McGregor Banned from Selling Sportswear with Last Name in Europe

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Conor McGregor has been ordered to halt sales of sportswear bearing his surname following a legal battle that determined the UFC fighter has been in violation of EU-wide trademark law. The Scottish fashion label McGregor, founded in 1921, issued an injunction against Adidas (and subsidiary Reebok) out of concern that consumers would believe sportswear made for the Notorious One was produced by the near hundred-year-old fashion house; the company also does not want potential customers to think it sponsors Conor. Adidas/Reebok, which hold the exclusive rights to McGregor’s line, will be required to withdraw garments sold in Europe or compensate the fashion label. It’s worth noting that the parent of McGregor’s fashion brand, Doniger Fashion Group, filed for bankruptcy for a 2nd time in September ’17; McGregor does not currently operate a working website.

Howie Long-Short: Moody’s credit service indicated that ’17 was the most lucrative year in UFC history, reporting the company generated “well over $700 million”. Even if you take Moody’s mathematics at face value (questionable, considering the UFC had 5 PPVs with 1 million buys in ’16 and 0 in ‘17) and account for the UFC’s newly signed $1.5 billion U.S. broadcast TV deal, Dana White’s claims of a $7 billion valuation seem far-fetched. WWE pulled in more money ($800.96 million) in ‘17, has larger TV deals ($2.3 billion for RAW and SmackDown Live), carries far less long-term debt and yet maintains a market cap of just $6.3 billion.

Fan Marino: In addition to having 0 PPV events with 1 million buys thus far in ’18 (that will change with McGregor fighting on Oct. 6), the UFC has failed to draw on cable television. UFC on Fox 30 (July 28, 2018) was the lowest rated (1.0) and least-watched (1.68 million) MMA telecast ever broadcast in primetime, surpassing previous lows set in January (UFC of Fox 27). The ratings for the main event (Dustin Poirier vs. Eddie Alvarez) declined 20% from the promotion’s July ’17 card and they tied a series low within the 18-49 demo (0.6 rating).

Speaking of the McGregor/Khabib fight, TicketIQ is reporting that UFC 229 is the 2nd most expensive UFC ticket since at least ’10. The get-in price is $729. Only UFC 205 (McGregor vs. Eddie Alvarez) cost more ($768) to walk in the door.

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Pro Wrestling Business Experiencing Boom

The pro wrestling business is experiencing a boom, as evidenced by the newly signed U.S. broadcast television deals for WWE “Monday Night RAW” and “SmackDown Live” (worth $468 million/year), the scheduling of the largest indie wrestling event ever on September 1st (“All In”) and the news that Ring of Honor and New Japan Pro Wrestling sold-out (18,500 seats) Madison Square Garden for their “G1 Supercard” in April ‘19; the first wrestling show at MSG without a McMahon promoting, since 1960. The next marquee event on the wrestling calendar is WWE SummerSlam, Sunday Night in Brooklyn. Brock Lesnar and Roman Reigns are the main event; Ronda Rousey will take on Alexa Bliss for the WWE RAW Women’s Championship. Fans around the world can live-stream the event on WWE Network, August 19 at 7pm ET; there is a 30-day free trial period for all subscribers.

Howie Long-Short: Q2 ’18 was another landmark quarter for the WWE. The company posted record quarterly revenue (+31% to $281.6 million) and reported it had nearly doubled operating income (to $21.2 million) from the prior year quarter, news that sent share prices to a new all-time high ($85.93) on Thursday July 26th. The +31% revenue increase represents the company’s greatest YoY sales increase in 2 years.

In addition to strong financials, WWE reported significant growth in digital engagement; video views rose +58% YoY (to 14.4 billion) and the number of hours consumed watching WWE content across digital/social grew a staggering +71% YoY (to 509 million). The company also just crossed the 30 million subscriber threshold on YouTube, a figure that represents a larger following on the platform than that of the NBA, NFL, MLS, MLB, NHL, PGA TOUR and NASCAR combined. While YouTube subscribers don’t directly correlate into dollars, WWE Network subscriptions do; and the company reported paid subs rose +10% (to 1.8 million) during the quarter ending June 30th. Co-President George Barrios said the company plans on growing its international subscriber base by adding more localized content and languages.

WWE shares are up +/- 275% over the last 12 months, closing at $79.01 on Thursday. Concerned the WWE trades at too high a multiple (60x ’19 earnings estimates)? Consider the company trades at less than 25x ’20 earnings projections.

