Wrestling Observer Live with Bryan Alvarez and Mike Sempervive returns today with tons of news including an appearance by the Doctor of Lucha himself, Steve Sims, LD, to talk everything that is going on with Alberto Del Rio, WWE, AAA and more! Plus, phone calls and texts! A fun show as always so check it out~!
Coming on the heels of the acclaimed Prince of Pennsylvania 30 For 30 that aired two weeks ago, ESPN is going in a completely different wrestling direction with a new pro wrestling piece. Legacy Talent and wrestling legend Ric Flair announced today that the 16-time world champion started shooting a 30 For 30 piece on his career.
It’s unclear whether it’s a full length doc, a 30-minute short, or even a 10-minute version.
“We named this company Legacy Talent because it’s our mission to help preserve the legacies that our clients have worked a lifetime to build,” stated Flair’s management company in a press release. “Yesterday we took a huge step in documenting Ric Flair’s legacy by starting to shoot his 30 for 30 ESPN Film. We are honored to work with such a prestigious group on a project we are so passionate about!”
ESPN ran a 15-minute 30-For-30 short on the Von Erichs earlier this year.
The Bryan & Vinny Show returns today with a packed episode! It’s CONTEMPORARY THURSDAY with modern Raw and modern NXT, plus Granny appears to talk Halloween, new songs and drops, and more! A fun show as always so check it out~!
By Chris Harrington of IndeedWrestling and Wrestlenomics, Special to Wrestling Observer
(Editor’s note: subscribers can listen to Chris talk about today’s call on today’s Wrestling Observer Live.)
WWE announced their Q3 2015 earnings Thursday morning of $0.14 per share, beating Capital IQ Consensus of $0.08 per share. During the period of July 2015 to September 2015, WWE brought in $166.2 million in revenue while third quarter operating income was $17.9 million and adjusted OIBDA was $23.4 million.
Compared to the financial turbulence of 2014, this was a successful quarter with the highest adjusted OIBDA on record since Q2 of 2012. However, this good news wasn’t reflected in the WWE share price which hdropped more than 10% since the market opened Thursday morning.
The key drivers for WWE growth have been the recognition of the escalating television rights which WWE negotiated in 2014 and the evolution of the WWE Network subscription model.
Television Rights
WWE has secured large growth from a bundle of key TV contracts (United States, United Kingdom, India, Thailand, Canada, Mexico and United Arab Emirates). Combined, these agreements were worth almost three-quarters of WWE’s total 2014 television rights revenue ($176M). In the latest earnings release, WWE finally provided an outline of the annual escalation expected for these contracts for 2015 & 2016.
Already, WWE has earned $175.5M year-to-date on television rights fees in 2015 compared to a nine-month number of $126.3M in 2014. While 39% annual growth is impressive, it’s worth noting that the plunge in WWE stock value last year was tied to WWE underdelivering against investor expectations for renegotiating their major US deal with NBC Universal. In fact, some investors felt so misled that lawsuits were filed.
Nevertheless, television rights remain the economic engine for WWE’s year-round growth. While some divisions have seasonal fluctuations (live events during the WrestleMania quarter, WWE Shop in December, licensing in Q1), WWE’s television rights contracts are structured so they continue to grow each quarter through the deal. Quarterly variations are largely driven by the scheduling of supplemental programming such as WWE’s reality shows Total Divas and Tough Enough, both which aired in Q3 of ’15. While these additional programs bring in additional money and possible new audience/demographics, it was noted during today’s conference call that the cost of production for reality shows was much higher than the “in-ring” entertainment.
One topic that was not addressed during today’s call is the ongoing dispute between WWE and their new television partner in Thailand, CTH, which owes several million to WWE.
Recently, live WWE ratings have been their lowest levels since 1997.
Yet, WWE’s television rights agreements are not tied to weekly ratings. Still, there are several reasons that ratings still remain a relevant component in evaluating the WWE business model.
First of all, NBC Universal does care about their television ratings. They’ve earmarked hundreds of millions of the dollars to pay WWE with a relationship largely built on the history that WWE can deliver large weekly audiences and in turn, a boosting of value for cable channels such as USA Network and SyFy Network. Indeed, NBCU is planning to move WWE’s SmackDown from SyFy to the USA during Q1 of ’16. If Raw stops being able to deliver the eyeballs, the WWE’s value to NBCU’s portfolio may greatly diminish.
