Yet Another Value Podcast - Mario Cibelli on the $WWE bull case

Episode Date: January 29, 2021

Mario Cibelli, the founder of Marathon Partners and breakout star of the book Netflixed (https://amzn.to/34cim9F​), makes his second podcast appearance to discuss the bull case for WWE.Mario's first podcast appearance: https://twitter.com/AndrewRangeley/status/1296130870949097472?s=20Chapters0:00 Intro2:10 WWE Overview4:30 Sale of WWE network9:10 Laying out the upside for WWE16:20 What if the next domestic contract is a down round?20:40 Ratings since the move to fox21:40 How the pandemic will improve the product going forward26:00 Vince McMahon risk29:40 What if the WWE can't find the next Rock?32:35 The time I went to WrestleMania34:20 WWE's other content plays and expansion plans43:35 How WWE's rights ownership is an advantage46:40 Our favorite SuperStars

All right. Hello and welcome to the yet another value podcast. I'm your host, Andrew Walker. And with me today, I'm excited to have on for the second time, the founder of Marathon Partners, Mario Shabelli. Mario, how's it going? All right. How are you doing? Doing good. We were talking before. I know you just got a haircut looking sharp for those people who are watching on YouTube. So look, let me start the way this podcast, the way I do every podcast. And that's by pitching you, my guests. You know, people can go listen to our first podcast to hear a little bit more of my pitch. But I would just reiterate how much respect I had for the fundamental investing you do. And especially, you know, people can go listen in December. You did an interview on Invest like the best, not to pitch another podcast. But I thought it was the best podcast I'd listened to last year. The fundamental work you did on Stitch Fix last year was incredible. You know, people can listen to it and make their own judgment. But I'm just really happy to have you back on the podcast and really respect you as investor. Thanks. You're serious? You thought it was one of the best you heard last year? Absolutely. I was really into it. I think modest proposal was on it.

Well, he was on two years ago, so nobody can compare it to modest proposal. But, no, it was really great. I loved hearing all the war stories and everything. And the stuff on Stitchpits, it was so crazy to hear how much it rhymes the stuff you did on Netflix a couple years ago. Yeah. Well, you know, Patrick creates a very natural, you know, progression of conversation, enjoy doing it. Obviously, you warm me up doing one this summer, so that made that one better. But, yeah, I think I've gotten the most feedback on the whole Stitch Fix thing, which is only one piece of the puzzle of the whole thing. But, you know, our visit to that DC and Dallas was semi-epic. I mean, I do think my goal is to be a Stitch Fix shareholder 10 years from now.

It's hard to accomplish sometimes. You know, the valuations get pushed and pulled at all different directions. And sometimes the valuation tries to chase you out of the name that happened on Netflix. I'm kind of determined not to have it happen here with Stitchvix. So we'll see how it goes. Yeah. Well, look, Stitchvix is mainly, not all, but mainly women's kind of pretty nice clothing, subscription clothing.

Let's talk about the complete opposite and turn over to the company we want to talk about today. men running around in their underwear that's uh wwe i think full disclosure both of us have a position in it but why don't you just laid up for us why are you so interested in the wwee today well um you know a little bit of background i've been filed the company um you know since it went public i think this is the third major time that we found the shares you know a pretty compelling bargain you know in in general though i mean i think it's a way better business than the market currently thinks, I found the valuation very compelling and that there were a number of opportunities for kind of upside potential embedded in the share price, you know, and just

to be completely upfront, you know, we bought a lot of our shares, you know, between 38, you know, and 44. So the share price has moved up a bit since I think we, we, we, we, we, we first started speaking about it a bit maybe in December. But I still think the shares represent an excellent value. And that, you know, this is a way better business than I think Wall Street currently understands. And there has been just a massive, massive transformation of the business model over time. The deal this week with Comcast kind of highlights that the company has is, you know, a licensing machine now. I mean, kind of think about it,

how crazy that is. You know, we're in COVID. There's no live events and they're going to have record revenues next year. It's an absolutely stunning transformation from a, you know, a regional wrestling company, touring company to a company now that gets, it will get the, you know,

majority of its revenues and profits from licensing IP. It's a stunning, stunning transformation that's occurred, you know, over the past, you know, five years or so. Yeah, and look, I think one of the things people, I think Bulls know, but bears forget, like, WW Network, when did he launch that? Like, 2013 is when he launched it. Like, this was, he was one of the first person to see the value in going direct to consumer. And it's really interesting that WWE, we were going to do this public this early this week,

and they announced the sale of WWE network domestic earlier this week. But it is interesting that they've decided, hey, we can't be a standalone product anymore. We're better off selling into, we're better off selling and having Peacock kind of take over the WWW network. So how do you think about that transition from owning the direct consumer domestic to being basically a peacock channel, having the wrestling peacock channel? Yeah, you know, initially a year ago when they first talked about the potential sale of the network, you know, I just, sale could, it's a little bit of a confusing word potentially. It's licensing of, you know, the streaming rights for sure, you know, and WWE has some assets there and whatnot,

but, you know, ultimately they're back into, you know, licensing that out, those rights out for someone else to run. You know, I think it, you know, Vince is, and the rest of the executives there, I think on many things, they're ahead of the curve and they may be again here. You know, it's a sign that perhaps, you know, niche products, you know, are best suited by being part of a larger conglomerate, you know, that has multiple properties and can leverage fixed expenses across, you know, a variety of, you know, viewership.

I'm not using the right word. You might have to edit this part out. a variety of platforms and whatnot. So, you know, NBC brings a, you know, a tremendous amount of scale to this property. And I think it highlights the fact that, you know, the days of that, you know, the niche direct-to-consumer brand, you know, maybe somewhat limited. Would we be here if the network had, you know, three and a half or four million subscribers, you know, the WWE network? You know, perhaps not, but maybe still. ultimately, I think this is a great transaction, you know, for everyone.

Again, it really further de-risks the whole WWWE business model to have such a, you know, large chunk of high, you know, very profitable, high margin revenues coming in. But it allows WWE to do what it does best and also NBC Universal to do what it does best. They both got back into their, you know, more of their. core business, you know, distribution versus content ownership. And, you know, I guess if it was really easy to run a wrestling league, you know, Comcast could have not licensed it and try to do it on their own, you know, and then vice versa, you know, perhaps WW is not no longer best suited by trying to, you know, seek an audience directly itself. You know, there's a, there's a lot of

costs. Technology's always changing. You know, there's a lot of infrastructure required to do This, you know, Netflix brings, you know, massive, massive scale and subscriber dollars to bear upon those problems. It's much harder for a company like WWE to do that. So to get out of that and refocus on the core business and get, you know, paid essentially, you know, more revenues than it was generating by running a network itself. Those are all great wins. And I think it's also, it's going to be, you know, great for the WWE fans.

They potentially are going to be paying less for the service if they kind of don't mind and bundling it and seeing a bit of advertising. They can keep the service that they currently have, you know, if they pay to continue to pay the premium. So I think it's an awesome deal. And, you know, we're not, we're not surprised by it. There was a, you know, it's been discussed for a while. There was a little bit of lull because of the whole virus recession and whatnot.

But, you know, Netflix is not going to be the only company with a streaming bundle. There's going to be other ones. And there's going to be other types of content. So sports and other live events, you know, they deserve a home from a streaming partner. So I think it's an awesome deal and really just, again, further de-risks WWE's business model and makes it, you know, even more high quality than the ones before. So I think the bull case for the WWE is right now you're paying, you know, I think the market

the enterprise value is around $5 billion right now, right? And this year, they're going to be approaching $300 million in EBDA post the peacock deal. I think they said, hey, once we get the touring going, we'll probably be 15% higher than that, right? So you're paying, call it 12 to 13 times normalized EBIT off for this company. I think the bull case is, hey, everything is incremental here, right? We have super high engagement on YouTube. If we can figure out how to monetize that YouTube, hey, when our peacock deals up, if there's a bidding more for the next rights, all this sort of stuff.

How do you look at paying $5 billion to the WW and how do you kind of paint that upside when you make this investment? Yeah, I would all like, look, I guess I have EV a little bit lower. They, you know, they have net cash position that continue to generate cash. And, you know, when we're converting the in the money convert into equity. So I think, you know, low four billion, four and a half billion, I think is the EV, you know, I tend to think about, you know, and I think we are looking at low 300s of, you know, adjusted EBITDA for 2021. So, you know, the valuation is not, it's not too demanding there.

Again, it was lower not too long ago, but if you look at other content-owning companies, you know, the valuations are significantly significantly higher, you know, in the high teens and low 20s. You can even look at, you know, the historical valuation for WWE, you know, kind of about 18 times. Now, keep in mind, you know, that was some of those valuations, you know, came at a time when, you know, the licensing revenue was much small than it is now. So I think that's too low of evaluation for a business of this quality. And, you know, the times that we've purchased it in the past most aggressively, you know, have tended. tended to coincide with periods where there is question marks around engagement and ratings and whatnot. We don't think that WWE is uniquely declining in ratings versus other kind of

sports properties, other live properties. You know, there's there are declines across, you know, across linear TV that can't be denied. But it remains a very, very competitive market. to license and retain content. And, you know, that's, that evidence itself, you know, earlier this week with the deal they struck with Comcast. So that's great. So, I, I just think this is a much, much better business than people think. I'm very hopeful that some of the new executives,

