWE (analysis)

On Wednesday, 6/17/15, BTIG Research announced that they were "initiating coverage for World Wrestling Entertainment (WWE) with a BUY rating and a $25 price target".

The key element of their analysis is that WWE OIBDA in 2015 would be $77MM and rise to $121MM in 2016.

WWE has noted that, "The rate of WWE Network subscriber adoption is a critical determinant of the Company’s projected future financial performance."
According to WWE's 2015 Business Outlook (published 2/12/15), to achieve $77M OIBDA, the WWE Network would need to average between 1,109,000 and 1,291,000 paid subscribers in 2015. (Depends on whether you're looking at the low or high ranges of estimate.) That middle point is right at 1,200,000 paid subscribers for the year (which is likely how the company arrived at their estimate.)

The key word is "paid subscribers". While WWE has shown the ability to grow the WWE Network (up to 1,327,000 as of 3/31/15), it's important to note that the first quarter average of paid subscribers was only 927,000. To achieve the 1.2M paid subscriber annual average, WWE would need to average 1.291M subscribers for April-December.

Interestingly, BTIG Research admits that at the end of Q2 they "expect to only have 1.18M subscribers". It does not qualify whether this number is paid subscribers, but we'll assume that it is. That would indicate that WWE would have lost about 147,000 subscribers from 3/31 to 6/30. That would put the midpoint for Q2 at 1,253,500 subscribers but only if you assume that the subscriber attrition actually would happen in the middle of April, as opposed to immediately following WrestleMania.

If we assume that Q1 is 927k paid and Q2 is at 1.2535M paid, that would still infer that WWE would need to average 1,309,750 paid subscribers for the second half of 2015 which is lofty target. Do we really believe that in the non-WrestleMania time-period, the service will be able to move back up to the WrestleMania level

Indeed, no one really knows what the post-WrestleMania subscriber slide will look like. WWE has adopted a continuous "free month" model and seems to be trying to "sweeten the pot" by adding WWE Network exclusive shows that are of PPV-caliber (Elimination Chamber). By timing the event on the last day of the month, was WWE successful in rolling over free subscribers to paid status? After more than twenty years, has the company successful reprogrammed casual WWE fans to invest and follow the product throughout the year instead of seasonal Royal Rumble to WrestleMania activity?

I think BTIG is taking WWE's talking points a little too literally and not digging deep enough to test the validity. (It's the same trap that many Wall Street firms fell prey to during the last round of television negotiations.)

For instance, BTIG believes that there's a lot more potential WWE Network growth in international markets. While this may be true, I don't believe it's right to just assume that "China, Germany, Italy, Thailand, Malaysia" are on their way (they forgot to list Japan) nor is it correct to assume that "it's relatively early in some of the markets such as the UK". Doing so demonstrates ignorance of both the high number of fans who are likely accessing the WWE Network using US accounts (explaining the vast difference between the historical int'l PPV percentage and the OTT int'l percentage) and the complex relationship between the media conglomerates in many marketplaces (India, Italy, Germany) and WWE. Furthermore, explicitly laying out the plan to enter the Chinese market and how their product would comply with the regime's censorship. Meanwhile, in the UK, the flood of new subscribers that arrived in January added a much needed subscriber boost. The reality was that hardcore fans were already early adopters and that it's clear that the second-wave of fans that joined during the official launch (nearly a year after the service originally debuted) represented the lion's share of willing subscribers left in the UK.

BTIG mentions they would, "like to see the company exit the movie business." While complaints about the WWE Studios model have abounded for years, it seems highly unlikely that WWE is going to be pulling the plug on the venture any time soon. First of all, the business has settled into a relative malaise. Without the massive financial drains, it remains an unimpressive, but relatively benign segment on the WWE's books. Second of all, WWE just completed $35 million credit facility with BOA/ML for the WWE Studios. Lastly, when you look at activities such as the 2015 Business Partner Summit, it's very clear that WWE values their ability to partner with Lion's Gate, Warner Bros. and Fox. Indeed, to truly understand WWE in 2015, one must realize that the company sees themselves as an "integrated media organization and recognized leader in global entertainment". While the world still sees WWE as a "pro-wrestling empire", initiatives such as the studios segment allows the company to operate in a completely different space.

I agree with BTIG that tiered pricing for the WWE Network would offer greater opportunity. I was critical of the decision to launch the WWE Network at $9.99 (a price which is higher in Canada, UK and Ireland) when it represented such a radical devaluation from the profitable $45+ PPV monthly business. In fact, should WWE move ahead with audacious plans to fill AT&T Stadium in 2016 for WrestleMania 32 with a Brock Lesnar vs Steve Austin main event, the company shouldn't even entertain offering the show as part of the WWE Network package. Indeed, the lessons of Mayweather/Pacquiao demonstrate that with the right program, the "dinosaur" pay-per-view business can be very lucrative.

