Live Coverage: WWE Q3 2020 Earnings Report

WWE’s Q3 earnings report is today after market close. It will cover the period Jul 1 to Sep 30.

In this thread I’ll be covering the information as it becomes available.

Conference call is at 5pm ET. Anyone can signup to listen at

Despite effects of Covid, I expect WWE to still record net income on par with its most profitable year ever.

First some background on WWE business as we know it this morning.

WWE’s market capital (the value of all shares combined) is currently just under $3 billion, down after huge waves of optimism in 2018 following the renewal of TV deals for Raw and Smackdown.

On January 30, CEO Vince McMahon fired his top two executives, co-presidents George Barrios and Michelle Wilson. Declines in the stock price and wider market uncertainty related to Covid followed.

Related press release:

As of August, Barrios and Wilson’s positions have been filled by new hires Kristina Salen in the CFO role (formerly of Etsy) and Nick Khan as president and chief revenue officer (formerly of CAA).

Khan was instrumental in helping WWE complete its 3.6x upgrade in US TV rights in 2018. The company likely hopes he can complete deals to sell the rights to PPVs to a major streaming player, rather than exclusively on the Network where they are primarily consumed today.

Last week I wrote a preview on what we might learn today. You can read it now, ad-free and paywall-free:

WWE Network average paid subs as we know them today are shown below. Q3 numbers will be updated this afternoon.

Subs are normally down in Q3 as it follows the Wrestlemania quarter. But there’s been a wider consumer embrace of streaming this year coinciding with the pandemic. Will this help WWE?

Last quarter online merchandise orders had a huge jump as fans were unable to buy merchandise at venues due to no live events. Will that continue into Q3?

The big question around WWE profitability this quarter centers around the Thunderdome. The introduction of the huge multimedia set coincided with the stabilization of plunging viewership for Raw and Smackdown. What production cost WWE though is uncertain.

Producing Raw and Smackdown at the company’s Performance Center throughout all of Q2 resulted in increased profitability. Q1 was even more profitable than WWE previously expected, partly due to lower expenses of running at the PC for the final weeks of Q1.

WWE also cut costs in April. Some of the non-compete compensation took until July to end. I don’t see this having a huge effect on the bottom line. Some may be overestimating the effect since talent releases are so visible to fan coverage.

The cost of the Thunderdome, per episode, is certainly higher at the PC. I could see the cost being as high as that of the pre-Covid traveling arena model.

Looking at the operating income line for WWE’s media division later today and comparing Q2 to Q3 may shed some light.

My predictions for the numbers WWE will report today:

WWE shares are climbing a bit late in the day

Q3 docs are dropping!

Key Performance Indicators (new look!):

Trending Schedules:

WWE reports net income for Q3 of $48.2 million. In only nine months, 2020 is already the most profitable year in WWE history.

Earnings per share of $0.57, exceeds even the highest analyst’s estimate.

Revenue for the quarter is $221.6, even with expectations.

WWE Network average paid subscribers are 1,604,000. That’s down only slightly from Q2, holding up better than many (including me) expected.

Online merchandise sales in the pandemic era continued performing well above last year’s trends, somewhat making up for the lack of any merchandise sales at venues.

More detail on WWE profitability: Net income now totals $118 million. As long as WWE doesn’t lose money in Q4 (no reason to think they will) this is the most profitable year ever.

Operating income for Q3 $63.4 million. WWE’s preferred profit metric, adjusted OIBDA was $84.3 million.

Profitability is almost completely driven by margins in the media division, where revenues for Raw and Smackdown rights are guaranteed and escalating.

It sounds like Q4 will be a lot less profitable as WWE incurs expenses related to the Thunderdome and employees returning from furlough.

The company refrains from reissuing guidance, citing Covid.

As WWE releases news it beat expectations, the stock price is continuing to climb in after-market trading.

New, darker-hued KPIs in the Salen era offer these comparisons of WWE Raw and Smackdown viewership trends, showing top 25 cable network viewing up 4% and broadcast viewing down 24%. In the below comparison, Smackdown was still on USA Network a year prior.

More from the updated KPIs: AVOD consumption (ad-supported video viewing on platforms like YouTube, Facebook, etc.) was up year-over-year, but not as high as the records set last quarter.

I believe WWE generates around $20 million in revenue annually from YouTube.

Media ad and sponsor revenue (which includes YouTube, on-air sponsorships, and WWE Network commercials) seems to be back to normal, reporting $18 million for Q3, after dipping in Q2, likely related to the wider economic effects of Covid.

Consumer product licensing was up to $10.8 million, higher than the previous two years’ Q3. This segment largely consists of game and toy products. The WWE Battlegrounds console game was released late in the quarter.

The conference call should start in a few minutes. Anyone can listen online here:

The investor presentation slides have been posted here:

The call has begun! SVP Michael Weitz’ introduction mentions that WWE executives Vince McMahon, Nick Khan, Kristina Salen, and Stephanie McMahon are on the call. I was not expecting Stephanie.

I will now quote executives and analysts on the call. These should be taken as paraphrases and not necessarily exact quotes.

Vince says, “I’ve never felt as confident as I currently do about our new management.”

He’s very optimistic about the outlook of the company.

Nick Khan begins after Vince. He runs through his professional background, his work with CAA. He notes was a lawyer before that. As a student he was an usher at Wrestlemania 9 in Las Vegas (his hometown).

Khan announces “in a groundbreaking deal we’ve sold a multi-part documentary to Netflix on the life of none other than Vince McMahon.”

