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TKO Group Holdings, Inc. President and Chief Operating Officer Mark Shapiro took part in a discussion on Monday 10/4 at the UBS Global Media and Communications Conference. Below is a transcript of the 31 minute conversation.
Ryan Gravett: Thanks for joining us this year, Mark. Absolutely,
Mark Shapiro: Ryan. Good to see you.
Ryan Gravett: So we're almost at about three months since the close of the transaction to bring together WWE and UFC. What have been the key learnings since the close and what are your top priorities as we head into the new year?
Mark Shapiro: Look, this is a sort of a humming engine right out of the gate. I'm happy to say. Just in the sense of the financial profile is, extremely strong. We're super cashflow generative. EBITDA margins of 40 percent between the two properties. Upwards higher than that. comfortable, manageable debt position. Net debt position at two and a half times. Certainly some opportunity to be flexible there if we saw fit. Low cap X. And a host of revenue and expense synergies. That we're just starting to get our arms around and we're three months into your point. So a lot of work to be done, but we've got a lot of best in class metrics that UFC like sponsorship, and we've got a lot of best in class metrics at WWE like digital content, social content and monetizing digital and social content. They've done an unbelievable job in that respect. So right now we are just 100%. those to the ground, working on our, those efficiencies, those synergies first on the expense, but right now merging our best in class teams to make sure we capitalize on the revenue monetization.
Ryan: Maybe if we jump into some of the major revenue drivers We've seen some major sports rights renewals in the market recently. We had NASCAR last week but obviously at the same time there's pressure going on in the pay TV ecosystem. So I guess just from a broad level, love to get your take on just the state of the sports rights marketplace today.
Shapiro: Yeah. I frequently talk about this because I think everybody just, first of all, skeptics want to be careful, and I get that everyone's doing their models. But everybody's waiting for the sky to drop on sports rights and it's just not happening, whether it's Friday, NFL on Amazon, which went for 100 million for one game, or the new NASCAR deal, which you're talking about, which is a 40 percent increase, our SmackDown deal was a 40 percent increase on an AAV, are relatively much smaller, but NXT on the WWE side, we renewed it a 70 percent AAV. Increase the NWSL, which is the new women's soccer league went for a nice increase. And I'm optimistic. Remember we're on the IMG side of this as well with Endeavor. We negotiate media rights for a living. And on the IMG side, they're in right now in the middle of an, a renegotiation for all the NCAA properties. So not men's football or men's basketball, but everything else from wrestling to volleyball to. The women's final four, which is going to go for a significant increase, and they're just in the exclusive window with ESPN if and when it gets out the market, it'll go even higher than I'm anticipating. So look, sports rights are urgent. They're immediate. They're live. They're water cooler. They're multitasking, social. People like to chatter about them and root and argue Florida States got screwed yesterday for the CFP or if it went down as it should have gone down. And as long as that continues, as long as these media companies, these behemoths are launching their own direct to consumer platforms, they're going to need sports if they want to either A, drive subs, or B, drive price.
Ryan: You mentioned the NWSL deal looks like it went to four different partners this time. NASCAR to five different partners. BA is probably going in a similar direction. Is that the, where the market is heading just in terms of spreading the cost across more partners and still kinda maximizing the rights value for the holder?
