World Wrestling Entertainment stock started to inch back this week, rising more than 3% in early trading Tuesday but still far short of reversing the 27% decline of the shares since it fired two top executives a week before it is scheduled to report Q4 results.
WWE shares were priced at $48.97 each in afternoon trading Feb. 5, 3.4% above their closing price the day before, when they rose another 2.8%. The shares are still well behind their price on Jan. 30 ($62.30), when the company announced its co-presidents George Barrios and Michelle Wilson had abruptly left the company. News that the well-liked and respected executives were gone, and a statement from the company that they had differences as to the direction of the company with chairman and CEO Vince McMahon, sent the stock into a tailspin. WWE stock fell 21% on Jan. 31 to $48.88 per share and another 6% on Feb. 1 to $46.08 per share.
“I am grateful for all that was accomplished during their tenure, but the Board and I decided a change was necessary as we have different views on how best to achieve our strategic priorities moving forward," McMahon said of Barrios’ and Wilson’s departure in a press release.
That has led to some wild speculation about the executives’ departure, none of which has been substantiated. But if nothing else, it appears that McMahon, who has come under criticism as WWE ratings have plunged, will have a lot to answer to during its Q4 earnings call on Feb. 6.
Already some analysts have chimed in, and many will likely try hard to make sense of the changes and seek solutions to the scripted sports giant’s ratings decline. But as one pundit put it, the responsibility will ultimately land in McMahon’s lap.
WWE has been on shaky ratings ground for awhile. Although Barrios and Wilson were praised earlier this year for landing a carriage deal for its SmackDown programming with Fox, ratings have been poor. And they’ve been poor for awhile.
Still, Barrios and Wilson had been the public face of WWE, and losing two seasoned executives at a time when the traditional TV market is in constant turmoil is not something investors would cheer. Over the past 12 months, WWE shares have declined 43%, from $82.34 on Jan,. 31, 2019.
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Injuries to top talent like Roman Reigns and AJ Styles were blamed for ratings softness last year, but those wrestlers have since returned and the viewership numbers haven’t gotten better.
In a blog post, LightShed Partners media analyst Brandon Ross said despite the changes McMahon has already made, engagement with WWE content is disappointing and ratings at its flagship SmackDown are down even after it moved to Fox.
“We anticipated at least 3 million weekly viewers given the increased reach of broadcast TV and the breadth of Fox’s substantial promotion platform,” Ross wrote. “Viewership has settled in at ~2.4 million per week.”
Ross added that he has no knowledge of the circumstances behind Wilson’s and Barrios’ departures or even if they should bear any if the blame for WWE’s ratings slump.
“However, what we do know is that content needs to improve at WWE if the company is going to be investible,” Ross wrote. “And no matter who comes in to take the place of the former Presidents, the burden of improving the content sits squarely on Vince, who has held tight control over the creative at WWE for decades.”
Righting the WWE ship will be critical over the next three years, Ross wrote, pointing out that is when Monday Night Raw and SmackDown enter their next renewal cycle.
“While the stars aligned last deal for rights to be bid up, we are very skeptical a remotely similar demand backdrop will exist,” Ross wrote. “The entirety of the $465 million per year WWE is receiving domestically comes from the Pay TV universe, where subscriber losses continue to accelerate.”
Ross added that by the time talks start again for the programming, pay TV subs could be in the 70 million range, substantially reducing the WWE’s negotiating leverage.
“Vince McMahon, the pressure is on,” Ross wrote.
