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Below are the basic notes from my hotline yesterday looking at WWE moving the network to Peacock. There is more depth on the hotline but this will give you an idea as to what was talked about.
Signing with Peacock is a huge win for WWE.
WWE has grossed about $141M in the first 9 months of 2020. If they maintained that pace, they will gross $188M for the year. That is for the entire world.
In selling the rights to Peacock, it’s a huge win for WWE.
*If the Wall Street Journal report is correct, they will gross more next year AND maintain the Worldwide rights to The Network. They will increase the overall revenue for The Network. Even if they keep creating the same amount of content that they do now, they will bring in more money. And, costs will be reduced greatly with NBCU paying for many of the aspects that WWE pays for now. Their net will definitely increase.
*FOX pays $205M for 104 hours of Smackdown yearly. That is 8.7 hours of programming a month. Most months, The WWE Network doesn’t do 8.7 hours of live programming (PPVs, Takeovers and Supershows). Those are the real draws of the Network, so WWE has gotten a comparable deal to what they have sold to FOX.
*They get protection if interest in the product continues to lag. The ratings have slid over the past year and interest in PPVs tends to slip when that happens. They protect themselves by getting a significant, locked in payment.
*By being on Peacock, they will get access to more eyeballs which could grow interest in the product (and of course NBCU is hoping that the PPVs bring eyeballs to their product. Someone who may not pay $9.99 for a PPV may pay $4.99. And we have a choice to pay less if we choose, plus if you use Comcast for internet you get Peacock for free.
*By doing this deal with NBCU, it strengthens their position in the Comcast universe. As they shut down NBCSN, more properties will move to USA (and Peacock). Cross promotion with the NHL, NASCAR and the EPL will become part of the synergy, much like with saw with Booker T on FOX yesterday.
What does it mean for the stock?
*I think it’s a kind of positive, if that makes sense. Guggenheim raised their target price today from $66 to $72. I think that is fair because the stock, which already pays a solid dividend, has become even more cash strong. Instead of wondering what the Network subscribers and revenue will be, they now have a number that they can count on, quarter in and quarter out. Add that with the TV deals and for the next three plus years, we know where probably 95% of the revenue is coming from and exactly what it will be. That is a big positive.
*The reason that I say “kind of” is there isn’t a lot of room for growth now. The main assets that WWE has have been monetized. They will sell tickets and more merchandise again when they start running their events in front of crowds, but that is more of a steady source. As David Baldini suggested when we did The Business of Wrestling a few weeks back, the best way to bring in new revenue sources is to sell more super shows, like they have to Saudi Arabia and Australia. I know WWE President Nick Khan said they will run house shows again, but if they do, they need to change how they do it. I will get into that later.
*Beyond that, I think WWE has monetized its assets as best as they can but that isn’t a bad thing. They will still generate strong revenue and the shareholders will get a decent dividend while the stock price will be backed up by financials.
What does it mean for WWE?
*They are a TV company now. Anyone who is still clinging to the old model can forget it. TV IS what will be served by WWE.
*House shows. For years they have dwindled. They don’t bring in much revenue and when expenses are added in, they don’t generate much profit. I think it would be best to get rid of all of the smaller markets, especially given no one knows when people will feel comfortable going to event when the pandemic finally ends. Super shows, that bring in a huge amount of money? Great idea. A loop through sparsely populated areas? Not so much. If WWE is going to continue house shows, this is how they should do it. They run two shows a week on non-PPV weekends, Saturday and Sunday. They have four matches from each brand. The Smackdown group works Friday, Saturday and Sunday while Raw works Saturday, Sunday and Monday. They start by running big cities, like Boston and New York, Philadelphia and Washington DC, etc.
*For those wondering, I don’t think it affects FOX at all. They already have been cross promoting. Like WWE business, TV has changed as well.
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