WWE’s next record-breaking year: media rights outlook, stagnant fan growth

This article was originally posted for subscribers last week Wednesday and included my full financial estimate model for WWE, not included here. Get access on Patreon.

Escalating media rights values should spur WWE to break its profit records for the third consecutive year in 2022. The tailwind from guaranteed live rights fees and incremental growth from other licensing opportunities more than offsets weakened fan interest that will keep consumer sales stagnant.

Even though popularity in the core product is down from recent years and possibly continues to wane, current viewership of Raw and Smackdown is strong enough to justify an increase in U.S. payments for new deals that would begin in October 2024.

WWE’s recent earnings call reported on the first full quarter since live event touring returned, indicating what normal trends might look like for the near future. I’m now expecting a record $206 million in annual net income for 2022 (up my earlier estimate of $190 million), adjusted OIBDA of $365 million (I haven’t previously estimated adjusted OIBDA), based on annual revenue of $1.25 billion (down slightly from $1.26 billion). Aforementioned differences are largely driven by what I believe is a lower, more accurate estimate of WWE Network revenue and lower expenses than I previously understood related to the operating and marketing of the company’s media and live events divisions.

Media rights value outlook for Raw and Smackdown remains strong

I believe the most important factor determining the value of Raw and Smackdown’s live rights is those programs’ performance with viewers 18 to 49 relative to other programs throughout television generally.

The average episode of Smackdown on Fox in 2021 had a P18-49 audience in the top 4% of all the year’s telecasts among cable originals and national broadcast airings, according to my analysis of Nielsen data from Showbuzz Daily [Chart 2].

By the same measure, the average episode of Raw was in the top 5%.

NXT, which I believe there’s far less value in, was in the top 24%.

For comparison, competitor AEW Dynamite was in the top 9%. AEW Rampage was in the top 12%, despite its 10 pm time slot.

It’s notable that WWE reality program Miz & Mrs. was in the top 13%, though it had just six new episodes in 2021; the other programs air new episodes year-round.

Despite declining viewership over the years, the trend in the percent rank for Raw and Smackdown hasn’t significantly weakened. Smackdown’s percent rank has only improved, coinciding with its move from USA Network to higher-reach Fox. Raw’s rank has weakened marginally but unpredictably from 2017, while remaining within the top 5%.

Will the reach of linear TV be enough for WWE through the late 2020s?

I expect WWE’s live rights in the next round to include some kind of live streaming component. To ensure WWE can broadly reach consumers including younger audiences, live distribution on linear TV may not be enough by the late 2020s.

Traditional TV viewership of the daily top 50 cable original telecasts for people aged 18 to 49 declined 49% from 2016 to 2021 and fell 62% for ages 18 to 34 [Chart 3].

That said, even while linear TV viewing is in decline and skewing older in age, traditional TV still makes up the majority of TV use time in the U.S., while streaming accounts for a little over 25% of that share.

Reach is even more important to WWE than to other major U.S. sports leagues, where local markets support individual teams and most games are telecast as regional broadcasts. WWE needs high-reach availability nationwide and weekly to support live event touring and consumer products businesses.

Tentatively, I think the likely outcome is the same company holding streaming and linear rights for the given show: for example, NBCUniversal’s entities USA Network and Peacock holding rights to Raw. Opposing companies may be unwilling to compete with one another, i.e., one company holding streaming rights (e.g., Prime Video) and a different company holding linear (e.g., USA Network), in case one of the platforms ends up empty-handed as behavior shifts (or doesn’t).

If this assumption is accurate, it puts Fox holding onto Smackdown more in question. Fox lacks a suitable streaming platform. Fox-owned Tubi (a low-revenue FAST) and Fox Nation (the streaming extension of Fox News) aren’t sensible options.

Content owners like WWE hope major tech companies like Amazon, Apple, and Netflix become new bidders for their rights. However, none of the tech players currently own a linear network, and therefore lack both kinds of media platforms WWE might need to navigate the late 2020s. A major acquisition that actually passes antitrust scrutiny (like, say, Amazon buying NBCU away from Comcast) or, perhaps more likely, a partnership between a tech player and a traditional network, could change these dynamics.

A third large-scale international event?

