Since taking the helm of the predecessor to WWE in 1982, Vince McMahon has built a global powerhouse in sports entertainment. Today, World Wrestling Entertainment (WWE) is at a turning point in its business, as cable gives way to streaming as the primary means to deliver content. In this episode of Industry Focus: Wildcard, Motley Fool analysts Bill Mann and Jim Gillies join host Nick Sciple to break down WWE's business and discuss why it could make a compelling investment today.

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This video was recorded on March 17, 2021.

Nick Sciple: Welcome to IndustryFocus. I'm Nick Sciple. This week, we're talking about one of my favorite businesses, and that's the WWE. It's got everything you want in a business story; you've got nostalgia, you've got drama, you've got a larger-than-life founder, and you've got a company that's crossing over into a whole new era for its business. But is this a story that's worth investing in? Motley Fool Analysts Bill Mann and Jim Gillies are joining me this week to take a look at WWE as a business, and as an investment. Thanks guys for joining me.

Jim Gillies: Thank you, Nick.

Sciple: Great to have you on here. As I said in the intro, WWE is one of my favorite businesses to pay attention to and track. WrestleMania is on my bucket list of events to go to. When you get to overlap WrestleMania with investing [laughs] it's always a fair topic. When you think about WWE as a business, just the first question for you all, is there a direct comp for this business? Can you think of one that would be a comparison?

Bill Mann: I think you've got to think of it as being a rival with the major sports brands. If you look at the numbers for WWE, they actually are somewhat close in viewership to the NBA in terms of television. In other ways, you almost have to think of it as being a library of characters. It's like the bizarre world Disney in some ways.

Gillies: Yes. Also yes. [laughs]

Sciple: You've got the biggest movie star today, a former WWE Superstar, The Rock, Dwayne Johnson. But at the same time, it's a bit this niche area of the world. One thing before we get into WWE's business in depth, I think it's worth talking about how we got here, how WWE became the business that it was today, because you go from wrestling at the high school gym to what is now this huge global business. Jim Gillies, can you walk us through how did WWE get from the high school gyms to the business that it is today?

Mann: By the way, I love how excited Nick is about this. You're fired up. [laughs]

Gillies: Not just Nick. I feel I was born for this. Essentially, WWF or WWWF, I suppose, was one of the old territories, it was the American northeastern territory. So New York, New Jersey, Connecticut, oddly enough, where they're based off today, but the territory system was all the local areas would have their territory, usually with their own homegrown stars, usually the son of the promoter, and there was this driving organization called the National Wrestling Alliance, so the NWA. The NWA would have a champion, your Harley Race, your Terry Funk, your Ric Flair. The champion would tour around. He'd come work a program in New York and then he'd go and work a program in Florida, and then over California, maybe up into Calgary, where the famous Hart family had a Stampede Wrestling, but the territories were largely gate-driven, butts-in-seats, where the promoters would bring in special attractions Andre the Giant, of course, was a special attraction for years of wander around, and that was the way the world worked. If you saw wrestling on television, you would see your local promotion, as you say, Nick, maybe from a local high school gym, maybe a small hockey arena or something, but it was a gate-driven league. Then along comes Vince McMahon II, well, technically, III, I suppose, but Vincent Kennedy McMahon. His dad, Vince McMahon Sr., owned the WWWF, which was the precursor of WWE. He buys WWWF from his dad in I think around '82, '83?

Sciple: '82.

Gillies: '82. Okay. He worked for his dad for years as well. Vince buys out his dad and he separates for the second time, the first time he didn't stay, but he separates WWWF or WWF from the NWA. They already had their own champion, but they say, OK, our champion, he's the world champion, and part of the end of the day, we're going to basically take this territory thing national. What he does is, he basically takes WWF -- if you guys, well, OK, Bill, you and I are of a similar age, so we remember the rise of Hawkmania.

Mann: Oh, yeah.

Gillies: The British Bulldogs and Rowdy Roddy Piper, that was culminating in the first WrestleMania in 1985. That is McMahon going national and taking it to the territory. Some territories he gets steam roles, others he buys out entirely, the Acronyms, and Stampede at Calgary, and others, the Carolinas basically. Mid-Atlantic, that was the one. He basically runs his own cable shows in their territory. You're not getting television for the local guys anymore, you're getting the big national. You can see Hulk Hogan coming soon to an arena near you, and that takes a bit of the shine off the local guys. But he goes out and essentially steam rolls everyone he can see in front of him and goes national. That then takes the next 15 years because he got a little bit of pushback from some guy named Ted Turner. Ted Turner liked wrestling. Ted Turner has A, money, and B, or had still has money, but he also had the cable, he had Turner Broadcasting. 