especially Nick Kahn, you will come in and look at the business, kind of much more creatively than they had in the past. I think there's amazing opportunities too, you know, to license content to new companies and new potential platforms. You know, I think of, you know, unique digital memorabilia, you know, is a potentially very interesting thing. The NXT property is, is potentially up for renewal this year. And if you just kind of step back a little bit when they've blown up the licensing revenue as big as they have, it does beg the question of like, what's the best way to run the business? Yeah, we're still our touring business. You don't want to like walk away from the

roots of the company, but might it make sense instead of doing that incremental house show, you know, might it make sense to invest some of that time and energy into other short form video content and other platforms where, you know, you make sure you're chasing your your fans into the next platform and engaging, you know, younger generation on a platform that maybe they're more comfortable with. And, you know, it's possible that you'll, you kind of see some changes there. That could have the effect of lowering travel costs and some op-X, lowering wear and tear on the performers and injuries, which is a real thing. So I do think there's a level of openness here and creativity that could be quite interesting. And

You know, you go back over time. I mean, you've got to just got to give Vince McMahon and the other executives at the company, just tremendous, tremendous credit. And it does sometimes really surprise me how much the world has changed and how much the businesses have changed. And yet, WWE here is going to produce record revenues and record profitability over the next few years. You know, think about it. This was a touring company that got onto TV, that then got onto cable. And then that, you know, had to make, you know, a transition, you know, via the Internet and then from the Internet to the mobile phone and all that kind of stuff.

And all these new platforms like, you know, Snapchat, Instagram, Twitter, everything. Here they are after all these years. They've made that transition, you know, almost seamlessly. They have huge engagement on all these new platforms. You would think, you would think their market would say, well, you know, of WWE, they deserve some credit. They've made these transformations look easy, you know, and they're not necessarily easy. So the whole idea that there's going to be, you know, a generation that skips wrestling,

I view that is, there's almost no risk of that. And I would just think that the company has demonstrated that they know how to transition between platforms, maybe about as well as anyone. So I think the valuation is very undemanding for a business of this quality. You know, I'll also say, you know, this is a very competitive company. They want to do really well. You know, from the IPO until now with the dividends reinvests, they beat the market. You know, sometimes do I think that the company, you know, could do more and show?

do more? And do I get a little bit impatient sometimes with them? You know, yeah, but I, you know, I think it's in their DNA to agree with me that, you know, at times I think they've underperformed their true potential. And I think that I'm hopeful, you know, that as we go forward, it'll continue to think creatively around their business model. They'll continue to drive value for shareholders. So I don't know. I just, again, I, for a business of this quality, that has this proven track record that has, I would call it semi-permanent IP. It's too cheap of a price, even though it's up, you know, $10 or $11 from kind of when I think you and I briefly discussed it in December.

There's a lot I want to dive in there, but let's start with the bear cases. And you fit on them a little bit, but I think that whenever I talk to anyone, there are two bear cases I always get there. The first is, yes, 12 times EBIDA, 12, 13, whatever it is, is probably too cheap for a business of this quality, right? Like, you know, you look at anything else that owns its IPA, they're going to go 20x EBITDA minimum, and if they've got the growth potential that I think WW is often a lot higher. But I think the pushback a lot of people give is, hey, you know, earnings went from under

$100 million per year to approaching $300 million per year, driven by this mammoth boost in their TV contract that they got in 2018. And people look forward to 2020, 2003, 2004, when the Fox deal expires. And they say, hey, ratings are way down since Fox signed that deal. When that contract is up, the next contract is going to be flat or down. And you're going to see, you know, yeah, you pay 12 times this year's EBIT off. But if you look forward to 2025, when you get this contract reset, it's going to be 20 times times four years EBITO after that contract reset or ever. How would you respond to that fair case?

Well, there's a lot to impact there. Who's making the prediction of what the redoal rights is going to be in three years from now? The ephemeral day is making the prediction. It could happen. Look, I think when the shares were, you know, in the mid-40s, it was pricing in a down-round. And, you know, I think there has been, you know, a number of properties that have indicated that the down-round is probably not in the cars right now. Maybe it will be at one point in the future. I still don't think at these prices, especially with the new streaming deal rights,

that there's a lot of enthusiasm kind of priced into domestic TV rights renewing in a couple of years. You know, and these are binary events, so I can't deny that there would be some risk there. You know, Fox decided they wanted Smackdown, and they got it. And that created kind of a new dynamic for bidding. You know, now Comcast has come back and said, hey, you know, we're really interested in the streaming rights. And we want to have a presence, you know, when the world rebuttals, you know, digitally, we're going to be there. You know, we'll see where NXT goes from here. You know, this Fox ticket, you know, a crack at that.

