In this engaging podcast episode, Motley Fool analyst Nick Sciple joins host Ricky Mulvey to delve into several exciting topics:
- The excitement surrounding the debut of Raw on Netflix and its implications for wrestling fans.
- An exploration of what’s permitted in Tribal Combat, including why wrestlers disregard the announcer’s table boundaries.
- The new “100% margin” revenue opportunities emerging for WWE and their potential impact.
- Understanding why TKO Group Holdings stands out as one of Nick’s largest personal stock investments.
Following this discussion, Motley Fool host Alison Southwick teams up with personal finance expert Robert Brokamp to share essential strategies for preparing your investment portfolio for 2025.
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You can find a full transcript following the video.
This video was recorded on January 7, 2025.
Ricky Mulvey: In the realm of tribal combat, anything goes. Welcome to Motley Fool Money. I’m Ricky Mulvey, and today I’m thrilled to be joined by Nick Sciple. Excitement is palpable in my voice because we are now officially a recap show for Monday Night Raw here on Motley Fool Money. Thanks for being here, Nick.
Nick Sciple: It’s fantastic to be here, Rick. We have plenty of friends in the wrestling industry on platforms like YouTube, and I’m excited to connect with the international wrestling community.
Ricky Mulvey: Last night marked the thrilling streaming premiere of Monday Night Raw on Netflix, a significant event in the world of wrestling. We’ve anticipated this transition for about a year, but last night was the first live broadcast on the platform. What were your thoughts on this monumental premiere?
Nick Sciple: It was nothing short of a spectacular event, truly felt like a massive TV moment. The audience was filled with stars, from Macaulay Culkin to Vanessa Hudgens and Travis Scott, alongside wrestling legends like John Cena, The Rock, Roman Reigns, and Solo Sikoa. It had the grandeur of a WrestleMania event, and WWE certainly treated it as such. The shift from one of the most popular cable TV shows to streaming represents a significant evolution in media consumption. I anticipate many new viewers in the U.S. tuning in to Monday Night Raw, especially since it’s easily accessible at the top of Netflix’s banner. More importantly, this move opens doors for international viewers in countries like India, the Middle East, and Latin America, where wrestling has a following but previously lacked access due to its cable TV exclusivity. This transition is monumental not only for Netflix but also for WWE, which is now exploring live events as a regular feature on their platform, following previous successes like the Christmas Day event and the Paul Tyson fight.
Ricky Mulvey: While it felt like another episode, the star power was undeniable, with icons like John Cena and Dwayne “The Rock” Johnson making appearances, even though they didn’t wrestle. As someone who doesn’t follow professional wrestling closely, I was reminded of how much of the experience involves audience reactions and storytelling. However, Raw has faced declining viewership over the years, dropping from about two million average viewers in late 2019 to roughly one and a half million by late 2024. Given this platform change, do you believe it will reignite long-term viewership growth for WWE?
Nick Sciple: My answer is a mix of yes and no. On one hand, the transition away from declining cable subscriptions should help WWE recover some lost viewership. However, as audiences have more options in the Netflix era, viewership has become increasingly fragmented. That said, I do expect to see a significant uptick in viewership for WWE on Netflix, driven by new audiences discovering the show through the platform’s prominence and international viewers who have historically lacked access to WWE content. Netflix now holds rights not only to Monday Night Raw in the U.S. but also to other WWE programming like NXT, SmackDown, and premium live events globally. This positioning at the forefront of Netflix’s offerings means that both WWE fans and newcomers will finally have the chance to engage with the product. Additionally, Netflix will benefit from access to WWE’s audience, which boasts over 100 million subscribers on YouTube, many of whom are outside the U.S. This cross-pollination could drive substantial growth in Netflix subscriptions, particularly in international markets.
Ricky Mulvey: I believe we’re also going to see a younger demographic engaging with the content, as they’re more inclined to browse Netflix compared to traditional cable. With Monday Night Raw airing every Monday, new viewers are bound to tune in. I had a new viewer in my fiancĂ©e, who I encouraged to watch it for this discussion. Although I didn’t manage to see the entire broadcast, I did catch over two hours of it. She initially pretended to be uninterested but began asking questions, which I found delightful. I thought it would be great to pose her questions to you, as an expert in this field. Her inquiries centered around the first match, which was tribal combat featuring Solo Sikoa versus Roman Reigns.
I’ll share her questions with you since I couldn’t answer them. Firstly, why do they fight outside the ring? Why do wrestlers throw each other at the announcer’s table? She also expressed her uncertainty about this type of wrestling. What exactly is tribal combat? Why do they have commercial breaks during matches, and why do random individuals enter the ring? Nick Sciple, what’s your take on these questions?
