The future of WWE NXT 2.0 on the USA Network

During “The Gullo Report” on the latest edition of Wrestlenomics Radio, Brandon Thurston and Chris Gullo discussed WWE NXT 2.0 and what the future holds for the brand. The show is now more of a developmental show with young wrestlers like Bron Breakker leading the way, and many fans have wondered what this change into a more developmental brand means for WWE. Thurston gave his thoughts first by explaining where WWE is with NBC Universal and their deal for NXT.

“I’ve heard some discussion earlier this week about what the future of NXT is,” Thurston said. “NXT has a multi-year deal that was renewed in March that has just begun in fact, has just gone into effect. Term one just came to an end, which was a two-year deal, and whenever I go through all the data, when I’m looking back at when Dynamite started, and I have to be like, oh, yeah, NXT had these two weeks in September 2019 where they had one-hour episodes that were unopposed, yada yada.

“I wonder if the deal starts there and ends two years later in the middle of September, and for some reason, the timing of that is the reason why they did NXT 2.0 when they did, if that coincides with the beginning of the second term or second deal that we’re now under for WWE and NBC Universal for NXT. I don’t think WWE is getting that much revenue for NXT being on the USA Network.

“I think they were originally taken off the WWE Network to go on linear TV for the notion that Triple H had this overperforming developmental brand that was doing really well and maybe we could grow its popularity, and oh yeah, by the way, we don’t want to compete with AEW. That had nothing to do with it, god, no, but I think they wanted to compete with AEW.

“And that reason combined with the opportunity to maybe grow a third brand that would generate major media rights fees like Raw and SmackDown have, I think that was the play, and NXT did not win the Wednesday Night War. They got handily beaten most weeks in total viewership. I think every week except for one in the demo out of the 70 some odd weeks that they were running head to head, and it didn’t work out.”

Thurston continued as he talked about the new change in direction for NXT post Wednesday Night Wars. He then discussed if he sees NXT 2.0 on the WWE Network or remain on USA Network.

“There doesn’t appear to be a huge media rights value opportunity here related to the NXT brand,” Thurston stated. “The play, at least now, is to sort of hand wave Triple H’s vision of doing cool wrestling and to really make it a developmental brand that serves Vince McMahon’s wants for talent. As far as a media property, what is the goal for NXT?

“Let’s say this is a two-year deal. Who knows? But let’s say three years from now, when, if this is a two year deal, then the two year deal will be expired, is NXT still on the USA Network? What’s the viewership like? I don’t know. When you’re the USA Network, you could put what was in the slot before, Law and Order SVU reruns or something, which don’t cost you really anything because you probably own that intellectual property.

“I don’t know if there’s royalties that you have to pay out associated with that or all the costs are, but it’s not an original program they have to produce, and it’s probably quite profitable now. It’s probably got a pretty low demo rating. I don’t know if it’s got a better demo rating than this, which is a 0.14.

“I could see NXT being back on the WWE Network in a couple years, but I don’t have a strong feeling that NXT is going to be cancelled by NBC Universal / USA Network. I think it helps, even if this is sort of a breakeven for the USA Network in terms of what revenue they’re able to get out of NXT. Even if they’re not making money here, it’s still deepening their partnership with WWE, which is important to them, for Raw, which is by far their number-one program on the USA Network.

“It’s important for them with Peacock, which they need to grow for the future, and WWE is a significant part of what’s keeping people using Peacock, probably at least a million people who were used to watching WWE stuff on the WWE Network and now have got to go to Peacock to do that.”

WWE President Nick Khan has revealed in interviews that PPVs like Money in the Bank and SummerSlam have done better viewership on Peacock than on the WWE Network compared to 2019 numbers. Thurston then explained further why he sees NXT staying on USA Network.

“It may be just linear TV’s need for live content as we’ve seen the explosion of the number of wrestling programs that are on television,” Thurston noted. “Maybe the the bar has been lowered for how high you have to jump to get over to get on to linear TV, because linear TV needs live programming.

