A commitment to growing brand exposure in both domestic and international markets continues to dampen WWE’s financial results in 2019.
The media and entertainment company disclosed third-quarter earnings Thursday, reporting declines in revenue and operating income for the second consecutive quarter. A delay in securing a network TV deal in the Middle East additionally led WWE to lower company guidance on profit for the year.
Yet WWE Co-President George Barrios told investors that the company still has its finger on the pulse for improving performance this year and achieving financial goals in 2020, even as it supports its growing brand by making significant investments in its portfolio.
In the three-month period ending September 30, WWE completed the transition of its flagship program SmackDown Live to Fox and signed a deal with USA Network to air its popular NXT offering on Wednesday nights. The brand’s Fox deal was signed in June 2018 for an undisclosed figure. Additional out-of-the-ring programming announced by WWE in recent months includes a new podcast and weekly studio show set to debut on FS1 on November 5.
“I think for us we are trying to balance investments in the short term and the long term, but clearly we are focused on 2019 and 2020 as well,” said Barrios on WWE’s earnings call, while filling in for CEO Vince McMahon who was in Saudi Arabia for the WWE’s second Crown Jewel event. He added that opportunities in the international markets WWE is tapping into – like the Middle East and India – will also develop over time.
WWE now airs seven hours of live, in-ring content during the week on primetime linear television. But TV ratings suggest the sports entertainment company is not drawing in new viewers. Ratings for Monday Night Raw and SmackDown declined 6% and 4%, respectively, last quarter. WWE did say that SmackDown Live on Fox debuted with 3.9 million average viewers on October 4, far outpacing programs that aired in that same time slot on the network in the month of September.
Another disappointing metric for WWE was total subscribers for WWE Network, which fell 9% to 1.5 million members in the third quarter. The company attributes the decline to lower subscriber additions earlier in the year prior to the company revamping its service over the summer.
When asked by analysts if the current WWE Network $10 price point was too high in the face of rival services, such as Hulu and Disney+, WWE said it offers a completely different value proposition compared to broader streaming services. Total views for WWE Network are up 12% year to date, the company said.
“I think WWE Network is fundamentally different,” said Barrios, adding that WWE network targets a very niche and passionate audience.
WWE will not offer any guidance on 2020 until February, but the company identified both TV contract fees and sponsorships deals as two clear revenue streams to help offset growing expenses. WWE’s other CO-President Michelle Wilson told analysts that brands including Taco Bell, Kohls, and Amazon Web Services have approached WWE about sponsorship opportunities thanks to its deal with Fox.
“Increased distribution has opened up opportunities with new brands,” she said, referencing cross-promotion by the network during NASCAR, NFL, and World Series programming. “It has had a great impact in terms of marketing power.”
WWE revenue in the third quarter fell 1.1% to $186.3 million. Operating income additionally plummeted 65% to $6.4 million. Those results are attributed to lower attendance at North America live events and slowed merchandise sales, according to company financials. International ticket sales remained flat year-over-year.