WWE president Nick Khan hinted at a third “large-scale international” event on the last earnings call. “Large-scale international event” is the company’s euphemism for its controversial events in service of the government of Saudi Arabia, but it was hinted to me that Khan wasn’t referring to a third event for the kingdom, which would be a significant financial revelation since each Saudi event is worth $50 million in payments to WWE.

Instead, I expect WWE will announce a stadium event in Europe, most likely in the United Kingdom, for the monthly premium live event in September. The schedule the company released in October 2021 shows an event during Labor Day weekend with the location listed as “TBD”. The U.K. hasn’t had a true pay-per-view/premium live event since Summerslam 1992. A peak monthly event in the U.K. would carry historic weight with fans in the region and would be a hot ticket. Putting such an event in a stadium-sized venue is probably optimal for the kind of demand it would attract. Therefore, I modeled into Q3 $5.9 million in incremental live event revenue. Such an event would positively impact venue merchandise in the quarter also.

A major event on Labor Day weekend would also compete for fan attention with one of All Elite Wrestling’s quarterly pay-per-views. AEW’s All Out event has been held during that weekend each year since 2019. AEW has more to lose in such a situation as it more heavily relies on direct-to-consumer activity by way of pay-per-view sales at a $50 retail price in the U.S. Conversely, WWE’s premium live (née pay-per-view) events are primarily streamed to viewers at a fraction of the cost to the consumer, on Peacock domestically and the WWE Network internationally. Ticket sales for the Labor Day weekend events wouldn’t strongly compete with each other since they would be on different continents. I expect All Out 2022 to be in Chicago, as it was last year and in 2019.

Stagnant consumer interest

WWE had a great Q3 2021 for live events, one of the best quarters for the division in company history, benefiting from pent-up demand as touring returned in mid-July. Since then, ticket sales for WWE’s most frequent events, non-televised house shows as well as tapings for Raw and Smackdown, continue to decline [Chart 4].

Another indicator of consumer interest is eCommerce sales. Those surged during the interruption of touring, somewhat offsetting the loss of venue merchandise sales. In the first full quarter comparison since touring resumed, eCommerce sales in Q4 2021 were even in revenue from Q4 2019 (the most recent pre-Covid Q4), but 30% lower in order volume. Fortunately, the company managed to increase revenue per order by 37% from two years ago, counteracting the decrease in transactions [Chart 5].

Google web search, which I view as an indicator of name recognition and mindshare, continues to be in secular decline for WWE, worldwide and in the U.S., for most year-over-year monthly comparisons since 2017 [Chart 6, 7, 8, 9].

I believe WWE’s fan base has deteriorated because of the poor quality of the core content, primarily due to creative leadership of CEO Vince McMahon. New major stars haven’t been more fully developed and storylines are weakened due to a lack of long-term creative planning, inauthentic presentation, misevaluation of talent, repetitive matchups, among other issues.

Management doesn’t acknowledge any problem with creative. McMahon is reportedly dismissive of criticisms of the content, citing the company’s financial success. Khan’s prepared statements in earnings calls only allude to a “strong in-ring product”.

Challenges with consumer interest are obscured by WWE’s increasing and largely guaranteed revenues from business relationships, a dichotomy that continues to become more defined as contractual escalators increase payments while the fan base diminishes under McMahon’s creative direction.

Disclaimer/disclosure: This article expresses my personal opinions only. I do not currently, nor have I ever, held stock positions in World Wrestling Entertainment, Inc. (NYSE: WWE). I have no plans to initiate any such positions within the next 72 hours. I am not being compensated for this article or any of my other Wrestlenomics-related work except through audience-driven revenue, including Patreon subscriptions and programmatic advertising.

This article is not investment advice, nor should it be construed as investment research.

↓ Chart 1: My recent history estimating EPS

↓ Chart 2: Compound Annual Growth with Linear Trendlines
(Jump back to text)

↓ Chart 3: P18-49 Viewership Percent Rank: Calculated Annually
(Jump back to text)

↓ Chart 4: Estimated Tickets Distributed, by Event Type
(Jump back to text)

↓ Chart 5: WWE eCommerce Orders and WWE Average eCommerce Revenue Per Order
(Jump back to text)

↓ Chart 6, 7, 8, 9: WWE Google Web Search Trends: Worldwide and United States
(Jump back to text)

Brandon Thurston has written about wrestling business since 2015. He’s also worked as an independent wrestler and trainer.

