The opinions expressed in this article are those of the author and do not reflect the views of WrestlingInc or its staff
One year ago, Vince McMahon shocked investors and Wall Street professionals when the company announced that Co-Presidents Michelle Wilson and George Barrios had been relieved of their duties. The conventional thinking was that Wilson and Barrios had been instrumental in putting together the lucrative television deals for RAW and SmackDown that led to WWE generating record revenue, and Barrios in particular was credited with launching the WWE Network. The move was shocking, and the stock market responded accordingly, with WWE stock plunging from $62 a share on Jan. 30, to $30 a share on March 16.
While WWE was not particularly forthcoming with why Barrios and Wilson had been terminated, publicly chalking it up to differences in opinion between McMahon and the two co-presidents, subsequent reports coming from The Wrestling Observer Newsletter stated that a main difference between McMahon and Barrios/Wilson was the future of the WWE Network. George Barrios was a key figure in founding the Network, and also frequently talked about it’s future on investor calls, always pushing the idea that WWE would be introducing different tiers to the Network. There would be a free tier, a regular tier and a premium tier. Despite Barrios talking for years that this system would be coming to the WWE Network, it never materialized (although a free tier was quietly added in June 2020) and became the butt of jokes among wrestling analysts.
Clearly, Vince McMahon had something else in mind. By bringing in new CFO Nick Khan to largely assume the roles held by Barrios and Wilson, McMahon and Khan put together a completely different plan; they would attempt to sell WWE content to a major streaming provider. This plan was first brought up in an investor call last February, with WWE even touting that they were in negotiations with several major streaming services and planned to have that year’s WrestleMania on a streaming platform.
That plan fell through; but WWE turned out to be a year early, as it was announced earlier this week that WWE had reached a deal with Peacock, the streaming service operated by NBC Universal, to air all of WWE’s archived network content, as well as future PPV events and Network specials. The deal is for an estimated $1 billion over the next five years, and by mid-March, the WWE Network will be dead (at least in the United States) and the content will fully be on Peacock.
From NBCU’s perspective, the deal makes little immediate financial sense. If you simply do the math on the 1.1 million American WWE Network subscribers switching over to the $4.99-a-month Peacock; NBCU will only be collecting $66 million in annual subscription fees from WWE fans, a far cry from the $200 million they are estimated to be paying annually to WWE over the course of the deal.
The math is very rough and there are plenty of variables. Peacock already has an estimated 20 million subscribers; some of whom will already have subscribed to the WWE Network and will therefore cancel their WWE Network subscription when it moves to Peacock. There is also the fact that Comcast and Cox cable subscribers get Peacock for free, so WWE Network subscribers who have those cable carriers will be canceling as well. On the plus side, some subscribers will pay for the $9.99 ad-free premium tier on Peacock, and Peacock can collect on advertising from the fans who do not pay up for the premium tier.
Why would NBCU make this kind of purchase? According to Brandon Thurston at Wrestlenomics, the intent is for the acquisition of WWE Network content to be a loss leader. NBCU is still very profitable on the cable television end, the legacy business of the company. Current trends suggest that streaming services are the future, and that cable television is dying. At this point in time, NBCU is focusing on pouring money into its fledgling streaming service to make sure that it has a strong streaming service when cable eventually becomes unprofitable.
“It’s a hedge against waning linear TV business NBCU and its parent Comcast depend on. Gather streaming habits this decade while your legacy business can afford to subsidize, worry about profitability of your streaming service next decade,” Thurston said, in response to my inquiry on the deal.
So basically, NBCU is willing to burn money by investing in different content for Peacock, so that users become familiar with the streaming service by the time cable television stops paying the bills. For WWE, this is an incredible windfall. Similar to their television contracts; the company has been able to leverage its existing fanbase in negotiations with desperate media titans that are grappling to stay at the top of a rapidly changing media landscape. Remarkably, WWE has gotten its hands into both pots; they have used RAW and SmackDown to get gigantic TV deals from network and cable television stations that believed that live sports are what will save cable television; and now they are selling their VOD content to a streaming service.
That brings us back to Vince McMahon, who a year after the surprise firings of Barrios and Wilson, has shown that he was right in the long run. Instead of pushing the tiers of the WWE Network, he and Nick Khan were able to find a lucrative streaming deal with a major streaming service. Barrios and Wilson were well-respected professionals by the investment community, but McMahon’s instincts ended up being correct and he outfoxed that kind of conventional thinking, and will now get much more money, guaranteed year-after-year, from the WWE Network content than he ever got from the Network itself.
WWE has managed to do all of this despite diminishing popularity. The average viewership for RAW has collapsed in recent years, going from 3.018 million viewers in 2017 to 1.8 million viewers in 2020. WWE Network subscriptions, which by the current trend of streaming services becoming more ubiquitous in culture, should never decline, have fallen from 1.8 million worldwide paying subscribers in 2018 to 1.5 million subscribers in 2020. One can only wonder what kind of deals McMahon could have struck if the company has not been in such a decline over the last several years.
What does it mean for fans of WWE?
The Peacock deal on its surface is a good deal for WWE fans; you get the WWE Network for half-off, and you also get all of the other stuff on Peacock, which includes live sports, movies and popular television series. We still don’t know if EVERYTHING on the WWE Network will get transferred over to Peacock right away, and we don’t know how user friendly the experience will be relative to the WWE Network, but it should be basically the same experience.
