When a crestfallen Cody Rhodes sat in the middle of the ring after losing the main event of WrestleMania to Roman Reigns this past Sunday, there were more than a few angry scowls in the crowd at SoFI Stadium. Yet somewhere beyond the Gorilla position, even further away from the semi-public areas that are backstage, you could imagine some smiles from Very Important Men in Suits because everything had gone according to plan – and not just about Reigns or Rhodes. After all, World Wrestling Entertainment (WWE) just got the ultimate bag.
Upon acquiring WWE and announcing that it’ll be merged with the Ultimate Fighting Championship (UFC) to form a new company, Endeavor has clearly set out to become the preeminent live entertainment destination of the world. With what will eventually trade as TKO, Endeavor’s new $21 billion dollar baby will also have an even bigger influence over the sports media market than ever before.
Unquestionably, shareholders will find themselves in love with the potential returns. Specifically, here are some winners and losers from this expected but still stunning deal.
This should be obvious, right? Any company that acquires another has a laundry list of reasons for doing so, but almost always the leading factor is that the company being bought fills a need that the buying firm cannot on its own. Yet not every megabillion-dollar deal ends up being worthwhile, as we’ve seen in recent years with companies like Yahoo!, Time Warner, and most recently, Twitter.
In filling needs, WWE checks off a lot of boxes on Endeavor’s list. WWE could have the greater work rate, to borrow from wrestling parlance, for Endeavor’s ambitious plans of increasing live events. It produces far more live televised content than its once competitor, now sibling in the UFC as Monday Night RAW, NXT and Smackdown are weekly primetime staples. It is also a merchandising powerhouse, one that moves units online as well as in arenas big and small around the world.
Considering that Endeavor is the holding company for talent and media agencies, the crossover potential between WWE Superstars and UFC fighters, along with other clients within the umbrella, feels limitless.
Not every part of this union will go smoothly, in fact, we should expect some awkwardness and sadly predictable staff reductions that typically define multibillion-dollar mergers. Yet in the long run, Endeavor as a holding company will be the undisputed benefactor.
Winner: Vince McMahon
Fans have dreaded McMahon’s return from what was essentially a self-imposed exile last summer – not just because of the serious nature surrounding his dismissal but because of longstanding criticisms over his creative decisions. Yet whether anyone likes it or not, the current media landscape created a once-in-a-lifetime opportunity that he, as the majority shareholder, was not going to pass up.
McMahon, who famously brought his father’s company decades ago for it to become the preeminent wrestling promotion, never had small thoughts about the future of WWE. The mythos behind creating WrestleMania in the 80s, taking the company public in 1999, building WWE Network as one of the first major over-the-top (OTT) platforms not called Netflix, even borrowing a page from sports leagues to have multiple media partners for much of the past thirty years.
Media rights deals have ballooned the valuation of sports properties the world over, and WWE is no different. Yet some team stewards have taken to the ‘sell high’ mantra as there’s even more money to be made from a majority or full sale of ownership. With a product that was creatively reinvigorated upon his departure, consistently strong licensing, and a market of media companies desperate for live product, selling at least the majority of WWE was going to net an unfathomable return for McMahon. To the shock of no one, he’ll remain with the company as executive chairman thanks to a rather interesting employment contract.
Loser: Major TV/streaming companies at large
They’re not losers in the sense that they came up short in their bids for WWE, if there were legitimate conversations even had in the first place. However, with two significant live sports/entertainment properties, Endeavor has a lot more power over media companies when it comes to future rights negotiations. The Hollywood Reporter collected reactions from Wall Street analysts, and a standout note came from Randal Konik, an analyst for financial firm Jeffries, who summed up said power as endemic for the current media landscape:
“From a fundamental perspective, we like the assets of UFC and also WWE in a world where linear TV is losing market share to streaming, thus live sport content is in high demand,” Konik explained in a report. “The upcoming rights expirations for both WWE and UFC present meaningful upside opportunity to the cash flows of both the UFC and WWE in their own rights and will further drive earnings before interest, taxes, depreciation and amortization (EBITDA) margins in each franchise incrementally higher.”
If any of those companies – namely Amazon, Netflix, or incumbent media partners from Comcast/NBC and FOX – bought WWE, the promotion likely wouldn’t have gone for rights bidding again unless it was sold or spun off. Yet there’s a premium on available sports packages these days as the NBA is the only major male pro sports outfit on the horizon (and perhaps that changes now that the CBA has been extended). WWE is up next as its deals with NBC (via USA) and FOX expires in 2024, and the streaming agreement with Peacock (which absorbed WWE Network in the US) sunsets in 2026. You know the saying by now: “Yesterday’s price is not today’s price.”
That said, NBC and FOX, take solace in avoiding a potential political quagmire of doing business with another controversial bidder had it won out.
Loser: The Public Investment Fund
Little has been said about if there was a bid from Saudi Arabia’s Public Investment Fund or how much consideration it was given. However, given the existing partnership with the country’s Ministry of Sport, it’s hard to imagine that McMahon didn’t have exploratory conversations with the PIF.
Assuming that it was in the running, Endeavor’s purchase of WWE is another blow to the Saudis’ attempts to grow any noticeable footprint in North American sports and entertainment. LIV Golf has been a massive flop here so far, largely due to its standoff with the PGA Tour. That battle with the PGA has kept just about every media firm away from doing business with LIV, leading to a bizarre deal with the CW that has been embarrassingly inadequate for both sides.
Fear of angering the PGA isn’t the only reason why major media players have kept a distance from LIV Golf as continued accusations of sportswashing have followed the PIF since its made westward advances. (A group representing the families of 9/11 victims has come after LIV and the fund, and the murder of journalist Jamal Khashoggi in 2018 led to even greater condemnation.)
Outright ownership of WWE would have invited red-hot scrutiny to the promotion and its partners, but the Saudi group would have held a long-established property in North America that enjoys a multigenerational, diverse, and lucrative audience.
With its willingness to spend money in the combat sports space along with the massive investment in LIV Golf, the Saudi group has already proven that it’s no shrinking violet in the sports world. In this scribe’s eyes, it’s only a matter of time before the PIF makes a wave in the West, even if it’s not a massive one right away.