The stats are amazing WWE is a combination of both scripted entertainment and sports. (Hang on its not real?). Unlike sport WWE can deliver content 52 weeks a year. WWE makes money from television rights and consumer product licensing, two very high margin businesses. Toy sales for the wrestlers tend to rank in the top 5 for action figures, last year WWE placed no.2 their highest ranking ever.
According to the CFO WWE believe they "may have the ability to double our 2012 EBITDA, double or triple through three key levers. Number one the launch of a pay network that would take our pay per view business and in essence build, use that 100,000 hour library to build out around the pay per views and create a subscription service similar to an HBO." As can be seen below WWE would breakeven at 1 million users and is looking to charge between $9.99-14.99.
More popular than Lassie and The Simpsons?
The next opportunity is contract renewals with four of their largest content agreements up for renegotiation over the next 18 months. WWE point out they have the number one and number two longest running shows in US history before Gunsmoke, Lassie and The Simpsons.
For some reason they opened a WWE Studio every film so far has proved disappointing only the recently released The Call featuring Halle Berry has knocked it out of the ring. The studio lost $28 million in 2011 and $6m in 2012 in EBITDA. UFC is also risk and has taken entertainment share, WWE management believe that with a PG rating they target totally different markets and experiences.
The stock is also closely controlled by the McMahon family yes that's right Vincent McMahon who is sometimes known to appear as a character on the show. Investors will not get a say in how the company is run but offsetting this is the families need for income. WWE historically has generated $50m in cash typically paying out 70% of earnings leading to a dividend yield of 5%, decent income when compared to the SP500's yield of 2%.
The value of content is rising and the WWE is unique. The upcoming content deals and potential network will be a good gauge for future growth.
Disclosure: Decisive has no position in WWE stock