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Steven Borovay, CFP
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My name is Steven Borovay and I have been investing in stocks for over 36 years. I am a CFP(R), licensed since 1988. I was a CFO/Financial principal (series 7, 24 and 27) of a retail brokerage firm, at one time a R.I.A. (Registered Investment Advisor) and worked as a Sr. Financial Analyst for... More
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  • Why The WWE Network Is An Investors Field Of Dreams

    1) The Network is a game changer as with technological advances WWE control their product like they never have before with a platform that extends global reach exponentially.

    2) WWE fans are passionate about wrestling and are never hesitant to express their opinions.

    3) The infrastructure of the WWE Network is rock solid and was developed by Major League Baseball Advanced Media . With a strong foundation new content and vintage wrestling history have been continually added giving fans even more of an incentive to stay connected to the WWE Network.

    4) WWE management needs to harness social media and is fully now aware what can happen instantaneously when fans are extremely unhappy. Some simple steps can control the power of social media and use it to increase the number of subscribers.

    It was if Terrence Mann was speaking to me when I learned of the WWE Network. He was saying 'Steve, people will come. They'll come to the WWE Network for reasons they can't even fathom. They'll click on to subscribe not knowing for sure why they're doing it. They'll arrive at the Network as innocent as children, longing for the past. Of course, we won't mind them looking around. It's only $9.99 per month. They'll pass over the money without even thinking about it: for it is money they have and peace they lack. And they'll turn on their computer or mobile device and sit on their favorite chair on a perfect evening. It's where they sat when they were children and cheered their heroes. And they'll watch matches and it'll be as if they dipped themselves in magic waters. The memories will be so thick they'll have to brush them away from their faces. People will come Steve. The one constant through all the years, Steve, has been wrestling. America has rolled by like an army of steamrollers. It has been erased like a blackboard, rebuilt and erased again. But wrestling has marked the time. This ring, this entertainment: it's a part of our past, Steve. It reminds of us of all that once was good and it could be again. Oh... people will come Steve. People will most definitely come.'

    Having gone through the financial side of a divorce starting in November of 2013, the stress was incredible as the legal process lacked any common sense. In June of 2014 I found something that 'eased my pain' and made more cents, especially with the dividend. I found the WWE Network.

    What I saw in the WWE Network was something that was a game changer on how this globally popular decades old entertainment brand could deliver and control their product. The naysayers of 'Rome Reigned' supreme as the stock collapsed from its 52 week all-time high over $30/share to $10.55/share. Questions then arose about Vince McMahon's sanity as he sacrificed more lucrative cable television deals that he would have had without the Network. A lot of critics frowned on the fact that from 2014 to 2018 that the size of the WWE cable contracts only increased $105 million. Add to this were lost PPV deals with DirecTV and Dish Network. It was as if the voices of Wall Street where telling Vince McMahon 'Your crazy! You need to stop the Network as you will lose your company. This is another XFL. Your going broke and Wall Street will make you pay!' On the flip side of not maximizing cable deals, cable deals hampered how the Network was going to be delivered to fans. Restrictions and delays reduced potential subscriber count in Canada, UK and Ireland.

    However, when viewing the shifting winds of how media is being delivered, the Network creation was a no brainer. Cable viewers has dropped substantially over a short period of time and the tread continues. From a Variety article dated November 4, 2014 by Cynthia Littleton, 'C3 ratings (live broadcast, plus three days of playback on DVR after the original airing) among adults 18-49 were down 8% across the board for the major groups - with steeper drops of 22% across the A+E Networks cablers (A&E, History, Lifetime); 14% across the NBC Universal cable cluster; and 13% for both Disney's cablers and those of Time Warner, notably TNT and TBS. 21st Century Fox's cable group was the only one to buck the trend in the quarter. These and drops at other networks follow a steady rate of declines in the past few quarters, according to research by MoffettNathanson. But the headwinds that Big Cable faces are much stronger than what might be deemed as a cyclical drop in viewership. In short, the most established players - think USA Network, Syfy, TNT, TBS, A&E, Lifetime, MTV, Discovery, FX, AMC, ABC Family, among others - are starting to grapple with the issues of audience erosion, rising programming costs and heightened competition for ad dollars that have bedeviled the Big Four broadcast nets for more than 20 years'.