New Japan Pro Wrestling is owned by the Japanese card game company Bushiroad (privately-held). You can play the promotion via the Japanese television network, TV Asahi Holdings (trades under the ADR THDDY) or the Japanese music artist management company, Amuse, Inc (TYO: 4301). Both are minority shareholders. Ring of Honor is a subsidiary of the Sinclair Broadcast Group (SBG).

Fan Marino: The WWE recently announced it will host the company’s first all-women’s PPV event, entitled Evolution, on October 28th. The event, which will be live streamed on the WWE Network, will feature more than 50 female competitors from Monday Night Raw, SmackDown Live, NXT and NXT UK rosters. While current stars like Sasha Banks and Ronda Rousey are sure to be in attendance, so too are WWE Hall of Famers Trish Stratus and Lite; both already confirmed to be participating.

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WWE Posts Record Quarterly Revenue, Renews Australian Broadcast Partnership

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Less than a month after the WWE announced U.S. broadcast deals for Monday Night Raw and SmackDown Live (worth $468 million/year), the wrestling promotion renewed its partnership with Foxtel for a 19th consecutive year. The newly signed pact ensures the WWE’s two highly-rated weekly cable shows (and PPV events) will continue to air live in Australia, but also gives FOX8 the rights to re-air Raw and SmackDown in prime-time on Tuesday and Wednesday evenings; Foxtel will carry one-hour versions of each program, in primetime, each week on Fox Sports and will make the shows available on demand following the initial broadcast. Financial terms of the deal were not disclosed.

Howie Long-Short: When the WWE announced their U.S. deals in early July, we wrote “WWE isn’t done yet either, broadcast deals in 5 of their 6 largest international markets are also coming up for renegotiation. It’s now projected that the company’s 7 largest TV deals in aggregate will grow from $235 million in 2018 to an average of $542 million by 2021.” The 7 markets I was referencing were the US, UK, India, Canada, Latin America, Middle East and South Africa, so, any revenue coming from the Australian market would be on top of that figure.

Q2 ’18 was another landmark quarter for the WWE. The company posted record quarterly revenue (+31% to $281.6 million) and reported it had nearly doubled operating income (to $21.2 million) from the prior year quarter, news that sent share prices to a new all-time high ($85.93) on Thursday July 26th. The +31% revenue increase represents the company’s greatest YoY sales increase in 2 years.

In addition to strong financials, WWE reported significant growth in digital engagement; video views rose +58% YoY (to 14.4 billion) and the number of hours consumed watching WWE content across digital/social grew a staggering +71% YoY (to 509 million). The company also just crossed the 30 million subscriber threshold on YouTube, a figure that represents a larger following on the platform than that of the NBA, NFL, MLS, MLB, NHL, PGA TOUR and NASCAR combined.

While YouTube subscribers don’t directly correlate into dollars, WWE Network subscriptions do; and the company reported paid subs rose +10% (to 1.8 million) during the quarter ending June 30th. Co-President George Barrios said the company plans on growing its international subscriber base by adding more localized content and languages.

WWE shares are up +268% over the last 12 months, closing at $77.60 on Wednesday.

Fan Marino: The WWE recently announced it will host the company’s first all-women’s PPV event, entitled Evolution, on October 28th. The event, which will be live streamed on the WWE Network, will feature more than 50 female competitors from Monday Night Raw, SmackDown Live, NXT and NXT UK rosters. While current stars like Sasha Banks and Ronda Rousey are sure to be in attendance, so too are WWE Hall of Famers Trish Stratus and Lite; both already confirmed to be participating.

Speaking of Hall of Fame wrestlers, Hulk Hogan was recently reinstated by the WWE into their Hall of Fame after a 3-year suspension (racism). While that news does little for me (I don’t want to watch 64-year-old Hogan wrestle), whispers of the Rock’s potential return at WM35 are thrilling. It would only be fitting that the biggest mainstream star in the organization’s history would headline the marquee show.

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SmackDown Live Moving to Fox Network Television, WWE Signs $1 Billion Agreement

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Fox Sports has confirmed reports that the Fox broadcast network (FOXA) will be the home of WWE SmackDown Live, effective Friday October 4, 2019. The 5-year deal, worth an estimated +/- $200 million annually, gives Fox exclusive rights to the “2nd-longest running weekly episodic cable television show in U.S. prime time history” (Monday Night RAW is 1st). By signing with Fox, the show will move from cable to network television; though it will air on Friday evenings, the least watched television night. In related news, USA Network has announced that is has renewed its contract with the WWE to retain the exclusive broadcast rights to Monday Night RAW.