This article is available ad-free for everyone because of support from our subscribers.

SUBSCRIBE NOW!

WWE is at least slightly undervalued

I’m going to wade into estimating WWE’s adjusted OIBDA profit metric going forward, which I’m learning — non-GAAP as it is — is better for determining what the stock price should be. I’ve previously been considering EBITDA as the profit metric to determine the stock price.

What’s this “multiple” you’re talking about?

Looking at historical stock prices and WWE’s actual reporting on its adjusted OIBDA in prior quarters, WWE’s market capitalization (the sum value of all shares) is normally about 12x the forward-looking four quarters of adjusted OIBDA.

Still (understandably) confused? Let’s take the prior four quarters of adjusted OIBDA.

Q1 2021: $83.9M
Q2 2021: $68.1M
Q3 2021: $77.9M
Q4 2021: $97.2M

Add those dollar values up and you get WWE’s record-setting 2021 annual adjusted OIBDA of $327.1 million.

Multiply $327.1 million by 12 and you get $3.93 billion, a number close to WWE’s market cap, as determined by the stock price.

Market cap = stock price × basic shares (about 76 million in WWE’s case).

WWE’s stock price on the last day of 2021 closed at $49.34.

$49.34 × 76,324,000 = $3,765,826,160.

Round that and you get $3.77 billion, which is roughly what you’d have found the market cap valued at on December 31, 2021, on sites like Google Finance and Yahoo! Finance.

Notice $3.77 billion is lower than the $3.93 billion I mentioned above, based on WWE’s actual adjusted OIBDA reporting. In fact, it’s low by 4%.

There are many hard-to-predict factors that go into determining WWE’s stock price, but the math above is probably among the factors causing WWE’s stock price to increase of late since last Thursday’s earnings report.

Disclosure/disclaimer: This article expresses my personal opinions only. I do not, nor have I ever, held any stock positions in WWE (NYSE: WWE). I have no plans to initiate any such positions within the next 72 hours. I am not being compensated for this or any of my other Wrestlenomics-related work except through audience-driven revenue, including Patreon subscriptions and programmatic advertising.

But what should WWE’s stock be priced at now?

I’m not a certified stock analyst or financial advisor and this article is not financial advice, nor should it be construed as such.

That said, I can’t resist flexing that I’ve been more accurate than the real stock analysts in the last three quarters at predicting WWE’s earnings per share ratio.

Updating my estimates following the Q4 earnings report, I now anticipate adjusted OIBDA for the next four quarters (Q1 2022 through Q4 2022) totaling $364.9 million.

12x seems like a reasonable multiple in my judgment based on the behavior of the stock in the last five years. By the end of Q3 2018 the stock traded at a ridiculous 55x multiple. This is when shares reached their all-time high of just over $100 in the midst of what in hindsight was clearly unfounded optimism, just after the new U.S. TV deal was struck and investors were apparently hyped about the idea of international TV rights deals that were coming up and the notion that Smackdown moving to high-reach Fox would have strong downstream benefits to the business.

Since, a multiple of 10x to 12x has been the norm. I’m favorable to the idea that the stock is somewhat underpriced. I tend to be more confident than what I perceive are the general assumptions about WWE’s U.S. media rights outlook. It’s notable WWE trades at about half the multiple of some of its peers like Endeavor and Liberty Media but we won’t explore that issue right now. We’ll proceed with a 12x multiple assumption.

My forward-looking adjusted OIBDA estimate of $364.9 million × 12 = $4.38 billion.

Which means, assuming a 12x multiple, that my adjusted OIBDA estimate implies the fair value of WWE is $4.38 billion.

How does that compare with how the company is being valued on the stock market currently?

Shares closed yesterday at $55.33, meaning WWE’s market cap was priced at $4.14 billion.

$4.38 billion is 6% higher than the $4.14 billion the market values the company at.

So in other words, yes, it seems to me WWE is slightly undervalued — or maybe more than slightly undervalued if you can argue the 12x multiple is too low.

Brandon Thurston has written about wrestling business since 2015. He’s also worked as an independent wrestler and trainer.

This article is available ad-free for everyone because of support from our subscribers.

SUBSCRIBE NOW!

WWE Q4 2021 earnings report and conference call with executives

WWE reports $1.095 billion in revenue for full year 2021, its highest ever.

