Once again, WWE has captivated a group of people. The behemoth pro-wrestling company knows how to control the situation and keep everyone in the palm of their hand. Anxiously, outsiders try to guess their next move. The key difference is that this time the spell-bound observers arent members of the WWE Universe watching Raw and Smackdown theyre investors impatiently awaiting news of WWEs big television deal. For weeks, the spigot of information has remained completely dry. Wrestlemania 30, the annual shareholders meeting and the first quarter conference call came and went without a progress update from WWE on the status of their domestic television rights deal. "Just wait." Here's the situation: WWE aligned their major television properties Raw and Smackdown to expire in September 2014. In the United States, currently both shows air on networks owned by NBC Universal (USA and SyFy along with replays on NBCU's mun2 and Universal HD channels). In a bid for a major TV rights increase, WWE has a lot riding on these negotations. They've tried to maximize the number of bidders (NBCU, Viacom, Fox, Turner, AMC, and WGN have all been mentioned); they've turned the hype up to an 11 (Were Live Sports! Were DVR-Proof! We Deliver Millions of Dedicated Viewers!) and keep trotting out their (let's say "optimistic") June 2012 WWE Consumer Survey (62M U.S. TV Homes have affinity for WWE!). They promised investors to expect "double or triple" which would result in a lot of profit for WWE since costs would remain virtually unchanged. The biggest piece of the domestic TV puzzle will is the Monday Night Raw and Friday Night Smackdown TV contracts. In 2013, WWE earned about $163M. It was split into Domestic TV Rights ($106M) and International TV Rights ($55M) with the small remainder being television advertising (a once gargantuan segment worth more than $92M in 2000 which was basically eliminated as part of the agreement WWE signed when they returned to USA in 2005). While WWE doesnt explicitly break out the $106M in Domestic TV Rights by Television program, my calculations (combined with other analyst estimates such as Laura Martin at Needham Research) suggest that Raw+Smackdown is worth about $86M (260 hours of programming) with Total Divas ($10.7M), Main Event ($5.7M) and Saturday Morning Slam ($3.5M) completing the picture. Its really tough to break down out the Smackdown and Raw individually contracts (interesting, it appears that USA is only paying a modicum for the 3rd hour of Raw), but hours alone suggest the split around 2/3 Raw ($56.5M) and 1/3 Smackdown ($29.5M). Note: Weve already seen the Main Event contract (on Ion) quietly end in April 2014. (Again, this reinforces that WWEs A/B level programming is solid but only hardcores watch the periphery shows.) Also, the new contract (like the old ones) are expected to have annual escalators in them for programming rights. What comes next for the company is the big question mark. WWE Stock used to be stable. Between June 2011 and June 2013, WWE stock hovered between $8 and $11. However, following the third quarter conference call, the stock started climbing. It grew from Halloween 2013 ($13/share) to a stunning $31/share high-water mark in March 2014. But that precipice was short-lived. Investors have been reacting much stronger to poor news (post-WM announcement that 667,287 WWE Network subscriptions was well-below many analysts expectations that WWE could hit a million subscribers by WM30) than good news (a few weeks later it was announced that "nearly 400,000 US homes" ordered WM30 via traditional PPV). Investors (as they should be) are narrowly focused on gauging the immediate benefits from the big TV rights deal. Theyre ravenous for new details on how negotiations are proceeding. Yet radio silence prevails. WWE wouldnt talk about the domestic TV Rights progress during the Annual Shareholders Meeting in Stamford nor on the Q1 Conference Call. After starting the year with interesting interviews, merger denouncements and quotes from the WWE PR machine, there hasnt been anything substantial (on the TV Right negotiations) published for quite some time. Hopefully, we may get a gem this week as many networks are announcing their upfronts and providing hints on their future programming and scheduling decisions. Investors were always hoping the WWE announcement would lean towards end of April instead of the beginning of May. They're an impatient bunch. Thats not to say that WWE hasnt been busy. Launching the WWE Network in February, producing Wrestlemania 30 in April, losing DirecTV and Dish TV PPV support while moving on to Extreme Rules in May has absorbed plenty of their time. For contract negotiations, this time WWE put Michelle Wilson (Chief Revenue & Marketing Officer) and George Barrios (Chief Strategy & Financial Officer) in charge of the Domestic TV Rights negotiations (along with hiring people like media rights expert Chris Bevilacqua). Its an interesting move that designed to insulate the process from the whims of the McMahon family while simultaneously protecting the McMahon Officers (Vince, Steph, Paul Levesque) should things go sour. Separating this important decision from the emotions of Chairman of the Board & CEO Vince McMahon is relevant (he was frustrated that Spike TV wasnt available in the hotels he stayed at; he didnt want to move to third-rate station like WGN in 2009; he couldnt agree to a partnership with a cable company to control a channel like SyFy or G4). I see it as a sign how seriously WWE is taking this. Additionally, while these delays may aggravate some investors (many whose interest in this company is sudden and short-lived), WWE has learned from previous mistakes and started the whole process very early. (Consider how WWE didnt announce the previous UK TV deal until 11/30/09 - it started in January 2010.) The current deals dont expire until September 2014. They've got plenty of time to negotiate. Click "next" below for part 2...