    With this semi-shift away from cable there has also been a change in how we download information. My Seeking Alpha series of articles on WWE showed very revealing stats on downloads via web versus mobile. My article on 'WWE and the Three Stooges' appealed to the 50+ crowd with 65.4% of viewership via the web and only 34.6% mobile views. The article entitled 'WWE, like the Starship Enterprise, Going Where No One Has Before' drew an astounding 46.5% mobile views. The total mobile views on The Starship article were more than The Stooge views by 105 despite total views of the Stooges exceeding the Star Trek by 807. As Star Trek series lead to a series of spin offs including The Next Generation, Deep Space Nine, Voyager, Enterprise and numerous featured films, the connection to the present generation was much stronger than that of The Stooges. To confirm the trend of younger people going to mobile devices, the article I wrote entitled 'The Ugly, Bad and Good' was a takeoff on the 1966 movie with Clint Eastwood entitled 'The Good, Bad and Ugly', shows the shifting trend. Again an older demographic chose to download the article via the web garnering 63.2% of views. The strongest base of the WWE is the younger demographic who prefer devices such as Sony Playstation 3 & 4, Xbox One, Xbox 360, Amazon Fire TV, Apple TV and Roku streaming devices and Smart TVs. The WWE Network not only attracts that generation but people of my generation who download the Network on computers.

    Seeking Alpha WWE Page Views as of 1/29/15

    Article

    Total Page Views

    Total Web Page Views

    Total Mobile Page Views

    % of Web Views

    % of Mobile Vies

    WWE and Three Stooges

    4,112

    2,690

    1,422

    65.4%

    34.6%

    WWE Network, Like the Starship Enterprise, Going Where

    No One Has Before

    3,305

    1,768

    1,537

    53.5%

    46.5%

    WWE: The Ugly, The Bad and The Good

    2,394

    1,514

    880

    63.2%

    36.8%

    When I invested in Facebook (NASDAQ:FB) I didn't pay too much attention to the fundamentals. There were none. What attracted me to Facebook was the incredible amount of users. Management just needed to figure out how to monetize the base. They did with mobile. One major key to the future success of the Network is monetizing its large social media following of over 400 million using the emotions of its base.

    This past week Mr. McMahon announced that the Network hit the 1,000,000 subscriber goal. The announcement came after the perceived disaster of The Royal Rumble. #Cancelwwenetwork links were provided directly to the website as many fans were ticked off big time. According to unsubstantiated sources, the call center was bombarded with calls that could not be handled. But herein lies the rub. WWE management saw just how powerful social media is on the negative side. They need to see the incredible power of social media on the positive side by making some changes. Hear me out on how this can be done. In this case it's easier done than said.

    The WWE Network infrastructure was developed by Major League Baseball Advanced Media. The physical infrastructure to handle the encoding and delivery of the additional video content has produced an incredible platform for WWE to deliver its product. However, the fan base is extremely fickle and even an improving product will not keep some from leaving. In slightly revising a quote by Abraham Lincoln he said 'you may please all the people some of the time; you can even please some of the people all the time; but you can't please all of the people all the time'. In other words, there's always going to be that portion of the WWE fan base that is a click away from canceling their subscription because their favorite wrestler lost or for whatever reason. It's the nature of the beast.

    As I'm a New York Yankee and Los Angeles Angels fan, I naturally hate the Red Sox. It's in my DNA. If major league baseball had a site where they controlled the outcome of the games, and the Sox ended up winning the whole thing, you can bet your bottom dollar I'm gone and bye, bye to your $9.99 per month! The passion of the baseball fan spills over to message boards and other sites where fans can express their opinions. The WWE fan, like the baseball fan, wants to show you how they feel. All anger to WWE is now directed to WWE management and the writers when monthly Pay-Per-Views go awry. WWE already uses social media on RAW and Smackdown for the fan to determine who they want to see in matches. As the Network site has the MLB infrastructure, why not take the plug-in module MLB uses for All Star balloting and have subscribers determine who they want to see through secret balloting. The Authority at a RAW event can come out and say something 'although we know what's best for business, we want you to tell us! You think you know better than us then tell us what you want. Log onto your account and go to the ballot section. You have up to 25 votes and let us know who you think the winner of the Lesnar-Reigns match should face. Also there's a link to where you can send us your story lines as to how you think everything should play out. The best story lines will be awarded the privilege of continuing their subscription plus free all paid trip to Wrestlemania XXXI'. You never want the foxes running the hen house, but by giving the fan some say in PPV outcomes this might serve to deflect a large amount of the anger away from management and the writers. The fans will only have themselves to blame and as such go to all forms of social media to express their outrage that other fans choose this wrestler over that one or that story line over this one. Also storylines sent give WWE a introduction to the next generation of writers much like NXT is the training ground for the big leagues.