The challenge with the WWE Network is understanding what content has been truly driving consumers to sign up for the service. While many fans, myself included, would love to see more than fraction of WWE's vast library digitized, organized and accessible, it's also clear that top tier of programming which WWE Network subscribers are watching is new content (live pay-per-views, Network specials and original programming). It's worth noting just how enormous the costs have been for producing original content for the WWE Network. In the first quarter of 2015, WWE amortized $6.8M alone and that's before the new batch of programming has come online. (The decision to carry the new season of Tough Enough on USA Network is a godsend considering that the company had to delay taping the show last year as a cost-cutting initiative when it was scheduled to be a WWE Network program.)

Core interest in the current WWE product remains the number one driver for subscriptions to the WWE Network. That's one reason why healthy relationships with television partners (in particular NBCU) are so critical. While BTIG insists that " In 2014, Raw ratings were up 2% and SmackDown ratings were up 3%." the reality is that Raw ratings have been falling throughout 2015. (For more analysis, see Brandon Howard's "An Investigation into WWE's Slumping Ratings"). WWE's trending schedule reveals that Q1 ratings for Raw and SmackDown both declined in 2015 (-5% and -7% respectively). That's in the most important quarter of the year for WWE interest. While WWE can rely on their guarantee television rights with built-in escalators, it does not bode strongly for future negotiations. Advertisers still remain wary of the WWE's brand despite the large weekly, live sports audience though it's clear the company has made some in-roads through their PG initiatives to appeal to more blue-chip sponsors. Moving SmackDown to USA Network in 2016 will likely boost the ratings of that show, though it remains an open question whether it would be fiscally responsible to move SmackDown to a live show since that incurs higher cost with limited upside.

BTIG notes that "The cost structure also makes us wonder if WWE is ultimately better suited to be part of a larger media company." While this is certainly true, it's also very unlikely to change until after the death of CEO Vince McMahon. WWE has shown a stubborn reliance to "go it alone". With the exception of using the backbone provided by MLBAM (a company whose CEO Robert Bowman used to serve on the WWE Board of Directors), WWE Network remains a service who enormous costs are mostly carried by WWE themselves. There's an opportunity for more partnerships (akin to the Rogers Communications deal in Canada), but WWE is reluctant to give up their crown jewel. After all, how could they go to all of those Telecommunication and Global Media conferences unless they had the WWE Network trump card to tout?
Of course, it's easy for me to play the contrarian when it comes to looking at WWE prospects. I'll maintain that core metrics such as house show attendance and television ratings are going remain very good proxies for the general appetite of casual consumers to subscriber for a OTT service such as WWE Network. And right now? Those aren't moving significantly. Furthermore, I maintain that WWE Network is a niche product and should be priced as such - not as a competitor to general entertainment service such as Netflix or Hulu.

Lastly, WWE is involved in several lawsuits. BTIG wrote, "WWE is a defendant in two lawsuits alleging performers have received traumatic brain injuries and could be liable for significant damages." They're actually defendants in at least three: Haynes III v. World Wrestling Entertainment, Inc., Singleton et al v. World Wrestling Entertainment, Inc and McCullough et al v. World Wrestling Entertainment Inc along with Cassandra Frazier v. World Wrestling Entertainment, Inc. Furthermore, there is the class action complaint for violations of federal securities law (Ganues et al v. World Wrestling Entertainment, Inc et al ) around the disappointing television rights renewal fees and the numerous IP suits involving patent infringement (mostly around digital initiatives, including the website and WWE Network). There also remains the risk that the entire system of independent contractors of WWE Superstars could be blown up, though recent challenges have not been very fruitful.

As always, I'll continue to review the analysis and carefully consider their points. As of this morning, WWE Stock shot up 5% though it's settled down to about 3% up as of this writing.

Chris Harrington
twitter: @mookieghana

Tuesday, June 16, 2015

WWE 1996-2005 Tag Team Tournament

I've arranged the tournament so I intentionally forgot your favorite team and I ranked them all wrong too.

You're invited to think of any iteration of a team that you want (i.e. FBI could be Nunzio/Stamboli/Palumbo or Kaientai could be Togo/Teioh/Funaki/Michinoku).

16 Rock 'n' Roll Express

8 Head Cheese

5 Mexicools
12 Cade & Jindrak

4 T&A
13 Brisco & Patterson

6 X-Pac & Kane
11 The Brood

3 LOD 2000
14 Albert & Droz

10 Furnas & LaFon

2 Too Cool
15 New Rockers

1 Dudley Boyz
16 Quebeccers

8 Heidenreich & Animal
9 X-Factor

5 Right to Censor
12 Smoking Gunns

4 Hurricane & Rosey
13 JOB Squad

6 Brothers of Destruction
11 3 Minute Warning

3 Godwinns
14 Kaientai

7 Jeff Jarrett & Owen Hart
10 Kane & RVD

2 New Age Outlaws
15 Heart Throbs

1 Hardy Boyz
16 Droz & Animal

8 Los Guerreros
9 Tajiri & Regal

5 La Resistance
12 New Blackjacks

4 Bulldog & Owen Hart
13 Mideon & Viscera

6 Radicalz
11 Nation of Domination

3 Billy & Chuck
14 Unamericans

7 Lo Down
10 Rhyno & Tajiri

15 Kendrick & London

1 Christian & Edge 
16 Los Boricuas

8 Bodydonnas
9 Albert & Bossman

5 Kidman & Mysterio
12 Truth Commission

4 Hollys
13 The Oddities

6 Basham Bros.
11 Evolution

14 Booker T & Goldust

7 Benoit & Jericho
10 Suzuki & Dupree

2 Headbangers
15 Mean Street Posse 

Wednesday, June 03, 2015

The Adventures of George Barrios in London & Buzzwords, and Sky Italia


I've registered two websites which I'd like to call out:
  • - this will redirect to this blog
  • -this will redirect to Voices of Wrestling (I spent their Q1 payment on registering this domain)