Howie Long-Short: This isn’t news as much as it is confirmation for JWS readers, as we first wrote of the deals back on May 22nd. Come 2019, Monday Night RAW and SmackDown Live will generate 3.6x ($468 million/year) what the company currently brings in ($130 million) for its 2-weekly prime-time shows. WWE isn’t done yet either, broadcast deals in 5 of their 6 largest international markets are also coming up for renegotiation. WWE now projects the company’s 7 largest TV deals in aggregate will grow from $235 million in 2018 to an average of $542 million by 2021.

The formal announcement of the Monday Night RAW and SmackDown Live deals sent WWE shares up +9.5% last week ($72.82). WWE is up +67% since the news first broke in mid-May and has grown +260% over the last 12 months. Of course, WWE is having success on both the television and streaming fronts; reporting WWE Network (OTT platform) paid subs grew 5% to 1.56 million in Q1 ‘18.

Fan Marino: Vince McMahon has committed to spending $500 million, not the $100 million originally reported, on the XFL over the first 3 years. Players (40 man rosters, +/- $75,000 salaries), coaches and a “broad-based insurance plan” (cost min. $10 million/year) are expected to be the biggest expenses. The league is scheduled to debut in February 2020. While $500 million will give the league some runway, I simply don’t think the competition level will be good enough to give it staying power; and if a wave of top high school prospects decided to forego college to pursue pro careers in the XFL, the NFL would simply renegotiate their CBA to enable HS prospects to enter the 2021 draft. The current NFL CBA expires following the 2020 season. It’s worth noting that WWE shares are up 117% since Vince sold $100 million worth in January, money he’s using to fund the startup league.

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ESPN to Pay $1.5 Billion for UFC Broadcast Rights

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Just two weeks after ESPN agreed to purchase the rights to broadcast 15 UFC events annually for $750 million, the company acquired exclusive linear broadcast rights to the MMA promotion’s cable television package. The newly signed deal, worth $150 million annually, will give fans 27 additional fight cards each year (consisting of 10 new linear cards, 12 PPV prelims on linear, and five new OTT cards); meaning ESPN will pay a staggering $1.5 billion to carry 210 UFC events over the next five years. Earlier this week, ESPN President Jimmy Pitaro called the UFC an “ascendant property”, while touting its young and diverse fan base. It must be noted that despite the $300 million ESPN will pay UFC annually, UFC will retain the rights to its 12 annual PPV events (i.e. their best content). 

Howie Long-ShortWe told you that once the WWE SmackDown Live deal with FOX was completed, UFC’s linear broadcast offering would be the next set of sports rights to fall. What we didn’t project was ESPN (DIS) acquiring them after spending $150 million per year on digital rights for ESPN+ and hearing that Fox Sports had increased its bid to $175 million/year for the package (up from $165 million). UFC may have left some money on the table to do this deal. Experts projected the linear package to draw $200 million and several networks (i.e. Turner, NBC, Fox Sports) reportedly had interest.

$1.5 billion for UFC cards between fighters no one has ever heard of (yes, that’s a bit of hyperbole) does not sound like a great investment. The UFC lacks mainstream star power to begin with and naturally the promotion places its biggest stars on PPV cards (which they’ll retain); meaning the cards appearing on ESPN & ESPN+ won’t include Connor McGregor (or any other mega star) anytime soon. Did I mention Fox Sports’ ratings for UFC events declined double digits in 2017?

Need reasons to believe ESPN made a wise investment? UFC has the youngest fan base in sports (median age 40). Males aged 18 to 34 are particularly valuable to advertisers and at $150 million annually the package is still cheaper than what NBCUniversal and FOX will pay for RAW and SmackDown Live.

Fan Marino: I’m certainly not surprised that WWE content is valued more than UFC content, as WWE has a far better business model. WWE stars headline tentpole events (like WrestleMania) and more than 500 other shows each year, so fans get to see their favorite Superstars on a weekly basis. UFC’s biggest names might fight twice a year and are always one fight away from never headlining another event, either because they’ve lost their sense of invincibility (see: Rousey) or because they’ve made so much money that getting punched in the face for a living no longer makes sense (see: McGregor). UFC promotion can also be limited by the outcome of fights, as the best fighters aren’t always marketable (see: Stipe Miocic). You’ll never find WWE in that situation, as career arcs are decided before the Superstars get to the ring.

