Thursday, June 01, 2017

WWE CFO George Barrios at JPMorgan Global Technology Media and Telecom Conference

You are listening to a recorded webcast of the presentation originally presented Monday, May 22, 2017 at 9:20 AM .

George Barrios "takes lead on Strategy, Finance, Technology and Business Development"

In 2016, record revenue for the company - about $190 million outside of North America. It's all part of the continuing transformation of the underlying business model.

5 years ago: About 5% came through digital platform; today about 1/3 does.
10 years ago: 10-15% was "direct to consumer", today about "half revenue"

Tripling revenues outside North America.

A little bit more digital
A little bit more direct to consumer

About 2/3 come from media and 1/3 is tickets & consumer products

Media EcoSystem: Three Pillars

1. Social & digital platform [YouTube is dominant AVOD platform; WWE is #1 sports channel with NBA as #2; more consumption that FIFA/Olympics]
2. Traditional TV [600m homes around the world; 5b hours consumed; 5hrs live weekly; 260hrs annually; partners NBCU/USA; BSkyB in UK; Ten Sports/Sony in India; OSN in Middle East - India is largest market; #2 is US and South Africa is #3)
3. Direct to Consumer delivery

From a consumption standpoint, on traditional TV, India is our largest market; number two market is the US and number three market is South Africa, in terms of average viewers.

In our "direct to consumer", our most premium content (our playoffs) - storylines culminate and championships change hands. Reality series & animation.

We're almost at 8,000 hours of content available to our "most passionate fans".

DTC network is where we "super-serve our most passionate fans."
Large platform on AVOD. Continue to be a big deliverer of eyeballs on pay TV.
We’re now the 5th largest direct to consumer video service in the United States.
That gives you some context.

Questions by David Karnovsky (Media, J.P. Morgan)

(4:00) Q: Let’s start on the Network. You provided a long-term target, I think, of three to four million subs. Where are you on the way to the goal and what are the catalysts to get you there?
A: One of the things we look at, and it’s public information. When we launched, we did a lot of primary research to say, “How big do we think the opportunity can be?” And what we thought globally was three to four million subscribers.

I don't know if everyone remembers, when Netflix their SVOD service and they were migrating from the DVD business, they actually set a long-term target for themselves in terms of US subscribers, kind of say in the long arc of time they could get to 60 million to 90 million subs; they're around 80% there to the 60m after eight years almost. We're three years in and we're just over 52% to the low end of our range of three million, so that's where we stand today. The business continues to grow year-over-year and we'll continue to invest it in and push it forward.

(5:10) Q: For background, for those less familiar, who is the fan who is using the WWE Network? How is it that you manage the content there to ensure that you're not cannibalizing one of your other video windows?
A: Yeah. It’s really important. There's players out there, and it's not about good or bad strategy, it's just different on depending on where you sit, they’re players out there who say, "I'm going to put it all direct to consumer, I’m going to put that same content on Pay TV and put similar on AVOD-support" - it’s the same content on the three platforms. That works for them.

For us, we have different content on three platforms as you were getting to.

You can enjoy a lot of WWE on AVOD, you can enjoy a lot of WWE on Pay TV and we always say the Network is for the superfan - it's not for every WWE fan - and there you get everything WWE including our most premium content, what we used to called the pay-per-views which isn’t available anywhere else. And that’s how we tier our content and that tiering word is really important internally.

We talked about this digital and direct-to-consumer transformation…

If you went back six years ago, if we created a piece of video, there was only one way to get it to a fan. We had to partner with a network and we had to create multiple partnerships to reach globally, in a capacity-constrained environment because of linear television (24 hours) - and then if we get that working, we'd deliver that video.

Today, I can do that and I can also put a piece of video into any broadband-enabled home in the world and monetize it either through advertising or monetize it through subscription direct-to-consumer. To your question, the Network definately within a tier is for a superfan.