Net income for the year is $180.4, also a new annual record for profitability, as expected, and blowing away analysts expectations.

https://corporate.wwe.com/investors/news/press-releases/2022/02-03-2022-210628884

How 2021 compares to every year WWE has ever publicly reported on.

Revenue: WWE reaches $1 billion for the first time ever.

Net income: The most final measure of profitability.

2021 is easily WWE's most profitable year ever. Even when adjusting for inflation, 2021 was nearly twice as profitable as the best "Attitude Era" years of 1999 and 2000.

Q4 2021 was the first full quarter with live event touring since Q4 2019.

The live events division managed to record $1.4 million in operating income, far better than I was expecting.

WWE's KPI slide on live events reports average paid North American attendance of 5200 across 48 events. Internationally, WWE averaged 3700 for 9 events (doesn't include their Saudi event in the quarter).

Click to access q4-2021-kpi.pdf

WWE states guidance for 2022, saying they'll set new annual records again for revenue and non-GAAP profit metrics adjusted OIBDA.

WWE expects adjusted OIBDA to be in the range of $360M to $375M. For comparison, they reported $327M for that metric this year.

Earnings per share (EPS) ratio (net income / diluted shares) for Q4 was $0.76, exceeding even the highest stock analysts' estimate.

I was higher than any analyst and closer to actual results, but Q4 EPS even exceeded my expectations. I was closer on revenue than the consensus.

Very little after hours movement on the stock so far.

Conference call coming up at the top of the hour may or may not inspire that to change.

WWE's KPI slide on AVOD (ad-supported video on-demand) consumption shows Q4 way down. WWE tries to excuse it pointing out no PLE (nee PPV) in December and "the removal of full matches on YouTube and Facebook".

Click to access q4-2021-kpi.pdf

WWE's updated slides on Raw and Smackdown ratings, showing its programs losing viewers but Raw maintaining year-over-year better than broader comparisons.

Click to access q4-2021-kpi.pdf

A rare quarter where social media followers are down from the prior quarter. Possibly due to talent cuts, since they're adding up followers from all talent and brand accounts to get to this number.

Media (think video) is by far WWE's biggest driver of revenue, reporting $936.2M for 2021, 85% of all revenue. That's exacerbated by the lack of live events in the first half of the year, but media revenues for WWE will only continue to grow as rights fees contractually increase.

It helps, though, that events in service for the government of Saudi Arabia (twice a year for ~$50 million each) are included in the "Other" line in the media division. That line reported $52.1M for Q4 with the quarter including the first Saudi event since Feb 2020.

Guess which quarters include a "large-scale international event":

Conference call is beginning now.

Comments are expected from Vince, Nick Khan, Stephanie and new permanent CFO Frank Riddick.

New IR SVP Seth Zaslow opens the call, makes introductions of the key executives, and read forward-looking statements.

"Welcome, everyone!" Vince says.

I will now do my best to quote and paraphrase WWE executives. This may not be direct quotes.

Vince gives a generic opening statement.

"Our performance speaks for itself…. So Nick take'er away."

WWE president Nick Khan says Jul 2021 MITB was up on Peacock 25% higher than in 2019.

Summerslam was up "over 30%" in 2019.

Extreme Rules was up 20% in 2019.

"international event" up 75%.

Survivor Series up "almost 25%" than in 2019.

Nick says over 3.5 million fully paid Peacock subs have watched WWE content.

"More people are watching PLE than ever before."

WWE has a dozen scripted and unscripted projects sold on our IP. Look for announcements soon.

Look for a launch date on NFT marketplace soon.

Look for WWE branded lottery tickets rolling out in a number of states this year.

Mattel partnership goes back over a decade results in action figures on shelves in 50+ global markets.

"Day 1" PPV date selected with the idea it would attract holiday travelers. It was one of the highest 60% greater than any December PLE in WWE history.

Royal Rumble more than "44,000 in attendance". 2nd largest gate in Rumble history. 45% higher viewership on Peacock vs. 2020.

Bad Bunny, Ronda Rousey returned. Johnny Knoxville involved. Pop culture sensations look to partner with WWE.

Upcoming Jeddah event clear of college football. "Large-scale international event" is uttered, charging me a the first $20 contribution to @pressfreedom.

Rey Mysterio will be cover superstar for WWE 2K22. Steph will talk about gaming in a moment.