Nick Sciple: I saw these questions in advance and tried to come up with sensible explanations. While some aspects might seem absurd to newcomers, wrestling is essentially a crafted narrative for television. Just like you might encounter a commercial break during a cliffhanger on your favorite show, wrestling matches also have breaks to accommodate advertising. The ongoing storyline, which has spanned over 1,500 episodes, revolves around good versus evil, often with supernatural elements. In the case of Roman Reigns and Solo Sikoa, their match is about establishing dominance as the true tribal chief of their lineage.
It’s fantastic to see new viewers engaging with WWE through Netflix. While not everyone will become a devoted fan, there will undoubtedly be a segment that does. For those unfamiliar with the spectacle, it may seem silly, but WWE has maintained a dedicated fan base for years. This content resonates across the globe, much like other beloved media franchises. That’s the essence of WWE, and that’s how I would respond to Sam’s inquiries.
Ricky Mulvey: It was indeed a unique viewing experience. Regarding the ads, there’s a notable shift in the business landscape, especially with Netflix’s introduction of advertisements, which is a new concept for wrestling fans. It was interesting to see brands like Snickers and Fortnite sponsoring the action. Additionally, the commercials reminded me of traditional television, featuring subway sandwiches and candy, rather than the more recent trend of pharmaceutical ads that dominate other broadcasts. You’ve been following these developments more closely than I have. What are your thoughts on the advertising changes and how WWE has adapted its broadcast since moving to Netflix?
Nick Sciple: The nature of the ads reflects Netflix’s target audience and the types of advertisers they’re engaging with. I did notice an increase in the number of in-ring advertisements. While we previously saw limited sponsorship with Logan Paul’s Prime drink, this time there were four different sponsors displayed in the ring, including Fortnite, Snickers, and Cricket Wireless. WWE management has indicated that they now have more flexibility in structuring commercial breaks in the U.S. than they had on prior platforms. It’s worth noting that Netflix has yet to roll out ads for international audiences, but that could change down the line. As for WWE’s in-ring advertising, this represents revenue with a 100% margin, as it’s simply placing logos in the ring. This strategy has seen increased focus following the TKO merger, and I anticipate many more such deals as Netflix leverages its audience.
Ricky Mulvey: The deal between Netflix and WWE spans a decade, which is quite extensive for sports broadcasting rights. While exact numbers weren’t disclosed, reports suggest it exceeds five billion dollars. We’ve primarily discussed TKO Holdings in relation to WWE, but the other major component is the UFC, which happens to be more aligned with my interests. I’m eager to discuss that as the ESPN deal is set to expire at the end of this year. For those listening, it’s important to note that TKO’s revenue is evenly split between WWE and the UFC. The UFC has benefited from the legitimacy that comes with its ESPN partnership, especially given its relatively new status in the sports industry. Considering the excitement around the Netflix deal, do you anticipate a similar partnership for the UFC, or what trends should we watch for during these negotiations?
Nick Sciple: Many believe Netflix could be a viable option for the UFC, given the potential for increased viewership and routine engagement that Netflix offers. However, Dana White has indicated a preference for maintaining the relationship with ESPN due to the credibility it brings. But why not explore both options? Like many other major sports leagues such as the NFL and NBA, TKO could split their rights between platforms like Amazon, ESPN, and Netflix. Perhaps some UFC events like UFC 305 and 306 will remain on ESPN, while others, like fight nights, could transition to Netflix or Amazon. There’s also the possibility of minor events, such as Dana White’s Contender Series, landing on Netflix, while traditional programming stays with ESPN. TKO is well-positioned to maximize revenue by negotiating with multiple partners, especially since many other major sports leagues have already completed their deals. This makes TKO a highly sought-after entity in the current market.
Ricky Mulvey: Another significant player entering the scene is the Kingdom of Saudi Arabia, which announced that the Royal Rumble will take place in Riyadh. This is noteworthy because it indicates Saudi Arabia’s growing interest in hosting combat sports and entertainment events. They’ve already welcomed major boxing matches and UFC events, and now WWE is joining the mix. This trend has implications for TKO Holdings’ business as well. What does this Saudi interest mean for WWE and UFC?
Nick Sciple: In a nutshell, it translates to significant financial opportunities. WWE has had a longstanding relationship with Saudi Arabia, being one of the first major sports organizations to host events there, investing tens of millions each time. Additionally, both WWE and UFC are generating sponsorship revenue from the Kingdom’s initiatives, like Riyadh Season. There’s even speculation about Dana White potentially expanding into boxing with Saudi support. The influx of money from Saudi Arabia is undoubtedly beneficial for TKO’s business. More broadly, WWE’s international presence has proven to be invaluable, setting records for gate receipts during events like the first Raw episode on Netflix in Los Angeles, surpassing previous records from Berlin, Lyon, and other international markets. This international revenue stream, coupled with rights fees from both Saudi Arabia and other global markets, adds to TKO’s bottom line significantly.
