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.

This is an edited version of my Twitter thread.

WWE reports Q3 earnings:

Net income: $41.7 million
Revenue: $304.6 million
EPS: $0.49
Adjusted OIBDA: $91.2 million

Revenue beats expectations, EPS is right in line with analyst estimates. Adjusted OIBDA is way over the guidance of $70M to $80M stated last quarter.

Earnings press release: https://corporate.wwe.com/investors/news/press-releases/2022/11-02-2022-200640885

Clash at the Castle appears to have drawn an $8.0 million live gate.

WWE reports $8.0 million in international ticket sales for the quarter. Clash at the Castle was the only international live event during the period.

The 10-Q gives a slightly more precise measure of international live events revenue for the quarter (Clash at the Castle gate), $8,020,000.

WWE’s North American (US/Canada) average attendance was 6,300. Down last year which was the first quarter back on tour since the pandemic.

WWE’s Key Performance Indicators deck: https://corporate.wwe.com/~/media/Files/W/WWE/press-releases/2022/q3-2022-kpi.pdf

WWE says they expect their favorite profit metric, adjusted OIBDA, to be on the “upper-end” of their previously stated $370M to $385M guidance range for the full year of 2022.

WWE estimates adjusted OIBDA of $83M to $90M for Q4.

WWE says the investigation into alleged misconduct by Vince McMahon “is now complete and the Special Committee has been disbanded.”

The investigation cost WWE $19.4M. My reading is that that’s separate from the $19.6M in previously unrecorded payments made by Vince McMahon.

WWE publishes more YOY% changes for PLE viewing on Peacock.

Money in the Bank: +17%

Summerslam: +20%

Extreme Rules: +36

All are the most-viewed event by that name in WWE history.

My note, remember Peacock subscribers were higher during these events than the year prior.

The average ticket price for Clash at the Castle was $148.52 (USD). It had a paid attendance of 54,000.

WWE doesn’t explicitly say these are Clash at the Castle numbers, but that was the lone international event during the quarter. WWE breaks out North America (U.S. and Canada) from international (the rest of the world).

If I’m backing into the math correctly, Clash at the Castle sold about $940,000 in venue merchandise ($17 per paid attendee)

That’s based on my math and their disclosures on total venue merch revenue, domestic attendance, and domestic venue merch per capita.

WWE co-CEO Stephanie McMahon begins the call after comments from SVP of IR Seth Zaslow.

Stephanie mentions “renewed energy around our creative” before highlighting WWE’s TV ratings. “Smackdown frequently ranks #1 in the coveted P18-49 demo”.

Stephanie talks about the success ess “The White Rabbit Project” multimedia campaign and says Paul Levesque will say more about it.

She calls Clash at the Castle the highest-grossing European event in their history. “Strong IP and better storytelling drives all lines of business.”

Stephanie names 5 key areas for growth:

• Media rights
• International PCs and local globalization
• Monetization of IP incl moats around talent
• Digital, web3, “whatever the metaverse becomes”
• Potential M&A that aligns with core competencies

Very notable she names M&A as that seems suggestive of WWE being acquired. Her comments later, though, make it sound like WWE is at least in the short-term interested in acquiring smaller companies.

Co-CEO Nick Khan says gross revenue is exceeding $4.6 million for Royal Rumble already in San Antonio in January.

More than 100,000 tickets are already sold for Wrestlemania.

WWE worked with the tourism board and local government in Cardiff. They got a site fee for the event.

Nick highlights the new Foxtel deal in Australia, the deal in the Caribbean region with C&W, and Multichoice in Sub-Saharan Africa.

“All 3 deals saw an increase in rights fees” and expanded WWE’s “distribution footprint”.

Nick Khan says WWE extended its deal with Hulu. “We recently extended our Raw re-air rights deal.”

This is news. Previously, we’d seen WWE content on Hulu marked with expiration tags before those disappeared and reappeared multiple times as recently as a week ago.

Nick talks about the success of the Amazon-NFL partnership. It’s driving younger demographics. He describes streaming as duplicating the dual revenue model of subscription and advertising of cable TV.

Mentions Fox and NBC paying a 70% increase in rights for the Big 12 deal despite the conference losing Texas and Oklahoma.

Paul Levesque takes over. “The creative is working and the storytelling is resonating with our fans.”