Over on the F4W board (subscription required), someone (TheVW) asked:
Does anyone actually like hearing as many buzzwords as possible crammed into answers? It seems like a lot of people could cut their word count in half during interviews if they just gave direct answers without superfluous words.
Here's my response:
Actually, in these situations, I think Barrios is trying to run out the clock.
He wants a few questions as possible. I doubt he appreciated my question brought up the revolving door in Digital with Perkins-abeyance-Schwartz-abeyance.He wants to craft a message (WWE Network has 159M potential homes!) and get out of there without being grilled on how much PPV-is-dead-but-somehow-still-generating-tons-of-OIBDA the company sacrificed to launch the WWE Network. It's investors and analysts who hang out on these things and they live this buzzword BS all day long. I felt that the guy asking questions was better than many, but he still didn't seem to have the time-table down on when they announced the WWE Network, when the WWE signed their TV contracts, and when the TV rights actually were being realized. WWE isn't going to these conferences because it's journalism - they go because it's PR and they're trying to control the conversation. Still, there's elements (especially when they do open mics) where you can actually get some good gems from even someone as granularity-avoiding as Barrios.

BARRIOS in London

CageSideSeats reporter Keith Harris did a huge favor for me and covered the BOA/ML Global Telecom & Media Conference from London where George Barrios presented on 6/2:
I'll be live tweeting globetrotter George Barrios' appearance at the BOA/ML Global Telecom & Media Conf. in London, England shortly.
George Barrios is here!
Thanks for almost making the PowerPoint slides work.
Talking about peak profitability at turn of decade, heavy investment in recent years. Pimps their strong balance sheets.
Business strategy monetizing their television IP worldwide, talks about their live events and merchandising streams, WWE Network.
Social media is an imperative! Touting the usual YouTube, Facebook, TV ratings stats, etc.
Makes up a significant proportion of USA Network's prime time blog. Talking about key foreign markets.
The WWE Network IS the most important development. $9.99 a month. Consuming 55 hours a quarter of content. Highly engaged subscribership.
90+% satisfied or highly satisfied. Lots of people following suit. Now, we have a WWE Network hype video.
Huge VOD library with live premium content.
Usual hundred of millions worldwide fan stats. Seth Green, South Park meets WWE show. Jerry Springer. Swerv'd. Creating new IP for Network.
Talking about their major TV deals in America and overseas markets. Pushing the locked in escalators in rights fees.
Barrios remembers the meeting where they were told they were not going to play in social media, they would own it.
500/600 million social media touch-points across platforms.
Looking to increase the % of revenue from overseas markets. Now to Q&A.
Why WWE Network? 1. PPV fairly expensive for consumer, didn't think growth projections were their for the future. 2. Monetize VOD library.
Hopefully no-one asks about Mayweather vs. Pacquiao.
Clearly the success Netflix drove the decision. Talks about their hardcore fanbase (gamer types) skews young.
Chose baseball advanced media as their technology partners.
Talking again about their first party research done prior to launching the WWE Network. How they came up with 3-4% subscriber goal.
Barrios has learnt that 85% of the viewership are the long tail (people are willing to watch content than just the WWE PPVs).
It is very difficult for a legacy company to leave their legacy. To enter one room to another have to go through a long dark hallway. Pivots
Grappling with the balance of where to put their content: TV networks, WWE network, social media. Need to optimize monetization.
Talking about similarities and differences with Netflix. Tactical level learnt alot from them. Strategic similarities too.
WWE PPV business had 1 million homes, think they can get to 3-4 million with Network. At similar % at similar stage.
Why $9.99 price point? Elasticity. Did a lot of research. Once they came up with a range, $9.99 became the arc in the range.
Asked about lumpiness! In a few years, we'll have a nice smooth best fit curve with a nice upward trend.
Growth hasn't been linear, due to the seasonal elements of their calendar, peaking at WM. That's why we focus on year to year growth.
We will be able to answer that really eloquently in five years.
Our primary acquisition channel is Raw & Smackdown. Sampling tool of a free month for new subscribers. Everyone does it.
December, February, April and May (June too) for free! Happy with early results. Mentions the markets they hope to expand Network into.
Including Germany, Thailand, etc. importantly to go deeper into the overseas markets they've already expanded in. Only 15% share now.
Asked about India! Their third biggest money generating market today. Talks about low pay, low broadband penetration, high broadband cost.
That's why WWE Network won't be a big money spinner there. Questioning how to launch in India? Could partner up with somebody.
Asked about China too. Even Netflix is looking for a partner in China. Talks about pivot in willingness to buy media there. Taking it slow.
WWE Network incredible EBITDA opportunity.
When are you going to have another bite at the apple at new TV rights deals? In about five years: 2019/2020 in most markets (not Canada).
Here in the UK, 60% watches Raw live. Live and branded content is valuable.
Asked about Raw and Smackdown move to WWE Network? Anything is possible, part of their 1% defensive strategy.
Audience Q&A now. Real core value of WWE is IP and the brand that we built. May be able to leverage it in other ways.
Asked about international slowing down? Barrios talks about Western Europe economic slump.
Asked about smart DNSs? How many foreigners are cheating? No rationale for people to do it in markets the WWE Network launched.
That's a wrap. Liked how Barrios ignored that the WWE Network is about $5 per month expensive in the UK. No incentives there.
This was all taken from Keith's twitter: with his permission.