The real impact this deal will have on fans will be how it relates to the quality of the product. The WWE Network changed the way the company booked matches and built up PPV events. Singular PPV events did not have to be sold on the strength of those individual cards; since almost all fans were monthly subscribers that passively renewed their subscription month after month; WWE could get away with shows having weak builds or sporting poor main events.
This fundamentally changed the way WWE approached not only PPVs, but RAW and SmackDown as well, and not for the better. During the pre-WWE Network era, WWE could not afford for a PPV to have a poor build or feature wrestlers and matches fans did not find interesting, since if the PPV bombed, WWE would be on the hook. Each month was spent trying to convince fans that they absolutely had to spend $50 to see what would happen at the PPV. In the current era, getting that monthly investment is not nearly as important and the result is less effort and focus being put into each PPV.
People have wondered for years how the company could continue to push Roman Reigns as the face of the company when it clearly was not working. Year after year, WWE tried to push Reigns as the top star in the company despite vocal fan resistance and declining viewership and interest in the product. It was frequently compared to the Lex Luger push of 1993/1994; where McMahon pushed Luger as the new top star of the company, but fans didn’t buy into Luger and eventually McMahon relented and had to go in a different creative direction.
The reason WWE had to get away from Luger is because his failure was impacting the company’s day-to-day business; they didn’t have the giant TV deals that guarantee them record revenue every year. With house show attendance and PPV sales in decline, WWE had to make the call to try something else; they simply couldn’t afford not to.
The reason fans were force-fed Reigns (and I’m using Reigns as just an example here, nothing personal against him in particular) for five years despite fan reluctance was because it didn’t matter if fans stopped watching RAW, or stopped going to house shows. WWE was going to make record profits no matter what; so it created the atmosphere of modern day WWE, where Vince McMahon can create his erratic fantasy of professional wrestling and ultimately it didn’t matter that he burned away fans or consistently under delivered on shows.
What the Peacock deal does is further exaggerate that condition; now WWE doesn’t even need to convince their fans to sign up for the WWE Network, they are getting all that revenue (and more) either way. The guaranteed money deals; from the RAW/SD television contracts and now the WWE Network deal with Peacock, have created an atmosphere where the day-to-day interest in the WWE product is irrelevant to the company’s bottom line. In theory, every single WWE fan could cancel their Peacock subscriptions one day and it wouldn’t prevent the company from collecting its money
What this trend has done is taken the power away from the true WWE customers (the fans) from having any say on the product. I wrote about it at the time of the latest TV deals, but it remains even more true today. Throughout the entire previous history of the professional wrestling business; fans have always had control over the product because the promoters would always have to put out a product that fans would want to see if they wanted to make any money.
That is no longer the case in WWE; McMahon has proven it by continually being able to sign more lucrative deals for merely producing content on a consistent basis and selling gigantic media organizations on the fact that his fanbase is still large and extremely loyal. Which it really is; RAW still usually comes in close to the top in both total viewers and 18-49 viewers; but one cannot be ignorant of the fact that over the last several years the viewership has been cut nearly in half.
WWE fans are no longer the true customers of WWE. What they are interested in and care about doesn’t matter, because WWE isn’t relying on collecting their money. The true fans of WWE are the giant media corporations, NBCU and FOX, who are paying billions of dollars for WWE’s product. WWE is getting paid by those companies, not by individual fans who are buying tickets to shows, or purchasing PPVs (now Network/Peacock subscriptions).
Now, it isn’t THAT black and white. If WWE’s average viewership plunged dramatically further, FOX and NBCU would be having a lot of questions about their investment and the next contracts WWE sign may not be as lucrative as the current deals. WWE from a day-to-day perspective, is still trying to create a product that fans are interested in. The difference is that WWE is no longer completely beholden to the interests of fans; as long as one million or so fans stick with the product (and at this point, it appears that will remain the case for a long time) WWE will still make billions. WWE may have burned down their fanbase to the absolute hardest of the hardcore, but that fanbase is still sizable enough to justify billion dollar deals from these media companies.
Some people believe that fans of wrestling should not care about the business side of the industry; since it doesn’t matter if something is good or bad for business if you find it personally enjoyable. There is some truth to that line of thinking, but in reality, business success is more or less an affirmation of the current product. WWE is making more money than ever before, so they are very unlikely to make big changes to their current product. Fans can complain all they want about the weekly quality of WWE, but Vince McMahon is laughing all the way to the bank.
If you are a fan of the current WWE product, you should be very happy about the deal with Peacock, since it ensures that you will be getting more of the same. If you want something more from WWE, a change of pace and a different creative direction, you should be worried about the Peacock deal. As long as business remains at record levels, WWE will not make any significant creative adjustments.
The sports media rights bubble may never burst, but it will eventually change. One day, WWE is going to have to actually worry about making new fans and creating a product that fans will become invested in once again. It does not appear that time is coming anytime soon, so the remaining fans who desire more from WWE will have to continue to tough it out.
In the latest episode of the Gentlemen’s Wrestling Podcast, Jesse Collings (@Jesse Collings) and Jason Ounpraseuth (@JasonOun95) discuss the career of CM Punk. They go over what made him so successful in WWE, the forces that ultimately led to his departure from the wrestling industry, the influence that he had over WWE’s product throughout the 2010s and his possible future in the industry.