Does Comcast want to secure that? Does Comcast want everything back the next goal around? I don't know. Like there's all different kind of ways, parameters this could play out. but look it is a risk cord cutting is a risk the last go around though

Fox went for it anyway there was a director consumer network that was like out there and still growing and beaming lots of content to engage fans you know and cord cutting was occurring now and yet they still wanted to pay up for the assets and you scratch your head like

why did that happen? It's a very simple answer it's still a very very competitive market for content and you start pulling out pieces of content now let you know i'll give up on monday night i'll give up on friday night you know i won't renew some of those baseball games you start pulling out some of this stuff guess what's going to happen you know it's going to decelerate faster you'll accelerate cord cutting so it's a very competitive market now that won't you know they can't shrink forever and keep paying more you know for, you know, for the rights. So, you know, is there a non-standard renewal out there, you know, potentially?

And then when that happens, too, you know, you would say, well, the streaming rights are more valuable. So sometimes it's like, you know, who cares what each of the individual pieces are worth, right? Can WWE continue to kind of step up, walk up the steps and step up their licensing rights over time? using the combination of everything that they have, including NXT, including the streamer rights, including pay-per-views, including, you know, again, new platforms, you know, virtual reality, all that kind of stuff. Oculus, yeah, I think so.

I think they'll be able to do that. That's what they've done historically. So I think clearly there's some risk around the TV contract we get. It's a very competitive market for content. I think it will remain so. When they move to Fox, I mean, obviously I was excited. I think it was a 4x step up in the rights value for SmackDown. So, you know, anybody's going to be excited with that big of an increase.

But when they moved to Fox, one of the things I was really excited about was they're going to advertise for WWE, you know, if you watch football, Thursday night football, there's an advertisement, hey, tomorrow night, Smackdown, Fox, what is it, 8 o'clock, or whatever, it's going to be on Fox and they advertise them Thursday, April. They advertise it's Sunday night football. I mean, there's a lot of advertising behind it. And I was kind of excited. And I thought, hey, this might bring in a couple new fans, you know.

And I've just been a little bit disappointed by, I haven't really seen any evidence of that. Have you been disappointed by the lack of kind of momentum from the move to Fox? No, not really. We're in a unique environment here, right? True, true. It's a month then you get the pandemic. Actually, you had a great tweet that said, hey, the pandemic, you know, it's men running. rest of his men running around in underwear.

And I watched a couple shows right after the pandemic. It was very silly without a crowd in there, right? It's just a man in his underwear and a ring kind of monologue. Can you talk about how you think that might actually in the long run to take WWEs the next level? Yeah, so I tweeted a little bit about this, and it was kind of a semi-organic thought. I was watching a podcast with Bill Burr, a comedian,

and kind of talked about, you know, how different it is now performing without a live audience and he developed kind of new muscle memory. And then I watched, and actually I might even play it on my phone. Did you watch the Drew McIntyre podcast on Stone Cold Steve Austin's? I did not. It was just absolutely amazing. And he said some things that just really got my attention.

He talked about, you know, he was asked, well, what do you want for 2021? And he was like fans. And it's just like a minute-long conversation ensued about how important fans are. And he just said, boy, the product is going to get so much better when the fans are back in. And it just got me thinking that these performers, you know, who are very talented. You know, they're talented with their bodies, obviously, and their athletic abilities. But, you know, they're also performers.

And they've had to, you know, just like Bill Burr, they've had to kind of figure out and feel the way around how to do this without the roar of the crowd. it makes, you know, in a certain sense, it makes it kind of more difficult. Other areas, maybe it makes it more easy. But I just kind of came up with this idea that, you know, when maybe not unlike how concerts will be, you know, when someone goes to a concert again, that's going to feel really good.

It's going to be really exciting. When WWD opens up the kimono, I'm like, we're live, here it is, there's a real audience here, and the performance are into it, and it's all kind of clicking. I don't think it's going to be like, you know, it'll get turned on and it'll be back the way it was before, I think it's going to go through like a bit of a renaissance

where people are just absolutely bonkers for it for some period of time. So to kind of judge the ratings now, and by the way, their innovation in the Thunderdome and everything like that, like that's been all good. That's an improvement. That costs money. They're doing that. When it all comes back on,

I just think it's going to be better. And I got to say, you know, when Drew McIntyre kind of was talking about this on the podcast. It just really, really struck a chord with me. I was, I was wildly impressed by him and his story and everything that he said. But he just said it so, so succinctly that I made mental note of it. You know, so I'm from New Orleans, and I remember after Katrina, that first football game where the Saints came back and they played the Falcons in the Superdome. And I mean, just the air, it was incredibly electric and they blocked the pun and they won the game. And I mean, It really deepened the bond between the football team and the city.

