Inside the WWE Raw and Smackdown TV Deals

WWE made a new TV deal to keep its signature shows airing on the same cable networks where they currently air.

May 17, 2014 at 7:12AM


WWE (NYSE:WWE) has signed a new television deal that significantly raises the rights fees the company receives for its flagship Raw and Smackdown programs. The agreement keeps the shows with Comcast's (NASDAQ:CMCSA) USA and SyFy networks, respectively.

Traditionally WWE has negotiated the contracts for its two biggest shows on a staggered basis. This time the company arranged for the deals for both programs to expire at the same time so it could negotiate a package deal. That strategy appears to have worked to a point -- the new agreement has brought a significant increase in the rights fees for Smackdown and Raw, though the company was vague on the actual figures.

"Over the past six months, the company has negotiated television distribution agreements in the U.S., U.K., and Thailand, and is in the midst of discussions regarding the distribution of WWE content in India," the company wrote in a release. "The company estimates that it will increase the average annual value of these key television agreements to approximately $200 million, representing an increase of more than $90 million that is nearly three times the increase achieved in the previous round of  negotiations."

That lack of specificity about the U.S. deal indicates that while the contract includes a large increase in the fees paid for the two programs, it's not as high as WWE had expected.

Behind the numbers

The Wrestling Observer, the leading newsletter covering the wrestling industry, broke down the deal.  

"That news would indicate the U.S. TV revenue of $106 million per year in 2013 would increase to roughly $142 million to $155 million in 2015, far below the $280 million hoped for, let alone analysts who were throwing around figures of more than $400 million when seeing NASCAR ratings comparisons," according to the publication.

In 2013 NASCAR landed a 10-year deal with NBC and Fox (NASDAQ:FOX) worth $820 million a year (up from around $560 million) despite declining ratings for many of its races. Major League Soccer also recently signed an eight-year deal with ESPN, Fox Sports, and Univision worth a combined $90 million, quadrupling what it currently receives.

Though wrestling has consistently good ratings, it generally brings in lower ad rates than other sports programming, which partially explains why WWE's deal did not grow at the same level. 

"WWE viewers skew toward less attractive demographics," Wrestling Observer's Ben Miller told the Fool. "Their audience fails to spill over into other USA Network shows and, frankly, the networks may have been eager to send a message in response to escalating rights fees."

By most standards, the new deal should be a huge positive. Unfortunately, it's like getting a 50% raise -- a huge increase -- when your boss had hinted your salary would double. 

It's all profit

While WWE got less than it had hoped for, the entire increase is profit. The company spends the same amount of money producing Raw and Smackdown no matter how much it gets paid for broadcast rights. Talent -- the wrestlers -- have contracts that guarantee them a minimum amount per year. What amounts to bonuses are paid based on a complicated (and secret) formula that takes into consideration live attendance and a wrestler's importance to the card. WWE performers do not get paid more based on increases in television rights fees.

The business is changing

Though the increase is smaller than expected the added profits should help WWE fund its transition from a pay-per-view model to a subscription model for its special events. The WWE Network launched earlier this year in the United States with a stated goal of 1 million subscribers at the end of 2014. Whether it will meet that goal remains a question -- the only figure announced so far is 667,287 subscribers on April 7, 42 days after launch. On the surface that number seems strong, but the company's biggest draw of the year, Wrestlemania, took place April 6.

Access to the WWE network costs $9.99 a month with a forced six-month commitment. For $59.99 customers would get access to Wrestlemania XXX as well as five other PPVs and countless hours of programming. One would think that deal would have led to even casual wrestling fans to subscribe -- the cost of Wrestlemania alone is roughly equal to six months of the network. It then could  be assumed that the vast majority of people who want the WWE Network would have subscribed before the big event.

But it should also be noted that nearly 400,000 people in the United States bought Wrestlemania as a traditional PPV -- paying between $59 and $79 to do so. Those 400,000 or so buyers likely include some network subscribers who were afraid the network would crash during the biggest show of the year. The real question for WWE is how many of those nearly 400,000 homes will buy into the network before the end of the year. 

The final 2014 subscriber number is likely to be pretty close (on either the high or low side) to 1 million. The real test will be how many people stay members and whether the company can reach the 1.3 to 1.4 million subscribers it needs to break even on the project (covering expenses and lost revenue from the PPV sales cannibalized by the network).

This is good news

The new deal for Raw and Smackdown may not be as big as WWE had predicted but the company is still getting a lot more money for doing exactly the same amount of work. It's also a huge bonus that both shows are staying in their current broadcast homes as switching networks has traditionally brought a loss of viewers. Keeping Raw on USA is especially good for the company as the other rumored suitors -- Spike and Fox's new sports networks -- are much lower-profile channels.

WWE has been dramatically transforming its business. The network gives the company a much more stable revenue stream than PPV did and the increased TV rights are a sizable win, even if the lower-than-expected number feels like a loss. 

Are you ready to profit from this $14.4 trillion revolution?

Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Daniel Kline has no position in any stocks mentioned. He is a WWE Network subscriber. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers