Is She Worth It?...Oprah Winfrey

Is She Worth It?

Oprah Winfrey and Her Purchase of Weight Watchers

     On the 16th of October Oprah Winfrey purchased a 10% (6.4 million shares) stake in Weight Watchers (WTW) worth $43 million. In 2 days that stake was at one point worth $119,404,000, some may think that's a bit fishy, using your name to solely increase the price of a stock. The company has seen a steady decline in revenue over the last 4 years which has been attributed to mobile fitness devices and apps. For Oprah it makes sense to enter into a deal and purchase a stake in the company,
her media empire could do wonders for bringing in customers. Right off the bat her name alone has increased the valuation of the stock, but does her expertise and possible help in marketing bring enough to the table to turn this company around, not in valuations, but in real earnings?

     No is the short answer. But we aren't in the game of answers that short, we like to expose the facts so that you can make informed decisions in the future. To give you transparency here are the details about their partnership (taken from their website):

• Member – Winfrey has joined the program and will candidly share her experiences and perspective along the way.
• Board Member and Adviser – Winfrey will bring insight and strategy to program development and execution that reflects not only her own experiences as a member, but also her unique ability to inspire and connect people to live their best lives.
• Owner – Winfrey will purchase newly issued shares representing 10% of the shares outstanding and will receive options to acquire an additional 5% of the fully diluted shares.

     First lets talk about what challenges they have going forward. The first one is being able to gain and retain new customers. Weight Watchers has been primarily losing customers to apps people can easily access on their phones, and for free. The next one is a bit of a conundrum, their business isn't actually good for business. If their program works then the people that sign up will pay, lose weight, and then no longer need Weight Watchers and cancel their membership. They will need to figure out how to retain customers after they have lost their weight. 

New Weight Watchers App

     Even before they signed a deal with Oprah Winfrey Weight Watchers has rolled out new offerings that include subscriptions that offer either entirely online & app based weight loss products starting at about $20 a month or online, app, and in person meetings starting at about $33 a month. The challenge they face here is having a premium enough service to were a free app is not an effective alternative. Perhaps they could offer a freemium app that requires payments for increasing amounts of service or goods. 

     Next they have to keep people paying past the point of weight loss, after all the most important part of weight loss is keeping it off. If they can monetize this part of their customer base they will have created a steady predictable portion of their revenues. Going forward they should add services that will help do this like identifying diet trends that have made you gain rather than lose weight or having a different point system to maintain weight. Monetarily they could offer discounted memberships for those that get to and maintain their healthy weights. This would give them an incentive to stay with weight watchers and stay at their healthy weight.

Will her Media Empire Help? 

     So how does Oprah Winfrey solve these dilemmas that weight watchers faces? She solves maybe one at best solely through her marketing power, and that's gaining new customers. The other problems will only be helped by giving their solutions better marketing power than what they already posses. 

     Should this change your view on investing in weight watchers or not? I would say not yet, as with any company I would not recommend investing in anything that does not have positive results. Weight Watchers definitely lacks positive results seeing as their most recent reporting Q3 15' showed they were down 20.8% since last year. Right now a purchase in Weight Watchers is simply an educated gamble.