    The end result of letting the Universe into the inner circle and letting them have a say in the key PPV matches is lowering of the churn rate. In fact, it will lead to more social media followers becoming subscribers to voice their opinions and influence the direction of WWE. The passion of the wrestling fan, like the true baseball fan, is impossible to measure. I can even envision where fans take off work only to hit that vote button a god zillion times although their votes are capped at 25.

    The man who created one of the top 10 greatest sports brands in Wrestlemania is now on the verge of creating a truly unique one-of-a-kind streaming entertainment brand. The potential WWE audience expanded exponentially with the internet and continual development of new electronic means of delivering content. With that said, I constantly hear a voice from above that is getting stronger every day. It could be the natural process of aging or something else. It repeats, how it repeats in my ear, 'If Vince McMahon built it, people will subscribe'.

    Jan 31 12:43 PM | Link | 3 Comments
  • The Disconnect Between The Investment Community And WWE Chief Strategy Officer

    On January 9th at a Needham Investor Conference WWE Chief Strategy and Financial Principal George Barrios made a presentation similar to those in the past. What I failed to see again is the true metrics of the business and more or less saw again the aspirations of the Network. This lack of clarity has caused a collapse in the price of WWE stock as fundamentals of the Network model have been improperly conveyed to the investment community. With this disconnect, technical factors are driving the stock down to lower than its 52 week low of $10.55/share. When it did hit that $10.55/share, it was program trading that aspirated the move downward. Currently all Network value has been removed from the stock price and the view on the Street is that it was a mistake for WWE to cannibalize the business of PPV with the Network. As WWE stock continues its downward slide, not only is the Street saying the Network is a total failure, but as it gets closer to it's pre-dividend low historical low of $6.76/share in October 2002 and the low since the Company started paying on dividend in June 2012 of $7.44/share, the Company survival is at stake. None of this makes any sense as PPV was only 16-17% of total OIBDA, the Company still has a strong cash position and management has lowered the breakeven numbers due to budgetary cuts. As I'm a long term holder, I'm only concerned about management not understanding the product they have and portraying it as something it's not. It starts with the fan base.

    WWE appeal is to a specific fan base that can cancel for a multitude of reasons. I have read thousands of comments from fans over many different wrestling sites. It was not unusual that fans seeing the same event state they are canceling their subscription as there's too much violence and do not want their children to watch. Then on the other hand, others state they are canceling as there isn't enough violence and the product is too bland. If a Netflix subscriber does not like one movie because the content wasn't what they wanted to see, that would not be a reason to cancel a subscription. In other words, WWE has fanatics with Netflix having subscribers who have no emotion positive or negative to the Netflix brand.

    HHH, part of The Authority, recently terminated 3 Superstars due to betrayal issues. There are some serious fans of Dolph Ziggler, Ryback and Erick Rowan who will not renew their subscriptions as a result. It's more than entertainment to them. That's the rub of the difference between the two. The WWE Fan versus the Netflix Subscriber.

    The conclusion I have reached is that the churn rate originally projected by WWE management of 6-8% is not realistic. Further, churn rate should not be one of the metrics used to measure the success of the Network as it works against the reality of the subscriber base. With multitudes subscribing just to watch Wrestlemania and then canceling their membership, the drop off will be significantly greater than management projections. The positive is that other quality content is continually being added to the site that can keep those event based subscribers from leaving. So what has to change?

    My greatest success since I started investing in stocks are retailers. My first purchase was 500 shares of The GAP (NYSE:GPS) in 1978 at a current share adjusted price of .63/share. Too bad I sold my investment off during the crash of 1987, but still took enormous profits. I have in invested in 99 Cent Store (NYSE:NDN) and Dollar General (NYSE:DG) to the time both went private making a lot more than pocket change. My greatest success over the past 12 years is The Buckle (NYSE:BKE). In the most fickle and volatile industry of millennium apparel retailers, Buckle has consistently outperformed all its peers due the talents of the management team. Textbook conference calls explaining key company and industry metrics and answering analysts questions in a precise detailed manner, leave no doubt in the minds of analysts that management knows what they are doing. Listening to Buckle management conference calls should be a must for any public trading company struggling to achieve acceptance in the investment community, especially WWE management.