“It needs programming that people want to watch live now more than ever. So I remain somewhat optimistic.

“Although, I wouldn’t be shocked if NXT is no longer on the USA Network a couple years from now, but I remain optimistic that that’s going to continue to be the case, even though NXT is not this more ambitious brand in itself in terms of getting itself. Its priorities seemingly have changed to serve the main roster proclivities.”

Excerpts from Wrestlenomics Radio were edited for clarity.

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.

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NXT Hasn’t Become A Third Media Rights Brand For WWE

On the latest edition of Wrestlenomics Radio, Brandon Thurston and Chris Gullo went into detail on the recent WWE NXT cuts made on Friday. It was reported by Dave Meltzer on Wrestling Observer Radio that these cuts were led by Vince McMahon, with support from Bruce Prichard and John Laurinaitis. The moves are an effort to revert NXT back into a developmental brand.

In 2014, Paul Levesque (Triple H) led NXT to become a prominent third brand away from the earlier reality series origins of the show. Thurston went into detail on this week’s Wrestlenomics Radio on NXT’s new deal with USA Network.

“Let’s talk about what’s causing this. Every wrestling fan wants to talk about AEW vs. WWE and the fact that AEW beat NXT consistently in the ratings, in the Wednesday Night War, almost every time in terms of key demo viewership [viewers aged 18-49] and most of the time in terms of total viewership in the 70 some odd weeks that those programs ran head to head from late 2019 to April 2021,” Thurston said. “I think that’s probably part of the story and part of the perception in Vince McMahon’s mind, and by the way [WWE’s repeated public message is that], ‘they’re only focused on themselves,’ but I don’t believe that.

“I believe WWE cares about what AEW is doing, to a significant extent. There’s that, but I think what’s as big a piece is what happened earlier this year in March, where we got this press release. NXT had a two-year deal that started in fall 2019 to be on the USA Network. USA Network’s parent obviously is NBC Universal, and that deal is coming to an end this fall in two months.

“They renewed, WWE announced on March 30 that they’ve signed a multi-year extension. Now, we don’t know how long it is, but it’s multi-year, so at least two years, and this is when they also announced that WWE would move from Wednesday to Tuesday, and that began on April 13.”

Thurston continued as he discussed NXT’s move from the WWE Network to the USA Network. He examined WWE’s efforts to make NXT into a third rights brand and compares NXT’s financials to that of Raw, SmackDown and AEW.

“We never got an idea of what WWE really got in terms of TV rights fees from NBCU for NXT,” Thurston noted. “Of course, NXT was on the WWE Network. It was essentially the flagship show for the WWE Network for the first several years in the pre-Peacock era, and they decided to move it away from being essentially an exclusive Network show.

“Yes, it was on Hulu too but moving away from the Network to be on the USA Network. There was some worry from stock analysts, media analysts and investor types. ‘Why are you taking content that’s exclusive or almost exclusive to the Network and putting it on television when you’re trying to grow Network subs.’ And I think the media analysts who aren’t inundated in the wrestling industry every day probably didn’t appreciate the extent to which WWE wanted to compete head-to-head with AEW and sort of stamp out AEW’s progress before it got too far, but the public message, and I think there’s some legitimacy to this, was that maybe NXT could grow into this third media rights brand, in addition to Raw and SmackDown.

“Raw is getting $265 million a year from NBCU, that’s just in the U.S. SmackDown is getting $205 million from Fox. WWE in 2020 made over $500 million, more than half of its revenue from Raw and SmackDown rights fees. To an extent, NXT is bundled in there too, but if you took NXT out, it would be a minimal difference. So did NXT turn into this media rights brand? When the move was announced in 2019, there was speculation from stock analysts who cover WWE that the NXT deal to go to USA was worth maybe $50 million a year, early estimates were $100 million a year.

“We don’t know how much it was really worth, and we don’t know if it’s even all guaranteed or if it’s to a great degree, an ad revenue share, but my current belief is that it’s worth well less than what AEW getting from Turner, which is $44 million a year on an average annual basis. I believe it’s something probably closer in the neighborhood to $20 million a year. That’s what I believe about the first term, which is a two-year term.”