Second, advertisers care about ratings. One of the interesting elements in today’s Q3 press release was a note that “37 new advertisers were secured for WWE programming following NBCUniversal’s upfront”. Largely, this advertising money would not be going directly to WWE, but rather NBCU. In some cases, WWE may directly benefit as advertisers may decide to integrate the advertising into the WWE programming (such as sponsorship of PPVs or in-program ads). Either way, the ability of WWE to combat the negative profile and low advertising revenue that professional wrestling has historically garnered is one of WWE’s key initiatives. WWE’s decision to pursue “PG” programming and go after blue-chip sponsors such as General Mills and Kraft is built around improving their image among advertisers.
Lastly, in order to gain and retain subscribers for the WWE Network, WWE needs to create new fans, create new superstars, and monetize their audience. Declining ratings demonstrate diminishing interest in the WWE.
Live Monday night Raw viewership was under 4,000,000 hourly viewers throughout July-September 2015. This was a significant drop in July (-11%) and September (-14%). WWE’s own numbers don’t fully reflect this, likely because WWE is including delayed +3/+7 day viewing and DVR consumption. When questioned about the drooping ratings during the conference call, Chief Strategy & Financial Officer George Barrios brushed off the concern, stating that the company looks at the totality instead of just one metric, reaffirming that WWE feels they are bigger and engaging with their audience globally more than ever before.
For the time being, WWE is locked in lucrative television rights deals which will continue to pay out generously for several more years. The true test will be come when it’s time for WWE to negotiate their centamillion dollar contracts. Has the “live events” rights bubble burst? Is cord cutting taking its toll? What will the media ecosystem (to borrow one of Barrios’ new favorite terms) look like in 2018-19 when WWE is looking for television partners? Obviously, no one really knows.
WWE Network
As of September 30, 2015, the WWE Network had 1,233,000 paid subscribers. This number was up 6.6% from last quarter’s ending total of 1,156,100 paid subscribers. This actually exceeded the guidance WWE provided during last quarter’s press release of 1.2 million paid subscribers as of 9/30, growing 3-5% above 6/30 levels.
Over Q3 ’15, WWE averaged 1,173,000 paid subscribers, down 3.4% from Q2’15 average of 1,215,170 paid subscribers.
Overall, the WWE Network revenue for the third quarter of 2015 was about the same as the second quarter of 2015 at $36M. About one-third of the growth in subscribers came from international subscribers (+26,200, +12%). There were 50,700 additional domestic subscribers though the rate of growth in the United States which was only about 5%.
Since the launch of the WWE Network, there is a general subscription trend emerging. The peak for interest and acquiring new subscribers is during the first quarter in the Royal Rumble to WrestleMania season. Then, the remainder of the year is a gentle curve with slight variations which, thus far, have depended mostly on the external factors such as bringing online new external marketplaces.
In the past week, WWE has announced three new launches for the WWE Network: India (November 2015), Japan (January 2016), and Germany (January 2016).
WWE Network will go live in the Indian subcontinent (India, Pakistan, Bangladesh, Sri Lanka, Nepal, Bhutan, Maldives, and Afghanistan) on November 2. The service will cost $9.99 USD and pay-per-view events will be blacked-out for 24 hours before being available on the WWE Network. While Barrios is clearly excited about the prospect (he spoke of “long tailwind” in India), it’s questionable how many new subscribers the service will attract considering the PPV-restrictions, the relevant high cost and broadband reliance (as opposed to specific mobile solutions that other streaming companies have adopted in that marketplace).
The announcement of the WWE Network launches in Germany and Japan for January 2016 fill in noticeable gaps in WWE Network coverage across developed nations. However, even Barrios admitted during the conference call that the consumption and ARPU (average revenue per user) of pay-TV in Germany was much lower than other countries such as the United States and United Kingdom. Likewise, Japan has historically been a weak pay-per-view marketplace. Even the native New Japan World over-the-top streaming service has only a small foothold in the country.
International markets certainly represent an important piece to growing the WWE Network. Still, about 80% of subscribers are have registered domestic accounts and it’s clear that the key marketplace for the WWE Network is still North America.
In the conference call, WWE did affirm that they are refocusing their efforts in China. Barrios noted that WWE has been investing in growing their business in China since 2007 through distributing content on local TV stations to build audiences. He also mentioned that WWE is reshaping their strategy in China to recognize the rapid changes in the “media ecosystem” in that country, and the emphasis in China’s new five-year plan towards investing in sport & entertainment. They’re planning to expand their Shanghai office. As always, WWE teased that they’re exploring launching the WWE Network in China somewhere down the line without getting into any specifics.
