Thursday has not been a good day for WWE’s stock. The company held a Q1 earnings call where they revealed declines in event attendance, ticket sales, and paid network subscriptions, but even more importantly, a much bigger revenue decline than analysts had forecast. And the stock market wasn’t happy; WWE shares fell 11 percent before the market even opened.
WWE stock ($WWE) just officially opened Thursday at $90 per share. It closed yesterday at $98.14 per. I have an MBA, so I can tell you that’s not great.
— Tony Maglio (@TonyMaglio) April 25, 2019
And they continued to fall from there, hitting a low of $84.15 before rebounding to $85.71 as of 3:30 p.m. Eastern. That low is 14.3 percent off the Wednesday closing price, with the rebound 12.7 percent off.
Now, granted, the stock fall alone isn’t catastrophic for WWE, and their stock has a history of some big swings; it opened at $38.43 one year ago, hit $96.73 in September, fell to $62.60 in October, and was at $86.78 a month ago. (For the record, WWE chairman Vince McMahon’s sale of 3.2 million shares of stock somewhere in Q1 was at a price of $84.87 each, giving him $272 million towards his XFL plans.) But it’s still not a great sign, and it suggests that some analysts’ predictions about their Q1 results were quite optimistic.
Maybe more interesting than the stock swing alone are the underlying numbers. This happened thanks to WWE revealing not just declines, but declines (especially in revenue) that were worse than many projected. (Consider David Karnovsky of JP Morgan calling it “his top pick in the live entertainment subsector” and boosting a price target to $105 earlier this week.) Tomi Kilgore of MarketWatch has more on the numbers that came out Thursday:
The company swung to a net loss of $8.4 million, or 11 cents a share, from a profit of $14.8 million, or 18 cents a share, in the year-ago period. The FactSet consensus was for a loss of 2 cents a share. Revenue fell to $182.4 million from $187.7 million, a 2.8% decline, while the FactSet consensus was for an increase to $199.0 million, as the increased monetization of content was more than offset by a reduction in live event ticket revenue and lower merchandise sales. Media revenue rose 1.5% to $135.4 million but missed the FactSet consensus of $143.1 million; live events revenue fell 15% to $26.2 million, below expectations of a 2.3% rise to $31.5 million; consumer products revenue declined 11.5% to $20.8 million, missing expectations of 3.8% growth to $24.4 million. The company said the absence of several Superstar talent hurt audience engagement, as U.S. TV ratings of “Raw” declined 14% and of “SmackDown” dropped 13%.
What’s also interesting is the way WWE tried to spin those ratings. They put out a couple of charts that got widely mocked:
There are many ridiculously stupid comparisons and this is one of them. Now do minutes of viewing. https://t.co/ZZfGd9GX64
— SportsTVRatings (@SportsTVRatings) April 25, 2019
(More detail on how they calculated these numbers.) pic.twitter.com/7NTARMUarV
— Wrestlenomics Radio (@wrestlenomics) April 25, 2019
As Robert Seidman (SportsTVRatings) notes there, there are plenty of problems with that comparison. One is the widely divergent amount of content, as shown in the second slide. Raw and SmackDown combined for only 25 events in the measured period (Q1 2019); comparing them to 142 regular-season NBA games and 71 regular-season NHL games is silly, especially when some of those NBA and NHL games are on NBA TV and NBCSN. The broadcast-only games for the NBA and the NHL are a better comparison (they’re closer to the once a week schedule of both Raw and Smackdown), and that would see the NBA ahead of WWE (averaging 3 million viewers in 11 games on ABC) and the NHL behind (averaging 1.3 million on NBC).
But that’s still a flawed comparison on a lot of fronts. For one, these are regular-season games and the viewership numbers for those leagues really spike in the playoffs; Raw and SmackDown don’t have “playoffs,” and one of their best periods is often the run-up to Wrestlemania (which took place earlier this month), so WWE is comparing some of their strongest numbers to what aren’t those other leagues’ best numbers. (Similarly, with NASCAR, they’re really bringing the number down by averaging Xfinity and Truck Series races in with the Monster Energy Cup series.) And then there’s also the question of overall inventory; it’s nice for WWE that they’re drawing better total viewership than the average NHL or NBA regular-season game on national television, but those other leagues still are bringing more overall value given the numbers of events.
Speaking of the amount of content, an interesting sidebar to this came from the discussion of a possible third hour for SmackDown (currently a two-hour show) after the move to Fox this fall. There’s been some discussion of a third hour, starting with Dave Meltzer of The Wrestling Observer saying this on Wrestling Observer Radio March 31:
“It is speculation but there is definitely a chance of that because the feeling is that since they have to film anyway and 205 Live is kind of just a waste of air. It’s just not working that maybe what they’ll do is two hours 8-10 on Friday nights and do hour 3 on FS1 with the idea that they can get another $50 million a year off of Fox by giving that extra hour.”
And that received some discussion on the earnings call today:
OK, so we know #RAW is three…
— Tony Maglio (@TonyMaglio) April 25, 2019
But there are a whole lot of potential issues there, especially when it comes to time zones. SmackDown is currently aired on a tape-delayed basis outside the East Coast, from 8-10 p.m. local. And it seems likely that will continue after the move to Fox; that’s the primetime window for that network (unlike the other big three broadcast networks, they then go to local news at 10), and showing it live across all time zones would run into affiliates’ earlier news and other local programming.
Yes, they could put a third hour on FS1, but FS1 is a national cable channel, so there’s then the question of what hour is that? If you do it after the end of SmackDown on the East Coast, that’s 10 p.m. ET, but that’s 7 p.m. PT, so SmackDown hasn’t even started there yet. Or if you do it before SmackDown, that’s 7 p.m. ET, 4 p.m. PT. Either could cause a whole lot of problems if there’s any sort of carryover in the storylines. It is possible that FS1 just repeats a “SmackDown Third Hour” all night and relies on people jumping over to it after their broadcast of SmackDown ends, but that seems likely to cause even more confusion and audience loss than a mid-program channel move already does.
So, if there’s going to be another hour, it would seem perhaps easier to make that of a separate show that doesn’t tie in to the main SmackDown broadcast. Maybe that’s NXT, which currently airs on WWE Network Wednesdays, but that then removes some value from that network. Maybe it’s something else. In any case, it will be another interesting thing to keep an eye on, as will the other developments around WWE.