Thurston discussed WWE’s attitude towards NXT’s deal with USA Network. He explained what it meant to WWE, based on WWE’s public statements about it and the market’s reaction to it.

“Again, that first term is coming to an end this September, and the new deal will go into effect,” Thurston said. “They announced the new deal this past March, and was it an upgrade? Well, the stock price didn’t move when this deal was announced. The market didn’t feel like it was a big deal, and if this is a $50 million deal or $100 million deal on an average annual basis, that would be a big deal. That would be along the lines of WWE’s second biggest global TV deal, which is India, $50 million a year they get from Sony in India.

“If WWE is really getting $50 million, or something in that neighborhood, for NXT on USA Network, I would think the stock market would respond, but the stock market didn’t respond in March when this deal was announced or in early April when the stock market had the opportunity to react. And then we had the Q1 call on April 22. Stephen Cahall from Wells Fargo asked Kristina Salen about it.

“Basically, what I read this to be saying is that whatever the NXT deal was worth, the new deal was not a surprise to them. Or the value is too small to even really affect their financial guidance. The NXT deal, number one, was not a surprise to them.

“If it was a really great deal, they wouldn’t report a number on these earnings calls or in the press release, but they could have at least, if it was a great number, celebrated it in some way or given some indication about how happy they were about it. I know she’s happy saying, ‘We’re really pleased with that result,’ but it wasn’t a highlight in the press release.

“It only came up because an analyst asked about it, naturally, because NXT rights are something that has been hyped in the past. They justified putting it on the USA Network with the idea that they would be able to grow this third brand as a major media rights producer. We didn’t get any sort of hype. It’s not leaked to the Hollywood Reporter or to Sports Business Journal, that this is a big deal. If this was a big deal, something like that might happen, but it didn’t.”

Thurston then discussed what this all means for NXT now. He talked about NXT’s business performance over these past two years.

“Yes, NXT did not win the Wednesday Night War. AEW did, and NXT did not transform itself into just being some hybrid version of developmental and good content for the WWE Network into being, whatever value that has, this real tangible value of producing dozens of millions of dollars in media rights every year,” Thurston explained. “That’s not happening.

“NXT did not turn into this third media rights brand, yet it’s still on the USA Network. It’s probably producing some money. I would guess somewhere around $20 million a year. It doesn’t sound like it got a major upgrade and I think that’s sort of the financial, tangible, quantifiable, if you want to call it, failure. NXT didn’t meet those expectations.”

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.

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Return of live fans may not have the long-term effect on TV ratings some expect

On the latest edition of Wrestlenomics Radio, Brandon Thurston and Chris Gullo discussed the possible effects the return of fans at shows will have on television ratings. AEW will resume touring starting with Road Rager in Miami on July 7, and WWE will kick off a multi-city tour on July 16. Thurston and Gullo broke down what effect they think fans will have on TV ratings for Raw and Smackdown.

Since recording the episode, Thurston has added predictions for monthly averages for AEW Dynamite, WWE NXT, and AEW Rampage, seen in the charts below. Rampage debuts on TNT on Friday in a 10pm Eastern time-slot, beginning August 13, before both AEW weekly shows move to TBS in 2022.

Averages for Smackdown and Rampage in December will be challenged by running on Christmas Eve and New Years Eve, which fall on the last two Fridays of the year. Thurston anticipates Rampage will begin by performing close to Friday Night Dynamite’s Hour 1 average (562,000 viewers total, 277,000 in 18-49), and wane from there. The amount of time viewers are willing to spend watching AEW will be spread more thin, which will cause Dynamite’s viewership to be slightly lower than it would be otherwise as well.

By the end of the year, he sees Dynamite and Raw’s 18-49 viewer counts drawing close to one another, but not quite overlapping.

