As previously noted, there has been much speculation on WWE potentially moving over to a new network, or at least commencing a bidding war to land the most profitable deal. Their current deal with NBC Universal expires in 2019, however WWE has stated that they are looking to finalize a new television deal this year. Right now, FOX appears to be one of the top options if WWE does decide to leave USA, with Raw airing on FOX and SmackDown Live moving to FS1.
For WWE, two key selling points to this bidding war are the ratings and TV rights deals.
“The company’s negotiating position with upcoming TV rights deals remains strong and should provide the biggest catalyst of the year,” reads a recent report from equity research company MKM Partners.
“The value of the TV rights for Raw and Smackdown in the U.S., the U.K., India and the next four most significant markets is roughly $213mn for 2017, which represents nearly 80% of WWE’s TV segment revenue for the year,” MKM added. “By 2019 the value of these seven contracts should total $250mn. In 2020, the first full year of the new contracts we anticipate a step up in value of at least 25% to $312mn from these deals and then increase at a 10% average annual rate through 2024.”
Personal finance advice and investing news site Barron’s Next illustrated a chart of WWE’s ratings compared to other networks, as well as their rights fees per viewer hour, created by Guggenheim analysts.
As shown, WWE has a higher average rating per hour for both Raw and SmackDown Live than other sports shows such as MLB on Broadcast, NBA on TNT, NHL on NBC/SN, and UFC (their main card).
WWE and the UFC are both reportedly negotiating with FOX. Currently UFC has a $200 million deal, however Deadline recently noted that 2017 showed a major decline in interest in the world’s largest MMA promotion, as average UFC viewers plunged 22% on FOX and 18% on FS1. Deadlineadded that one significant reason on why the interest has declined is because major draws like Brock Lesnar, Ronda Rousey and Conor McGregor are now either contracted with WWE, or endeavoring in other ventures, such as McGregor exploring the boxing world by competing against Floyd Mayweather last August.
WWE also has a significant edge over those other sports when it comes to rights fees per viewer hour, as shown in the diagram below:
Along with sharing these two charts, Guggenheim analysts also commented on how undervalued WWE is compared to other major sports broadcasts.
“Our estimate for the new domestic contract would still significantly under-index all other professional sports contracts on a per viewer hour basis,” expressed the analysts. “While we do not expect WWE will fully close the audience monetization gap with pro sports, we do believe that our estimate of the contract doubling is not unreasonable given the extent to which it underindexes today.”
Source: Barron’s Next