Levesque talks about social and digital engagement records broken. WWE is the #1 most followed sports league on TikTok, “ahead of NFL, UFC, NBA by millions”.

Levesque talks about “The White Rabbit Project”, which he calls a multi-week-long campaign that played out across social, linear, and in arenas. “We let our fans discuss it among themselves and try to figure out what was going on.”

It resulted in the September 23 episode of Smackdown being the most-watched since March 2020.

Levesque says the campaign also drove merchandise sales. Upon Bray Wyatt’s debut, his new T-shirt from Extreme Rules became the top-selling item across the entire Fanatics platform, not just WWE.

Levesque says they’re engaging new fans. He notes Roman Reigns vs. Logan Paul this Saturday in Saudi Arabia. Survivor Series will have War Games.

Levesque dryly says no one is more excited for War Games “than our president and CFO Frank Riddick.”

“Thanks, Paul…”

Riddick says ad and sponsor revenue declined because of WWE’s decision to exit a third-party audio deal, which had an impact.

He doesn’t name the company they terminated the deal with. Seems possible he’s referring to Spotify, but I’m trying to figure it out.

Riddick says, in discussions with Hulu, WWE expressed their desire to align the timing of those next-day rights with live rights. Live rights expire in September 2024, so presumably, Hulu rights now expire at the same time. WWE is pleased with the outcome but Riddick noted the extended deal will cause a “mild headwind”.

Sounds like WWE settled for less money from Hulu in exchange for getting the deal to expire with live rights in September 2024. I’ve noted before this is important so WWE can negotiate live rights alongside next-day rights, making a potential deal more enticing to major streaming players, possibly including Amazon.

Later in Q&A, Riddick says about the Hulu extension, the mild headwind doesn’t indicate the value of media rights. They decided a shorter-term deal was better for WWE.

Analyst Q&A begins.

Brandon Ross from LightShed asks Levesque what the core tenets of his content philosophy are.

Without using the phrase, Levesque basically talks about long-term booking. He says he wants to pick places to go to, put it in the “GPS” system. Already beginning to figure out what next year’s Wrestlemania could look like.

Levesque says the creative they’re doing is without Charlotte, Becky Lynch, Cody Rhodes, Randy Orton. Those are significant stars who will move the needle when they return, he says.

Guggenheim’s Curry Baker asks Nick what metrics they look at that give them confidence in the next right of media rights negotiations.

Nick says it’s the three Rs: Ratings, relevancy, and revenue. He feels the company is firing all of those cylinders and so is the market.

Nick says WWE has an offer for one of their PLEs that they like already (presumably a deal similar to the Cardiff event). “We’re trying to close that up.”

Eric Handler from MKM Partners asks about NXT UK/Europe.

Levesque say “as Europe evolves… you’ll begin to see it replicating a bit more as you do in the U.S.” A system that brings in the best athletes from all around Europe.

Levesque notes it’s a hard process to recruit and bring athletes from India into the U.S. It’s easier to get them into Europe. Europe can be a hub.

Handler asks about what kind of timeline is right for determining if talent can succeed in WWE.

Levesque says high-level athletes speed through the program more quickly. There’s almost a six-month cut-off period. Four to six months after that, there’s another one where the crowd starts to thin out.

David Karnovsky from JPMorgan asks Stephanie to expand on M&A she mentioned earlier when listing the company’s areas for growth opportunity.

Stephanie says there are smaller opportunities they’re looking at in the short-term “and in the long-term who knows what the future might hold”.

Karnovsky asks about WWE’s Canada TV deal. Nick says the market there is strong for WWE. There are a plethora rather than a small number of buyers. They love their relationship with Rogers, but he’s “quite bullish” about the next deal in Canada.

In response to a question from Steven Cahall, Nick says with Raw on cable, Smackdown on broadcast, and Network/PLE content on Peacock allowed WWE to test those platforms. He says they’re happy with all three. There will be fewer opportunities in cable. Linear is best for live which is the kind of content WWE has.

About splitting digital and linear rights, Nick points to the NFL as an example. NFL rights are staying exclusive, even in the case of an exclusive streaming deal with Amazon on Thursday nights. He expects deals to continue to be made that way.

I’ll talk live with John Pollock tomorrow at 1 pm ET on POST Wrestling’s YouTube channel. Audio will be available afterward in the free podcast feeds for both Wrestlenomics Radio and POST Wrestling.

Brandon Thurston
brandon@wrestlenomics.com