And I think it took the Saints fandom to the next level. And I can't hope but wonder that first time where the WWE has a packed house and there's tens of thousands of people in there or you're a huge WWE fan and you're watching, you're going to feel that electricity. And I think it might take that bond that millions of people have with the WWE to the next level. Or it might, you know, if you're a kid or you're somebody in there and you're just, you watch for the first time, it might create that bond for you. I think that's a great analogy.

Well, I didn't know that that occurred down in New Orleans, but it makes perfect sense. Yeah, I'm excited to see what it's going to look like when they really turn it back on. And look, there's going to be some period of time when they're touring and they're doing live events and they won't be able to sell out. There'll be some social distance there too.

So they'll be operating kind of suboptimally as they kind of turn the engine back on. But I think when that engine turns over, it's going to roar. So I think, you know, and that's like, you can't put that in a spreadsheet. I think it's going to happen. So second bear risk I hear all the time, WWE, is the Vincent McMahon risk, right? he's 75 I think you know obviously I think people can tell you and I have a lot of respect for him but I do think there is something to for the past five years it feels like the company's

excuse for ratings or anything has always been hey the storyline isn't where we want to be there's been a lot of management turmoil uh you know I do think there's some questions especially when XFL 2 was launching I know a lot of people said he's distracted there were a lot of people said oh my god I hope the WWE doesn't put a single dollar into this there was tons of worries about that. But, you know, I think there's a lot of, there's a lot of pessimism over Vincent van. So how would you respond to that? I have a lot of respect for him. I've met him once. And, you know, I think he's a visionary. He's done a tremendous job over time. Like I said before, you know, I do think there's still a lot of potential that, you know, at times is kind of going

untapped at the company. But I don't have a huge fear there. You know, I don't know. You know, I always used to think there's no way WWE kind of ever, ever get sold or, you know, works in someone else's hands. And I still think that's the case. But I don't know if they'll sell one day or consider becoming, you know, part of a larger media conglomerate.

You know, that's certainly possible. But, you know, on the flip side, look, Vince McMahon is going to live forever. so that's not really worried. But just in case that's not true, he's got a deep bench and it's all family. You know, Linda ran the company, his wife, for years before, you know, after the IPO. And, you know, she was great. I had a good relationship with her. I thought she was just absolutely awesome.

She could do it again. He's got two children in the business. He's got a son-in-law in the business who seems to be pretty darn good at this. Yeah. So, you know, if something were to occur overnight and he was unavailable, you know, for service, I don't think that would be a terrible issue. And I do think, again, that some of the new executives and their ability to look at this business and look at it creatively and think, you know, what else can we do? How can we make the product better? You know, and how can we

drive value for shareholders? Which, you know, they've done a good job with over time. And they, look, they seem to be hardcore capitalists. You know, I don't think, they're not doing this for charity. Certainly the family and Vince care about the legacy a lot. They care about the fans a lot. I remember once, you know, I heard a lot of stories over the years from current executives, former executives. You know, I don't care.

One was like, you know, Vince doesn't care if they're, you know, booming or cheering. It doesn't matter as long as there's like heavy, heavy emotion in it. They want reaction. So I know people like, you know, criticize the product and Vince and this and that. And, you know, I'm a, I'm a.

casual wrestling fan, which is, you know, when I first got involved in the company, I had no interest in wrestling at all. And now I kind of find it interesting and entertaining. And I got a couple characters that I kind of think are superstars are, you know, that are interesting to follow and, you know, comical at times what they do and how they do everything. But I lost my train of thought for a second, remind me where we were we were talking about. You were talking about, we started off by talking about the deep bench and then you were going to how you became a casual fan. Yeah, so, you know, I can, I'm still, I'm still really, actually, actually, so I, so you mentioned your casual friendship, and I think this is another thing that kind of relates to the bare thesis,

right? Like, wrestling is a superstar driven sport, as all sports are, right? Like, when the NBA has the bronze jeans and the finals, ratings are higher. For wrestling, when they have a Hulk Hogan or Stone Court or the Rock, ratings are going to be higher than when they don't have that. And for the past few years, you know, they had John Cena, who was obviously a superstar, and then Roman Reins, and I think they've had trouble kind of getting that next superstar. Are you concerned at all about they just haven't had anyone really break through that next level? No, not really. They've always got stuff right over time historically, you know, while I've been following it.

