This week the WWE finalized their new television rights deal with NBC Universal and it was a lot lower than initial projections. This caused the stock to drop 50% on Friday during trading on Wall Street. Since the WWE became a publicly traded company, the investment market generally has had very knee jerk reactions to their earnings reports. This is largely due to the fact that financial types don’t exactly respect professional wrestling as a business and do not understand its model in depth.
The story attracts me for two different reasons. The first one is that obviously I am a wrestling fan like 99% of the people who will read this but also I am a guy who has a business education and loves watching the market. So I do feel like I can give a unique perspective on what is going. Basically investors were not pleased with the TV deal and are not as impressed with the performance of the WWE Network as they once were. A lot of their speculations fell short of what they felt they were promised.
The new deal with NBC and its renewal deals in Thailand and the UK are expected to bring $200 million, a $90 million increase over prior television rights deals. That is a about a 50% bump since their last arrangement. That falls far below the increase that investors expected of 2 or 3X the current deal. Also the money people expected the WWE Network subscribers to be at around the 1.3 million mark and instead it is hovering around the 670,000 customers. This has caused some people to panic and wonder what will happen to the WWE.
Now I am sure some wrestling fans are asking “What does all of this mean”? Realistically the fans will not notice any major difference in the product. Is Vince McMahon happy that he lost 350 million in one day, of course not but the will not cause him to all of a sudden push Zack Ryder. For anybody rooting for the McMahon downfall, you may not want to hold your breath because even at that major loss he is still worth 750 million dollars. Expect a little more aggressive marketing for the WWE Network but other than that not much should change.
The WWE is still a multi-billion dollar operation and will be the number 1 company in wrestling for the foreseeable future. There has been a lot of discussion about Lemelson Capital purchasing a large stake in the WWE and already making demands. The rumors of them making large demands may be a little over stated or they don’t realize who they are dealing with. Vince McMahon doesn’t take orders from anybody. Vince McMahon still owns 57% of the controlling interest in the company and that does not include the shares that Stephanie and Shane have between them. Even if they were they wouldn’t have enough votes to make any impact at the shareholders meeting to force the Board of Directors to do anything.
The McMahons have survived a boxing match with the federal government and spending 90 million dollars on failed elections. This is a little hiccup but it is no more of challenge than WCW in the 1990s. There will be a big story about the WWE stock surge sooner or later and Vince will be back on the billionaire club.
Written By
Keith B. Holt
Follow on Twitter @Kholtjr
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