Khan says “conversations have resumed for alternative strategic options” on selling rights to WWE Network content to major streaming players, but they’re unable to say when a deal will be completed.

Khan says WWE is working on a 2021 event that will primarily feature developing Indian superstars. It will be distributed through India media partner Sony as well as domestically in the U.S.

Khan introduces “Forbes #2 most influential market executive, Stephanie McMahon”.

Stephanie gives remarks on WWE’s perseverance through Covid. WWE gave fans “escape from their fear and uncertainty and delivered on our promise of delivering smiles to people’s faces.”

Stephanie puts over the Thunderdome and the Capital Wrestling Center, the latter, “a nod to my grandfather”. She highlights WWE online media performance.

This is the first time Stephanie has played such a major role in the opening remarks in an earnings conference call.

Stephanie went over many highlights I’ll need to catch up on later and turns over the call to new CFO Kristina Salen.

Salen summarizes a number of financial highlights.

I should note Thunderdome expenses do not appear to be enormous or nearly that of sports venues as I modeled.

On Raw and Smackdown viewership, she notes they improved from July to September and did so through unprecedented sports competition.

Salen says WWE can’t say when ticket live events will return, but “our intention is to return as quickly and as safely as possible.”

She reviews WWE’s large cash reserves, much of which was secured following Covid.

Salen WWE anticipates adjusted OIBDA of Q4 2020 will be below that of Q3 2020. Q4 2020 will have lower revenues than Q4 2019, in part due to the lack of a KSA event as in Q4 2019.

WWE did not buyback any stock in Q3 under its repurchase program but may do so in the future.

Q&A with analysts begins.

Guggenheim: On the ratings. They remain under pressure for Raw and Smackdown. Can you give us any plans to improve ratings, lay out strategy? If they remain at or below current levels does it impact rights negotiations?

Vince: Ratings are one of our many measurements… We have far more fans now than we have ever had. When you look at TV ratings, it is what it is… Our total audience is much bigger. You can’t just hang your hat on, ‘okay ratings are down’… We’re never off the air.

Nick Khan says: linear TV has lost eyeballs. Viewership has not. Consumption of content across many parties is up significantly. Consumption for us is up significantly. We’re confident our rights are going to continue to go up… Our ratings exceeded the NHL Stanley Cup.

Khan: We’re confident with where the product’s going and we’re confident the market understands that.

Q: Any update on the MENA TV deal?

Vince: We’re still in contact with them on that. We’re still negotiating. And I sure as heck don’t want to put a timeline on what it’s going to happen. It will happen one day. I don’t know when that is.

Q: Can you expand on potential sale on Network rights?

Khan: Everything outside of a sale of the Network is what we’re looking at. There are a number of streamers domestic and abroad… We’re in constant dialogue domestically and globally about licensing the Network to them.

Q: Is data something you plan to preserve in a strategic partnership?

Khan: Yes. Very important.

By the way, the 10-Q (long quarterly report) is already out:

Q: A lot of profitability is reliant on the greater TV ecosystem. What do you think is going on with ratings, not just WWE, but sports broadly?

Khan: If you look at the traditional (media) conglomerates… Many of these structures are realizing it’s about content first, where we put it is second…We all see where it seems to be going. Lets see if it gets there. If it’s a streaming first world, we’re prepared for it.

Q: Where do you think the FAANGs (Facebook, Apple, Amazon, Netflix, Google) are interested in the kind of rights you have?

Khan thinks the hires those companies have made indicate they’re interested in live content. “Our anticipation is that the FAANGs, if not all, the majority will be there in terms of live [content].”

Q: Is there any assumption on Saudi events for next year?

Salen: We’re very diligently working on 2021 operating and financial plans. It’s our full intention to speak about outlook when we speak next [Q4 call in February].

Q: When Amway deal ends, would you go back to PC, other venue?

Salen: Our assumption is we’ll be at a venue like the Amway Center for the rest of 2020.

She notes there are many places to go, given the state of the world.

Q: It looks like NXT (viewership) has held up pretty well. Can you update on when USA Network agreement for NXT expires? Any thoughts about monetizing NXT long-term?

Khan: #1 congratulations to Paul [Levesque] and the entire team. Last night’s ratings were particularly strong.

Khan says Network subs have held up well without NXT there. We typically don’t talk about the length of the deal without our partners being onboard to discuss it. We feel we have a long runway.

Q: Any learnings on what’s working with NXT that isn’t working for Raw and Smackdown?

Khan says it seems to be working with a cluttered fall schedule. We want the best writing, the best content.

Q: I remember when Trump mentioned leaning on you for leadership early on in Covid… What are you trying to see before you say ‘we’re going to go for it’ [return of live events]?

Vince says it was a conference call with Roger Goodell and others. “What is the turning point? I don’t know. I really don’t. Obviously when Covid lets up and it’s safe for our fans and performers. That’s just all I can tell you in terms of when.”

SVP Michael Weitz cuts in and says they’re going to end the call. The call ends more abruptly than usual.

Thanks for following along! I’ll be recording a @wrestlenomics Radio podcast soon.

Tweet me your questions. I may answer on the podcast.

Also look for my guest podcast appearances talking about the Q3 results.

Originally tweeted by Brandon Thurston (@BrandonThurston) on October 29, 2020.

Brandon Thurston has written about wrestling business since 2015. He’s also worked as an independent wrestler and trainer. For more, see our About page.