So, the territories that hadn't gotten steamrolled by McMahon or that still survived, the kind of DoB, the core of the old NWA they banding together under what was called Jim Crockett promotions, mainly situated in Georgia, the Carolinas, Florida, and what have you. They became an entity called WCW or World Championship Wrestling. In the mid to late '90s, you had these two large organizations that had quasi-national exposure, certainly, cable national exposure and that coincided with a really hot period for wrestling. The guys like Stone Cold Steve Austin, Hulk Hogan went to WCW, became a bad guy, Hollywood Hulk Hogan. You had the rise of the Monday Night Wars, where these guys would go out on cable. Now it's no longer a butts-in-seats local business, it's who can get higher cable ratings and how much can we sell our cable shows for? 

The business has already transitioned and it has gone from usually when you'd watch the television shows from the '80s, it's a lot of not good wrestling. It was a no star against me, say, and my job is to basically get steamrolled by the known star in one minute and then collect my $50 and sling out the back. You actually had good programming on television. They would have these shows on the cable thing, but then as well, big things that happened either on television now versus the Swash matches of the day before. It was all driven toward the next level of the business, which was the monthly pay-per-views. That's where we are at the end of the 2000s or the end of the 1990s. 

Sciple: What I was going to say there is you have this idea of you going from these regional wrestling promotions to Vince McMahon essentially rolled up the business. Bill talked about WWE as being like a bizarro Disney. Well, maybe Vince McMahon is kind of like a bizarro John Malone. Well, John Malone is rolling up all the cable companies. Vince McMahon is rolling up all the content companies on the side of WWE. As this whole pay-per-view business gets built up, there on the content side doing the same type of thing. After 2001 and WCW went bankrupt and WWE bought up the rest of the rights. Essentially, he has monopolized the business at least in North America.

Gillies: Vince McMahon owns the North American history of wrestling. Now, you may question the value of owning the entirety of North American wrestling and certain promotions, Impact, which is a group called TNA, which has been around for a number of years now, I guess the latest as AEW, they might argue this point, which I actually think that's a good thing because Vince McMahon I think always works best when he has competition. But yeah, basically the Monday Night Wars came to an end when essentially Turner and TBS -- Turner got little forced out there, then the new guys came into Turner Broadcast Networks, didn't really like wrestling, didn't want to spend the money. Frankly, he spent a lot of money on wrestlers to not do a lot, well, a lot of guys had guaranteed contracts and only had to work over 14 days a year. They mismanaged themselves into the ground. You also mentioned there's another little upstart group I forgot out of Philadelphia, called ECW, which had pioneered this concept of hardcore wrestling. Those guys also went bankrupt. So Vince bought everything. So now, in 2001, Vince McMahon owns the tape library, the history of all of this competition, he's forced all of the territories into an almost permanent subservient kind of thing. Where do you go from there?

Mann: He was the king of a mountain that nobody else realized that they wanted.

Gillies: But it's a valuable mountain.

Mann: It's a super valuable mountain.

Sciple: Absolutely. So that ties into maybe where we're at today. So if you go back to maybe the late '90s, the last time wrestling was really the peak of pop culture, WWE became the business. When it comes to the big leagues, they own the entirety of the business, though there are some other upstarts AWE has shown up in the past couple of years. But essentially, WWE controls the global wrestling business for all intents and purposes, the big leagues. That brings us to where the company is today, they have a massive audience. You look at their Instagram following, larger than the NFL. You look at YouTube, the No. 6 most-followed YouTube channel on the face of the planet. So, just an incredible audience. When you talk about the business today, what's the narrative for this company, it is still very much a Vince McMahon story, correct?