Quarterly, WWE Network churn remains large. In Q3 ’15, the WWE Network lost 376,000 subscribers (2nd highest quarter yet) and gained 453,000 subscribers (3rd highest quarter). Regarding churn, Barrios said that the plan was making great original content and improving the user experience and user interface. It will also be interesting to see what impact new programs such as selling pre-paid three-month gift cards at Walmart has on WWE Network subscription numbers and churn.
Other
The WWE Home Entertainment division continues to profitably limp onwards with $3.0M in quarterly sales and $1.3M in quarterly OIBDA for Q3 ’15. While Home Entertainment sales have been sliding downwards for the past several years, WWE did flood the marketplace in recent months in the bargain bins with discount $3/$5 discs such as 2012’s “Rock vs. Cena Once in a Lifetime” which is the second-highest selling title of 2015 thus far behind WrestleMania 31.
Live event attendance remains flat for North America (5,100/event, same as Q3’14) while Q3 ’15 had stronger international results (8,900 for 6 international events). However, “adverse changes in foreign exchange” offset most of the expected revenue increase.
Licensing continues to be a strong performer in 2015. A large contributor has been video game revenue, especially from WWE SuperCard downloadable content and the WWE Immortals mobile video game.
An interesting note that WWE’s Night of Champions, with Sting challenging Seth Rollins for the WWE title, was up almost 60% in total PPV buys versus last September’s event that featured John Cena vs Brock Lesnar.
However, the true lesson on WWE pay-per-views is that there is still 31,000 domestic households that are buying full price PPVs each month though the majority of buys are from international customers.
As always, WWE brags about their Digital Media footprint (VOD presence and Social Media Followers) on every call. As Barrios loves to say, “we’re going to get our unfair share of that viewership.” He believes that where the eyeballs go, the money will follow. Digital media for Q3 ’15 was $5.8M, buoyed by higher advertising revenues. It’s clear that the company views digital media as an integral part of their engagement strategy with primarily short-form video content being available on Facebook and YouTube. WWE is certain a superstar at making things trend on Twitter, but they’ve got a long way to go before they will be seriously monetizing this medium.
Looking Forward
The remaining quarter (Q4 ’15) will include about 90 hours of new original content (compared to 85 hours in Q3’15). New programs will include the recent premiere of Breaking Ground, NXT Takeover: London from Wembley Arena, new episodes of WWE 24 and new episodes of the popular Stone Cold Podcast. Some analysts questioned whether WWE should be spending so much money on creating new content, but WWE officers defended the strategy, stating that they believed this content had a long tail effect and generated a lot of interest.
WWE did provide an estimate for Q4 ’15 WWE Network paid subscriptions (approximately flat to Q3’15 at 1.2 million), and were surprisingly cagey about putting out predictions for WWE Network in 2016.
To quote the press release, “Regarding WWE Network, given the inherent uncertainty of this nascent and growing business, management will not provide guidance for 2016 subscriber levels. However, the Company has evaluated other successful subscription businesses and observed a wide range of subscriber growth rates in the early stages of their development.”
However, WWE then went on to point out that Netflix grew at an annual rate of 22% in their early days and that growing 20-25% for the WWE Network would be “very strong performance”. Surprisingly, many analysts on the conference call actually challenged WWE’s numbers as being too conservative since WWE Network is a worldwide service while Netflix was originally only a domestic service. While the Q1 peak for the WWE Network next year will likely be higher than Q1 ’15 (1.327M paid), it seems ambitious to assume that WWE would be able to average a full 1,500,000 paid subscribers throughout the entirety of 2016.
Even WWE confirmed internal expectations that 80% of the growth in the coming year would still be domestic and in light of flat live event numbers and sagging ratings, WWE Network’s crystal ball remains very opaque.
Overall, the state of the WWE is solid. They have escalating television rights, a profitable WWE Network service, and a growing digital media footprint. However, the fundamentals for interest (ratings, attendance) still seem stuck in a general malaise. The company has rebounded from a tough 2014 and transformed from pay-per-view to over-the-top. Next year, we’ll see the continued roll-out of the WWE Network, the re-launch of the joint venture TapouT brand, an enormous WrestleMania 32, and the continued rise of the NXT brand. It should be interesting.