I'm a professional wrestling analyst, an improviser and an avid NES gamer. I live in Saint Paul, Minnesota and I'm working on my first book (#wrestlenomics). You can contact me at chris.harrington@gmail.com or on twitter (@mookieghana)
What comes next for the company is the big question mark. WWE Stock used to be stable. Between June 2011 and June 2013, WWE stock hovered between $8 and $11. However, following the third quarter conference call, the stock started climbing. It grew from Halloween 2013 ($13/share) to a stunning $31/share high-water mark in March 2014. But that precipice was short-lived. Investors have been reacting much stronger to poor news (post-WM announcement that 667,287 WWE Network subscriptions was well-below many analysts expectations that WWE could hit a million subscribers by WM30) than good news (a few weeks later it was announced that "nearly 400,000 US homes" ordered WM30 via traditional PPV). Investors (as they should be) are narrowly focused on gauging the immediate benefits from the big TV rights deal. Theyre ravenous for new details on how negotiations are proceeding. Yet radio silence prevails. WWE wouldnt talk about the domestic TV Rights progress during the Annual Shareholders Meeting in Stamford nor on the Q1 Conference Call. After starting the year with interesting interviews, merger denouncements and quotes from the WWE PR machine, there hasnt been anything substantial (on the TV Right negotiations) published for quite some time. Hopefully, we may get a gem this week as many networks are announcing their upfronts and providing hints on their future programming and scheduling decisions. Investors were always hoping the WWE announcement would lean towards end of April instead of the beginning of May. They're an impatient bunch. Thats not to say that WWE hasnt been busy. Launching the WWE Network in February, producing Wrestlemania 30 in April, losing DirecTV and Dish TV PPV support while moving on to Extreme Rules in May has absorbed plenty of their time. For contract negotiations, this time WWE put Michelle Wilson (Chief Revenue & Marketing Officer) and George Barrios (Chief Strategy & Financial Officer) in charge of the Domestic TV Rights negotiations (along with hiring people like media rights expert Chris Bevilacqua). Its an interesting move that designed to insulate the process from the whims of the McMahon family while simultaneously protecting the McMahon Officers (Vince, Steph, Paul Levesque) should things go sour. Separating this important decision from the emotions of Chairman of the Board & CEO Vince McMahon is relevant (he was frustrated that Spike TV wasnt available in the hotels he stayed at; he didnt want to move to third-rate station like WGN in 2009; he couldnt agree to a partnership with a cable company to control a channel like SyFy or G4). I see it as a sign how seriously WWE is taking this. Additionally, while these delays may aggravate some investors (many whose interest in this company is sudden and short-lived), WWE has learned from previous mistakes and started the whole process very early. (Consider how WWE didnt announce the previous UK TV deal until 11/30/09 - it started in January 2010.) The current deals dont expire until September 2014. They've got plenty of time to negotiate. Click "next" below for part 2...