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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.

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.