Mann: It is, but they have made a number of mistakes over the last few years, I think, with the WWE Network. They have SmackDown, which is Friday nights. Then they have WrestleMania, which is a little bit like the Super Bowl. Right now, the only way that you'd be able to see WrestleMania was to be subscribed to the WWE Network, which in some ways, I think they're trying to lift up a platform, but in another way, strangling their premier event. So that's about to change in a big way, and I think that that's why, you look at the valuation of this company right now, maybe on a cash flow basis it's not that cheap, but it is completely I think underestimating what this change is going to mean.

Gillies: I was just going to say I was going to push back a little on Bill there because I like to. But no, I was going to push back a little bit -- we'll take us to the parking lot after the show. [laughs] I think we can probably agree that we like it when businesses, maybe I like it, when businesses engage in a little bit of self destruction, creative destruction. The model from the '90s, up until the mid-part of the 2010s, was this: you've got your RAW on Monday night, you got your SmackDown on Friday nights or Thursday nights or whatever night they're doing it. At the time, you had the WCW competing offerings and then once Vince McMahon is unfettered, he has no real competition, but they saw the pay-per-views every month. You have 12, 14 pay-per-views a year and which you could watch via your cable provider, you just give them $50 and you're good. You could watch it that way and Vince McMahon comes out, the WWE comes out and says, "We're going to destroy our own distribution model. We're going to go from this pay-per-view thing," which of course, you have to cut AT&T in the cable companies on those. "We're going to launch this network, this Netflix of wrestling." Again, they own the tape libraries of all of the other territories and all of the other big guys; they own WCW, they own ECW, and you can have access to all that programming. You can watch like any show from the past. Oh, and by the way, for just $10 a month, on the WWE Network, this Netflix video streaming on-demand, you're going to get all of the pay-per-views. So you're paying $10 a month, $120 a year. That's like, if you only bought WrestleMania and two other pay-per-views a year, you're now ahead of the game.

Sciple: Maybe just a double underlying of the story we're talking about here. Yes, in 2014 WWE launched WWE Network, moved all their pay-per-views to that over-the-top service, they had a direct relationship with their customer, got lots of data, all those sorts of things. However, there was clearly some tension internally in the company around the future for that distribution model, there were reports that Vince McMahon was unsatisfied because of some of the things that Bill talked about limiting the size of the audience, limiting the amount of monetization they could get out of WrestleMania and some of those things. 

Back in early 2019, the long time co-presidents of the company, George Barrios, Michelle Wilson, in January 2020, they let them go, which we thought that might have presaged some change in their strategy with respect to the WWE network, and we're now seeing that come to fruition; starting tomorrow, as part of an agreement with Peacock, WWE as a multiyear agreement, we're starting tomorrow, all the WWE Networks content is going to be available on the Peacock streaming service. So from Bill's perspective, I believe the number of subscribers to the Peacock service today is 30 million. If you are a Comcast, Xfinity or Cox Cable subscriber, you get Peacock free, so a super large audience there. 

What it looks like here is, from WWE's perspective, they get access to this bigger audience. People are going to drive by view WrestleMania that may be wouldn't have thought about subscribing WWE network or the pay-per-view. Also worth noting that WWE says they're going to get their own proprietary data out of this, they're not losing data that they would have gotten from the WWE network deal. Then on the side of Peacock, you get to watch the WWE. This is a huge engaged audience. [laughs] They're the No. 6 most followed YouTube channel on the face of the planet. This is one of those things that brings people in. There was a deal at the beginning of 2020, and we've talked about a lot over the past year of Penn National buying Barstool Sports to get their audience in and get them customers on their platform. It's not gambling, it's a different universe, this is streaming, but I think it's the same type of thing; getting this relationship with WWE gives Peacock access to customers that have to have this content. At least 1.5 million folks who are subscribing regularly, and there is some seasonality to that as well. There's higher subscribers to WWE Network in Q2 when WrestleMania comes out. You can see how this is a big win-win for both sides. WWE makes their brand bigger, Peacock makes their service be something that you can tell a story about why you have to have if you're a particular demographic. It's certainly a huge opportunity for the business. 

How do you think this has changed the narrative for WWE with more people seeing it on their Peacock platform? Does that make the brand more mainstream than maybe it has been in the past?