Shapiro: Yeah. Look, what I would tell you is there's an argument to be made both ways, right? We benefit in UFC from having essentially one partner, right? We do everything with ESPN and A B, C we're across their direct to stream, direct to consumer with ESPN+. We're in conversations about what happens when the flagship goes direct to consumer. we're on ESPN, ESPN2, even ESPN News sometimes from a linear perspective. And then a lot of our weekend fights are bumped up to ABC. It's a great place to be because they're a marketing machine. They're the best brand in sports. But having said that, the NFL has got an incredibly successful model having splintered their media rights for years across linear and now streaming networks. So it's a, it's a great time to be in sports overall. And I think that Steve Phelps, just speaking to him because he's, most current, he's of course the president of of NASCAR. He went out there and maybe he found some linear networks like Fox and NBC that said, We love NASCAR. We want to be in the NASCAR business. We can't pay as much or as much of an increase, so we'll take less inventory, but that wasn't an issue because you could still put a lot of his premier content on those linear platforms. And at the same time, a lot of mouths to feed and a lot of. A lot of folks lined up to be fed, and that's why he was able to go to CW and Amazon and and I think we're in that similar position, on the WWE side, we've already renewed two of the three deals we're in conversations on Raw. Our deal with USA is not up until October of next year. So we've got time, we've got time to be flexible, we've got time to be creative we've got time to develop different solution models for. Depending on what the player may be, and we can also go before the NBA if the price is right, or we can go after the NBA if somebody gets left at the altar. It's a good place to be. And UFC, of course, we still have two more years of that deal, and we'll have a conversation with Disney first and foremost.
Ryan: On the Raw package, I think you mentioned you could go before or after the NBA deal. Are there other milestones out there that investors should be watching? Other sports properties? I think college football playoff is on the horizon. Is there other things we should be watching? I would have said that the one that was most analogous was NASCAR, but now that's done and ended in a very favorable place.
Shapiro: Yeah, there's CFB. There's always going to be something. I talked about the NCAA and there's a lot of traditional players lining up for the NCAA. And that'll be a hefty price. A lot to be figured out but having said that there's no necessarily, shiny point of when. Or if we'll go, we have time, we can be flexible, we can be patient, our job is to maximize the rights value of RAW, and I would tell you at the same time, just remember that we do all the production, so we just feed, you take it in and you air it or you charge for it, so we can literally wait till the night before if we want to decide where we're going to go in the next deal.
Ryan: And you mentioned it a bit, but just on the UFC side a bit more time left before that deal is up, as it's currently structured. Can you just talk to the plans, over the next couple of years to make sure.
Shapiro: Yeah, look, we've got two years left on the UFC deal once we get past December here we're flying high on the UFC, it's just the linear ratings are extremely strong, the buys for ESPN have been extremely strong, we're developing new stars our social is very robust and we're monetizing it like never before, our sponsorships [are] up near $200 million when we bought the UFC at Endeavor, we were doing you know, roughly $40 million in sponsorship. So that shows you the kind of opportunity and the size and the scale, the breadth of the UFC, the fan base, the way it's grown and the way we've been able to monetize alongside it. And that makes us very optimistic about what we can do for the WWE, which I'll remind you, has five times as many events, right?
There's 42 events that take place for a UFC. Plus our pay per views, plus the Dana White Contender Series. But you've got over 300 events at WWE. Now, only 170 are televised. But, nonetheless, you've got sold out shows across the board. Wherever you're going, from Cheyenne, Wyoming, to the Survivor Series we just had in November in Chicago. So we've got a lot of opportunities for eyeballs. Both in ratings and ad dollars it's, it's a good place to be. And when you think of the UFC, remember, we also have fight pack, which is our analogous to our WWE Network, which is our streaming service. That's something we own in totality.
It's a proprietary product and platform very much the way WWE was under Vince McMahon until he decided to do a deal with Peacock for $250 million. So going forward, Fight Pass may be something we take to market. We may package it in with our current content vehicles. We may keep it the way it is and just continue adding more live sports to drive subs and reduce churn.
That's all, to be decided. And then of course, the WWE Network. The deal with NBC is up in March of 26, and that's something that frankly, we can take the market all by itself or we could potentially package with the UFC as that, they're in similar time frame in terms of when they come up to drive value again.So it's sports rights are hot. The experience economy is hot. We're seeing it in attendance. We're seeing in our ticket pricing, we're seeing in premium experiences that we offer through on location. We're seeing in site fees. And we're certainly going to continue seeing it from a media rights price perspective.
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