Ricky Mulvey: Recently, I made an investment in TKO stock. Part of my rationale stemmed from our earlier conversation about the importance of being a savvy player in this media landscape. My experience attending a sold-out UFC fight night in Denver also reinforced my interest. However, many investors have faced challenges with fight promotions, and TKO’s stock appears to be on the pricier side. What is your bullish case for TKO at this time?
Nick Sciple: I am indeed a TKO shareholder and it represents one of my largest personal investments. I’ve already touched on the potential for significant revenue from broadcasting rights. The UFC is poised to secure a substantial deal when it renegotiates its broadcasting agreement later this year. Additionally, the U.S. rights for premium live events, currently held by Peacock, are also up for grabs, and it’s plausible that Netflix could acquire these rights to complement international premium live events. Both the UFC and WWE’s rights negotiations are expected to yield substantial increases in revenue, which would directly contribute to TKO’s profitability. Moreover, the anticipation of higher venue fees, as evidenced by the Saudi Arabia deal, will also bolster revenue. TKO is exploring opportunities for site fees for events like Monday Night Raw and SmackDown, which are expected to represent significant revenue streams.
Furthermore, the advertising revenue generated from this partnership is a major catalyst for growth. The number of in-ring sponsors has increased dramatically, as evidenced by this latest event featuring five sponsors compared to just one or none previously. This represents a new revenue stream for TKO, which is entirely profit-driven. As we discussed earlier, the consolidation of the UFC and WWE teams has allowed for operational efficiencies, and sponsorship revenue has surged by 50% year-over-year through Q3 of 2024. Overall, TKO is poised for significant growth, fuelled by multiple catalysts, and I remain optimistic about its future in the media landscape.
Ricky Mulvey: Nick, we’ve spent quite a bit of time on this topic, but I value your insights, especially regarding a company that you hold significant personal investment in. Thank you for sharing your expertise with us today.
Nick Sciple: Thank you, Ricky. I’m always happy to be here.
Ricky Mulvey: If you found this discussion valuable and are eager to enhance your investing skills, visit fool.com/signup to join Stock Advisor. As a member, you’ll receive two new stock picks each month, comprehensive rankings of numerous companies, and access to all episodes of our premium podcast, Stock Advisor Roundtable. This exclusive show dives deeper into our Foolish recommendations, featuring insights from familiar Motley Fool analysts. Tom frequently appears on bonus episodes of Stock Advisor Roundtable, providing updates on the Stock Advisor universe and addressing questions from members. Visit fool.com/signup, and I will also include a link in the show notes.
Up next, Robert Brokamp and Alison Southwick share practical strategies to refine your investing approach as the new year unfolds.
Alison Southwick: I think I’m experiencing a bit of the post-holiday blues. How about we visit Bicester Village to explore their incredible sales? You can find discounts of up to 70% off original retail prices in select boutiques, including All Saints, Coach, and The North Face, available until January 26th. Bicester Village is conveniently located just under an hour from London. It’s shopping, but with an upgraded experience. Terms and conditions apply. For more information, visit bicestervillage.com.
January is a crucial time for reviewing your portfolio’s performance. It’s essential to evaluate the effectiveness of your portfolio managers, including yourself, and consider some rebalancing. This period also prompts introspection about what kind of investor you aspire to be.
Robert Brokamp: Absolutely, as an investor, you’ll face numerous decisions regarding asset allocation and exposure. Will you invest in individual securities or opt for mutual funds or index funds? Are you satisfied with your current portfolio, or do you need to adjust your investments? Lastly, will you navigate these choices independently, or seek professional guidance? The start of the year is a fantastic opportunity to reassess these critical decisions.
Alison Southwick: Those are indeed substantial decisions. Where should one begin this process?
Robert Brokamp: Let’s kick things off with a fundamental aspect: cash. It’s a necessity for covering bills and unforeseen expenses, and it should not be invested in the stock market. As we progress into the new year, consider bolstering your cash reserves. This includes establishing an emergency fund, ideally covering three to six months’ worth of essential expenses to safeguard against job loss or unexpected large expenditures. For context, I recently faced an emergency on Christmas Eve when my water heater broke, causing a flooded basement. Starting with a clear understanding of how much cash you need is vital. Ensure you seek competitive yields on your cash holdings. The Federal Reserve made several interest rate cuts last year, and while further reductions may occur this year, there are still opportunities to secure yields of 4% or higher on cash, but this requires some diligent searching. One excellent resource is Motley Fool Money, which provides insights similar to this podcast. Remember to scrutinize the cash options in your brokerage account as well, as default choices often offer subpar yields compared to money market funds or higher-yielding cash alternatives.