And those have been great times to, you know, own the equity at the reasonable prices when that, you know, that level of concern is high. So I think they've shown an ability to reinvent themselves. what I've talked about all the transitions for various platforms over time, which has been kind of breathtaking. And along with that has been kind of, you know, talent ebbs and flows over time. So I guess getting, you know, back to your question,

I don't put a whole lot of risk in wrestling, not being able to captivate, you know, audiences. Keep in mind, too, you know, the, you know, AEW kind of sprung into existence. You know, the amount of T-Live wrestling, content on TV, you know, well, you know, not year over year. I think they've laughed that, but, you know, you kind of go back maybe 18 months ago, there were a lot fewer hours of live wrestling entertainment on TV and there are now.

And you go back before then, you know, there wasn't a direct-to-consumer network. So there's a lot more engagement, a lot more out there overall. Now, part of that, that's NXT as well. Part of that, you know, is a new competitor. But, you know, you add all those viewers. up and you know and the sport looks pretty darn healthy um you know other sports have done it too right they've they've gone on additional nights that didn't exist before so i think engagement's high and again every time there's a new platform out w wd's there they push the envelope on all these

new platforms so you know again i i suppose it's a risk that they won't develop new talent that appeals to a different generation in existing fans but you know that's that's their job that's that's what they do that's what they do better than just about anyone. And they had that legacy. They had that ability to have like, you know, a son, a father and a grandfather kind of all watching at once and having characters, current characters and older characters, retired characters that appeal to all of them and still speaks to all them. That's not easy to do. And a brand new league kind of can't do that overnight. Yep. I mean, years and years, you know, decades of stories, you know, and just, you know,

epic matches and wild things that have happened that, you know, people would remember for 10 years. There's tradition and, you know, in WWE that doesn't exist with other leagues. So I mentioned I was, I'm from New Orleans and maybe four years ago now, W, WrestleMania was in New Orleans and I managed to get tickets to it and I went and, you know, I watched wrestling when I was a kid, but I'm by no means a super fan. I just went because I was like, this WrestleMania. I was interesting to stop. It was the crazy. One of the crazy. One of the of the craziest nights I've ever been to like first just the flights going in were a hundred percent wrestling fans you know like um everyone there knew every story every chant everything it was it was crazy

you know it was literally they called the super bowl wrestling it was like the super ball and you don't get that level of passion and that level of tradition as you said you can't get that overnight with AEW right like it's very difficult to pull a w fan who's been going to wrestling for WrestleMania for 20 years or watching it with the same 10 people for the past five years, very difficult to pull them over. So I'm with you. Like this is why it's hard launching a new sport, right? Yeah. Well, look, it's intriguing to me that USA is going to pull over some new content. You know, I think of like you're a traditional hockey fan, you know, and how, you know, when the playoffs come, you know, what those games, how electric those games are and how much loyalty there is.

You know, and NASCAR has people like that, too, that I've been going to that race. that place and pulling the RV up for all those years. You know, I think, I think this, this, this exists with wrestling. And again, I think there's just, there's this wonderful opportunities for this company to continue to innovate, to tweak its business model. It certainly has. Again, how do you not give these guys some credit? You know, like, someone's going to be like, oh, the ratings are, or weak.

Oh, you know, there's not, they can't replace this person. Like, they've been doing this for 20 years. they've been doing it well for 20 years I mean my God please give them some credit maybe this time I'm wrong maybe this time it's curtains down on Vince McMahon

I doubt it so you mentioned you mentioned USA pulling in content and you know when I first started researching this and kind of dreamed with my big full like landscape thesis I looked in you know last year

at one point Netflix two of their top 10 shows were produced by the WWA I think it was the main event and the big show. And then, you know, the Andre the giant documentary on HBO was a hit. The Vince McMahon documentary on HBO has tons of applause about it. I think that comes up next year. WW is the fifth most popular YouTube channel last year. I think traditionally it's normally been about number two, but it's the fifth most popular channel overall. When you look at all of that landscape, like how does that pin into your thesis for the WWA? I didn't even mention YouTube. Funny. Like I said, all these other platforms, of course, I'd

up, YouTube. It's indicative of a company that is embedded itself into culture. Yep. I think it's semi-permanent. And again, as you pointed out, it seems silly at times with, you know, grown men throwing themselves around, you know, cloud in bikinis. That's how Vince described it. That's not my words.

That's how Vince described it. I described it. You know, I used it, I think it's a Sebeli original. I used to call it soap opera for men. Yep. It's a nice way of describing it. Yes, of course, you know, women watch it as well. You know, I look, there's evidence, too.

It's not only popular in the U.S. It's popular in many other countries. There's other leagues internationally that have existed for a long period of time. There's something about this content that just appeals to people, I think will continue to appeal to them. No one were, you know, baseball and the ratings of baseball and, you know, hockey has gone through some, you know, wild swings, right? You know, there's a strike and all that kind of stuff.