Mann: I think it definitely does, and it still doesn't preclude, and actually a question that I have back for you, because I don't think it really precludes them from doing pay-per-views for certain events. I think maybe another really good proxy for WWE is the UFC network. I would suspect that a lot of the things that have been happening with UFC have informed some of the moves that the WWE is making now. Not that it's a risk because it's a different sport, but it definitely has taken some of the air out of the martial entertainment, if you will. As far as we know, the ESPN deal for UFC was $150 million a year worth to them. I'm interested to know what you think the WWE has in their pocket potentially for taking some of their content and putting it into pay-per-view.

Gillies: What happened with the pay-per-views, Bill, is if you bought the network, you got all the pay-per-views. Someone like me who may have purchased WrestleMania once or twice [laughs] is not a subscriber to the network and has never been. I bought WrestleMania a couple of times. It's a fun night with the kids. You get that for free, and you're going to continue getting that for free if you'd move over to Peacock, except now that Peacock is also $10 a month ad-free or you can get it for $5 a month with ad supported. The average subscriber here, they're no worse off and you also got a couple that they had the Saudi Arabia special shows, which [...] they also talked about. The UFC, I think you said, it's about 150 million. The scuttlebutt that's been out there for moving over to Peacock, the scuttlebutt on this deal is that it's over $1 billion for five years, so let's call it $200 million a year. That NBC Universal, whatever we're calling them, is paying to WWE for the right to basically take the network over. 

Then of course, I think you should see some lower cost at WWE because they're not doing this network stuff anymore. I'm not sure they're going to move in this direction of specialty pay-per-views in addition to what they have, because I'm not sure there'd be that much. I couldn't tell you the last time I looked for a cable pay-per-view. I presume they exist, but I haven't looked at them for a while. I think the UFC has some really interesting comparisons, as you brought up. For one thing, the UFC of course got bought in 2016. They got paid for about $4 billion in 2016, which is roughly what the market tap of WWE is today. Revenue at the time was around $600 million in the most recent stat that we have [...] private entity, so we don't know for sure, but it's as of last year, and grows, up to $900 million, which is close to what WWE is doing. It's probably the best proxy, and for me, I wonder if also it might be a bit of a forecast for what the future of WWE could be.

Mann: Nick, what is your understanding that will happen with their minor league, with NXT? Is it being rolled in with the deal, or is it something that will remain outside of the Peacock deal?

Sciple: I believe that's going to remain outside of the Peacock deal. So, this deal with Peacock is taking the WWE network and pouring that over to Peacock. However, their existing deals with SmackDown on Fox or a RAW on the USA Network, which is also NBC Universal Property. Also, I believe NXT had been on the NBC Sports channel, but then that channel is being shut down, so I believe they're moving over to the USA Network.

Gillies: NXT was on the network and then about, I'm going to say three or four months ago, they moved from the network. They also moved onto USA, which all the people say, "But why are you doing this? You're reducing the value for the network." Now it looks like it was a pretty clear precursor move. [laughs] Like, we're doing this because we're getting --

Mann: Is that right? [laughs]

Gillies: Yeah. Well, you've spotted what we're doing, yeah. NBC aside from Fox, NBC is clearly and they've been the partner for WWE, WWF forever. Last night on YouTube one of the old 1980s era Saturday night's main events propped up and I threw that on, pretended it's in a wave of nostalgia. This is kind of cool. They've been partnering here forever but now if you look at how the streaming rates, the cable rates or just the non-live events stuff that WWE does, at some point, I have to think, NBC Universal might question why they're paying annually for these rights fees and wouldn't it just be a nice little component of our greater universe to own the anti-Disney here, as Bill would call it, or bizarro Disney.

Mann: I'm now completely committed to calling WWE bizarro Disney.

Gillies: Yes.

Sciple: I see where you're coming from Jim's this idea of maybe why doesn't NBC just acquire them. You've seen WWE take some of their properties that they've had in-house and essentially license those to NBC's properties, rather that's licensing NXT, which you mentioned that was an in-house network property and now licensing the whole network out to Peacock. The reason I don't think that's going to happen is because it's to WWE's advantage to be able to play off different players in the market. For example, the deal we just got a couple of years ago with Fox, the reason that they left, they previously had SmackDown on the USA Network channel, but they got a better deal from Fox, and they had the opportunity to be in front of a larger audience and all those sorts of things. So I think because of the negotiating position that WWE is, in relative to a lot of these properties that want to have access to their audience, that want to have 50 weeks of live programming, all those sorts of things, I think WWE is in a better position not doing it, not selling, and bidding the rights every few years in the same way that the sports league are. They have this valuable content that everybody wants to have and they're going to fight over it and so WWE holds those cards, but we'll see.