    I will use the analogy of The Buckle net income and WWE PPV statistics from 2013 to provide a comparison and illustrate the new metrics that WWE should be evaluated on in the future. On past SA articles I have stated why the Network potential reach gives WWE another potent weapon in their arsenal of revenue drivers.

    Buckle Net Income 2013 (in millions)Net Income% of TotalKey Event
    1st Q 201337,55223.1%Clearance
    2nd Q 201325,14415.5% 
    3rd Q 201340,58425.0%Back to school
    4th Q 201359,30436.5%Holiday
    Totals162,584  
        

    Realigning WWE PPV events to align with the current 2015 schedule of events, 50.4% of total PPV worldwide buys are in the 1st quarter. The Buckle in 2013 generated 36.5% of net income in the holiday season with net income in other quarters generated by specific events including clearance and back to school sales. What made Buckle originally a great buy, excluding common fundamental evaluation numbers (quarterly and yearly EPS, net income, net sales and gross and operating margin percentages), were quarter and year to date same store sales percentage comparisons along with future store expansion. Future store expansion sales then eventually became a part of the same store sells comparison. As such, WWE Network evaluation metrics need to account for the seasonal fluctuations in product event purchases.

    PPV Events 2013Worldwide BuysQtr in 15% of Total Buys
    Royal Rumble (Jan)579,000  
    Elimination Chamber (Feb) (1)241,000  
    Wrestlemania (April) (2)1,104,0001st50.4%
    Extreme Rules (May)245,000  
    Payback (June)198,000  
    Money in the Bank (July) (3)223,0002nd17.4%
    Battleground (Oct) (4)114,000  
    Summerslam (Aug)332,000  
    Night of Champions (Sept)196,0003rd16.8%
    Hell in a Cell (Oct)228,000  
    Survivor Series (NYSE:NOV)177,000  
    TLC181,0004th15.3%
    Total Worldwide Buys3,818,000  
    (1) Being replaced with Fast Lane in 15.   
    (2) Moved to 1st Q in 15.   
    (3) Will be a June event in 15.   
    (4) Will be a July event in 15.   

    In the meantime, George Barrios needs to see the Netflix model of subscription growth is not the reality of the WWE Network model. Emmanuel Lemelson, one of the top rated hedge fund managers, shorted the stock at the top and then went long near the bottom, stated that top management needs to change for the true value of the WWE brand to be extracted. He points to George Barrios as one of the weak links. I'm willing to give Mr. Barrios the benefit of the doubt as WWE Network is a trail blazer in streaming online sports entertainment and with that and the correct analysis of the drivers, the true positive metrics of the Network will eventually become more clear. It rests with Mr. Barrios to correctly reflect that to the investment community.

    Jan 17 9:06 PM | Link | Comment!
  • WWE-What Investors Need To Hear From George Barrios, CFO, At The Upcoming UBS Investment Conference On December 9th.

    After having the disastrous Wells Fargo investment conference on November 12th, George Barrios, CFO, of WWE will be back at it December 9th with UBS. In over 30 years of investing in stocks, I've never seen where one conference caused a severe drop in a stock (over 15%) as the Wells Fargo one did. But as the future of the Network was uncertain in the investment communities eyes prior to that conference, the answers by Barrios only created more uncertainty.

    This conference should be different as times have changed. December 1st was a pivotal date in the short history of the Network. On December 1st, those who were given the free November month had to opt out from continuing their subscription or would continue as paid subs into the month of December. Further, the last of the 6 month subs of 205,000, 59% less than the previous quarter, were given the option to renew on a monthly basis. I strongly believe that the sub count will increase more this quarter than the 16-17% annual increase in the prior 2 quarters. The reasons being that the Network has substantially improved content and giving subscribers a month-to-month option is better than a 6 month commitment with no opt out.

    As a former CFO and current investor and believer in the Network, I've created a fantasy interview answering questions at UBS conference as George Barrios. My answers show certainty and positivity not expressed at the Wells Fargo conference.

    Moderator:

    George on your last call with Wells Fargo you didn't state specifically why the Network lost as many subs as it did. Please clarify as to why that happened.

    Barrios:

    Simply put it was the 6 month subscription model and the lack of content that lead to customer's not wanting to renew. The month to month subscription gives our fans the option to opt out at any time with less of a financial commitment. Also, since the inception of the Network we have added a tremendous amount of content by expanding our library of wrestling history and current programming by over 200%.