(If you're serious about understanding WWE business, I highly recommend you follow Keith on Twitter and read his articles over at Cagesideseats.)

As has been discussed before, Barrios really glossed over the fact that £9.99 is not the same as $9.99. UK subscribers are paying more.

Barrios exact quote on the subject was,
"[At] conception it would have been a bigger issue before we were available in all those markets, ight because we just launched in the US. We saw some of that. Was it something I would say was material? No. At this point we're in all the markets, it is the US product, so other than the markets we're not in, there's no real rationale for someone to have to IP spoof to do that, so obviously some people just like to making things a little bit more complicated than it needs to be. So we see some of that, but nothing that is material to us."


In other news, WWE announced on 6/3 that "SKY ITALIA SECURES WWE® FOR FIVE MORE YEARS". The press release specifically mentions that 12 PPVs will continue to air on "Sky Prima Fila".

Italy is one of the handful of countries (along with Germany, Japan, India, China, Thailand and Malaysia) where WWE has a significant presence but has yet to launch the WWE Network. 

An Italian fan on Twitter, @Stefano_Summa, helpfully pointed out that Netflix is launching in Italy in Q4 2015, and WWE may be waiting to see how that launch goes before they jump in. He also noted that "good quality Internet for a service like this (WWE Network) isn't quite there outside of Big cities".

Still, WWE ends their latest Investor Presentation with four goals:
  1. Continue to grow WWE Network global subscribers
  2. Communicate plans for WWE Network in Italy, Germany, Japan, India, China, Thailand and Malaysia
  3. Monetize digital and social media prescence
  4. Increase share of revenue from international markets
Launching the WWE Network in Italy (either via OTT or as a Premium Network similar to Canada) would be on point to achieveing goals #1, #2 and #4.

-Chris Harrington

Thursday, May 28, 2015

Barrios @ Cowen & Company 43rd Annual Technology, Media & Telecom Conference

Report by Chris Harrington (@mookieghana)

WWE Chief Strategy and Chief Financial Officer George Barrios appeared at the Cowen & Company 43rd Annual Technology, Media & Telecom Conference on May 27 for a forty minute session split between his normal WWE Investor pitch and Q&A from analyst John Blackledge.

(My comments will be italicized.)

Webcast is available at

Moderator Blackledge notes he's a WWE fan. First, it'll be the investor presentation (about 20 minutes). Then about 20 minutes of Q&A with Blackledge.


Barrios begins presenting:
  1. Quick Overview of the Company
  2. Key Strengths
  3. Future: Growth catalysts

Barrios characterizes the 2011-2014 as "deep investment cycle wrapped around monetizing WWE IP across variety of emerging platforms".

(You'd never survive one of these presentations if you were taking a shot whenever any form of "monetization" was uttered..)
Barrios pitches WWE as "Strong Balance Sheet with Net Cash Position".
"At 50,000 foot level, WWE fairly traditional media model. It creates intellectual property (shows, superstars/divas) and then monetizes it across a variety of platforms (tickets, toys, t-shirts, video, advertising)."

About 25% of the revenue outside of the US. Over the last 10 years, double-digit CAGR over last 10 years (9%). Live Events 5% CAGR. International Markets has almost doubled from 2004 to 2014.
Random Barrios Quotes:

  • "One of my personal favorites, we just brought our IP to the Flintstones."  

  • "WWE Immortals taking our IP to more of a 'superhero vein'." 
(He's also fond of comparing the new Seth Green project to "South Park".)

(You need to read the small print to figure out how WWE is claiming to beat Game of Thrones, Duck Dynasty and Walking Dead in viewership.)

(Not only is this apples-to-oranges comp- one weekly show versus whole network in Prime Time, but think of how much advertising revenue differ.) 

Barrios brags the #WWENetwork has subscriber(s) in Timor-Leste. He even offers "all of the money" in his pocket to anyone who knows where Timor-Leste is!

  • "What makes us unique- we own 100% of our content. We license it out, but no back-end."
  • "We have an expertise around creating live content."
- 311M broadband homes in WWE's top 16 broadband global markets.
- About half of them have someone in the home with some affinity for WWE content.
- About 60M are lapsed fans. 100M are active. 25% passionate, 75% more casual fans.