*tells story about his brother-in-law who watches WWE Network*
(8:00) Q: One of the underappreciated benefits, in our view, of a direct relationship with your consumers has to be the data and analytics that you’re able to receive. How important of a benefit has this been for you in terms of understanding your fans and growing fanbase and limiting churn?
A: Anybody who knows me and has gotten to work with me has known that by nature, I’m a pretty data-intensive person and always have been. Vince & I were talking about something else the other day and I said ‘Having the Network over the last three years has completely changed the way that I think about media’; because as a creator and purveyor of content you, historically you had so little access to how that content was consumed - the best you had were averages based on 1% of the homes - you know whether it’s Nielsen or Kantar, whichever service you subscribe to - today you can see by the minute how different people… how they consume the content; we see cohorts that are created in our subscriber base; not everyone watches the same things in the same way. I was telling Vince, ‘All that data and it’s orders of magnitude greater than any data we ever had before about our consumer, it’s changed how I think about the media business in general. Not just our business but the business outside our four walls.’

That’s high level context. From the day-to-day, the easiest way to describe it is that when we launched, we had one segment in our consumer base. That was “you are a subscriber”. Soon we had two segments - either active subscriber and inactive subscriber.

Today, we have about 10,000 segments. They’re not all actionable. They’re not all actionable from a marketing or engagement standpoint. When you crosstab all sources of data we have and that includes what you watch, when you watch it, what device you watch it on, how you pay, what country you’re on, 3rd party data overlays - that’s where the 10,000 - when you crosstab all of that, just the math, that’s thousands of segments. Probably have about thirty or so that are actionable, but it went from having one.

Today that actionability was “how do we drive engagement?” - so we see what kind of fan you are, so we message you - and say “hey you’re watching this / you like this / we really think you’ll like this” and similar this fan has a different behavior and we can tailor the messages a little more - both on the engagement and promotional side on reactivating the inactive subscribers, we can tailor the message more towards those cohorts, as well.

The data has been incredibly enlightening.

We’re starting to begin marrying the data from the network with our ticket data, with our commerce data, I always like to say, today it’s “a video relationship”. I don’t know - go three, four, five years in the future, what you’ll see is that WWE Network will be hub of how we interact with our most passionate fans in all the different ways that we touch them - not just video. Video predominately, because that’s what we are at our core, but we think there’s opportunities to go beyond that and kind of strengthen that relationship.

To your point, long-winded answer, the direct to consumer element, and I talk about this and sometimes people don’t get it - I feel it every day - going from going from very little of your transactions or your relationships direct to consumer to half, driven by the digital transformation, we’re a different business today.

(11:40) Q: If I could push on that a little more, did you have moments or epiphanies that you were able to learn something about your fanbase that wasn’t there before? How does that affect your decision-making in everything that you do?
A: Yeah, there were some tactical elements along the way. Early on, on the Network, we saw consumption of different type of talent and we’d talk about that internally and we’d give that to Vince and the creative team. I think there were decisions made about maybe what talent we might bring back for events and so on based on that. That’s at the tactical level.

I always say, at the broader level, it’s less about a specific action afterwards, but you talk about change in our “mental model” of our fans - when we launched the Network, in our minds, these pay-per-views would be what people consumed. That’s really what it was for.
We put a big VOD library out there because we have a big library so we could, we started with 1,500 hours and as I mentioned we’re close to 8,000. Mental model was “it’ll be the PPVs.” The reality is it’s not that.

Last year, we averaged almost 200 hours per subscriber consumption. Massive amount if you think about it’s almost 30 minutes a day. Obviously it’s lumpier than daily. 30 minutes a day.

And so we only had 45-50 hours of those special events - only about 25% of the total consumption per subscriber were the live specials. That was a total.. it just changed the way we thought about our business and really demonstrated the value of the archive which is one of the differences we had with sports.

I thought.. To me, that was one of the biggest revelations that we had - exactly just how much passionate and how much hunger there was for our video content.

(13:35) Q: I think you said about 100,000 hours of library content is what you have - how do you think about about rolling that out over time?
A: We have over 100,000 hour library archive that includes b-roll, multiple angles and so on. That’s a broad number. But basically, if you looked at, as we’ve announced, new thresholds - you can kind of do the math - we’re adding anywhere between 100 to 200 hours a month from that archival library to the Network - so we’ll keep doing that along the way because we see that there’s real value to it.