Chris Gullo: Fans are coming back. We had a Dynamite in front of fans on Wednesday, and we’re gonna have fans in WWE crowds in a couple weeks. How much of an effect do you really think it makes on the ratings because you’ve heard, ‘Oh, wrestling’s hard to watch with no fans, or in Thunderdome or with the same fans at Daily’s Place.’ Well now, we have live audiences all around the country.

They’re going to fill arenas. Do you really think it’s gonna make that huge of a difference on the ratings? I think because it’s summer, it won’t, but that’s just me. I don’t think, after a year and a half, someone goes, ‘I think I’m gonna watch Raw again because they have fans.’

Brandon Thurston: I was looking at what the month-to-month trends usually are, and usually, July is up from June and then August is up from July. I just sort of went through each week and tried to do a rough prediction of what I think is going to happen, trying to take into account holidays and things like that.

General overview, I think that there’s definitely going to be a short-term bump with Raw with its first event in front of live fans. It will pop a pretty big number over what it had been doing in the weeks leading up to it. Smackdown, same thing. I don’t know this, but I think they’re going to bring in John Cena and probably advertise him ahead of time and maybe he’ll start a program off with Roman Reigns heading towards Summerslam.

I think there’s going to be a short-term boost, and after that, both of these programs are just not good enough and don’t make people feel like watching them enough to sustain a long-term increase in ratings compared to their trends over the last year and a half during the pandemic.

Thurston noted WWE investors have high expectations for TV ratings when fans return.

Thurston: In July 2020, Vince was grilled on the earnings call about ratings and the excuse was that, well, once we get fans back in attendance, ratings will improve, and the Thunderdome was introduced partly to address that.

And the Thunderdome did coincide with ratings stabilizing. But I think investors are really expecting a major boost in ratings when fans return.

With the prediction that Raw and Smackdown will have a short-term boost, Thurston explained predictions for total viewership numbers for Raw and Smackdown for the remainder of the year. These predictions also take into account the NFL season where there will not be a lead-in during the holiday season like there was last year that led to a big number for Smackdown on Christmas.

Thurston: Let’s talk about what the averages were for June. I’m just gonna talk about total viewership here. Raw averaged 1.67 million viewers. Smackdown averaged about 2 million flat, which I think is the first time that the average comes in below 2 million on Fox. I think in July, about 1.7 million for Raw and 2.1 million for Smackdown, so they’re both up. This is for the second half of the month only, including live fans in attendance again, and then in August, 1.75 million for Raw and 1.20 million for Smackdown. And then in September, we’ll start to get back into the season of Monday Night Football, in the case of Raw, and I see it falling about 1.60 million for Raw and then maybe Smackdown, I feel like this is being generous, but Smackdown staying above 2.1 million.

It certainly may have John Cena throughout August, but then I see it really slipping for Raw down to 1.5 million, and Smackdown getting to 2 million flat again. Smackdown, the way the calendar works this year, is going to land on Christmas Eve and New Year’s Eve. So those ratings, almost certainly, are going to plunge. I see Raw doing 1.5 million through the prime of the football season so that will be scraping record lows again. To be fair, I expected that to happen last year, and it did not go as badly as I expected. I think that’s partly thanks to the Thunderdome, remember through the summer where they were panicking with things like Raw Underground.

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.

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A Brief State of the Pro Wrestling Business at the End of 2020

I’ve gone to some lengths the last few years to research and try to understand the popularity and finances of the pro wrestling business.

There’s good reason to believe World Wrestling Entertainment’s popularity diminished each of the last three to four years, based on consistent annual declines in ticket sales, merchandise sales, Google web search, WWE Network subscriber losses in 2019, and Raw’s viewership has been under-indexing since at least 2019 compared to other TV trends.

WWE is the industry leader, obviously. The company attracts the vast majority of the eyeballs and view time globally, and the vast majority of the revenue.

WWE will report somewhere around $1 billion in revenue for 2020. I estimate All Elite Wrestling, WWE’s new competitor, generates somewhere around 10% of that amount. The likely next-closest company, New Japan Pro-Wrestling, in its most recent non-Covid fiscal year, reported $53 million in revenue, about 5% of what WWE will generate this year.

