My goal with this newsletter is to provide a window into my thought process about investing. Considering the deluge of content out there, I hope you find this to be a fairly high signal and low noise read.
If that is the case, I am asking you to forward this along to someone. As my business grows, I am trying to find creative, low friction ways for me to reach a broader set of potential investors. This seems like a good first step!
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I wrote about Comcast in my first newsletter way back in October 2018. I’ve maintained that investment over the entire life of SCP. It’s a really big company followed closely by the markets. What type of advantage do I have investing in a company like Comcast? If you made it to the end of my inaugural issue, you would know I believe there are three types of advantages: Information, Analytical, Behavioral.
My beliefs on this remain unchanged. My biggest advantage against the market is behavioral. I am willing to concentrate investment in my highest conviction ideas. Furthermore, I am willing to hold these investments for a long period of time. When it comes to information I believe it is increasingly commoditized. The ability to have a significant advantage over the market via information is a game I don’t believe is winnable over the long-term. That leaves analytical, which is the point of this newsletter.
I believe you can only prove an analytical advantage retroactively. This requires you, the reader (and potential investor!), to take a leap of faith in my ability to better analyze information than the market. With that being the case, I want to provide an example of how I am monitoring Comcast today and analyzing information to inform my thesis.
Comcast is the proud owner of NBC Universal, which owns a variety of media assets such as film studios, tv stations, theme parks, a stake in Hulu, and Peacock. Besides theme parks, Peacock is the most important asset within NBCU because it is the platform needed to bridge the chasm from linear to digital content. Peacock was launched last year during the height of the pandemic. The timing wasn’t great as the Olympics were meant to be a tentpole event drawing in new subscribers. Despite those issues, according to management Peacock has exceeded all internal forecasts.
As an investor you want to believe everything management tells you. It makes your job easier. However, as Ronald Reagan said during the Cold War, “Trust, but verify.” My job analyzing businesses requires a similar ethos. You need to build up trust that what management is telling investors is true. The ability to independently verify said information, however, is extremely helpful. Which leads us to Vince McMahon, Stone Cold Steve Austin, and the WWE!
This spring Comcast signed an exclusive deal with WWE. Under the deal WWE is bringing all of their content onto the Peacock platform. I think this is an incredibly important incremental data point for the thesis Peacock can be a successful digital content platform. Chief among them is the WWE needs to balance maximizing revenue and audience reach. Peacock is positioning itself to be the go-to platform for live events. WWE on their last earnings call highlighted why this was the case.
“So in terms of sponsorship working with Peacock, basically, anything that you'll see that will air on Peacock in terms of sponsorship, we are working with them. There is a lot of white space, if you will, as was recognized, I think, in the question around WrestleMania, around all of our major properties. And when you're dealing with teams who have regularly sold the likes of the Olympics and the Super Bowl, you're working with really top-notch teams who will provide us opportunities that we have not had in the past."
Secondly, the WWE has been on the forefront of innovation. Prior to Peacock, WWE ran their own digital platform called the WWE network. This began all the way back in February 2014. For reference, Netflix released House of Cards to streaming 12 months earlier in February 2013. More recently WWE created NFTs (Non-Fungible Tokens) around the Undertaker and WrestleMania. These anecdotes highlight how the WWE attempts to stay on the cutting-edge and better serve their fans.
Which makes the decision to partner with Peacock so interesting. In less than a year after launching, Peacock had the right combination of audience, advertisers, and technology to get the WWE to shutter their service and partner with them. They wouldn’t do this to be charitable. They believe partnering with Peacock will provide some economic benefit. From the excerpt above, that likely comes in the form of more Revenue via better advertising deals. Peacock will be able to profit off their ability to increase the size of the WWE’s pie.
Unfortunately, there isn’t an easily quantifiable data point to prove or disprove an investment thesis. Those rarely exist outside of biotech. However, data from Sensor Tower provide support for the thesis. The chart below shows daily signups for Peacock following the announcement and in the run up to WrestleMania.
Time will tell if this thesis is correct. The Information I provided is readily accessible for most investors. The Analysis providing context behind the WWE’s decision provides insight into how and why Peacock can be successful. The ability to stitch together these seemingly disparate points hopefully provides an advantage over investors unable to make a similar connection. This all feeds into the Behavioral components of investing. The rules and compositions surrounding investment decisions are increasingly the main differentiator for investment returns. My ability to concentrate in high conviction ideas over a long period of time will hopefully continue to generate attractive returns.
Interested in learning more about me, my firm, and my investing process, please reach out at bill@springcitypartners.com