I always say “of the archive content, no one piece of content gets viewed a lot, but all the content gets viewed.” That’s.. you talk about data, you see that there’s these viewership cohorts. Not everyone using the Network is looking at the same thing. The vast majority of them are looking at the pay-per-views, but as you start going to the archive, that’s where you see start seeing clusters forming people - either by era, by superstar, by wrestling promotion - there’s just clusters of different viewership behaviors.

(14:50) Q: So as you learn more and are better able to segment your fanbase, does this increasingly open up the possibility for opening up price tiers or packages for the Network?
A: We’ve always said from a wonky business perspective, if you can segment your demand curve, you maximize revenue. By definition, you want tiers, because that’s how you can optimize revenue. The key is being able to differentiate the product and create value proposition at different price points and if you get that wrong, you can damage the existing business. So that’s the, kind of, intellectual context.

So because of the first point, you definitely what to be able to differentiate - we are looking at it.

People have written that they see us testing things in the market and we are consistently testing that. No plans as of yet, but if I had my druthers, we’ll figure out a tiering model that really brings value to our audience. And, you know, if we can sit back here three or four years from now, you can look and say “yeah, we now have a tiered product.”

You have to be careful. If you don’t do it well, it has really negative second.. first and second order consequences so if we’re going to do it we want be sure that we have something that really works for the consumer.

(16:10) Q: Okay. We don’t believe the WWE currently offers the Network through wholesale partners. And we’ve heard from others some other companies that we cover that go direct-to-consumer that this has been a great way for them to reduce churn. You know, is this something you’ve considered, you know, and is the bottleneck here more around price or data relationship?
A: Yeah, so we’re agnostic on whetherit’s wholesale or retail. I think you hit on it.

What we’re not agnostic on:
#1: What are the economics of the relationship?
#2: We want access to user identification, the email account usually being the primary ID.
#3: We want access to consumption data of our content similar to what have now with direct-to-consumer.

So if we can get those three things, we’re open to working with everyone. And we’ve had conversations. We haven’t engaged in one of those partnerships yet because we haven’t gotten comfortable across all three dimensions that I’ve mentioned. My guess is that one day that’ll happen.

The other element I’ll say when you talk about other partners because we’ve talked to some of those folks as well. Keep in mind the point about who the Network subscriber is. We’re not out trying to get people who aren’t familiar with WWE and engaging on our other platforms to become Network subscribers. That would be illogical. This is the premium tier. It’s got the premium content. Almost by definition, you have to be a fan already of WWE, you have to be engaged already and you want more.

If I’m a general entertainment network, subscription network, and I’m competing with a Netflix or HBO or whomever, and the whole world is my market and that’s my competition - those wholesale relationships, I think, can be a little bit more valuable.

In our case, we’re talking to the potential network subscriber every day on Facebook, on YouTube, on traditional TV - so it’s a little.. so that tiering makes it a little bit different when you think about us versus others.

(18:15) Q: How’s the WWE Network doing abroad? Do you find that your content produced in the US travels or do you see a need to produce more local content to in order to support a local fanbase?
A: You know, If you look at our core TV content that we’ve been delivering around the world for at almost thirty years, we provide it in over twenty languages.

In India, you can get it in English; you can get it in Hindi - and our most watched show is a version of Raw in Hinglish - a combination of Hindi and English. It’s our most watched show in India. We’ve been producing localized language, it’s the same video, but language localization for a long time.

On the Network, it’s a US product so it’s a $9.99 dollar price offered around the world. We’ve been able to get about 25% of our subs to come outside of the US - primarily skewing towards English-speaking countries and the percentage of the population who are WWE fans that speak English in other countries as well.

That’s where the product is today. It worked out great for us.

We now do more revenue internationally on the Network than we did internationally in the PPV business - if you look at that one model that has been cannibalized on the new model. So it’s been great.