Our POV on consolidation in gaming section. MSFT acquisition of Activision. TakeTwo acquired Zinga. Sony bought Bungie. Sector should end up with 4-5 player emerging, depending on IP.

We believe consolidation trend will continue in 2022. Eyes on DirecTV, Dish, Nextstar.

Sports rights space talk. Streamers are spending on live sports. EPL-NBCU deal was largely a Peacock play. ViacomCBS shifting UEFA programming to Paramount+ and picking up Serie A.

Just a matter of time for Apple and Netflix to make moves, Nick says.

In sum with WWE focused on IP value and a market hungry for brands, we couldn't' be more optimistic to drive growth in 2022 and beyond.

Now Steph's comments.

Sasha Banks starred in the cold open for CFP championship game. In Nov, Drew appeared in MTV VMAs. Big E starred in cold open for Fury-Wilder on ESPN+ and Fox Sports PPV.

Paramount Studios partnered with WWE to promoted Jackass Forever. Knoxville talked beating up Zayn on Kimmel

Ronda won Rumble match. Rumble 2022 saw 45% increase in viewership versus 2020 and was the most socially engaging program across all platforms.

WWE launched DoorDash sponsorship, co-presenting with 2K for Rumble. We aired 2K22 trailer which will launch on Mar 11.

WWE is 2K's highest grossing mobile game. 88% of our audience identify as gamers.

We're optimistic as NFLX and YouTube launch their own gaming initiatives.

The next generation of fans and superstars is a huge priority for WWE. We launched NIL, allowing athlete sponsorship.

Many NIL signees have strong social followings. "Think of all the collegiate athletes who won't make it to the NBA, WNBA, NFL, Olympics." Gable Steveson is highlighted.

WWE YouTube channel has 83 million subs. We remain the #1 sports brand on TikTok. Across all social platforms we had 50 billion total views, earning "10s of millions of additional revenue".

Pizza Hut was brought to the ring by the Street Profits during Survivor Series. Fans chanted "We want pizza" showing how successful these integrations can be.

Steph highlights Red Notice starring The Rock integration.

She hands it over to CFO Frank Riddick.

Riddick talks over these slides. He mentions "large-scale international event" twice (we're up to 3 mentions of this euphemism for Saudi event).

MLW's lawsuit against WWE is mentioned in the latter's 10-K, which was just published.

The MLW suit has not been mentioned on the call, to be clear.

Riddick discusses WWE's profit guidance, driven by growth in media, live events being back for a full year, large-scale international events ($) and decreased production costs thanks to no Thunder Dome.

WWE's new HQ move will contribute $235M – $255M in capex in 2022. Riddick highlights the benefits.

Riddick finishes comments and Q&A with stock analysts begins.

Curry Baker w/ Guggenheim asks about ads & sponsors monetization outlook.

Steph says there's no reason why they shouldn't be in the hundreds of millions in the future. ($71.5M was reported for 2021)

Eric Handler w/ MKM asks about Disney+ Hotstar deal. Disney, Discovery covering multiple countries. Why start with 1 country deal, not blanket deal?

Nick says look for more region by region deals. We thought Disney was particularly strong in Indonesia.

Ben Swinburne w/ Morgan Stanley asks about metaverse, markets physical and digital.

Steph says absolutely, WWE is a community based business. There's huge opportunities to expand upon that.

($60 in donations to CPJ in this exchange alone due to "metaverse" utterances)

Steven Cahall w/ Wells Fargo (one of few analysts who have WWE as a sell) asks what's driving increases in media revenues.

Riddick mentions new content they're creating that hasn't been announced yet.

Nick adds "why just limit it to 2?" regarding Saudi events. "We'll see what happens in the next months.

David Karnovsky w/ JP Morgan asks about NIL program.

Steph and Nick respond, largely reiterating Steph's earlier comments about opportunities for college athletes. Nick mentions Reigns specifically as an example.

Brandon Ross of LightShed asks about next-day rights.

Nick says they feel as good about those rights right now as he did about their live rights deal in 2018 and Peacock deal more recently.

Nick asks Brandon Ross if he'll be going to Wrestlemania this year. Nick jokes that they'll have a special piledriver ready for Brandon.

I missed many comments and some questions throughout here. I encourage everyone interested to listen back on http://corporate.wwe.com

The call has ended.