Alison Southwick: The first step involves determining your cash needs and finding a competitive yield. But how should investors approach their stock and bond allocations?
Robert Brokamp: You can determine your allocations independently or seek professional assistance. Even if you choose to navigate alone, it’s beneficial to observe how professionals allocate their portfolios. Target date funds are a helpful resource, offering a balanced mix of cash, bonds, and stocks. They automatically rebalance and become more conservative as the target retirement date approaches. I researched allocations for target date funds from BlackRock, Fidelity, T. Rowe Price, and Vanguard. For instance, a 2025 target date fund, which caters to individuals retiring this year, typically holds 46% stocks and 54% bonds and cash. A fund targeting 2035 may have 66% stocks and 34% cash and bonds, while a 2045 fund might comprise 85% stocks and 15% bonds and cash. These allocations serve as reasonable starting points for investors with moderate risk tolerance. If you’re more aggressive, consider increasing stock allocations by 5-10 percentage points. Delving into the funds’ asset allocations, you’ll discover insights regarding areas such as small caps and various bond types. It’s worth noting that many target date funds contain over a third of their stock allocation in international stocks, which has weighed down performance compared to U.S. stocks that have outperformed for over a decade. However, one of these years, international stocks are poised for a comeback; we just don’t know when.
While target date funds cater to a broad audience, they may lack personalization. For a more tailored approach, consider exploring Robo-advisors like Betterment and Wealthfront, or even offerings from major firms like Vanguard and Schwab. Though these services tend to charge around 0.25% annually, they offer more customized strategies aligned with your risk tolerance. Some Robo-advisors also provide benefits like tax-loss harvesting and financial planning. Alternatively, you might hire a financial advisor, which may involve higher costs but allows for regular meetings with a human expert who can create a comprehensive financial plan tailored to your needs. Fee-only financial advisors are often recommended, as they charge for their advice without the conflict of interest that can arise from commissions. You can find fee-only advisors through networks like Garrett Planning Network, NAPFA (National Association of Personal Financial Advisors), or the XY Planning Network. Ultimately, managing your allocations and rebalancing can provide greater control over your investment strategy. Still, I believe that starting with broad allocations from target date funds is a solid foundation that can be adjusted to suit your risk tolerance. A few additional rules of thumb: consider limiting any single stock to 10% of your portfolio and keeping individual sectors to around 20-25%. While these aren’t strict rules, they serve as a guideline to avoid excessive concentration in your portfolio.
Alison Southwick: Discussions about bonds are often scarce here at The Motley Fool since they tend to be considered dull, unless you’re Steve Broido. However, bonds have not performed well recently. In fact, the Vanguard Total Bond Market ETF has lost value over the last five years. Do investors still need bonds in their portfolios?
Robert Brokamp: Traditionally, investors turned to bonds for yields of 1-3% above cash, but recent years have presented a challenging environment for bonds, making this approach less effective. We’ve navigated a particularly tough period for bonds in U.S. history, marked by low interest rates during the pandemic followed by rising rates. When interest rates increase, bond prices generally decline. However, the outlook for bonds is improving, with current 10-year treasury rates hovering around 4.6%. Bonds warrant consideration, especially individual bonds, as they offer predictability regarding interest payments and maturity amounts, assuming the issuer remains solvent. In contrast, bond funds experience price fluctuations without the same level of certainty. However, a specific type of bond fund known as target maturity bond ETFs, or defined maturity ETFs, can be advantageous. These funds hold bonds maturing in the same year, providing some benefits of individual bonds. Major issuers of these funds include Invesco (under the BulletShares brand) and iShares (known as iBonds, which should not be confused with U.S. iBonds). That said, I understand if you prefer to stick primarily to higher-yielding cash or treasury bills lately, given the limited yield advantage of bonds at the moment.
Alison Southwick: Now, let’s turn our attention to the investments that resonate with Fools, stocks—sometimes referred to simply as stocks. What are the various ways to invest in the stock market?
Robert Brokamp: The Motley Fool was founded over 30 years ago on the principle that investing in stocks is the most effective route to long-term wealth creation. Fortunately, you can invest in the entire stock market through index funds. Unless you’re an avid stock picker, I advocate for making index funds the cornerstone of your investment strategy. The most popular choices include funds tracking the S&P 500 or the total U.S. stock market, both of which serve as excellent starting points. Additionally, there are index funds based on various indexes that provide diversified, low-cost exposure to market segments that you may not already include, such as international stocks, small-cap stocks, or sector-specific funds. Index funds possess a significant advantage due to their low costs—since they don’t require a team of managers to select investments, they typically outperform 80-90% of actively managed funds over most 10-year periods. You could easily build a diversified portfolio of index funds, rebalancing annually, and spend less time worrying about it. But if you’re listening to this podcast, you likely want to engage