From a distance, WWE (NYSE:WWE) looks to be at a high point. The pro wrestling company (which would bristle at that term, preferring "sports entertainment") has locked in lucrative five-year U.S. television rights deals for its signature Raw and SmackDown programs. It also has a rich deal to produce two shows a year in Saudi Arabia, higher rights fees on most markets around the world, and a third night of live programming on a major cable network.

Those deals have set the company up well for the next few years. So if your retirement horizon is three or four years, it probably makes sense to hold WWE stock. Outside of that window, however, this company has some red flags when it comes to its ability to maintain its position (and revenue) in the long term.

WWE' Seth Rollins holds up a title belt on the entrance ramp at Wrestlemania.

WWE has put most of its eggs in the TV rights basket. Image source: WWE.

Why WWE shareholders should be wary

WWE's television rights deals for Raw on Comcast's USA Network and SmackDown on FOX last five years, and should give the company stability and predictable revenue growth. The two deals will bring in $311 million in 2019, rising to $462 million in 2021, according to CNBC

The company does not break out revenue from its deal to produce shows in Saudi Arabia, but it's believed to be around $50 million a year. In addition, the company now has two hours for its NXT brand/show on USA, for which it's getting between $50 and $100 million in annual revenue (the exact numbers have not been reported yet).

Despite all of that good news, there are signs that the company has slipped in popularity. That may be thanks to rival AEW (which airs its weekly AEW Dynamite on TNT opposite NXT on USA), or consumer disillusionment with the brand. So while TV revenue has increased, a number of other areas have fallen through the first three quarters of 2019:

  • Live events: Dropped from $109.9 million in 2018 to $98.2 million in 2019.
  • Consumer products: Down to $60.9 million this year from $69.8 million last year.
  • Network: Fell to $143 million in 2019 from $152.5 through three quarters of 2018.

"WWE Network average paid subscribers decreased 9% to approximately 1.51 million for the third quarter driven primarily by the impact of lower subscriber additions earlier in the year which we had previously discussed," explained Co-President George A. Barrios during the Q3 earnings call.

The company has also forecast a 10% drop in WWE Network subscribers for the fourth quarter.

Is WWE less popular?

WWE television ratings have generally been lower in the U.S. over the past year. The move to FOX, which is a larger platform than USA, has helped, even though Friday is a weaker night than its previous slot on Tuesdays. In theory, the FOX move, which involves heavy promotion during NFL football, could reignite interest in the brand.

The drop in live show attendance and consumer products, however, suggests that fewer people are willing to spend money on WWE. Falling subscriber numbers back that up -- which leads to the key reason WWE may not belong in your retirement portfolio:

The company's long-term success depends upon its ability to grow its television deals five years from now, or at least renew them at similar rates. That's not guaranteed, especially if ratings fall. To get more money for its rights, WWE needs multiple suitors. It had that this time around with FOX and Comcast. But at its next negotiations, if one of the two bails and no new party emerges, WWE could be looking at a major drop in rights fees. That's not a far-fetched scenario, either -- it has happened before, and to avoid that the company needs to grow its fanbase.

The good news for WWE shareholders is that the company has nearly five years to prove its worth. In that time, it could find the next Rock or John Cena and reach new heights of popularity. That's not guaranteed, though, which makes this stock a solid performer for now but a long-term risk.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.