Analysis: Thursday Night Football ratings are good news for WWE TV rights value

More young adults are sometimes watching Thursday Night Football on Amazon Prime Video than Monday Night Football and ESPN and ESPN2.

In total viewership, MNF has been ahead of TNF every week of the NFL season so far, but TNF beat MNF in P18-49 in Weeks 4 and 8, and they virtually tied for Week 9.

Younger viewers are presumably a leading indicator of future television trends. This should give WWE, and other content providers considering selling live sports rights to Amazon or possibly other streaming platforms, some reassurance that Prime Video provides substantial reach value which should only improve over time. The first Nielsen measurements of live sports of this size on a streaming platform show streaming need not be merely the home for scripted and unscripted programming that can be watched at any time, but it can be a medium for huge live audiences as well.

Based on comments on last week’s earnings call, WWE I believe took a low revenue renewal with Hulu for next-day rights to Raw so that those rights will expire at the same time as live rights in the U.S. Next-day rights to Smackdown, which are sublicensed by Fox to Hulu, I believe also expire in line with live rights, in September 2024. This should allow WWE to more favorably negotiate with streamers like Amazon who would naturally want next-day rights when considering live rights.

The viability of Amazon buying Raw or Smackdown should better allow WWE to leverage a favorable TV rights upgrade. I expect at least one of the shows to stay on traditional TV, most likely Raw because of the depth of WWE’s relationship with NBCU. Smackdown going to Amazon is a real possibility. Even if it doesn’t happen, the notion makes enough sense to cause NBCU, Fox, and possibly others to bid more aggressively. I believe WWE has an exclusive negotiating period with both NBCU and Fox for Raw and Smackdown, respectively. Even if neither show goes to the open market, the prospect of Amazon may encourage either network to make WWE a good enough offer to finalize a deal in the exclusive window.

Given the less lengthy relationship between WWE and Fox and rumblings that Fox may not be satisfied with ratings for Smackdown, I believe Smackdown is more likely to go to the open market. I believe WWE will start serious negotiations for its live rights just after Wrestlemania in April. Deals could be completed within months of that start time.

I see NBCU, Fox, and Amazon as the most serious potential bidders. I don’t believe Apple will make an aggressive attempt to associate its brand with pro wrestling and the stigma that comes with it. I rule out Warner Brothers Discovery based on the assumption they’ll retain AEW content in at least some form.

It’s plausible Paramount could make a bid if either property reaches the open market, but a network fit isn’t obvious; MTV and the Paramount Network would be the two likeliest fits. Paramount+ isn’t proven with live sports beyond as a streaming supplement for CBS.

Raw or Smackdown couldn’t possibly take priority on the ESPN mothership. ESPN2 is more plausible but would be a step down in reach and profile. If Disney is willing to pay to offset reach in the short term, ESPN+ could make sense. Still, it’s been decades since ESPN regularly aired in-ring pro wrestling content. There may be unhealed wounds too from WWE choosing Peacock over ESPN+ in 2021.

I don’t believe macroeconomic headwinds, including recession, will precipitate an unprecedented reduction in value for live sports rights.

The exponential growth of sports rights fees in trailing decades is largely the result of — not Vince McMahon’s creative genius, but — the proliferation and evolution of media, which is indifferent to economic cycles, and continues to increase entertainment options while fragmenting audience sizes. That exacerbates the value between the haves and have-nots of content. Suitors compete for a few reliable, highly-popular sports properties, which are exponentially more highly viewed than other content further down the strata.

Economic hardship may well provide potential buyers with a sad sap story about why they should pay a lower upgrade rather than a higher upgrade, but I believe someone will still be paying a sizable upgrade when the agreement is made, as multiple suitors need those rare highly-viewed programs to justify their business models. And if their business models are in decline (traditional TV), they need the best content to invest consumer behavior on their new platforms (streaming) if their businesses will thrive in the future. Though I readily anticipate consolidation or acquisition of traditional players Fox, Paramount, NBCU, and WBD seems inevitable.

The entrance into the market of companies that don’t originally rely on content, for whom content is a pivot into a new venture (Amazon and Apple), have greater businesses that can subsidize their investments. A reduction in suitors because of further consolidation I expect to be offset by tech companies’ increasing participation in this market.

Disclosure: I’m long on Amazon (NASDAQ: AMZN) and Apple (NASDAQ: AAPL). I have no positions in WWE (NYSE: WWE) and have no plans to initiate any such positions.

