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.