WWE has since October 1999 been a publicly traded company, meaning that every Tom, Dick and Hunter can grab their Bowler hat, light up a pipe and apoplectically yell at their computer screens while the company’s share price tumbles… I have no idea how to trade stocks, in case that wasn’t already clear.
However, being a public company also means that WWE is subject to a bunch of tedious regulations. One of these less glamorous requirements is that it file financial reports every three months, reflecting its earnings, business projections and other market-sensitive information.
Many of these reports consist of little more than a confusing barrage of numbers and dollar signs. Many, many dollar signs if Vince has anything to say about it.
But as with most things in life, context is everything. And often the information that isn’t readily apparent ultimately turns out to be the most important. It can reveal a company’s health, its motivations and, in certain instances, provide some insight into its future plans.
On the morning of October 25, WWE filed its third quarter earnings report. Accompanying this report was a press release, providing some additional detail to its more salient points.
So pour yourself a strong cup of coffee, brush aside that number-induced delirium and be prepared to possibly catch a glimpse into WWE‘s future. Here are the five observations we gleaned from the company’s Q3 results.
1. Saudi Arabia Is So Beautiful! Maybe.
This feels like a comfortable topic to start with.
As we’ve reported, WWE used the press release to announce that it “has decided to uphold its contractual obligations to the General Sports Authority and stage [Crown Jewel]”.
While this seems to be an unequivocal commitment to travel to Saudi Arabia next week, lurking amongst the footnotes to the earnings report is a notable qualifier, perhaps providing WWE with some wriggle room should the situation continue to deteriorate:
“The Company is continuing to monitor ongoing developments in the region, and there can be no assurances in this regard. If the event were to be cancelled, there could be a material adverse impact on 2018 [income]. While not anticipated, it is possible that a cancellation could also impact expected results beyond 2018.”
Although it appears a near certainty at this point that Crown Jewel will be going ahead as planned, it’s clear that WWE has not entirely excluded the possibility of cancelling the event.
One reason for hedging its bets in this manner is that the controversial Saudi show is still causing ripples in the main stream consciousness.
Consider, for example, the words of Dan Le Batard when addressing the news on his nationally syndicated radio show (which boasts 2.2 million weekly listeners and almost 60 million annual podcast downloads):
“Did you see that the WWE is still going to Saudi Arabia? What a bad decision that is.
[But] there’s a lot of money in Saudi Arabia – so much money. And so wrestling is going back to Saudi Arabia as we wonder whether Saudi Arabia kills journalists with bone saws. It’s crazy!
…
We’re usually not quite that coldly overt about ‘yeah, we’ll take your money – your blood money – no matter what’.”
Crown Jewel has become a public relations nightmare for WWE. Unfortunately, as they say, you can’t buy private jets with public relations.
2. TV Ratings Are Down, Revenue Is Up
WWE earned $142.1 million off the back of their programming in the last three months; a significant increase over last year’s figure of $130 million.
The primary driver of that revenue is the plethora of shows it produces, as well as the associated advertising income that comes with it. Distribution deals are of course negotiated years in advance and are therefore insulated from ratings fluctuations.
This means that shows like Raw, SmackDown, Miz and Mrs and Total Divas, while all struggling in the ratings, continue to make WWE a lot of money (around $27 million a month).
Overlaid with these earnings is the steady surge of subscribers to the WWE Network. Despite the regular rage-fueled pledges by long-time fans to cancel their subscriptions, the numbers in fact indicate that the opposite is happening.
The subscriber base grew by 9% in the last quarter alone, meaning that on average 1.66 million people are currently paying to see Lana throw a shoe at Aiden English.
God, that segment was awful.
3. Is The End Nigh For Live Events?
Live audiences are shrinking and WWE knows it.
Normally a steady earner for the company, live events actually cost WWE $1.1 million this quarter.
The reason for the loss is obvious. Across the ninety live shows held since mid July, attendance figures were down by 8% in the US and a whopping 18% internationally year-on-year.
Compounding the issue is that these figures include ticket sales for SummerSlam and Super Show-Down, each of which were massive earners for the company. The problem then is that pay-per-view profit is offset by the lack of enthusiasm for WWE‘s other offerings.
With Raw, SmackDown and the monthly pay-per-views not going anywhere, the door is therefore open for WWE to reduce (or possibly eliminate) the number of house shows it puts on, should this trend continue.
Of course, one wouldn’t expect any drastic changes to the schedule any time soon, but if live audiences keep shrinking, WWE could well choose to focus on the money it earns from television and the network, while cutting its losses elsewhere.
4. Digital Media Is Growing
One major point of emphasis in the earnings report was WWE‘s dedication to expanding its online presence.
It’s an area that WWE very diligently monitors, specifically noting that 842 hours of online content has been consumed across 22.9 billion views so far this year. Both of those figures relate solely to social media consumption as well as views on WWE.com, and represent dramatic increases of 81% and 61% respectively over last year.
Social media engagement is comfortably the fastest growing market for WWE, and one that it is keenly looking to exploit. We’ve already witnessed one third-party partnership emerge, in the Mixed Match Challenge on Facebook Watch, and one wonders how the company will look to expand its social media presence in future.
Perhaps Shane McMahon could become a Snapchat exclusive Commissioner.
5. The Future Is Green
The Q3 report ends with a brief summary of the financial outlook for 2019. With new US distribution deals kicking in next year, in particular SmackDown‘s imminent move to Fox Sports, the future looks bright for the McMahon family’s cash cow.
Citing the “substantial revenue growth” created by the new TV deals as well as the “transformative nature” they will have on the company, next year is expected to see a significant bump in income.
Taking into account that the new TV deals are only due to come into effect in the latter part of next year, WWE claims to be targeting a total profit of “at least $200 million for 2019”.
To put that into perspective, the company recorded a $95.1 million profit through the first nine months of 2017 and $114.5 million so far in 2018.
You might want to grab that Bowler hat and pipe, because I’ve got a hot stock tip for you.
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