Gillies: My only pushback to that would be Vince McMahon is that 75 years old and if you drop a very large pile of money in front of him, he might opt to take that money rather than letting his kids and son-in-law run the business going forward.

Sciple: Certainly, yeah. We'll talk maybe in a second about Vince McMahon, the future of the company. Briefly, we've talked about the licensing part of the business, the TV shows, that really is the driver of the business today. They still offer live events and live events are important, but really, they just had a record year for revenue without having live events. So that tells you what's driving the business, but we should talk about how they've navigated through the pandemic; at its core, this is a live events business. What do you make of the way WWE has tried to maintain operations through this disruption?

Mann: We called it pretty early on. Again, I'm not quite sure whether to call it a sport or entertainment, but I'm going with sport here in this for a specific reason. Obviously, it was the major sport that was most well-suited to just shutting down live events. Not that live events weren't a huge market for WWE and their revenues in live events was down 84% this last year, so almost all of that, I assume, was in the short amount of time, pre-shutdown. Yeah, I think that's correct, isn't it, Jim?

Gillies: Yeah, you're right. 84% on live events, but it was trending down before that too.

Mann: Yeah, they were really well-situated, but they also had just inked a deal to start producing live events in Saudi Arabia, and this is a huge deal for them, and that has basically been nothing but a cost prior to now because they've had to cancel. I think they had one and it was meant to be a consistent stream and they are looking to take that and reapply it so that they develop a fan base, and that once again increases the global reach of this company. So the live events, obviously, they are revenue-creating, I think that they look at those as the beginning of a lifetime value relationship with their fans.

Gillies: Yeah. The Saudi events, I think that probably hurt them the most last year, Bill. It wasn't the touring show coming through downtown Toronto where, well, maybe we can also make it as a live event tape [...], because that's what they do a lot of these things, they tape them for RAW and SmackDown. If you go back to 2019 -- because as you said, they have just hit record revenue, but they've got three revenue buckets that they earn in right now. Last year, as you said, live events dropped 84%. Revenue from live events drops 84%, and a second thing they have is consumer products, so you can go buy your nostalgia Randy Macho Man t-shirt at the live event --

Mann: Another one.

Gillies: Another one. So, you should probably tie a lot of the consumer products also to the live event. You can buy it online, of course. Revenue there dropped also 6%. The consumer products stopped, the merch, whatever, but yet total revenue was up last year. The reason for that is because the media, as we said earlier. This is now a media and content company. The media revenue, so rights from RAW, SmackDown, NXT, The Network, that was up 17% last year, and that was enough that it completely obliterated the 84% drop in live events. Live events have been going down. The year before, so pre-pandemic, live events were down 13%. The year before that, 2018, it was down 5%. Live events have been getting starved for a while because the media growth has compounded, I think, somewhere around 17%, 18% the last few years. You mentioned earlier, Bill, that these guys were probably one of the best "sports" positioned for living the pandemic, because of course, fairly quickly, they started doing stuff just at one of their own, I guess their training facilities. Then they built something called the ThunderDome, which I went and checked that out and it's not the Mad Max stuff from the movie in the '80s, it's like giant video walls of hundreds, if not thousands of fans who get to giant Zoom calls, but these are four and five foot screens. It's cool and terrifying and I guess they've set that up at Tropicana Field.

Sciple: Yeah. They moved to Tropicana Field in December. The other cool thing is they got drone cameras and all this business going on, which takes you back to Vince McMahon historically has been very innovative in TV production. The XFL only made it one year, but they did pioneer the Skycam and all those sorts of things, so maybe seeing some of that going on right now. He said on the fourth quarter conference call, "We are the most flexible, adaptable, media company in the world," and I think he has a point. They are incredibly flexible and adaptable to be able to maintain all their events, be able to deliver the product they need, draw their TV partners, even though they didn't do these live events, be able to maintain all those episodes of SmackDown and RAW throughout this pandemic. It has been incredibly innovative, I don't think the company necessarily gets credit for it. So, when we talk about the business moving forward as we come out of the pandemic, we have this new relationship with Peacock in place, new live events should start ramping up at least in the back half of 2021, when you look at this business moving forward the next, say, three years, what are you paying attention to for this business? Is this a business you would be excited to invest in? 