(Interesting to see the large number of lapsed fans in Japan. Also, the WWE Network hasn't officially launched in either Japan, India or Germany yet.)

Discussing the infamous affinity studies... (see also )

India is our third largest market. The top three are US, UK and India. Sweet spot for WWE is 18-34 males. Yet, WWE has a "very diverse audience."

WWE is now claiming 38% audience is female. 

(This is higher percentage of female audience than 2012-2014 claims which were more in the 33%-35% range. Brandon Howard notes that FB analytics tells a different story - closer to 25%. Scott Walters did suggest that some of this could be stigma about "liking" wrestling, which is a valid point. I believe WWE looks at unique HHs who want several minutes of any programming throughout the whole year including all of the replays, which are obviously much more plentiful on E! for Total Divas.)

(Worth calling out the footnote noting admitting that 2014 had "negative cash flow" and also that WWE recently took a $50M pre-payment from a TV partner for cash.)

While speaking about the WWE Network, Barrios notes that Jerry Springer's "Too  Hot for TV" program is not programming into the 24/7 linear stream and only available via on-demand.

(Impressive 97% growth in paid subs. However, the drop in profitability that 2014-2015 WrestleMania generates versus the 2009-2013 WrestleMania is also stunning.)

(It'll be interesting by Q2 to get a feel for much of that incremental $105M we're going to see in 2015 alone.)

  • "We spend a lot of time internally, all layers of mgmt engaging & expanding our social footprint. 2010-2011 was the internal clarion call."

Where WWE has identified for greatest potential international growth: UK, India, Australia, the UAE and Mexico.

Regarding India...

The $14M that India generated in 2014 was solely from TV rights and that is before the latest deal began. India is WWE's 3rd largest int'l market solely off TV rights. There was "infinitesimal Consumer products" revenue.


WWE Network is the guiding variable. Barrios did promise to "tighten that range up on a quarterly basis."


Regarding new international WWE Network markets, Barrios said plans would be communicated in "12 to 24 months".


Q: On the Network side, how do you feel and management feel about the value proposition? You have PPVs including WrestleMania and the vast library of content. Current thoughts on value proposition?

A: I think it's phenomenal but I'm pretty close to it. Bill Simmons wrote a review, "All this for $9.99? I feel like I'm stealing money from Vince McMahon." We had a "million and change" PPV homes. We're trying to get to 3 to 4 million homes. It's about the Elasticity from bringing price down. 
Look at Netflix. Started with 17M DVD homes and goal set was 60-90 SVOD homes by lowering the price and giving customers almost  infinite content. The value proposition we're thrilled with.

Q: The Pricing - if we look at pricing, Netflix is about $8-$9/month US irrespective of market. That's the same price even though what consumers pay for TV may vary greatly. Will that work for markets like China and India?

A: What we've done with the WWE Network is make the US product available around the world. There's been very little localiziation. Why? We thought we'd benefit from learning. Over time, we'll see if it makes sense to localize in those markets and which markets. 
Localization can have three have layers: 
  1. Marketing
  2. Pricing
  3. Content. 

Q: What are some particular learnings you've had from Netflix?
A: We learn from Netflix all of the time. Internally, there's those of us who have read every single public document from them both from a conceptual & opportunity level. 
  • "We are very happy to take other people's ideas and make them our own."

Q: Let's discussing unpacking the content. You have about 3,000 hours available on the WWE Network versus the 130,000 hours of content that WWE has in their library. How do you unpack the content?

A: Right now, we'll add anywhere between 400-1,000 hours this year. One of the internal questions will be, is that enough? Should we speed that up? That will become our internal operations and how quickly we can move that. The value of bringing it in more slowly and promote it. Themed promotions around new content and make it seem more special bringing it in. There's definitely a long-tail to the way that the content gets viewed. A smaller piece of the content is always viewed by someone. Of the fifty hours, we're probably alike on the 10 hours of PPV. The other 40 hours are different. That is the long-tail of digital distribution.

Q: How do you feel you're monetizing your YouTube views?
A: It's monetized through advertising and revenue share. That business has gone from hundreds of thousands of dollars to millions. The monetization has grown about 10x which is great and that's terrific. 

That's the way we view content. It's a balancing act. It's an internal debate about which content goes where. Today, this is our strategy. YouTube is important to us from a monetary standpoint and important from a ubiquitous and engagement standpoint.

Q: I want to touch on innovation. There's been a lot of innovation at the company. It was a strong move going over-the-top with the WWE Network. Touch on innovation and where you feel there's been innovation. Also data. How you use data to inform investment in content?

A: On the innovation side, we're doing more things in any part of business than before.
New content using our IP (Scooby Doo), new games (Immortal, Supercard), testing out at new ways to merchandise at live events where you can order from your device and pick it up to avoid the long lines. These initiatives are "singles" and "doubles". We think over time they will add up. The WWE Network was singularly the biggest innovation that we've done. There's been a lot of innovation between 2011-2014. As our deals were being renewed, we wanted to take advantage of that.