The business model for the biggest wrestling companies transformed drastically over the last several years. No longer is U.S. pro wrestling such a “destination” business: where promotions’ TV programs are a loss leader used to promote sales of tickets and pay-per-views. (This raises questions about what the optimal creative approach is to wrestling storytelling in this environment, but that’s another article.) A progressively large portion of U.S.-based wrestling companies’ revenues come from television broadcast rights. This has little to do with anything wrestling companies have accomplished and more to do with the media economy. As cable homes and viewership have diminished, the most-viewed programs have become increasingly valuable. Top wrestling programs are among these.

To maintain their diminishing subscriber bases, cable networks and cable/satellite systems are increasingly reliant on highly-viewed programs that people watch live. Viewing programs that are live (like sports and news) is emerging as cable TV’s enduring valued function for consumers. Netflix and other streaming services have absorbed much of the time viewers used to spend watching scripted programming, but those services have yet to do so much in the area of live programming. Because of that, cable networks are paying increasingly huge fees for highly-viewed programs that are best watched live.

For the first time, WWE will get the majority of its revenue this year from TV rights fees. That will be the case after Covid is long gone too. This will also be WWE’s inflation-adjusted most profitable year ever, despite not selling a single ticket since March and not being able to do Wrestlemania in front of fans.

So while cable TV is perceived to be a dying medium, it’s actually making wrestling more profitable than ever.

And — you may be thinking: But what happens to wrestling when cable actually dies? I’m skeptical it truly will, but even if cable subscribers were to evaporate entirely, I don’t see the value in highly-viewed live content diminishing much. Big live audiences will be highly monetized some way or other. And if the large FAANG (Facebook, Apple, Amazon, Netflix, Google) companies ever get involved in live sports rights bidding — a topic explored on the previous WWE earnings call — that may drive the going rate for sports rights, including wrestling, even higher.

Clearly there’s a ton of watch time and other forms of engagement happening digitally, across many wrestling brands. That digital consumption drives far less revenue, though, even for WWE. Even if you live in an economy where the digital CPMs (ad rates) are high, an hour of watching WWE content on YouTube is probably worth about 5% of what it is when you watch on traditional TV.

Keep in mind, too, cable television is not just an ad platform (like YouTube is), but it’s a subscriber-supported platform too (unlike free-access YouTube).

Not only are advertisers paying more per eyeball on cable TV versus digital platforms, but networks rely on highly-viewed programs to justify the affiliate fees they charge your local cable/satellite system. (And, by extension, your local system relies on top programming to justify the subscriber rates they charge, you, the end-consumer.) And those affiliate fees make up the majority of cable networks’ revenues.

Revenue sources breakdown for TV networks that distribute WWE and AEW in the U.S.

Consider, too: Netflix has been hugely successful. It’s in more than 73 million homes between the U.S. and Canada, as of Q3. But major cable networks like USA Network and TNT, for now, likely still have the edge. As of 2019, USA and TNT were in 89.7 million and 89.2 million U.S. homes, respectively. Those counts are almost certainly lower today, but probably still marginally above the count of Netflix subscribers in the U.S.

That said, time spent on wrestling is probably stable, maybe growing. WWE still easily makes up the majority of time spent, but people are engaging with a wider variety of wrestling brands, which probably make up a larger minority of the engagement than at any time since the end of World Championship Wrestling in 2001, especially with the introduction of AEW on cable in October 2019.

Quality of the current content notwithstanding, it’s a great time to be a fan. Fans have more easy and low cost access to a wide variety of current and historical wrestling content than ever. There’s an enormous supply of wrestling footage for free on YouTube. Every wrestling company of note with a substantial archival library has a streaming service for about $10 monthly or less.