The question for us, and it’s similar to tiering, different.. it’s the same kind of analysis: “Do you think you can really drive even more subscription growth in particular markets by going in a fully localized product like Netflix does or HBO does?”

And that’s something we’re still taking a look at but not something that imminent.We still think there’s run-rate in the way that we’ve structured it. But again, if I went out two years, three, four years from now, if I had to put money down, do I think we’ll have at at least one other language, the Network available in a fully localized form? I think so. But again, nothing imminent.

Q: How about foreign content viewed domestically - you’ve mentioned about Netflix, they’ve talked about taking a show that’ve produced for Brazil and showing it in the US market. Do you think, you know, a US WWE fan would be interested in shows centered for the UK or another market?
A: That’s non-WWE I.P.?
Q: No, that’s WWE I.P. But more locally produced for a UK market.

A: Sure. We’re doing that. We started kind of organically about a year and half ago. We did an event in Japan, Beast from the East, primarily our NXT talent. And airing live from different times in the world from Japan, different types of consumption. Not exactly.

More recently we did UK championship with UK talent. Not the folks you’d see in Raw or Smackdown. Obviously it did well in the UK on the Network. We were interested to see. I think it gets to that passionate wrestling fan in other parts of the world. They also tuned in to consume…
I think what you’ll see over time, and it gets to that localization question you were asking. Little by little, more and more of the localization of their core content.

I mentioned that Hinglish show, we thought that model worked so well, we did something similar in the Middle East with OSN. So it’s a clips-highlight show, so it’s not exactly something like the UK Championship, but it’s hosted with local Middle Eastern talent - on camera talent, in language. Matter of fact, I was just watching - It just debuted.

I think you’re going to see more and more of that - so whether it’s in YouTube or Facebook localizing the content, traditional TV localizing the content, or on our own network localizing the content, you’ll see more and more.

Round that, again not exactly what you’re saying, but somewhat tangential, when you look at our developmental group… So WWE has our stars that you see on traditional TV and social media and on the Network and on our specials, but we also have a developmental system - anywhere between 50 and 100 talent are training to be the next superstars. Our minor league, if you will.

The media from that, we create media for that talent sits on our Network on a show called NXT. But where I was getting on that localization...

Today, about half of our talent comes from outside of the US - massive change for us. We’ve always been global and we’ve had an international talent base. But not to that scale. We just had a tryout in the Middle East in Dubai primarily for Middle Eastern and India talent.

So again, back to this localization, I always say: every day, a little bit more digital, a little bit more direct-to-consumer, a bit little more global. That has tentacles across the organization including talent recruiting and development and video that we’ll ultimately create from that.

(23:15) Q: I just want to get one more on the Network. As you...
A: I could talk about the Network forever, so yeah.
Q: We’ve got to get to TV at some point. As you look potentially add content to the pipeline, would it ever make sense to add or partner with other wrestling federations? Something like a Ring of Honor or even adjacent sports that your fans might be interested in?

A: I think they’re something there. It’s always priority and what one comes first.

We recently announced a deal with ICW and Progress which are wrestling promotions in the UK. So we’re thinking about best way to utilize that content. As you know we’ve been fairly active over the years in purchasing wrestling libraries, video libraries, a lot of which you can see on the network. So we think there is a home for that - it’s just a matter of priority.

(24:05) Q: Alright, let’s switch it over to Television. Relative to other live TV properties, and I think in particular the major sports leagues, the rights fees that you receive whether it’s on a viewer-basis or viewer-hour-basis is substantially lower. What do you think is driving that and can that gap be closed over time?
A: Yeah, I mean, the one thing that I’ll say - that type of analysis depends on which market you’re in. I’d argue that in some markets we’re kind of right in the range, I think you’re referring to the US... (Yup) I always say time will tell. I always think the most important thing that we can do is to continue to strengthen the brand, both at the consumer level, which we’ve always done a pretty good job at getting audiences passionate about engaging and watching our product but also just as importantly on the business-to-business level, I think if we keep doing that, that’s what we can control. We can’t control how someone else wants to behave in a commercial discussion. But if we can control that, I think that’s really important.