On the data side, I'm not going to make news today. When we see what's being viewed on the Network, internally people are stunned. At the amount of consumption of content that intuitively would been consuming. 55 hours on average with only 10 hours of our PPV content. 85% of the consumption was other content. No one would have intuitively thought that.; People who would 
have lived & breathed the brand their whole lives were stunned. The big push would be to link the disparate accounts that we have: e-commerce, ticketing, social side. It's easier said that done. 
That ability to make the customer at the center of our ecosystem and really personalize. We're one year in to our Big Data. We're fast followers. We've hired our first five data scientists. We see that as an opportunity over time. The programming data we get on the Network informs the network. The biggest opportunity is the cross-pollination of data across the different data sets that we have.

Q: You have made a big push into development. The development center in Florida. How do you view the roster? How does the developmental center lead to the results?

A: 3-4 years ago, we were discussing about investing in our talent development side. You would look at the investment and see that it wasn't a high priority by the spend. It's changed under Paul Levesque's leadership. It's a step-change on how we're grooming our Raw & SmackDown talent. Roman Reigns, Dean Ambrose, Bray Wyatt are becoming one of our most popular superstars. Go to event and get a feeling for who our fans are. Go to Orlando and see the development center and the future.

Q: As you talk about international push, it'll become increasingly important over time. You have a big audience in China & India. Is it important to have a popular Chinese or Indian character? 

A: I don't think it's one or the other. John Cena is iconic and popular around the world. He's the most followed US athlete - 75% follower are from outside of the US. He has more followers than Kobe. Does Wade Barrett resonate a little bit more in the UK? Sure. How about Great Khali in India? Rey Mysterio in Mexico? Sure. There's no doubt there is a certain amount of ethnocentrism to it.
How do you balance that and give everyone a little time? We've got a lot of people around the world who like what we do. It's a good problem for us.

(I've tried by best to summarize Barrios' comments. In some cases, I have paraphrased the dialogue or even left out portions of the conversation. To fully appreciate and understand, you are encouraged to listen to the webcast yourself.)

Chris Harrington

Tuesday, May 19, 2015

Barrios @ JPM Global Tech, Media, Telecom Conf.

George Barrios did a short Q&A session at the 43rd Annual JP Morgan Global Technology, Media and Telecom Conference. Soon the replay should be available at this webcast link. The host was Mark Strouse, a JP Morgan analyst.

While the entire conversation was short (less than 20 minutes), there was a few interesting tidbits.

Q: What was the purpose of developing the WWE Network and their goals?
A: Barrios said that the Network came as a the intersection of two steams - thinking about their PPV ala-cart business (charging high prices for only 3-4 hours of content) and developing the best monetization model they could for their large library of footage (of which they owned 100% of the rights).

Q: How did WWE develop their Total Addressable Market?
A: Barrios said the company did primary research in their top 16 markets and looked at the 300M broadband homes. He went into his discussion about the "half of homes with a WWE affinity." (I have a webpage where you can read more about that research if you care.)

Barrios mentioned looking at Netflix which lead to a question, "What can WWE learn from the the Netflix business model?"
A: Barrios said that WWE studies Netflix very closely. He mentioned they scruntize their public filings, what they say in speeches and even peruse the Netflix website to look at the job descriptions. In particular, Barrios focused a lot on the size of the Netflix business when it was a DVD distribution service (17M customers) and initial Netflix expectations around size of the streaming market (60-90M). He noted that was about a 3.5 to 4.5 multiplier. In a similar fashion, WWE estimated they had about 1.1M unique global homes that order PPVs. He tied that to the stated goal of "3 to 4 million" WWE Network subscribers - using a similar 3-4x multiplier.

The webcast allowed listeners to submit a question. So I did. And to my shock (unlike every single WWE Conference Call I've ever been on) they actually asked it. I asked about the state of WWE Network leadership considering that the recent hire (Lou Schwartz in October 2014) had already left the company by Q1 2015.
Barrios, unsurprisingly, blew off the question by admitting they did lose their Chief Digital Officer but that the CDO's job was much bigger than the WWE Network. And "WWE Network is pretty functionalized. Technology Lead manages Technology. Marketing side. Big corporate marketing group. Analytics function. Resources dedicated there. We're a functional organization for most part. Small group of us who lead the coordination of the effort." Specifically, he named Vince McMahon, George Barrios (CFO & Chief Strategy Officer), Michelle Wilson (Chief Marketing Officer) and Lisa Fox Lee (EVP of Content) as the leaders for the WWE Network.

There was discussion about the WWE TV Rights. I didn't write down a lot of the notes but it was just about the timeline of the negotiations and when the money actually started to come in. Nothing new or groundbreaking in my mind. When he was asked about "untapped opportunities in the international television market", Barrios said that in most of the countries that have the economics to generate sizable television revenue, WWE is there. However, he did call out the Nordics as an area which was a "white space" while acknowledging that through pay-TV there is some programming available.