We’ve got two new long audio shows up today. Last night we did part two of the Hall of Fame with historian/wrestler Matt Farmer, which is a series we’re doing every Wednesday night, plus lots more on the latest news, and today we had an interview with Bob Backlund talking all kinds of different subjects including his long WWF title run, Mr. Backlund, training at 66 and much more.
Thanks to everyone for their comments on the new issue of the Observer, notably the lead story and the Von Erich story. People are sleeping on the lead TNA story but it’s the one with the most significant ramifications of anything this week.
We’re looking for reports on tonight’s NXT show in Citrus Springs, FL at Dave Meltzer We’re also looking for reports on tomorrow night’s NXT show in Gainesville, FL.
Smackdown tonight on Syfy at 8 p.m.
Kevin Owens vs. Roman Reigns non-title
Lucha Dragons vs. The Ascension vs. King Barrett & Sheamus vs. Dudleys
Dolph Ziggler vs. The Miz in a trick or treat street fight
Natalya vs. Paige
R-Truth vs. Alberto Del Rio
Ryback & Cesaro & Dean Ambrose vs. Erick Rowan & Braun Strowman & Luke Harper
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Figure Four Weekly:
Figure Four Weekly (10/26/15): Analyzing some the favorites for the Hall of Fame
A look at some of the favorites to get into the Wrestling Observer Newsletter Hall of Fame this year including Brock Lesnar, Carlos Colon, & more.
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Wrestling Observer Newsletter
Check out the latest issue: Wrestling Observer Newsletter October 26, 2015: Raw ratings woes continue, More Eric Bischoff notes
The lead story is how the Alberto Del Rio deal went down, with full details, including financials that even blew away those in WWE and those who used to negotiate these deals. We look at how in demand he was, including by organizations you wouldn’t even know, an angle he shot for MMA that was kept secret and will never probably see the light of day on television, and how this affects AAA, where he is their world champion.
We look at the ramifications of this on WWE, AAA, how the deal was put together, how he positioned it to AAA, how AAA has taken a huge talent hit, when the deal was really put together, how Del Rio was scheduled to main event AAA’s next major show against what top U.S. star in a hair match, and his dates advertised in Mexico. We look at other promotions that wanted him, Konnan talking about how the Myzteziz and Del Rio situation affects AAA, the Zeb Colter deal, how Lucha Underground and Del Rio fell apart as well as his huge money MMA offer just recently.
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If you are a new subscriber ordering 24 or more issues, you can get one free classic issue of your choice sent to you today. With a 40 issue subscription, you can get two free classic issues sent to you today. We’ve got coverage of every major PPV event and world wide spectacular, every major star switching promotions, histories of companies like FMW, Rings and New Japan, retirement and obit issues of every major star who fits into those descriptions over the past 11 years, as well as our biggest issue every year, the annual awards issue, and our most controversial issue of every year, the Hall of Fame issue.
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THURSDAY NEWS UPDATE
WWE
Luckily, Ronda Rousey’s anger wasn’t taken out on Scott Van Pelt.
Photo: Joe Faraoni/ESPN Images
MMA
Other Wrestling:
ON THIS DAY IN PRO WRESTLING HISTORY INTERNATIONAL (thanks to Graeme Cameron)
1966 – Spyros Arion beat The Destroyer (John Hill/Guy Mitchell/Jerry Valiant) in Melbourne to win the IWA heavyweight title
1978 – Ray Mendoza beat El Solitario in Naucalpan to win the UWA light heavyweight title
1992 – Cassandro beat Lasser in Toluca to win the UWA lightweight title
2000 – Minoru Tanaka beat Masayuki Naruse in Tokyo to win the IWGP jr. title
The situation with Alberto Del Rio and AAA is no longer looking good as WWE has confirmed that Del Rio will be working Monday’s Raw in Denver, as well as Smackdown on Tuesday in Colorado Springs, before going on the entire European tour, working on the Roman Reigns half of the tour.
AAA was under the impression that Del Rio would be fulfilling most of his advertised dates with the promotion, starting with a TV taping on Monday in Nuevo Laredo, and would be missing Raw. The other taping date he was advertised was November 15 in Ciudad Juarez, and he is booked the day before in Minehead, England, and traveling to Greenville, SC, from there, so it would appear very difficult to reroute him to Mexico.
At this point it appears AAA will be lucky to even get one date with him to drop their Mega heavyweight title.