The second element is, as we mentioned before, and we’re only five or six years into it, you know, if you’re a content owner today, you have multiple ways to monetizing, delivering that content around the world and I think over time, my sense is, that’s just going to become more and more of a potential opportunity as people get more and more comfortable consuming content that way as business models harden around that both ad and subscription supported, I think the future, if you’re a content owner and rights owner, and we own 100% of our IP, you’re in as good a position as can be but it’s hard to say what the future holds specifically.

(25:57) Q: You have a major renewal cycle, I think it starts in 2019, that last one ended in 2014. In the TV ecosystem is fairly different now than it was then. It’s likely to change further. So when you consider what’s different, including, you know, less live viewership, more delayed, more cord-cutting/shaving/nevering, how do you think these factors are going to impact the value that your partners place on WWE? Mainly what’s different now versus 2014?
A: Yup. First off, I think we’re talking about US specifically because what you just described, the economics are different...
Q: Leaving aside the renewals in UK and India in 2019.
A: Yup, the US renewal, the current deal expires at the end of September 2019. UK and India which are the next two largest at the end of ‘19. To your point, there’s a big event on the horizon for WWE.

As far as the US ecosystem, we’ve talked first of all at the micro-level, we can control it - which is: engage fans and get the brand as good a place as possible, that’s within our control. In terms of the ecosystem, I always say that for a content owner there is a bear case and bull case.

The bear case is: boy this ecosystem is damaged or subscriber losses are more significant or pace of subscriber losses changes. The ecosystem is damaged and it becomes difficult for anyone to extract economics including the owner or creator of the content. That’s the bear case.
I think the bull case for a content owner is the ecosystem is under pressure and the folks who aggregate content (i.e. networks) are under even more pressure than ever before, to have as much viewership to remain as fully distributed as possible, you know, to not be skinny-bundled because of impact on both affiliate fees and the ad model.

So in that case, in that case the bull case for content owner is, boy there’s even more demand for anyone can that aggregate eyeballs. And we can certainly aggregate eyeballs. We’re one of the largest deliverers of live eyeballs in the United States.

So, I think there’s a bear case/bull case. I think the world is changing so quickly it’s hard to know which kind of one, which model where in that range, where the future goes...

So,internally, our engine is about build the brand up on a B2B basis. And just make sure people are engaging with our content. If we do that, then we’ll let the kind of chips fall where they may.

(28:25) Q: You just talked about brand. What’s the perception of the WWE brand now versus you know five years ago. I am thinking I turn on Monday Night Raw on the NBC-Universal owned network and there’s Enzo & Cass and they’re doing a commercial for Universal’s new water park in Orlando. I mean that type of endemic promotion has to be, I assume, highly valuable for your partners, right?
A: Yeah, I think if you went back and watched Monday Night Raw in 2013, let say, or 2014, and kind of did the ad roster, you know, who’s advertising? Which is a measure of that, who is getting close to the brand. And then you look at today. And you gave one example.

It’s been a… I don’t think it’s an overstatement to say there’s a sea change there in who is advertising, the breadth of the categories on Raw, so, you can see that. I think there’s other elements.

You know, It wasn’t too long ago, probably two years ago, a very senior person at ESPN when asked about covering WWE said “We don’t cover that.” And literally, three months later, ESPN was at SummerSlam. Six months after that they did SportsCenter from WrestleMania and about three months after that launched a WWE vertical on And shortly thereafter FoxSports did the same. And that all happened after a very senior person said, “We don’t cover that.”

I think that to me is the perception, the B2B perception changes. And not so much the consumer. The fans always been a fan. That’s B2B. We’ve done a lot of hard work. Our partners around the world, including USA have done a lot of hard work.

But I would not undersell or discount our repositioning, as kind of.. Y’know.. it sounds a little bit over-the-top, but this digital and direct-to-consumer powerhouse has changed the way that the B2B world looks at us.