Strouse asked a question about, "How do you compare the WWE Network to TV Rights?" and tried to start a conversation about "when would it make sense to go complete Network"? (In this scenario, flagship Raw/SmackDown would be aired via the WWE Network.)
Barrios did one of his favorite things - he talked about "pillars". There are three (in this case).
A. Video (WWE put up tons of content on YouTube. That's why their the #1 Sports Network on YT. Etc. Etc. Etc.)
B. Core Live Event Programming (Live Content is valuable to the TV landscape. That was their pitch for the negotiations and they firmly believe that.)
C. The WWE Network (Delivers Prime content - i.e. PPVs - and long-tail content - i.e. replays and delayed episodes of Raw/SM - for $9.99)
"What connects all of that? Social. We're very aggressive in the scale of that footprint." - Barrios

(Does that make sense to anyone? You'll need to listen to the replay and figure out if Barrios actually answered the question or whether he just went off on his own buzzword pitch.)

Barrios did answer the last part about "when would it make sense to move Raw/SmackDown to the WWE Network?" with a "probably not viable in 5 years, but we can't really know."

There was a question from the audience. I couldn't hear it. Barrios did respond by talking about the WWE Network engagement metrics which the company was hyping at the Q1 results.

Based on people who watched for at least 6 minutes, WWE estimated that WWE Network users were watching, on average, 53 hours of content in Q1. Barrios explained that they've extrapolated these numbers for Netflix (who becomes #1 at 167 hours) and WWE would rank very high among traditional and premium television Networks. In addition, Barrios emphasized that with only 10 hours of new PPV content in Q1 (Rumble, Fastlane, WM), that implied that almost 80% of that viewing was content outside of the premium first-run PPV stuff.

"I'm surprised by how much content people are consuming on the Content. Happily." - Barrios

The final question was from the audience about the NXT strategy.

Barrios started by calling NXT "a tiger by the tail for us". He went into a description of what NXT was. (WWE needs to have a pretty structured way to attract, develop and retain new talent. We send our Superstars and Divas to Orlando to do that.)
He did note that as NXT has begun touring, some of the areas selected were chosen due to highest rates of NXT viewership. (He noted that was an example of being able to use data from the WWE Network for other uses.) He admitted it's grown much faster than they expected and they're adapting to the demand and interest.


That's my summary on Barrios' appearance. It was nice that we got Q&A instead of a canned presentation and they even read my question from the web. (My second question about the viability of the WWE Studios was not addressed.)

My key takeaways were:
a) Downplaying CDO loss
b) Nordics as int'l TV rights opportunity
c) Netflix influencing strategy (growth, jobs)
d) NXT touring influenced by NXT viewership
e) 3-4M goal was based on 1.1M global PPV homes base

-Chris Harrington (
Twitter: @mookieghana

Monday, May 04, 2015

Commentary on WWE Q1 Results



Mookie's notes

On Thursday, WWE announced, "record quarterly revenue".

First quarter revenue jumped to $176.2M (up more than fifty million over last year's first quarter) and OIBDA came in at $21.0M (highest number in ten quarters). Operating income, which has been negative for five consecutive quarters, finally registered a huge improvement at +$15.1M.

Obviously, the advantage of holding WrestleMania 31 in Q1 2015 (versus WrestleMania 30 in Q2) is that the timing results in a HUGE revenue shift (WWE estimates it at $24.9M).

What's driving WWE's revenue growth?

  • TV Rights: the preponderance of new TV deals signed in 2014 have began in Q4 2014 and Q1 2015. We've already seen quarterly TV revenue jump $16M in just 6 months.

Meanwhile, it's interesting to see that ratings for WWE's flagship show (Raw) and SmackDown have been flat/declining. Still, Total Divas continues to be a valuable hit for the company. And with Tough Enough returning to television and SmackDown moving to USA Network at the beginning of next year, clearly NBCU still sees big opportunity in the WWE product.

  • WWE Network: With 1.327M paid subscribers as of 3/31/15, WWE generated more $28 million in revenue. Once again, WWE announced that they will be running a "free month for new subscribers", this time in May. And they've promised they are "developing plans for geographic expansion to India, China, Germany, Japan, Italy, Thailand and Malaysia."

Yet, quarterly Churn for the WWE Network is still high (284k in Q1). WWE seems to believe they'll be able to retain more and more subscribers year-round going forward instead of the historical WWE fan model where many tuned out between April and December each year.

Also, international WWE Network subscriptions (which includes Canada) are less than 15% of the total WWE Network number (196,000 of 1,327,000). However, in the past, WWE averaged more like 38% of total WWE PPVs from outside USA/Canada. Does this imply a large portion of WWE fans cannot access the WWE Network (do to lack of availability or reliable broadband access?) or that some 125,000+ fans are accessing the domestic version of the service?

Scattered notes:

WWE Q1 Results
                                             REVENUE                           OIBDA                                 NET INCOME
Q1’15                                  $176.2M                             +$21.0M                                +$9.8M
Q1’15 w/o WM                 $151.3M                             +$21.4M                             +$10.1M
Q1’14                                  $125.6M                             +$12.9M                                -$8.0M
(This is WWE's accounting. Dave Meltzer indicated that it looks like they weren't assuming that WWE Network swell between January & March in the "pro-forma" on WrestleMania. In reality, WM 31.)