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

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

SUBSCRIBE NOW

Support quality reporting on the wrestling business

WWE Q3 2022: Thoughts ahead of earnings call tomorrow

WWE moved the earnings call date back a day, to Wednesday evening rather than Thursday morning. The company noted that was to accommodate scheduling related to their Saudi Arabia event on Saturday.

Does that mean there will be more involvement on the call from the newly-appointed chief content officer, Paul Levesque, than they previously planned? They may want to have him comment and highlight that he’s done an effective job since taking over creative in late July.

I expect positive stories about TV ratings. Monday Night Raw is holding up well in year-over-year comparisons, despite NFL competition starting in September. Smackdown is also up year-over-year in four of the last five months. I expect an emphasis on “Easter eggs” as they point to how they hinted at the return of Bray Wyatt with clues in their programming and QR codes.

Stronger ratings will help their case for an upgrade in live rights fees. I believe serious negotiations for U.S. rights to Raw and Smackdown will start in Q2 2023 (April to June) and may even be finalized in that quarter. Given NFL on Thursdays has done well on Prime Video, Amazon seems like a more realistic player for one of the WWE shows. Current deals with NBCUniversal and Fox expire in the fall of 2024.

NFL Thursday Night ratings make it seem less likely a core WWE show would be airing in obscurity on a streaming platform. Streaming one of the flagship shows may actually expand WWE’s reach, given the younger demographics of streaming and pay TV’s continued decline and aging audience. Although the trade-off of moving away from the wide reach of broadcast (Fox, in the case of Smackdown) in favor of streaming (hypothetically, Prime Video), may be negative. Amazon can to afford to pay content providers like WWE commensurate to the tech giant’s current lesser ability to reach audiences.

Smackdown I believe is more likely to find a new home since it’s held by Fox. It’s questionable whether Fox is happy with the show’s ratings performance. And Fox can certainly live without WWE content. Contrasting against that, NBCU is deeply invested in WWE, so I see them likely to hold on to Raw and keep it on the USA Network.

Next-day Hulu rights are still in question. Did WWE and Hulu agree to an extension? Don’t expect clarity on that, but I’d work with the assumption that those rights will be dealt with live rights. Where NXT ends up in all of this seems in play, as well. It’s not publicly known when the agreement putting NXT on the USA Network expires, but it’s possible WWE has aligned those rights with Raw and Smackdown’s deals.

If Comcast/NBCU really wants to acquire WWE, it seems like 2023 is the time, ahead of another likely rights fees upgrade. Vince McMahon’s exit reasonably opened up speculation about whether WWE will be acquired. However, I’m neither convinced that Comcast wants to own WWE and fit it into its set of brands, nor that WWE is enthusiastic about selling with family members like Stephanie McMahon and Paul Levesque recently elevated in their executive roles. Acquisition seems somewhat inevitable, though. Endeavor is a well-suited acquirer and their president, Mark Shapiro, sounded interested in his comments on The Town podcast recently. Maybe that happens someday.

WWE’s September 3 “Clash at the Castle” event will be another highlight. Because of how WWE breaks down its revenue lines, we should get an idea of what the live gate was for the event since that was the only international event in Q3.

Domestically, I expect them to report an average paid attendance of around 7,000 per event, based on my reading of WrestleTix data, which would be their highest excluding-Wrestlemania quarterly average since the return-to-touring quarter of Q3 2021.

It will be interesting to see what their merchandise numbers are like, too. I built $28.5 million in revenue for the quarter toward the consumer products division, which consists of three areas: product licensing, venue merchandise, and eCommerce.

Consumer metrics have improved somewhat since Vince left, I believe due to the quality of the content. Some fans say not much has changed, but it seems to me enough has perceptibly changed to strengthen TV ratings and attendance, at least in the short term. It’ll be curious to see how WWE spins these trends without contrasting against the weak performance of their disgraced former CEO and Chairman.

I’ll cover the earnings report Wednesday evening on Twitter, @BrandonThurston. The call is at 5 pm ET, live on corporate.wwe.com.

I’ll be talking about the report with John Pollock of POST Wrestling on Thursday at 1 pm ET. It streams live on POST Wrestling’s YouTube channel and will be in both the Wrestlenomics Radio and POST Wrestling podcast feeds afterward.

My full WWE financial model and outlook are available to subscribers.

My latest estimates for WWE’s Q3 2022:

Revenue: $293.7 million
Operating income: $37.7 million
Adjusted OIBDA: $55.3 million
Net income: $24.5 million

For full-year 2022:

Revenue: $1.302 billion
Operating income: $291.3 million
Adjusted OIBDA: $369.4 million
Net income: $206.8 million