Gillies: One of us on this podcast has publicly recommended the business to members of The Motley Fool. I'm not saying which one, but it's not Bill. [laughs] So, I guess you probably could already gather my opinion on that subject. I honestly don't think that the true value of the Peacock deal is probably already factored in. I like the ever-rising rights fees that you've both talked about. The value of getting WrestleMania in front of the casual fan, because they've got a hardcore fan, no pun intended, but to get the value of that in front of the hardcore fan is, I think, really important. That's what Peacock's going to do. I don't dismiss as easily as you guys the idea that NBC might drop as much money as Vince McMahon can carry, and he's got a lot of muscle, he's a big guy.

Mann: Yeah.

Gillies: They talked about their proxy for EBITDA. They have a long-running thing, operating income before depreciation and amortization.

Mann: OIBDA, there it is.

Gillies: OIBDA. Yeah, exactly. But they've been using it forever, so I'll cut them some slack. Usually, I don't like adjusted numbers, but we'll give them some slack here. They're calling for record OIBDA this year and they've flat out said it'd be 15%, 20% or higher if our live events had come back and we didn't have the pandemic. At the top end, this is maybe 10 times that proxy for EBITDA. This is not an expensive company, and when you factor in the value of just things people put a value on, things like the WrestleMania brand. Obviously, in sporting events, the Super Bowl is the most valuable one. But when I was doing a little bit of background reading on this, and found out that WrestleMania is valued at nearly a quarter billion dollars and the World Series is valued at less than half of that, that made my proverbial Spockian eyebrow rise.

Mann: Given the cultural significance of the two, inarguably, that is a baffling statistic.

Gillies: Oh, yes. I was like, "Really?" Because the casual fan tunes into the World Series.

Mann: Yeah.

Gillies: Look, I don't think it's going to be a multibagger in short order from here, but I'm happy with the present valuation.

Mann: Yeah. From my standpoint, and I have not come out and made a formal recommendation of this company before, but I have spoken very highly of it as being one that I thought had a great future in front of it, including last year as the pandemic was starting, that exact same reason that every other form of entertainment that seemed was shutting down. Ultimately, I love the boost in brand that they're going to be getting from moving everything onto Peacock. I think ultimately, the value is going to accrue a lot more to WWE than it will to Peacock. It's a symbiotic relationship, but I think that the most value is going to be captured by WWE from that standpoint. The Saudi deal is going to ramp back up.

Gillies: And other deals, Bill. India, that was one I was going to point out. 

Mann: India was the one I was about to mention. I wanted to make sure that I got my statement of fact about it correct. I don't know if you know that, but there's a lot of people in India, Jim.

Gillies: [laughs] One or two.

Mann: It is conceivably a massive, massive market for them. Once again, something where you can very easily weave in live events and pay per view and all sorts of television subscribership, it's potentially massive for them. I think that this is a company that looks fairly valued given the results over the last year, but I think there was a whole lot of hidden optionality that's just in the process of being unlocked.

Gillies: One of those hidden options, Bill, -- I'm going to key off to something you've said earlier where Vince McMahon won a mountain that no one else wanted. But that everyone else had underestimated the value of this. Like a lot of people, even in Slido, I think, today, people, "Wait a minute, WWE --''just dismissed the idea of owning. This is a media and content company [laughs] trading at a reasonable value, folks, that has more dedicated fans than the NFL.

Mann: Rabid fans.

Gillies: Rabid fans.

Mann: People say, "Oh, wrestling is fake." You know what isn't fake? The fans of wrestling. You know what else isn't fake? The money of those fans from wrestling.

Gillies: Yes. You know what else is fake? Every television show you're watching on Netflix. [laughs] Like, "I'm not going to watch wrestling because it's fake." Well, I'm just going to go turn on Breaking Bad because that's a good documentary [laughs] of the drug trade in New Mexico. [laughs] Sorry. I think being underestimated is almost a superpower for Vince McMahon and the WWE.

Mann: Sure.

Gillies: Because people's first reaction is to literally blow off that investment thesis. Like you say, the money is real and the dedication is real. These guys own that real money and real dedication.

