Stephanie McMahon speaks at conference on WWE possibly buying international wrestling promotions, Nick Khan on Raw and Smackdown rights value

WWE is interested in making acquisitions, possibly of international wrestling companies or in the boxing world, according to comments from co-CEOs Stephanie McMahon and Nick Khan.

The two executives spoke with Wells Fargo analyst Steven Cahall on Wednesday in Las Vegas, at the bank’s TMT conference, where the most newsworthy topics included a discussion of the kinds of companies WWE may be interested in acquiring, some further confirmation that the scandal surrounding Vince McMahon was hurting sponsorships, and insight on the argument in favor of an increase to WWE’s media rights value.

McMahon alluded to comments she made on the most recent earnings call in early November, where she cited mergers and acquisitions as one of the company’s potential areas for growth.

WWE is in the market to buy other companies, maybe wrestling promotions

“Just to give some examples of what I meant by that, [an acquisition] has to align with our capabilities, whether that’s smaller wrestling promotions, say, internationally,” she said on Wednesday.

McMahon didn’t name any particular wrestling companies or specify further on what international regions WWE may have in mind.

Those that come to mind first to me are based in Japan and Mexico.

For a quick survey of Japan, Bushiroad owns New Japan Pro Wrestling, the leader there, as well as Stardom, the women’s wrestling promotion, which is probably the fastest-growing company in the region. 

Additionally, CyberAgent owns Pro Wrestling NOAH, DDT Pro-Wrestling, and Tokyo Joshi Pro-Wrestling. NOAH would be among the biggest companies in Japan after New Japan’s wide lead.

Dragongate and All Japan Pro Wrestling, I believe are more independently owned.

The Japanese companies owned by large parents like Bushiroad and CyberAgent seem to me less likely to be acquired, but then again if one of those conglomerates ended up in cost-cutting mode in a major economic recession, it’s conceivable they, like Sinclair Broadcasting did earlier this year with Ring of Honor, might look to sell their wrestling assets.

In Mexico, the major two companies have long been AAA Lucha Libre Worldwide and CMLL (Consejo Mundial de Lucha Libre). Both have been family-owned for decades.

One could see how acquiring a company in either of those regions would fit into WWE’s apparently renewed “global localization” strategy. The idea, originally introduced by Paul Levesque in 2018, would put WWE training facilities throughout the world and would develop stars for the local market.

I can see WWE looking at the popularity and well-developed wrestling cultures in Japan and Mexico and seeing those local wrestling economies as an opportunity they could absorb and, in their view, enhance. Loyal puro and lucha fans are surely squirming as I type this, at the notion WWE could enter the market and absorb or compete with their favorite promotions. It’s hard to imagine WWE successfully entering those regions with little but their own U.S.-based wrestling experience. A theoretical “NXT Japan” or “NXT Mexico” that starts from scratch sounds like a sure money pit, which may well have been what the now-defunct NXT UK was. Lucha libre in Mexico and pro wrestling in Japan are even more different wrestling cultures than that of the United Kingdom. It’s doubtful, in my view, that WWE has the knowledge base or personnel to navigate those regions without acquiring an active player with brand equity and local experience.

Also in the context of acquisitions, McMahon and Khan both talked about potential opportunities in boxing. McMahon pointed out how there are multiple boxing championships that could be rolled up into one, like how, in her description, Vince McMahon consolidated wrestling in the 1980s.

Khan said most sports stars before the mid-80s were individual sports stars like boxers and tennis players, and pointed to an opportunity with boxing. He added that boxing, as well as horseracing, were the most popular sports along with baseball in the 1950s. Khan said with the rise of sports betting, there’s an opportunity for WWE, seemingly in boxing and, if I understood correctly, horseracing. The latter he noted is only popular up to three times a year, seeming to indicate there may be a way to make those events successful more frequently.

The scandal surrounding Vince McMahon hurt WWE’s ability to sell sponsorships

“We’re seeing positive momentum [with sponsors], and again, like I said on the calls, we did have a pause,” Stephanie McMahon said. “In addition to the macro headwinds, ya know, of course, there was some change and things that happened in our company this year. And we’re definitely seeing, for next year, what we wanted to see.”

There’s no doubt she was referring to reports that started to come out in June that Vince McMahon paid several women to sign non-disclosure agreements after he had sexual relationships with them, and, in at least one case, he allegedly coerced a sex act.

The story was a financial scandal, too, because the company later determined the NDA payments, which were to protect WWE as well as Vince personally, should have been (and weren’t) accounted for as company expenses.

This sheds a small amount of additional light on the forces that led to Vince McMahon’s resignation as CEO and Chairman in July. Additional factors beyond hurting WWE’s sponsorship business, which analysts have repeatedly noted is an underperforming area, it’s possible the scandal would have loomed over U.S. media rights negotiations too. According to the Wall Street Journal, WWE was also facing regulatory scrutiny from the Securities and Exchanges Commission and the Department of Justice, which expedited Vince’s departure. However, it’s now been months since that report and there’s no additional public information on what if any investigations government agencies may have opened related to the matter.

Insight into Nick Khan’s argument for WWE’s live rights value

U.S. live rights negotiations for Monday Night Raw and Friday Night Smackdown likely take place this year, picking up after Wrestlemania in April. Presumably incumbents NBCUniversal and Fox have exclusive negotiating windows where the parties will have the chance to re-up or let the rights go to the open market.

Cahall, who’s one of the few equity analysts who rates WWE stock as a “sell”, noted that networks that air Raw and Smackdown have declining advertising revenues, related to the decline of pay TV, so those networks may now be generating less ad revenue than what they’re paying for WWE rights fees.

NBCU currently pays about $265 million for Raw. Fox pays about $205 million for Smackdown.

Khan suggested the subscriber rate for USA Network, home of Raw, is “hovering around 80 cents a home”.

If I do the math, 80 cents per home, times about 80 million homes, times 12 months comes out to about $768 million in annual revenue for USA Network related to subscriber fees.

“We’re the highest-rated program on USA [Network] times three. Times three,” Khan repeated for emphasis. “So to us, obviously it’s a dual revenue stream, as everyone knows in [the] cable [industry]. So it’s not just about ad revenue; it’s about the relevancy of eyeballs brought to that network by WWE.”

Khan argued USA Network needs to increase their 80 cents per home fee while subscriptions to pay TV continues to decline.

“In terms of Fox on broadcast, outside of the [retransmission fees], which we have little or nothing to do with, it’s a single revenue stream.”

I believe cable networks (like USA) have higher subscriber fees and retransmission fees than broadcast networks (like Fox). But it’s not clear to me why he admits WWE has “little or nothing to do with” the retransmission fees for Fox. I can only speculate that Raw is tied to specific agreements between NBCUniversal and pay TV carriers and/or that that’s not the case for Smackdown on Fox.

However, Khan went on to pitch that live and unscripted content, like Smackdown, is key to the future for Fox.

“[Fox] had their most expensive scripted program of all-time, ‘Monarch’, which did not do particularly well.”

One key question Fox would have to answer if they don’t renew Smackdown is how they’ll replace those two hours on Friday night with programming that’s as or more cost-effective. Despite growing live rights fees for sports-like content like Smackdown, roughly $4 million per week for two hours of live content is likely still a good deal for the viewership the show delivers.

Stephanie McMahon and Nick Khan touched on other topics, including live events, ticket pricing, stadium events, streaming, Logan Paul, and more. Audio of the talk is available at corporate.wwe.com.