$WWE shares are up about 2% in after market trading after the call, just over the day's open price.

I will have to check the transcript but the count of utterances of "metaverse" and "large-scale international event" were numerous and I believe I owe CPJ over $100, iaw my earlier pledge.

Some notes now from their annual report (10-K)…

WWE updated the number of talent count:

WWE reports its full-time employee head count at approximately 870 as of February 2022. Unsurprisingly, that's down from last year. There cuts not only to talent (evident in previous tweet) but many employees were laid off and depts consolidated.

10-K:

https://otp.tools.investis.com/clients/us/wwe/SEC/sec-show.aspx?FilingId=15529495&Cik=0001091907&Type=PDF&hasPdf=1

An increasing portion of WWE's revenue is coming from North America, driven by contractually escalating media rights fees in the U.S.

That reverses the increase by percentage in 2018 in EMEA, driven by new payments from the Saudi Arabian government.

WWE doesn't name the customer but discloses amount of revenue from any customer contributing >=10% of WWE's annual revenue.

I believe customers referred to here match w/ amounts as follows.

2021
$412M: NBCU
$200M: Fox

2020
$270M: NBCU
$183M: Fox

2019
$207M: NBCU
$110M: KSA

A short excerpt from Frank Riddick's restricted stock award and non-compete agreement, attached to the 10-K.

Possible other executives have agreed to similar language.

He basically can't go work for another pro wrestling company for 12 months after his employment with WWE ends.

Q4 2021's average North America ticket (by my calculation, since some Q4 data isn't explicitly reported) of $63, gives more clarity on what the average ticket price for WWE events is going forward.

Up until now I've been assuming ~$55, slightly higher than Q1 2020, too low.

Seeking Alpha has the conference call transcript up now here:

https://seekingalpha.com/article/4484230-world-wrestling-entertainment-inc-wwe-ceo-vincent-mcmahon-on-q4-2021-results-earnings-call?mailingid=26593247&messageid=2800&serial=26593247.547&utm_campaign=rta-stock-article&utm_medium=email&utm_source=seeking_alpha&utm_term=26593247.547

Fascinating seeing online sales of merchandise offset the losses in during the touring pause, then those sales relax when touring when back on the road.

I think of venue merch sales as spontaneous impulse buys and not something that would be deliberately replaced by consumers.

Venue merch sales per capita seems to have settled at about $12, higher than the $9 from Q4 2019. Like with ticket price, it's increased from where they left off pre-Covid, probably more than inflation.

Jason Ounpraseuth has covered pro wrestling since 2019. He co-hosts the Gentlemen’s Wrestling Podcast.

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

This image has an empty alt attribute; its file name is patreon-horizontal-1-1024x452.png

Become a Patron!

WWE Q4 2021 Preview: Record profits, media rights optimism, live events trouble

On Thursday’s earnings call, WWE will almost certainly report 2021 was its most profitable year in company history, with annual revenue surpassing $1 billion for the first time.

Wrestlenomics estimates 2021 revenue of $1.102 billion, net income of $174.5 million, with a diluted earnings per share ratio of $2.05 for the year. We estimate EPS for the fourth quarter at $0.68, which we understand is higher than any analyst’s current estimate.

The company will disclose new information covering the months of October to December. This will be the first full fiscal quarter of live event touring since Q4 2019.

Media rights value

WWE president Nick Khan will host another installment of his quarterly masterclass series of podcasts on the sports media business — or as some call them, WWE quarterly earnings conference calls.

U.S. rights fees for Raw and Smackdown are the company’s most crucial deals, currently held by NBCUniversal and Fox, respectively. Terms are still nearly two years away from expiring but they may be the most valuable U.S. sports rights renewal on the horizon. NFL, NHL, and Premier League rights were re-dealt within the last year, and NBA and MLB’s current deals extend beyond 2024, after Raw and Smackdown current terms conclude.

Flirtations with sports rights by the FAANGs (Facebook, Amazon, Apple, Netflix, Google) continue to drive optimism. Specifically, Apple and Amazon have shown interest in live sports. Amazon currently has a deal with the NFL and Apple has reported interest in NFL Sunday Ticket, as well as MLB and MLS rights.

