World Wrestling Entertainment (NYSE:WWE) has been on a crazy ride for the last few months. Longer-term investors should be happy if they bought before the beginning of 2014. For a bit of perspective, this stock was trading below $10 just 18 months ago. That being said, the company's recent earnings reveal a significant short-term challenge, but two huge opportunities.

4 out of 5 stars, but that's not enough
Let's get the bad news out of the way first. WWE had to transition from THQ to Take-Two Interactive for its video game franchise. Over the long term, this is a good move, as Take-Two has more financial stability and experience with huge hits like Grand Theft Auto V. In the short term, however, there are some obvious problems.

Relative to WWE's competition, the likes of Netflix (NASDAQ:NFLX) and Live Nation Entertainment (NYSE:LYV), WWE's consumer products division has unique challenges. Netflix generated over $90 million in profits from its DVD businesses, and Live Nation saw 18% revenue growth from its concert operations. Neither company is wholly reliant on these businesses, but they positively contribute.

On the other hand, WWE gets almost 19% of its revenue from consumer products, and this division is under serious pressure. In the current quarter, this division witnessed a nearly 30% decline in revenue. Part of this decline was a $10 million drop in licensing revenue. Considering WWE's net profit dropped by $11 million, it's not a stretch to say that consumer products was the main problem.

Another big problem in consumer products is the video game WWE 2K14. The game has a rating of four out of five stars on Amazon, but the game didn't have an easy road to success. First, the game came out at about the same time as several other big titles like Assassin's Creed IV: Black Flag, Battlefield 4, and Call of Duty: Ghosts. Second, the game was produced only for PS3 and Xbox 360, whereas these other franchises had support for these systems as well as PS4, Xbox One, and PC.

If WWE hopes to see a recovery in the WWE 2K franchise, the next game needs both next-generation support and a more opportune release date.

A key to the future
Now, for some of the good news. In the last three months, WWE produced exactly zero international live events. This was a shame, but also an opportunity. When it comes to WWE's peers in the entertainment industry, Netflix's greatest growth opportunity is its international audience.

With 85% annual growth in international paid streaming subscribers, Netflix investors have reason to be excited about the company's growth overseas. Live Nation generated 32% of its events overseas. Considering WWE produced nothing from overseas shows, this appears to be a huge opportunity.

In the last three months, WWE generated an average of $271,000 in revenue per domestic event. Last year, the company generated over $330,000 in revenue from international events. This suggests a missed opportunity. In addition, WWE expects to expand its WWE Network to international markets, but it will be difficult to expand this over-the-top network without the support of live shows.

About that 75% increase...
If investors are looking for better results from WWE in the future, the WWE Network is the key. The company signed up 667,000 subscribers in just the first 42 days of the network's launch. Since WWE owns and produces all of its content, this network is akin to Netflix's ideal situation.

Netflix generated an almost 32% gross margin, which was better than Live Nation's margin of 28%, while WWE did slightly better at 33%. The big difference between the three was their SG&A spending.

Netflix spent about 15% on SG&A, and Live Nation spent 19%. By comparison, WWE spent just over 38% on this line item. Given that WWE expects a better-than-80% gross margin on each additional subscriber, it's not unreasonable to think that WWE will see the same improvement in gross margin that Netflix has experienced in the last year or so.

WWE generated a 40% gross margin last year and spent about 30% on SG&A. As the WWE Network expands, it's likely these numbers will be possible again. In the current quarter, a 40% gross margin and 30% SG&A would have generated a profit that was 75% higher than reported.

Whether you believe wrestling is real, fake, or just a show, WWE's Network is a huge opportunity for the company and the stock. If the company can improve its consumer products results and continue growing the Network, the current drop in the stock represents a long-term buying opportunity.

Chad Henage owns shares of World Wrestling Entertainment. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. 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.