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WWE Gets $1 Billion for SmackDown Live, Shares Up 33% in Last Week

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21st Century Fox (FOXA) has agreed to a 5-year deal worth more than $1 billion for exclusive broadcast rights to WWE’s SmackDown Live show. Effective October 2019, the 6th highest rated original show on cable television will move from USA Network to FOX’s over-the-air TV network. FOXA plans to move the Tuesday night staple to Friday evenings and will continue to broadcast the 2-hour show live. WWE reportedly chose the FOXA bid despite a larger offer, as “new Fox” committed to promoting the show during tentpole sports broadcasts (think: NFL on Sun, NFL on Thurs, MLB, CFB). NBCUniversal, the show’s current rights holder, declined their right to first refusal to negotiate a new contract after deciding to retain WWE Monday Night RAW with a deal worth $240 million annually; that show will continue to air on USA Network. Combined the new deals are worth +/- $445 million annually, a +/- 145% increase on the $180 million/year that the company currently brings in for the 2 prime-time shows.

Howie Long-Short: We noted in yesterday’s newsletter that Fox was among the favorites to land the WWE franchise and should it do so, was likely to air SmackDown Live on its Big 4 network; so, we weren’t exactly shocked by Monday’s news. The deal’s total value had us doing a double-take though, as earlier reports pegged the show’s value at +/-$110 million/year (up from $30 million/year on deal signed in 2010). WWE shares rose again on Monday, closing +12.5% (at $57.86); the stock is up 33% since last Wednesday’s close (RAW deal broke Thurs.) and a whopping 192% over the last 12 months (from $19.80).

The next shoe to drop is likely to be UFC’s linear cable broadcast package, with 20+ live events. FOXA currently pays $165 million annually for exclusive broadcast rights, but that deal expires in December. While earlier reports indicated that FOXA would let the UFC walk if it successfully acquired WWE rights, it now appears as though the company wants to retain the rights and is willing pay an extra $10 million/year ($175 million) to do so. Of course, it’s no guarantee that will be enough, as industry experts have been expecting the UFC’s deal to fetch $200 million+.

Fan Marino: There is the possibility (if not high probability) that SmackDown Live will outdraw RAW during the deal’s duration. While RAW currently draws 3 million viewers (compared to SmackDown Live’s 2.59 million), SmackDown Live’s pending move to FOX will put the show in 30 million additional homes on a night with far less competition in terms of programming.

For those who don’t follow the WWE, SmackDown Live was historically an inferior product to RAW (even taped at one point). However, a 2016 draft split the company’s talent roster, requiring fans to watch both shows to see all their favorite superstars. Should SmackDown Live begin to outdraw RAW (as we expect), look for some of the promotion’s biggest names (think: Roman Reigns, Ronda Rousey) to join Miz and AJ Styles on the SmackDown Live roster; the WWE will want the opportunity to put forward its best product on its biggest stage (i.e. broadcast television).

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NBCUniversal To Sign Monster Deal for RAW, WWE Shares Skyrocketing

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It’s been reported that NBCUniversal (CMCSA) intends on retaining exclusive broadcast rights to WWE Monday Night Raw with a deal worth +/- $240 million/year. Under the terms of the proposed contract, RAW will remain on USA Network where it’s resided since ’05. WWE will have to find a new home for SmackDown Live though, as NBCUniversal passed on renewing its expiring deal with the franchise. It’s been rumored that the SmackDown Live package could be worth an additional +/- $110 million/year (worth $30 million/year under current deal), with Fox, Amazon Prime and Facebook Live all considered viable landing spots for the Tuesday night show (6th most watched on cable TV).

Howie Long-Short: The outcome of this deal represents best-case scenario for the wrestling promotion. The value of their broadcasts will double (worth $180 million in ’18) and should Fox (FOXA) land SmackDown Live, it’s possible that they would broadcast the show on their over-the-air TV network; had Fox won rights to both shows, it’s likely SmackDown would have been relegated to FS1 (30 million less households). Should SmackDown Live end up on Fox, the show would have the opportunity to beat RAW in the ratings for the first time since the company split the roster in 2002.

The WWE is projecting record revenue in ’18, boosted the company’s deal with the Kingdom of Saudi Arabia (reportedly worth +/- $20 million/year) and with a reduced corporate tax rate, it’s possible (if not likely) the company will set a record for profits too. Combine that rosy outlook with the enthusiasm over the company’s pending TV deals and it explains why shares are up 18% (to $51.42) since Thursday (5.17).