It’s not clear whether any of the major tech players have serious interest in WWE core content. Next-day rights to flagship programs, though, currently held by Hulu are likely being shopped currently. A new deal should be announced sometime this year. Should WWE reveal a tech player like Amazon or Netflix bought those rights, it would probably excite the stock, which was stagnant in the bull market of 2021. Such an event would fuel speculation (realistic or not) that FAANGs could actually bid for live rights to Raw or Smackdown. An announcement that next-day rights will go to Peacock (where WWE’s monthly peak events and library resides in the U.S.), though, still seems like the safest bet.

But as any wrestling fan active on Twitter can tell you, WWE’s TV ratings are in long-running decline. Doesn’t that mean we should be cautious about the value of the company’s key programs?

Raw in particular has fallen below the general decline of linear TV in some recent years, though not in 2021. Smackdown on Fox, has held up better over the years thanks to moving into improved time slots and networks. The blue-branded show also held up better throughout the fall while Raw suffered as usual against Monday Night Football. Still, new competitor All Elite Wrestling’s Dynamite program on Wednesday on TBS continues to draw nearer to both Raw and Smackdown with viewers in the important 18 to 49 ad demographic, a fact WWE has reacted to by framing AEW as a more violent alternative, unattractive to business partners and viewers.

Nonetheless, we believe WWE’s rights values remain strong as long as Raw and Smackdown remain highly-ranked with viewers 18 to 49 and as long as the broader market of suitors for those rights (TV networks and, theoretically, streaming platforms) maintain stable economics. And we believe a disproportionate share of the value in media rights remains with programs that can finish among the top five or so slots on their given night.

Raw and, to a lesser degree, Smackdown’s ratings have suffered for many years, to a worse degree than necessary thanks to often abysmal content orchestrated by head of creative and CEO Vince McMahon. But over the years, Raw and Smackdown’s rankings among programming generally, has held up better, as frustrating as that is for a wrestling fan who wants to see great content rewarded and weak content discouraged.

WWE Network

WWE has also made efforts to change viewing habits for fans with Saturday (rather than Sunday) tentpole events in stadiums. This year’s Royal Rumble was at The Dome at America’s Center in St. Louis, and this year’s Money in the Bank and Summerslam will be held at Allegiant Stadium in Las Vegas and Nissan Stadium in Nashville respectively. These initiatives are led by Khan to extract more revenue out of the company’s biggest events.

According to Comcast’s latest earnings report, Peacock has 9 million paid subscribers. That doesn’t include the 7 million “highly engaged users” who have access to Peacock through their cable subscription like Comcast or Cox. In the U.S., the WWE Network peaked at 1.3 million subscribers in 2018, so the reach of WWE’s newly-dubbed “premium live events” (no longer “pay-per-views”) is higher than ever, even if a large portion of subscribers to the variety of content on the NBCU streaming platform are indifferent to WWE content.

In previous calls Khan disclosed that recent events were more highly-viewed than those in the previous year, not revealed in terms of viewers, but by percentage. Hell in a Cell 2021 was up 25% versus the previous year. Backlash was up 26% on Peacock. Money in the Bank was up 46% compared to the one that took place at WWE headquarters in 2020.

It’s possible a similar disclosure about this past Saturday’s Royal Rumble or other recent events will be reported.

Ads and sponsors

WWE has promoted itself as a company willing to make various brand partnerships. Zombies made a widely–panned appearance at Wrestlemania: Backlash to connect with the movie Army of the Dead, which starred Dave Bautista. Bad Bunny and Johnny Knoxville were in the men’s Royal Rumble match, the latter to promote his new movie. Vince McMahon’s golden egg, a reference to Red Notice starring Dwayne Johnson, was stolen at Survivor Series, and the mystery around it coincided with Raw popping a rating the next night.

Expect these notes along with others to be thoroughly celebrated in a stream of B2B highlights narrated by Chief Brand Officer Stephanie McMahon in her opening comments. The tax the execution of these integrations may have on the audience, reminding viewers they are actually a means to corporate sponsors who are the real audience, surely won’t be raised.

We anticipate the ads and sponsors line under the media division being slightly up from 2020, but not quite to the level of pre-pandemic 2019.

Consumer products

WWE has made efforts to expand their brand in other areas, including NFTs. WWE entered into the NFT space releasing an Undertaker NFT coinciding with Wrestlemania in April and a John Cena NFT for Summerslam in August. Many of WWE’s product licensing deals have seen successful, but WWE’s foray into NFTs has been mixed.