No one says, you know, I'm not sure anyone will watch the NFL anymore or MLB. And, you know, WWE holds us out against, you know, non-playoff basketball during the winter and other things they do amazingly well against all sorts of properties that people don't think don't describe a lot of risk to, you know, them not existing anymore. So I do put a low risk on that. I'll highlight my risks, you know, decline in linear TV.

That's a risk. I can't deny it. It's there. But I think the market is going to be so darn competitive that they'll do fine. I don't think they'll have a big down round. It's certainly possible. I think they may have a nice step to increase.

And there's a lot of pieces of the puzzle to play with to move things around to do, you know, some of their marquee events. Again, the NXT property, streaming rights, which are now addressed in new platforms. So I think there's a lot of things to potentially play with. You know, one thing I can't not say is that, you know, Vince does, has pushed the envelope at times. You know, is there a risk that he overinvested in the product or he tries new things that don't bear fruit? Yes. We've been around for a while. I think it was called The World. I can't remember, but the restaurants. They did a huge restaurant in Times Square. It didn't work out so well. They were trying to be the next kind of planet to Hollywood. They're going to be all over the world and generating tons of money. That didn't work out. The first version of the XFL didn't work out. There were a lot of movies made. I think that turned a lot of dollars and a lot of time and energy and didn't produce much. So, you know, we build in our model a fair amount of OPEX against rising licensing revenues.

And I think that's realistic. So overinvesting in the product or maybe not optimizing, you know, profitability as much as maybe someone else might. I do think that's a risk at the same time I'm saying that you know Vince is a he's very rational you know we witnessed him do multiple rounds of layoffs and cutbacks when it when it made sense did he you know shut off some of these money losing businesses ventures that he tried when you know it made sense to do so you know he did that I think these are unemotional decisions made by a businessman you know that is interested in you know growing the value of of the shares that he and his family own,

which are rather substantial, huge economics still. So I do think that the market does have a bit of worry that, hey, these are great deals, but maybe the profits won't flow through as much as you think. And I think there's some validity to that. And again, at the same time,

though, people gave him a very hard time when he launched the network, the direct-to-consumer network, which led, you know, proved out the whole model. He was very early in that and ultimately led to a very nice deal that they announced this week. You know, that was seemingly crazy at the time, but it was a great, great bet. So, you know, I do worry about, you know, overinvestment, you know, in the product, you know, maybe a little bit too much up-ex at times, but I can't say that, you know, that's a massive problem. I worry about it.

And I'd say that, you know, the last one is I do think they have, you know, somewhat of a mixed record for capital allocation. You know, they like dividends. They kind of got that right. I do think the companies, you know, there's two major tools for returning capital to shareholders. Dividends and buybacks, you know, the buyback piece, you know, I would say I've, personally found disappointing, you know, over time. And we've talked to him about that. We'd like to see better there. But, you know, we pushed them in 2003 to do buybacks at six or seven bucks. Those would have made a lot of sense. It's been good ones to do. We pushed them

again in 2013, maybe at 12 or 12 bucks or so, something like that. So over a very long period of time, we've tried to get them to be more open and have a kind of more robust, well-thought-out return of capital strategy. Certainly, we would, we like our management teams to be opportunistic. You know, when the shares are undervalued, we, we think, you know, companies especially with good balance sheets and locked in revenue from contracts, you know, those, those kinds of things present nice opportunities for management teams and boards. And I do think they've been, for some reason, you know, a bit passive about looking at repurchasing shares aggressively. And again, we have good relationship with them, we like them, we love them. We have talked to them about

this. And it's rare to have a shareholder be able to say, you know, I talked to you about this 15 years ago. I talked to you about this eight years ago. I'm talking to you about it now. I really think I'm right. I really think I'm right. I think the shares would make great sense to retire shares from here. So that's another thing I worry. about some of the other stuff, you know, that the wrestling is going to, you know, lose popularity and the flame will flicker out. I have very little fear there. Perhaps that, you know, I could be proven wrong or, you know, the period of less engagement

could last longer. But, you know, like if you're just only looking at ratings, and that's not the only place that WWE lives. It lives everywhere. It's just transitioned so nicely to all the new platforms. Again, it's wildly impressive to me. It's just funny because, you know, like, I'm an NBA fan for a long time at an investment in MSD. And, like, there's worries about basketball's rating, but everybody says basketball's the future, the international growth prospects, which we haven't even talked about WWU international.

I don't know if we've got enough time, but, you know, the international prospects, the Twitter engagement, all this sort of stuff. And, like, WWE has all that. And, you know, like, you mentioned the ratings. WWE over the summer, I sent you this, you know, Lakers Nuggets, conference finals gets 1.5 million viewers. WW Raw, same night, two million viewers. It's like it's outperforming the NBA playoff Western Conference Finals with LeBron James in it. You know, like, I just think the engagement is so huge here.

