Tuesday, November 10, 2015

Barrios at Wells Fargo Securities Technology, Media & Telecom - November 2015

WWE CFO and Chief Strategy Officer George Barrios presented and answered questions today at the Wells Fargo Securities Technology, Media & Telecom conference in New York City.

My live-tweet coverage from the event:

Presentation materials link: http://ir.corporate.wwe.com/Cache/1001204397.PDF?Y=&O=PDF&D=&fid=1001204397&T=&iid=4121687



He's giving the "media eco-system" pitch with the three pillars. 

#1) Social
"We need to own social." 
"We feel really good about the job we've done over last few years" 



#2) Pay Eco-System 
(talking about securing the pay-tv contracts) 
(Core programming - Raw & SmackDown) 



a) Premium live content
b) Originals/Specials - "Swerved did really well on Network"
c) Library



#3) Direct to Consumer
We believe over time we can get to 3 to 4 million subscribers globally - Barrios 

Q&A

Q: Released earnings, better than expected.. Q4 guidance/2016. Any more color will give? Why not avg paid instead of quarter subs?

Barrios: We're still learning. The one thing you notice is the peak in Quarter 1, and a decline. We have a seasonal product (WrestleMania our Super Bowl). As we move forward, unlike a Netflix that grows sequentially, because of the seasonality inherent in the content we might see year-over-year growth but sequential declines. We'll see how it plans out in April. 

Investment Areas:
1) Content
2) Emerging Markets
3) Technology

1) Content - We see how much consumption there is;it creates an asset value. we're experimenting how much drives subscriptions? 

2) Emerging Markets - about 25% of the business outside of the US. 3rd largest market is India. See more people on ground in India, Middle East, Latin America, China. China has changed for willingness to pay rights fees for exclusivity to Western content. China may skip to digital content without pay-tv phase. Starting to invest in Chinese social media content (outside of YouTube, Facebook, etc.) 

3) technology - some of that is Network itself. Add new features to network to help acquisition and retention. Primarily in Data Analytics stack. Use data to drive thinking. We've got a rich data-set in the Network data in real time. Stitching together all of the disparate data elements - using Twitter, e-commerce, TicketMaster, YouTube, etc. We think it's worth it in the long term. 

On China: "no direct table table on china WWE Network launch" 

Q: Looking 5 years out, what does the entertainment landscape look like? 
A: More and more people are watching content "non-linearly except live content". Globally, the penetration and quality of broadband will improve. More and more content owners will have some element of their business direct to consumer. You hear a lot about skinny bundles, cord cutting, cord nevers - I think how you bundle will evolve - that makes sense, basic economic theory - the question is who is doing the bundling and what do they look like? I think there will be more choice. Where is the money? It will follow the eyeball. We can't control that element. We can control being incredibly strong and penetrated in the platform. That's why YouTube and FaceBook is strategic for us. 5 years ago FB and YT was at the CEO level with his direct reports giving him updates on what we wanted to do with that.  We're going to continue to drive the value of core programming Raw/SmackDown. We will have the choice for the best place for our audience and our shareholders for where we want to put our content. How does that all shake out?I don't think anyone knows.There's a lot of uncertainty. We can control being strong across board 

Barrios is talking about the long-tail value of the archive/library footage. "It's varied." 

Audience Q&A  

1) Balance Sheet Mgmt
2) Cash-Flow

A: We generate a significant amount of cash. We have a fairly plain-vanilla balance sheet.  Only debt is the corporate aircraft.  Return of cash to shareholders.  Given to transition, we've stayed away from talking about the future. We're a high dividend payer. We've stayed away from prognosticating around usage of cash. If you look historically, the company has been an aggressive return of capital. 

Churn?

A: In terms of churn, subscription businesses are akin to retail. It's a ground game. There's no silver bullet. It's lot of initiatives layered on top of each other. Tell future subscribers "here's what's coming" way ahead of time. Segmenting subscribers into cohorts. Target messaging to them. Adding watchlists. We're doing collections coming up. New payment methods - gift card (no CC required) at Walmart. A lot of little initiatives that you hope will reduce the churn. 

Let's say Netflix is a 10. We're probably a 3-4 now. Hope is 2-3 years from now, we'll be an 8 or 9. 

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