World Wrestling Entertainment may have slightly missed revenue targets — and overperformed on cash flow — in the third quarter, but executives spent the majority of a conference call with analysts talking about the potential for big gains in its renewal talks for its flagship shows — Monday Night Raw and SmackDown — which are expected to commence early next year.
WWE reported Q3 revenue of $256 million, about 1% below analysts consensus estimates of $259 million, but beat and raised estimates for cash flow in the period. WWE said adjusted OIBDA for the period was $78 million, 15% above consensus estimates of $68 million and driven by strong live event revenue of $28 million. As a result, WWE increased its full-year AOIBDA estimate to between $305 million and $315 million from the previous mark of $270 million to $300 million.
On a conference call with analysts to discuss results, WWE president and chief revenue officer Nick Khan said rights for Raw will come up for renewal with Hulu during the back half of 2022, while international licensing for its direct-to-consumer offering WWE Network expire at around the same time.
Khan seemed especially encouraged by the Hulu talks, adding that Raw “has a substantial and recurring audience who watch the show via delayed viewing week to week” on the streaming service. He noted that the last time WWE and Hulu negotiated those rights — in 2018 — the streaming landscape was considerably different than today.
Regarding international licensing, Khan said that WWE has a strategy to optimize WWE Network’s value outside the U.S., and a model that programming buyers are responding to.
“As so many U.S.-based companies look to go international overnight, it sets up a competitive global landscape that none of us have seen over the course of our careers,” Khan said on the call. “We continue to believe that will garner great results.”
But the bulk of the optimism was for Raw and SmackDown renewals in the U.S. Khan pointed out that during the last negotiation, WWE was able to more than triple its fees from $130 million for the shows to $470 million.
“We are as bullish now on those rights as we were when we went into the prior negotiations,” Khan said.
The CFO pointed to recent sports rights deals for the NFL, NHL, Major League Baseball, the SEC, La Liga and Wimbledon, and pointed out that other interested players like Amazon Prime Video, Apple TV and Netflix are sniffing around the sports market.
Amazon and Apple are reportedly in the lead among the possible bidders for NFL Sunday Ticket and Netflix chief operating officer Ted Sarandos has said publicly that he would rather own sports properties than run them.
In a research note, Wells Fargo Securities media analyst Steven Cahall said NBCUniversal’s Peacock streaming service is expected to be the bidder to beat for the WWE properties.
“We expect Peacock to go hard for the re-air rights given it already has Raw and NXT on linear + domestic streaming rights on Peacock, so it's really a question about whether media companies compete for the rights against NBCU,” Cahall wrote. “International is tougher to pin down as no comprehensive ex-US OTT rights have ever been struck to our knowledge, so a single deal for WWE Network [outside the continental U.S.] would be truly groundbreaking.