You can’t.. You cannot diminish the fact that we’re the number 1 sports video property on YouTube in the World. We’re the number two Sports brand on Facebook in the world. We’re the fifth largest direct-to-consumer video service in the world. You’ve got the three big aggregators and then MLB and then us. And everybody else is behind us,.
I think the B2B community.. Companies have changed. We have a parade of people coming through Stamford just wanting to sit down & talk. Kind of, how are you guys doing this? How do you think about it? Can we talk about your data stack?

We’re way behind a Netflix or an Amazon in terms of utilizing data to really engage engagement but what we’ve learned that we’re way ahead of a lot of other people. And they’ve learned that too.

And so I think all of that gets to that repositioning of the brand and again, you know and again we’ll see how it manifests itself but there’s been a lot of work internally and we feel pretty good about it. I think everyone internally feels it’s in the best place it’s ever been.

(31:40) Q: You mentioned the UK and India are a little different. I want to talk about India specifically. When I got up this morning, top trending item in Twitter is that Jinder Mahal is new Smackdown champion. What does that say about WWE’s commitment for that market?
A: This were a lot of agape mouths in the Barrios household last night when that happened. We were excited. My wife is part Indian, so my kids were part Indian. So we were all excited on multiple levels.

Look, I’ve said before, we’ve been global and the talent base has been global for a long time. We’re more global today than it’s ever been before.

In India, which the pay TV market is in the early, early stages. We have more viewers in India of our traditional longform weekly content than any in the world. So it’s a critically important market.

I think having an Indian champion can only help, hopefully but.. India is a little bit of a crown jewel for WWE, you know, because given its scale, given its GDP growth, given the current levels of engagement that we have with the brand, it’s almost just don’t screw it up, it’s just so good. So hopefully we’ll do a lot better than.. just not do that.

(33:20) Q: We haven’t touched on a few subjects, nothing on social yet. Just on distribution, we’ve seen digital players like Amazon, YouTube, Twitter, Facebook all recently, you know, show an interest in live content and there’s industry talk in the next major sports renewal cycle, you know, you might see TV and digital get unbundled. What’s your thoughts about potentially distributing through a platform like that?
A: Yeah, I mean.. It’s no different than any other platform when you value the traditional world over the past where you said if I’m going with a partner there’s different elements: The economics obviously, but also what’s the strength of their platform, how distributed are they, what’s their reach, um, do we think there’s a good fit with the brand ‘cause the cross-promotion is important.

So I think.. You know.. We kind of… We can get all starry-eyed about digital but at the end of the day it’s a pipe delivering bits and bytes and it’s video content and everyone is trying to do the same thing: engage people.

So, I think it’ll come down to the traditional evaluation which is: What’s the scale? What’s the reach? What’s the engagement levels? And that’s important. Right? Long-form viewing is different today on digital platforms than it is on traditional - change eventually. The point is when will it change and has it changed and will it change by the time you did a renewal? It’ll change eventually. When will it change? And the economics, are the economics right? I would be shocked if at some point they’re not all competing with each other, The question is that in two years, one year, five years, ten years out? I don’t know.
But I would agree David that recently in the marketplace that digital players are really getting a little more aggressive than they have in really trying to secure premium content. So, it will be interesting.

(35:00) Q: We didn’t leave much time to talk about WWE in social and digital in general but it’s somewhere where you guys maintain such a huge and tremendous presence. Why is it an area so important to you? And for investors specifically, how do we think about how material it is in terms of financials?
A: Yeah, I mean, every piece of content that we create has one of four potential uses and sometimes multiple:

#1: Engage current fans
#2: Bring in new fans
#3: Monetizing directly through ads or subscription
#4: As a promotional tool to bring your fans to other products like the Network.

So for us social started out as engage 24/7, bring in new fans, promote other products. We’re now monetizing through a greater degree with our ad-shares on the digital platform.

Stating the obvious, global scale, it’s a landgrab like attention always is.
For the last seven years, before it was cool to do so, it was a strategic priority internally.
Vince pulling senior team and saying literally, “this is a landgrab and we’ve got to grab our unfair share.”

So far we’ve done a pretty good job.

* end of talk *

transcription: Chris Harrington (

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