    Another shortcoming was we needed to replace Perkins Miller when he left for the NFL Network in April. Unfortunately it was not until October we brought on Lou Schwartz to replace Perkins. Lou's OTT background is off the charts. Additionally, the support staff behind Lou, including Elana Sofko and Roberto Levin, give us individuals who understand the OTT model and what needs to be done to make the Network a global success. We are truly in good hands.

    Moderator:

    On Steve Austin's recent podcast with Vince McMahon, Mr. McMahon stated that the Network is doing great. Was this statement based on him knowing that a large number of free November subs became buyers as of December 1st, the date of the podcast?

    Barrios:

    As I'm not permitted to release any specifics at this time. I can say that the promotion is definitely working. This is witnessed by an increase in customer satisfaction from 91% on our last earnings conference call to 97% currently.

    Moderator:

    It appears the Steve Austin Podcast with Vince McMahon was extremely successful. Is this something that on a weekly basis the WWE Universe can see in the near future?

    Barrios:

    The Podcast was phenomenal. The feedback from our fans was substantial. We are looking into adding that or something similar to our content in the near future. Having current and past stars reaching out to the Universe directly can only assist in giving our fans what they want.

    Moderator:

    Other than what you previously expressed, are there any other regrets in making the transition to OTT?

    Barrios:

    Nothing is perfect. Recent studies show that cable has decreased 10% as more individuals go OTT choices. That only confirms that we are heading in the right direction. It's difficult being a trend setter, as being one of the first puts you in the spotlight front and center. Mistakes tend to be amplified. However, the transition to OTT was definitely the right move as now CBS, HBO and others are attempting to do what we are.

    Moderator:

    Both Vince and yourself constantly refer to the Netflix model when comparing your Network. Although your subscriber base will never be the size of Netflix as its entertainment specific, what are your advantages over the Netflix model?

    Barrios:

    Netflix only owns less than 10% of their content. When Netflix started to increase owned content that's when their subscriber base increased substantially. We own 99% of all content and that means more revenue will hit the bottom line. Other than technological advances, owning our content was one of the key factors in changing the model to OTT from PPV. Additionally, we have increased our cable revenue over 105 million dollars to 2019 as we understand how critical cable is in expanding the WWE Universe. Fans who view cable are the majority of the ones who eventually will subscribe to the Network.

    Moderator:

    How much larger is your Network potential than just staying with cable outlets?

    Barrios:

    There are over 3 billion people who have access to the internet. There just over 900 million that view cable. Needless to say the size difference is substantial. However, we are not cord cutting at all. Truly our model will maximize revenue streams on both cable and OTT.

    Moderator:

    It appears now that your route of expanding is based first on cable contracts and then Network subscribers. Is that correct?

    Barrios:

    We look at each countries situation independently. We view our cable partners as a critical component to our success. In those countries we've had prior cable agreements and/or have the ability to obtain new contracts (i.e. India and Mexico), we want to have a cable deal in place prior to expanding to the Network. Understanding that PPV is the variable in each country, we need to come to terms with our partners as to how to treat the PPV events. The situation in the U.K., which we hope to resolve shortly, is one where we need to get on the same page as our partner. These situations are very delicate as we want to create a win-win-win situation for our fans, ourselves and our cable providers.

    Moderator:

    Looking at your expenses it seems that WWE does not depend heavily on PPC advertising (pay per click). Why is that?

    Barrios:

    WWE is a global brand and our generic placement on any search engine is right at the top. It would be a complete waste of funds other than to advertise a direct link to the Network subscription.

    Moderator: Vince McMahon has always had his share of critics. He's 69 years old and although he says he's in as good of shape as ever and still puts in incredible hours, the reality is that no one goes on forever. Has any thought be given to the day that Vince transitions out of his day to day duties?

    Barrios:

    Vince is still at the top of his game. However, there are individuals within the organization Vince believes are capable of showing the passion and commitment needed to continue the WWE brand. He takes tremendous pride in this organization. 'Then...Now....Forever' is more than just a motto. Vince wants to insure the WWE legacy continues long after we are all gone.

    Moderator:

    George in one sentence describe how you feel investors should view the future of the Network?

    Barrios:

    The Network is heading in the right direction and with patience the future looks incredible.

    Dec 07 9:11 PM | Link | Comment!
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