June 26, 2018
WWE's Billion Dollar Deal
During the late spring of 2018, important rumblings began leaking out of the television world: WWE was going to sign a deal with FOX television, and that deal was going to be worth far more than originally imagined. At the same time, a separate deal with NBC Universal that would keep RAW on the USA network would also be worth much more than what was originally expected.
The deal, which would become official later that year and kick in during the fall of 2019, would fundamentally change WWE. WWE was about to receive an unprecedented amount of money; the likes of which the company had never seen before, even during eras in the 80s and late-90s where the product itself was much more popular. The FOX deal would be to broadcast SmackDown, with FOX paying WWE $205 million annually for five years, or $1.025 billion. The USA deal would be even more lucrative, paying $265 million annually for five years, or $1.32 billion.
Those numbers dwarfed the previous TV money WWE was getting, $150 annually for both RAW and SmackDown on USA. On those deals, television revenue was already making up a bulk of WWE's total revenue, and with the billion dollar deals now in place, television revenue is pretty much everything for the company. Previous barometers for business success, such as tickets sold, PPV buys, WWE Network subscriptions, merchandise sales and other sources of revenue are almost meaningless with so much television money coming in each year.
The TV deals have placed WWE in an almost unassailable financial position; the company has revenue coming in each year that is guaranteed, unlike ticket sales and PPV buys, which would rise up and down depending on how hot the product was. The company has never been so financially secure.
At the same time, the company is not exactly peaking in overall popularity. The irony of the billion dollar deals is that they come at a time when the product is about as cold as it has ever been. TV viewership numbers are at record lows, the key 18-49 viewing demographic is lower than it has ever been and the older measurements, such as live tickets sold and network subscriptions, are also in decline.
WWE was able to get those big deals because of the general uncertainty of the cable industry. Due to cord cutting and increased competition from streaming services such as Netflix and Amazon Prime, networks are willing to spend big on programming that provides stable viewership. Live sports, which in this case wrestling is considered to be, is believed to be the key, since live sports are generally not on any streaming services and there is a belief that live sports are DVR proof, although statistics show that WWE is DVR'd at about the same rate as other scripted shows.
The live TV sports bubble has been a windfall not just for WWE, but for other sports leagues as well. Recently, it was reported that the SEC college football package would be leaving CBS when its contract expired after the 2023 season. Under its current deal, the SEC was receiving $55 million per season from CBS. CBS reportedly bid $300 million per season, and the SEC turned it down, meaning that another network, most likely ESPN, is bidding even more than that. So WWE, like college football, the NFL and the NBA before it, was cashing in on the race to lock up live sports programming.
It wouldn't be accurate to say WWE has lucked into this windfall. The company has been producing weekly cable shows for decades that have delivered strong viewership, even if that viewership has been trending in the wrong direction. WWE offers stability to some desperate network executives looking to fight off a new war in the television industry. However, WWE didn't get this deal because the product was really hot; they got it because wrestling emerged as a convenient option during uncertain times.
The real effect these deals have, outside of Vince McMahon's bank account, will be on how WWE utilizes this financial security in regards to their product. In previous generations, if a product wasn't resonating with the fanbase, promoters would have to change things up and try to find something new that worked, because fans wouldn't buy tickets to the show, or buy PPVs. Since that revenue is now financially irrelevant, and all of the serious money is guaranteed, WWE can continue to produce a product that doesn't resonate with fans and still make more money than they ever have before.
In the 90s, WWE did have to evolve and usher in the beloved Attitude Era, but that was only because business was in the tank and WWE was losing money each year. Today, even with less fans watching or attending live events, WWE will still set revenue records. There is no serious impetus to change; which is probably why over the last few years, the product has felt stale and very similar week-to-week. Unless WWE has a financial reason to change their product, they aren't going to make serious adjustments.
That being said, while the money is guaranteed, the investment both FOX and USA have made in SmackDown and RAW does give the networks a bigger stake in the promotion. WWE has more pressure to deliver viewership from that end since FOX and USA are paying a lot more for the programming. The numbers for RAW on USA are lower than usual, but are still much higher than the network average. The numbers for SmackDown on FOX have been disappointing so far, barely getting much higher viewership than when the show was on USA despite FOX's wider reach and heavy promotion of the brand. The network pressure isn't quite the same as the company sinking into the red if interest in the product doesn't improve, but it does provide some kind of motivation for Vince McMahon to alter the product.
Another wrinkle of the TV deals is the impact it could have on WWE's stock. WWE getting on network television with FOX was a huge deal for the company, since FOX is in many more homes than USA and has a much higher average viewership than USA programming. FOX would also get to advertise SmackDown during NFL football games, the undisputed king of television. The optimistic view was that not only would WWE be receiving more guaranteed money from FOX, being on FOX would expose the brand to new or lapsed fans, and create a new boom period for WWE. That would see a rise in other revenue sources, with more fans buying tickets, network subscriptions and merchandise. Some experts on Wall Street genuinely believed that SmackDown on FOX would add more than a million new fans to WWE's fanbase.
That optimism led to a surge in WWE's stock price, reaching just a shade under $100 a share at its all-time high earlier this April. Since SmackDown debuted on FOX in October, the barely increased viewership and continued decline in the other business metrics have been a sobering reminder that no boom period is coming anytime soon, and the stock price is now back around $65 a share. That is still much higher than in previous years, but those stockholders who were banking on FOX being a game changer for WWE's popularity have had to curb their enthusiasm.
The billion dollar TV deals have given WWE tremendous security and leverage, and after being undervalued by TV networks in the past, the company is getting rewarded for its stability. At the same time, the product has rarely felt staler and most fans have a pessimistic view of the product, despite the financial revenue the company is set to generate. The conundrum of WWE continuing to set business records while the product's popularity wanes will likely be a defining factor in the wrestling industry over the next five years.
This article is the ninth in a series of articles discussing the most significant moments in wrestling over the past ten years. Make sure to check back on Tuesday for the next installment in the series
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