And creative fulfillment notwithstanding, it’s a great time to be a wrestler. There are more living-wage-paying positions for wrestlers in the industry than at any time since the fall of the territories. And that’s the case as we head toward a time where WWE might cut back on house shows post-Covid, and AEW will probably never run them, meaning there are more positions with less travel, time away from home, and physical wear required. Even as house show fees for wrestlers may disappear, competition for talent among major companies is tremendous and should result in increased salaries. It likely already has.

At the independent level — where many of today’s top wrestlers started — wrestlers and promotions are empowered (and hazarded) with the tools of social media, which allow them to connect with fans, wrestlers, and promoters like never before. As mentioned, there’s an endless relatively low cost video library at wrestlers’ fingertips to study. And the eagerness with which top companies are signing wrestlers to exclusive contracts means roster spots at the more prestigious independent promotions have been largely vacated, and those companies should be desperate to cultivate a new crop of independent stars.

The enormous time people spend using the internet also empowers those ambitious indies to monetize video in various ad- and subscriber-supported platforms. Companies like FITE work with a variety of wrestling companies to stream live pay-per-view events, and IWTV (which I’ve done limited work for) live streams some of its partners’ events. I expect before long live streaming events for most any indie of note behind a paywall will be commonplace. All this allows relatively small companies to monetize not just live events (via ticket sales) with fans in the local area but to monetize video as well with fans globally, without the expense, shipping, and labor required of creating a physical product like a DVD.

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

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The mystery of WWE NXT’s rights fees on USA Network

I don’t believe there’s any reliable public report on the average annual value (AAV) for WWE NXT on the USA Network.

There are specific credible reports on the AAV of WWE Raw ($265 million), WWE Smackdown ($205 million), and AEW Dynamite ($43.5 million).

But for NXT, reports and estimates are all over the place:

Eric Handler of MKM Partners: $50 million to $100 million
Dave Meltzer of Wrestling Observer Newsletter: $30 million to $50 million
Curry Baker of Guggenheim Partners: ~$30 million
David Karnovsky of JPMorgan: ~$70 million

I believe the MKM and JPMorgan numbers are estimates modeled by stock analysts, and not based on human sourcing. Those firms’ estimates might be based on revenue per viewer hour rates of Raw and Smackdown, and consider estimates of what NXT might deliver, based on the 2017 one-off 7pm airing on USA.

I don’t endorse these results, but you can see here how such estimates might’ve played out, allowing analysts to surmise NXT was getting as much as $50 million or $70 million AAV:

P18-49 viewership numbers are estimates based on actual P18-49 rating (from Showbuzzdaily) multiplied by 1295.

I believe the Observer report is based on human sourcing, but it’s not clear whether the information was from someone with direct knowledge.

However, the Observer’s valuation ($30 million to $50 million) does overlap with the Guggenheim estimate (about $30 million), which is also apparently based on a human source.

Guggenheim analyst Curry Baker wrote in a related stock analysis: “After speaking with [WWE], we believe that the NXT deal struck with USA is for one or two years at ~$30 million a year.”

If WWE was getting a great deal — of say, $50 million annually or more — from USA for NXT, one would think that fact would be celebrated in the following earnings report. But there was no such bragging in the Q3 2019 report.

To make things more opaque, the timing of WWE’s new deals for Raw and Smackdown makes it impossible to make a meaningful estimate based on the company’s revenue reporting. The increase in rights fees for the flagship shows went into effect in the same first full quarter that NXT appeared on USA Network (Q4 2019), so it’s not clear what a “normal” quarter would look like without NXT money for the “core content rights fees” line, within which all domestic and international rights fees for the three programs are reported.

However, it’s not clear the NXT deal is so valuable that it’s actually a profit contributor.

WWE co-president George Barrios (before his termination) was asked on the earnings call on October 31, 2019 if NXT (which debuted on USA the month prior) was now an EBITDA contributor. He declined to answer and deflected to emphasizing the long-term opportunity of monetizing NXT.

