The World Wrestling Entertainment shares have crashed 0ver 20% after third quarter earnings showed lower revenue and concerns over $WWE Mid East and India networks. United Kingdom BT Sport & Fox Sports in Latin America guidance is awaited also. WWE shares fell 5% immediately following the announcement.
World Wrestling Entertainment, Inc. NYSE: WWE Q3 Earnings
World Wrestling Entertainment (WWE) Reported Earnings After Close Wednesday
$0.06 Beat $0.02 EPS Forecast And $186.3 Million Missed $191 Mil Revenue Forecast
Earnings
World Wrestling Entertainment (NYSE: WWE) reported Q3 2019 operating income of $6.4 million; Adjusted OIBDA was $25.4 million, which exceeded the Company’s guidance. THis equated to earnings of $0.06 per share vs. $0.02 expected but revenues fell 1.1% to $186.3 million missing the $191 million expected. Adjusted OIBDA (which excludes stock compensation) was $25.4 million compared to $35.8 million last year.
World Wrestling Entertainment, Inc. NYSE: WWE
Market Reaction $55.22 − $11.22 (-16.89%)
Days Low $53.25 – $13.97 (-21.02%)
Highlights
- SmackDown debuted on Fox (Friday, Oct. 4) and averaged 3.9 million viewers during the premier telecast, up 221% versus the same time slot over the prior four weeks on Fox (9/6-9/27)
- Announced content distribution deal with USA Network to air NXT, expanding the reach of the new live, 2-hour show to further build WWE’s third global brand alongside Raw and SmackDown
- WWE Network averaged 1.51 million paid subscribers3, consistent with the Company’s guidance
- Through the first nine months of 2019, digital video views increased 12% on a year-over-year basis to 25.6 billion and hours consumed increased 14% to 957 million hours across digital and social platforms4
Note: TV ratings over the past few years have fluctuated, with last week’s episode of “Monday Night Raw” drawing its third-worst rating of 2019. The company’s live events business has also taken a hit due to lower North American attendance, with live attendance revenue down 13% compared to the prior-year quarter.
Outlook
Guidance revised lower to an Adjusted OIBDA range of $180 million to $190 million. A delay in the finalization of media rights deals in both India and the Middle East/North Africa region has served as the primary catalyst.
Concerns on lingering worries about the WWE international TV contracts with several are due for renewal, including in the Middle East and India.
Investors are also waiting for WWE to provide guidance about two other recently signed international TV deals, a new partnership in the United Kingdom with BT Sport that begins in January 2020, and the extension of an existing deal with Fox Sports in Latin America. Terms have not yet been disclosed.
The company’s inability to strike a deal in the Middle East is a major concern as the WWE has made a concerted effort to boost its presence in that market. Several of its top wrestlers are currently in Riyadh, Saudi Africa. WWE champion Brock Lesnar will face former UFC heavyweight champion Cain Velasquez and WWE wrestler Braun Strowman will take on heavyweight boxer Tyson Fury at the WWE’s Crown Jewel event at Fahd International Stadium in Riyadh, Saudi Arabia on October 31.
The event includes a match between Natalya and Lacey Evans which will be first ever match between two women WWE wrestlers in Saudi Arabia. Two female WWE stars, Sasha Banks and Alexa Bliss, appeared in the ring together nearly two years ago for a live event in the United Arab Emirates, wearing outfits that were far more modest than the ones they usually wrestle in.
WWE is tailoring market specific content. The question is though when WWE will find a TV partner to air more of the company’s programming. The obvious partner is Bien Sports.
Sports broadcast assets have soared given their value to a broadcaster. We have seen record prices in the NFL, NBA, MLB, NHL, EPL, NRL and AFL to name a few of the most popular sports leagues around the world. WWE property Smackdown, which still boasts the sixth biggest audience among cable originals (including news programming) underscores the value of such deals to WWE.
Guggenheim analyst Curry Baker spoke to Yahoo Finance in August and highlighted just how big the international market, especially India, is to WWE’s growth.
“India is WWE’s number one market in terms of content consumption and audience size, with sports viewership trailing only Cricket.” On a call with analysts, WWE’s George Barrios, co-president and director, said that the company does expect a deal TV deal to be done in India by year-end. He also spoke to the complexities that can arise as far as international deals are concerned.
“We’re very focused on 2020 as we are in ’19. We’re very focused on the value of that live content in 2020 – 2024, 2025 in the U.S., especially. Intervening years between ’20 and 2025 are really important for us,” he said.
“And then frankly, we think beyond 2025, especially in some of these international markets, some of these opportunities will take time to develop. But I’d like to say they’re not public, so it’s hard to track. But when you look at the NBA’s success in China, that happened over 25 years of investment. And my guess is … [in] some of those early years, there were losses. But I guess they’re happy with the relative performance of that business over time. So I think for us, we’re trying to think across those time frames, But clearly, we’re also — we are focused on the ’19 and 20 as well. It’s not just the long term … We’re trying to make the right tradeoffs.”
Media Deals Concerns
Recent TV Deals
- Fox five-year, $550 million annual deal for rights to the NFL’s Thursday Night Football
- In 2012, Major League Baseball, Fox Sports Media Group and Turner Broadcasting entered into an eight-year national media rights deal for postseason games said to be worth $12.4 billion.
- Disney and ESPN earlier this month signed their first-ever multiyear deal for digital rights to live UFC Fight Night events in a pact worth $750 million ($150 million annually) starting in January. Those matches will be broadcast on ESPN+, the sports network’s OTT platform.
- Channel Nine and Fox Sports inked a $2 billion rights for the NRL in Australia last year.
Source: WWE, TradersCommunity
From The TradersCommunity Research Desk