Sciple: I totally agree with you all, I think we're entering in the world of the Internet value, these niches, whether it's wrestling or UFC or any of these others, I think we're seeing that value be realized in a way that folks just haven't realized in the past. These niches are way bigger than anybody ever expected. When you have global distribution, you can really monetize those in a significant way and you talk about just dismissing the company, I just thought it would be fun just to run WWE through David Gardner's Rule Breakers framework because I think it fits right in there. [laughs] Nobody ever thinks about it. Top dog and first mover in an important emerging industry, globalized wrestling. The human race has had these types of performances for a long-line of time, but as far as a globalized entertainment media brand built on wrestling, the top dog and first-mover; check. Sustainable competitive advantage gained through business momentum, patent protection, visionary leadership or net competitors; I think they checked three of those off. Business momentum, they're the biggest in the world, they're the major leagues, the same way as the NBA, I don't think there's going to be another NBA that jumps up and challenges them. It's where the talent goes, it's where the money is. Visionary leadership, Vince McMahon, we already talked about. They've pioneered lots of different things when it comes to cinematography. He rolled up the industry, saw an opportunity there lots of other folks didn't. Enough competitors. Every other wrestling [laughs] business [laughs] has had horrible management.

Mann: Everything except for UCF. Everything.

Sciple: Inept competition; he's got all those. Pass price appreciation, it's beating the S&P handle the past five and 10 years. Good management, you've got the McMahon family, still owns about 40% of the stock, 80% of the voting shares. I think you're one, maybe not. Don't have the full check mark there because Vince is 75, is the controversial figure, maybe the company changes going down the road. Strong consumer appeal, I already said how big the YouTube channel is, WrestleMania is a huge brand. Overvalued, maybe it's not. The one that you don't compellingly check-off out of the Rule Breaker list is the valuation one, which I think is pretty good.

Mann: Even now, if there was a symbol for [...] By the way, I don't know why I have University of Central Florida on my mind. UFC, not UCF. [laughs] My mouth is moving faster than my brain. I get that a lot. But for me, when we talk a little bit about the Rule Breaker, the David Gardner checklist, you would never think at the top that you're like, "Oh, no, they're obviously going to fail the David Gardner checklist." It just doesn't seem like a David Gardner-ian process is going to show WWE in a very great light. I think it really has to do with one, to be completely committed to my term earlier that they own a hill that nobody else wanted. But two, you look at Vince McMahon and he's not necessarily the nameplate or he's not necessarily who you would view as being a top rated, highly accomplished effective CEO of a company. You just wouldn't. 

Sciple: Plays a bad guy on TV.

Gillies: I could probably apply that moniker to a few other CEOs I could name.

Mann: That's definitely true, Jim. I think that there are two knocks against McMahon. One is that I don't know that the way they treat their employees is necessarily that great. They tend to churn and burn the contractors.

Gillies: That's a whole other discussion.

Mann: The other thing with McMahon -- and he's gotten away with it. But I think that there's very few problems for Vince McMahon that aren't solved with money. Throw some money at this, see what happens.

Gillies: Yeah. Although, you do allow me to say one of my all-time favorite investing, little weird things is that -- WWE, of course, or WWF at the time, I guess, it went public in October of '99, and it was the day after another little company went public the day before. That was Martha Stewart Living Omnimedia. [laughs] You've heard me say this, if you were taking bets on which CEO was going to serve jail time, ain't no one taking Martha.

Mann: No. [laughs] Those are some pretty long odds. In fact, that bet may have been the best investment outcome of all, if that was [...] .

Gillies: Yeah, no kidding.

Mann: I don't even think, Jim, that you would have necessarily said -- I mean, at the time, when Martha Stewart Omnimedia came public, it was a machine with momentum. I don't think you would have taken the bet that WWE would've outperformed it.

Gillies: 100% not, you're right.

Mann: Yet.

Sciple: Yet, WWE has done that over the past 20 years, maybe it'll keep doing it over the next decade to come. Thank you all for coming on the podcast to chat with me about it. If you can't tell, this is a company I love talking about, it's a fun one. [laughs] Thank you all for indulging me.

Mann: Thanks, Nick. This is super fun.

Gillies: Thank you, Nick.

Sciple: As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear. Thanks to Tim Sparks for mixing the show, for Bill Mann and Jim Gillies. I'm Nick Sciple. Thanks for listening, and Fool on!