Look, anything else you want to talk about with the WWE? Any risks you worry about? Anything you're especially excited for? Let's see. I think we might have covered, you know, a decent amount here. You know what? I think, I do think one, one interesting kind of important factor is, is, you know, WWE, you know, controls all of its rights.

And there's not too many people you have to call and pick up the phone if you're interested in a property they have or doing something. So they, you know, they have all the rights cleared and they're available, you know, fairly cleanly in any country or even globally, potentially, you know, when folks want them. So, you know, I think one of their advantages is that they made themselves easy to work with. They deliver a finished product to, you know, to distributors, and it makes it very valuable. So I just, I think with an XT, I think with some of these alternative platforms, I think, you know, with some of the unique things that are that are happening here, you know, in a digital environment where we kind of maybe are going to create new forms of memorabilia. I think these are fascinating things. I think Nick Kahn and other executives there are going to be very, very focused on that. You know, and again, getting out of the business of running the network probably is going to be a nice positive for them.

I always love when companies kind of focus on core operations and business, it's fun off and like, all they do is think about this. All they do is think about that product, nothing else. There's an element of that here. and it was look it was a surprise you know the executive changes that that occurred last year and I think those are great executives that left you know and I don't know the whole story behind why that occurred but you know George did a fabulous job over time and he was the face of the company to a lot of the shareholders so you know there's a bit of a new new team here you know and that and that takes a while for Wall Street you know to to for that team to build

credibility with outside investors, but I think they have such an opportunity here. Again, for all the disappointment, the stock was $100 and just about $100 two years ago, it got out on low as 38, you know, here we are up a little bit, you go back all the way to the IPO, they outperform the market. That's really impressive. You know, I think when they go all in on some of these new business ventures, international, licensing some of those opportunities and then just consider what's the best way to run the business going forward you know maybe some of their regional centers could become a little bit of a destination will the fans come to them more we used to go around and see all the fans and we'll do that that's the

core business and that's the roots of this company but might it make sense that we have some places where fans would come to see. So they're not always running around everywhere. You get less wear and tear on the performers and saving some expenses while you're doing that. It's just all these things are, it's just for a company with strong, strong content, great, great contact.

You know, these are all possibilities. Yep, yep. That's great. All right. Last question, you've got to ask it for a WWE podcast. Favorite WWE superstar? I do have a couple of favorites. I, you know, I like Drew McIntosh.

hire a lot here since he did that podcast. I mean, I just was blown away by some of the things he said and his whole story. I didn't realize there's a shortage of Scottish wrestlers. And so he's broken through a level that didn't exist. I love Finn Baller. He's, he's an NXT star and he just has this look and athletic ability that I just wildly impressed by. My favorite is R. K.L. though, and I don't know how it happened. He's just it's just such a bad character, and, you know, who doesn't want to see him

lining up the fiend on a Sunday night? Like, why, you know, who wouldn't want to see that? So I just, I just love the way he performs what he does, how he carries himself. He's I kind of like him, probably. He's probably my favorite of all, the whole crew.

For me, it's, you know, I'm a child of the 90s. And I, I'm not just saying this. I've got I've got years of blog posts that I reiterate I love the rock man I love the rock but I Stone Cold Steve Austin I love as well have you ever watched his uh what is it broken skull challenge no no I think he's a great he interviews people very well I think he could he could carry that show and interview all sorts of people politicians uh perhaps or former presidents maybe even like he he he knows how to talk to people he's great and uh of course

course, I didn't say the rock because like everyone knows the rock. My wife told me I'd be basic. I did it. No, but on Stone Cold, you know, it's easy to look at these guys as giant muscle-bound men in underwear, but you forget, like, these guys are so charismatic. And it kind of loops back to the point made, like, for them to control to be in their underwear without any fans and, like, put out a workable product that's still a million and a half people every week are doing, I think both speaks to their talent and the level of engagement and fan passion for this product. And, you know, again, once fans are back in the fans, I think it's going to be great. But Broken Skull challenge was awesome. You should watch it at some point. I'm a huge

fan of Stinkgole. I will. Are we going to have a, you know, Rock, he's going to be president one day, right? Not sure. Went that to a trip? I vote for him. He might be. You know, his endorsement of Biden might have stolen some votes over there. So anyway, any last word before we uh wrap this up no i uh i appreciate you having me on again it's fun talking about this one this is a this is a fun one and hopefully it's fun and profitable too over time i think a little bit well mario thank you so much for coming on i'm looking forward to 2022 heading over to msg and catching a wwe raw smackdown whatever it's going to be catching that with you so thanks again for coming on and we'll chat soon all right thank you