Fan Marino: Hulk Hogan, who has been out of favor with the WWE since ’15 (racist comments), is reportedly in discussions with the promotion about a return. Once the face of the organization, the company was quick to remove all references to the Hulkster following the incident. While purely speculation, WrestleMania 35 (New York City, April ‘19) would seem like an opportune time to bring him back; of course, Hogan and Mr. T faced Rowdy Roddy Piper and Paul “Mr. Wonderful” Orndorff in the main event at WrestleMania I in 1985.

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WrestleMania’s Economic Impact Trails Just Super Bowl, Olympics, World Cup and March Madness

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WrestleMania 34, “Showcase of the Immortals” is Sunday Night in New Orleans. Brock Lesnar and Roman Reigns will headline the event. JohnWallStreet had a chance to catch up with WWE Co-President George Barrios to discuss the mathematics behind the company’s subscription based model, the economic impact WrestleMania has on the host city and why the company is more attractive than ever, from a marketing standpoint; days before the company’s biggest show of the year.

JWS: Roughly 3 years ago, the WWE moved from a PPV driven business to a subscription based model. If WrestleMania is the “Super Bowl”, how does the company ensure there isn’t a drop-off in subscriptions following the biggest show of the year?

George: “There’s a certain math to subscription businesses. Every day that you bring in new fans, they will eventually fall into one of three buckets. The first is someone who joins and says, “it’s not for me”; they come, they try it and they leave. The second one is somebody who comes in and says, “I like it, but in this digital subscription world, it’s easy to come in and out”. Then the 3rd group, which is obviously our favorite, comes in and says, “I love this, I’m in and stays.”

So, WrestleMania, because it’s so big, will draw a disproportionate number of people into the service. By definition, all 3 of those buckets will be the largest at that moment in time; including the first bucket, which is the people who leave. You can’t really get away from that. We know it’s a normal part of the cadence of the business. The math means that because it’s the biggest gross ad event, it’ll also be the biggest one where we lose people. As long as we keep growing, we’re fine.”

JWS: Over the last 11 years, WrestleMania has generated more than $1 billion in economic impact for the host cities. What is about the event that has cities bidding for the event time and again?

George: Forbes has a ranking of the biggest drivers of economic impact and every year we’re in the Top 10, last year we were number 6; it’s the Super Bowl, the Olympics (Summer/Winter), the World Cup, the NCAA Tournament and WrestleMania. Not only will we have fans from all 50 states in attendance, but we’ll have fans from 30 or 40 countries there; those other properties don’t do that. So, our ability to bring in people from literally all over the world, is what drives the economic impact (and cities interest). Last time we were in New Orleans (WM 30), we did $140-$150 million of economic impact; it’s what got us on the Forbes list. Last year in Orlando, we did a record $181.5 million.

JWS: Corporate sponsorship revenue grew +29% YoY in ’17. Why is WWE more attractive than ever, from a marketing standpoint?

George: I think it’s a confluence of a couple of things. Number one, we went TV-PG with RAW and SmackDown! in 2008; so, we’re now 10 years in and I think that it takes time. That move did a lot for the perception of the brand, which is important for the advertising community. The second thing is the technology that enables us to go to any home in the world with a video broadband connection, that was not possible 7 or 8 years ago. We now aren’t just known as a company that creates this interesting wrestling content, in the B2B community we’re now viewed as the poster child for social, digital and direct-to-consumer engagement (Editor Note: in Part 1, George discusses the company’s transition to a multi-platform model). It’s changed our business profile.

Howie Long-Short: WWE reported record revenue ($801 million, +10% YOY) for full-year 2017, with adjusted OIBDA (operating income before depreciation and amortization) also setting a company record ($101.9 million, +40%). For Q4 ’17, the company increased revenue 9% YOY to $211.6 million; while increasing paid subscribers to the WWE Network from 1.41 million to 1.48 million. Shares are up 67% since October 25th, 2017 (and 17.75% in 2018). The primary catalyst is the optimism surrounding the company’s next series of television contracts. The current deal with NBCUniversal (for RAW/SmackDown) pays the company $200 million/year. It’s expected the next deal will double in value. Broadcast deals in India and the U.K. will also be expiring at the end of Q4 ’19.

Fan Marino: WWE fans aren’t going to be pleased to hear this, but UFC President Dana White reported “Brock Lesnar’s coming back (to the UFC).” The return may not be imminent though, as White left himself a little wiggle room adding, “I don’t know when, but yes he is.”

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