Growing Segments:
·        TV Rights (new deals signed for Q4’14 & Q1’15; grew to $58.2M)
·        Live Events (WrestleMania, domestic house show attendance up 4%; grew to $37.5M)
·        WWE Network (new UK market in January; 3/31/15 = 1.327M paid subscribers; grew to $28.6M)
·        Licensing (Video Game-higher unit sales, higher royalty rates; downloadable content including the WWE Supercard)/Venue Merch (WM); residual sales from Q4 activity spill over to Q1

Declining Segments:
·        Home Entertainment (dropped to down 5.8M versus same quarter last year)
·        Digital Media (loss of WWE Magazine, no more WWE PPV webcasts; dropped to $4.3M quarter)
·        WWE Studios (only generated $1.5M in revenue this quarter)

Exceeded Revenue/OIBDA expectations. However, market-opening rise in stock price to above $15 was quickly reversed and currently stock is hovering around $13.50 (-6%).

WrestleMania 31:
WM31 was the “highest-grossest event in WWE history”
KPI (Key Performance Indicators) page on Attendance implies that WM31 attendance was 57,800
·        7,400 NA for 73 events w/ WM and 6,700 NA for 72 events w/o WM
·        WWE internal calendar from Annual Bootleg Merchandise Lawsuit listed the Levi Stadium Capacity at 66,060
·        WWE announced the attendance for WM31 at 76,976

WM31 Revenue was calculated at $24.9M including $15.7M (Live Events) and $3.3M (Venue Merchandise, broke WM29 record of $2.7M).

PPV Buys: $9.0M
·        WM31 (259,000 buys)
·        Fast Lane 2015 (46,000 buys)
·        Royal Rumble 2015 (145,000 buys) 

WWE Network
Revenue: $28.6M            
·        1,327,000 paid subscribers as of 3/31/15; subscribers as of 12/31/14 was 816,000.
·        795,000 “gross additions” (new subscribers plus “win-backs”)
·        Q1’15 Churn was 284,000 subscribers (Q4’14=-251K, Q3’14=-255K, Q2’14=-144K)
·        Remaining marketplaces: India, China, Germany, Japan, Italy, Thailand and Malaysia.
·        Possible new Distribution devices? ChromeCast & Android TV.
·        196,000 international subscribers (15% of total) which is below historic non-North America PPV buys average (38%)
·        “All new subscribers who register for the network in May will receive the network for free in that month, including WWE Payback live on Sunday, May 17”
·        Will continue to add 1,000 hours to “robust video-on-demand library” including the new programming. Barrios specifically called out the new Springer “Love Hurts” episode as example of new programming initiative.
·        77% of the 201,000 “trial subscribers” from February became paying subscribers in March. (Might include some of the UK/Ireland fans who signed up in January?)
·        94% of total subscribers access WWE Network

·        Programming: 8 brand new original shows (“compelling special programming and “short form content”)
·        Promotions (Free May)
·        Features/Distribution (“improve user experience and content discovery across devices”, “continuing to expand distribution platforms”)
·        New Geographies (India/China/Germany/Japan/Italy/Thailand/Malaysia)

OIBDA on Network segment (PPV+WWE Network) was still -$1.5M despite the 1.33M paid subscribers.
To compare, Q2 2012 (with WM29) generated $18.9M in OIBDA for that segment.

Lots of factoids about “WWE Network engagement vs. broadcast and cable networks” showing WWE has “53.43 viewing hours per Household” which exceeds HBO (36.3), Disney (39.4) and ties with TeleMundo (53.2).  Netflix was the market leader at 167.1.
Viewing Hours per Household was “Cumulative hours of network content watched across network households divided by the number of viewing households” whatever that really means.


WWE had 1.6 billion total views in Q1’15 on YouTube and 333 million Social Media Followers on Facebook along with 107 million Twitter followers.

Meanwhile, the Digital Media segment brought in $4.3M.

Still a huge push for WWE as they feel right now is a “land-grab” and they view engagement as key to reaching the younger generation as well as evidence to show advertisers why WWE is important beyond TV ratings.


WWE Television Rights swelled to $58.2M during first quarter of 2015. That’s up nearly $16M since before the new deals started at the end of last year.

·        SmackDown is moving USA Network during Q1 2016.
·        Tough Enough is starting on USA Network in June
·        Vince said Total Divas was #1 show on E! since the Kardashians were on hiatus

According to WWE Raw ratings were down
·        RAW ratings were down 5% this quarter (3.5 versus 3.7 for Q1 2014)
·        SmackDown ratings were down 7% (2.2 versus 2.3 for Q1 2014).

Barrios didn’t give his India pitch. Did talk briefly about China in the Q&A.
No mention of TapouT partnership, though that deal doesn’t start until 2016.
No surprise that Home Entertainment has been down (shipped 620,000 units in Q1 2015 versus 1,087,000 units in Q1 2014). Top recent seller was Slam City (116k, Nov.) & Best of Sting (84k, Sept).
No real discussion about WWE Studios. The segment was unprofitable this quarter (-$400k) as usual.

First time net income has been positive since Q3 2013.  Net Income in Q1/Q2 2012 was higher than this quarter. $176M in Revenue was a quarterly record.