From WWE’s earnings call, 10/31/2019:
Ben Swinburne — Morgan Stanley — Analyst
Okay. And I don’t know if you’ll answer this but is NXT a material — a contributor to EBITDA? Or a material contributor to EBITDA? A material impact to EBITDA, in the fourth quarter, either good or bad?
George A. Barrios — Co-President and Director
Yeah, we haven’t talked about the economics of NXT. I think if you remember the release when we announced it, we said that we were doing this for the long term.

The relevant statement in the August 20, 2019 press release Barrios referenced is a quote attributed to Chairman and CEO Vince McMahon.

“The move to USA Network provides an opportunity to deepen our relationship with NBCUniversal and further build the NXT brand,” said Vince McMahon, WWE Chairman & CEO. “Over the long term our goal is to develop a following that can be monetized to the same level as our flagship programs, Raw and SmackDown.”

Again, one would think if the NXT deal were on the upper end of some analysts’ estimates, the company would be showing more pride when asked and wouldn’t so emphasize the long-term opportunity.

It’s possible NXT could be getting as much as $30 million a year while not being a profit contributor, depending on the cost of production. I believe the pre-Covid cost to produce one live Raw or Smackdown was about $1 million. It seems reasonable to imagine a pre-Covid live NXT with its smaller set and regular venue at Full Sail University would cost substantially less. If the weekly cost of a live NXT was as much as $600,000, the annual cost comes to just over $30 million. If so, that would explain Barrios’ unwillingness to affirm NXT’s contribution to EBITDA. Still, I lean toward thinking the notion of $600,000 in weekly production costs for NXT is higher than the reality.

To consider the value of the NXT deal, let’s think too about what motivated the decision to move NXT from being a one-hour program (usually taped in advance in four-episode sessions) exclusive to the WWE Network to being a two-hour program airing live each week on USA.

I believe there was an urgent desire from WWE and NBCUniversal to protect the value of Raw by directly competing with AEW head-to-head on Wednesday. Despite public comments from EVP Paul Levesque that he’s not that concerned with the competition, I believe that’s the largest motivating factor behind the move. That compulsion to go head-to-head with the strongest wrestling competition in 20 years is probably a greater motivator than any short-term monetary compensation.

Indeed, competing with AEW is apparently an issue NBCUniversal is interested in as well. When AEW was preempted from its normal timeslot in September, replays of the most recent NXT episode were suddenly scheduled on Syfy (another NBCU channel), ensuring Dynamite was still opposed head-to-head by NXT in some form.

Why would NBCU care so much?

Raw is USA Network’s most-viewed show. It delivers weekly live first-run three-hour episodes 52 weeks a year. Depending on how you define it, Raw is arguably the most-watched weekly show in the key P18-49 demographic that’s airing year-round anywhere on cable. Really only NBA, NFL, and college football do better consistently, and none of those air year-round.

Raw is a strong enough show that it’s probably associated with specific guarantees called “covenants” within the agreements for transmission fees between NBCUniversal and cable/satellite providers. In other words, Raw is specifically justifying a portion of USA Network’s largest source of revenue, transmission fees. If Raw were to suddenly stop airing on USA, cable providers could go back to NBCU to renegotiate terms. If WWE has a strong wrestling competitor in the media ecosystem, it may make it harder for NBCU to sell those covenants to cable providers at a high price. In sum, the success of AEW may threaten a portion of USA Network’s revenue from transmission fees, and if Raw isn’t driving transmission fees as strongly, then that threatens NBCU’s willingness to contribute highly to WWE’s biggest revenue source, its TV rights fees.

Considering these motivating factors and the inconsistency of the various aforementioned reports and estimates, I don’t have confidence in any particular number on NXT’s compensation. Further, it does seem within the realm of possibility the number is well below $30 million.

That said, there is a long-term opportunity for NXT to be monetized at $50 million to $60 million per year, based on the current revenue per viewer hour compensation of Raw and Smackdown, and the increasing demand for live content on pay TV. NXT’s terms could be renegotiated sooner than later, since, if the agreement with USA was for two years, the deal will be expiring around September 2021.

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