There was no NFT offering associated with the Royal Rumble, traditionally a bigger event than Summerslam. The Cena NFT did not sell well, by Cena’s own admission.

Many successful NFTs give the owner something of continuous value. In WWE’s case that could be the right to every new John Cena T-shirt that’s released in the future, giving the NFT greater resale value. Wrestlemania tickets aside, we’ve yet to see WWE get more creative with the special access these digital assets might provide owners.

Live events

We expect WWE’s live events troubles to return in Q4 reporting. The division struggled to make a profit in the final quarters before Covid stopped touring and relieved scrutiny. Q3 was a great period as pent-up demand produced WWE’s best quarter for live events in many years.

The recent Royal Rumble was the second-highest grossing event by that name in company history, which will be used to obfuscate what we believe will be a loss of several million dollars in the first full quarter with ticketed events.

Perhaps the resurgence of the Omicron variant of Covid over the winter will be pointed to as a cause. But we believe the issue is fan interest and possibly the antiquated system of running untelevised live events, which fans widely know almost never have bearing on storylines.

AEW didn’t see a similar decline in attendance in Q4 for its weekly Dynamite tapings while weekly Smackdown and Raw tapings as well as frequent house shows declined.

*Average tickets distributed per event, according to WrestleTix estimates*

In one of the last quarters before touring shutdown due to the pandemic, Vince McMahon acknowledged there was a problem and promised to “reimagine” his live events strategy. We never got to find out what he had in mind.

The company is currently considering outsourcing its live events capabilities, as we’ve reported on Wrestlenomics Radio. If the plan comes to fruition, it’s possible those activities would be accounted for under the live events division, perhaps offsetting loses from touring. Whether such activities would be a distraction from WWE’s core issues is another question.

Questions we hope to hear in analyst Q&A

Does WWE view the new Premier League deal with NBCUniversal, in which the EPL was given a 2.7x increase in the average annual value of its payments, as encouraging sign for the renegotiation of its own live rights?
Does the company have a timeframe for when investors can expect an announcement on next-day rights?
Given the decline in attendance, does the company feel that untelevised live events are still a viable product?
Is there any more information WWE is comfortable disclosing related to the health or future of EVP Paul Levesque? Given the overhaul of NXT and concerns about his apparent heart issue, Levesque doesn’t appear to be held in such favor any longer. Vince’s son-in-law was widely-believed to be next in the line of succession to take over the creative duties of 76-year-old Vince McMahon one day. Does the company have a succession plan in place that clearly guides how duties would be dispersed if Vince were to be capacitated?
WWE launched its NIL (Name, Image, Likeness) program in the quarter. This “Next in Line” program is designed to recruit college athletes and prepare them to become WWE performers. What led WWE to launch this program? Was Vince McMahon dissatisfied with talent that was promoted from NXT to the main roster over the last few years? What will talent developed through the NIL program more effectively bring to WWE versus the previous system?
WWE hasn’t resumed it’s local Florida loop of small events since the pandemic. This was how inexperienced talent gained reps needed to develop into viable stars. Will that loop or something similar resume? If not, does the company feel that wrestling once a week in front of a global television or streaming audience is sufficient to develop valuable talent, particularly if WWE is prioritizing talent without prior wrestling experience?
What did WWE learn from its two experiments with NFT sales? Why was there no offering in conjunction with Royal Rumble?

We’ll be covering Thursday’s report and conference call here on wrestlenomics.com. You can also follow @BrandonThurston on Twitter for live tweets as details are released.

WWE’s financial documents will be released at about 4:30 p.m. ET on corporate.wwe.com and will be followed by a conference call at 5:00 p.m. ET. Vince McMahon, Stephanie McMahon, Nick Khan and Frank A. Riddick III are expected to speak on the call. New Senior Vice President, Head of Investor Relations Seth Zaslow could make an appearance as he has recently replaced longtime WWE finance executive Michael Weitz in the role.

Disclosure: We have no current positions in WWE stock (NYSE: WWE), nor do we have any plans in the next 72 hours to initiate any such positions. This article expresses our opinions, only. This article is not investment advice nor should it be construed as investment research.

Jason Ounpraseuth has covered pro wrestling since 2019. He co-hosts the Gentlemen’s Wrestling Podcast.

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

Become a Patron!