Wrestling Observer Radio with Bryan Alvarez and Dave Meltzer is back again with special guest BOB BACKLUND to talk his Hall of Fame career from the beginning through WWWF through Mr. Backlund in WWF and even through his TNA run. Also, how you can buy his great new book. A fun show as always so check it out~!
Wrestling Observer Live with Bryan Alvarez and Mike Sempervive returns today with special guest CHRIS HARRINGTON of WrestleNomics to talk everything you ever wanted to know about WWE’s latest earnings report and the future of the company and the WWE Network. A fun show as always so check it out~!
With the increase in television rights fees and network subscriptions as the key components of their current business, WWE generated $166.2 million in revenue and $10.4 million in profits for the quarter ending 9/30.
The numbers compare favorably to the $120.2 million in revenue and $5.9 million in losses for the same quarter last year, but last year was supposed to be a losing year due to the start up of the network. This year was when profits were supposed to turn around big. While they are nowhere near what was being projected and network numbers are well below original projections, the business is solid and contractual increases in television rights fees should lead to no more losing quarters and eventually the strongest profit margins in company history.
The growth in television was from $42.2 million in revenue for the quarter to $65.2 million. Some of that is misleading as increased rights fees that are contractual are a solid increasing number, but part of the increase was having a full season of Total Divas and Tough Enough during the quarter. There were only four episodes of Total Divas during the third quarter last year and Tough Enough didn’t exist. Plus, Tough Enough ratings weren’t good and thus far, there has been no talk of a new season.
The other important driver of future growth is the Network segment, which on September 30th had 1.233 million paid subscribers and 73,000 free subscribers. That’s up from the 1.15 million at the end of June, but down from the 1.33 million at the end of March. It’s pretty clear the network business looks to be big increases in the first quarter of the year due to the Royal Rumble and WrestleMania, and trying to hold those increases for the rest of the year.
The U.S. Network number was up from 703,000 at the same point last year to 990,000, while international went from 28,000 at the end of the third quarter last year when it was in limited markets, to 243,000 this year.
Besides the India launch on Monday, it was announced that both Japan and Germany would get the network starting in January, and they were working on China, Thailand and The Philippines.
Even though the results were better than most analysts expected, the stock price had fallen from $19.95 per share at the close of the market yesterday to $17.95. That’s a big drop, but not a surprise given the big ramp up leading to the call based on the ‘buy on hype, sell on results’ mantra.
The other categories were more good than bad. By running more shows, total attendance, revenue, and merchandise sales for house shows increased with $5 million more in revenue, part of which was due to the successful Barclays Center SummerSlam run in August. Attendance was similar per show, but high ticket prices and more shows led to the increase.
– Home Entertainment was the only division down, but that’s not unexpected given the Network would cannibalize that.
– Licensing was up from $10 million to $11.5 million for the quarter due to the success of the video game.
– WWE Shop also continued to show big increases, from $4.3 million in revenue in this quarter last year to $6 million.
– The 10/3 live event from Madison Square Garden was the company’s most watched network show to date with the exception of the regular Sunday PPV events. Other strong performers were the Beast in the East show from Japan and the August 22 NXT Takeover show from Brooklyn, as well as the Stone Cold Podcast and Swerved.
The expectation is, due to contractual growth of the television deals, that the company is healthy and profits should grow. In many ways, the investment call was vague, but due to the changing landscape of distribution both domestically and abroad, nobody really knows exactly where things are going. WWE pointed to its strength in places like YouTube and Facebook in that they will be ahead of the curve in the future. However, things change, and they downplayed the declining TV ratings by saying its not about singular metrics, and that most metrics are up.
Former WWE Champion Brock Lesnar will be wrestling on a major house show on Dec. 19 at the Forum in Los Angeles, CA.
The match is part of his new contract where, besides a few PPV and television shows, he agreed to work scattered house shows. In the past, all of his house show appearances (July at Sumo Hall in Tokyo against Kofi Kingston and October in Madison Square Garden against Big Show) also became WWE Network live special events.
WWE has not run the Forum in recent memory as the L.A. Sports Arena, Honda Center and Staples Center have been the venues of choice in the Los Angeles and Orange County area over the last two decades.
There is advertising out listing both John Cena and Lesnar for the 12/19 date, indicatating Cena will be returning a week before his prior first advertised date of Dec. 26 as MSG, making this a pretty big house show.