WWE is a television giant. Complete with its flashy presentation and larger-than-life characters, it has conquered not only all competitors in professional wrestling, but nearly everyone else on paid television. This past Monday, its flagship show Raw accounted for three of the five highest-rated hours on cable, with each segment averaging near or above 3,000,000 viewers. The following night, SmackDown Live! was the second-highest-rated show, trailing only Discovery Network's Shark Week programming.
It's a position that remains familiar to WWE, despite a steady year-over-year ratings decline. By and large, television viewership is down across the board. That holds true for sports, network and cable programming. The number of households "cutting the cord" and turning exclusively to streaming services such as Netflix and Hulu is accelerating. Traditional broadcast networks such as CBS, which owns this website, have launched their own over-the-top networks in an effort to keep up with the rapidly evolving way media is consumed.
That's why it's arguable that more people than ever are watching WWE programming, despite the drop in traditional viewership. There is no panic at the company headquarters in Stamford, Connecticut. This is a trend that executives saw coming years ago and have been working feverishly to keep pace with. The videos posted on WWE's digital platforms, including Facebook and YouTube, were viewed more than 9.1 billion times during the first six months of the year -- an increase of nearly 20 percent from the same time last year. Likewise, WWE's social media channels continue to explode and now have 800 million followers.
And then there is the company's own over-the-top digital channel. The WWE Network averaged more than 1.6 million paid subscribers during the second quarter of the year, which is an 8 percent year-over-year increase. Total subscriptions, including first-timers receiving a free trial period, nearly topped 2 million around WrestleMania in April. However, only a small fraction transitioned to paid subscribers once the trial period expired.
What that glut of numbers translates to is the future. In roughly two years, WWE's current television rights deal expires, and the company may find itself at a crossroads. Will they re-up and remain on the USA Network? Will they shop around for other television suiters willing to pay a higher rights fee? Or will WWE themselves cut the cord? Planning to eventually do the latter has been in the works for more than six years.
Make no mistake about it, television rights fees are WWE's bread and butter, and generate more income than any other division in the company. It's not even close. The company's second quarter earnings show television is responsible for $60.1 million in income, compared to $13.9 from the WWE Network. The content posted to social media and YouTube generated less than $1 million. But here's where it gets interesting. Although the new revenue streams pale in comparison to television, they are growing at an exponentially faster rate. Network revenue is up 85 percent year-over-year while digital media is up 1,300 percent. However, digital media growth must also be taken with a grain of salt, given its small numbers and negative income in 2016. Regardless, it points toward the future of media consumption.
Established online platforms are also showing an increased interest in live programming. Amazon has purchased rights to stream select NFL games to its Prime subscribers this season, taking over from Twitter, which had the rights last year. Twitter also continues to stream other live sporting events and shows. Meanwhile, Facebook has acquired the streaming rights to a number of Major League Baseball and Major League Soccer live broadcasts.
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During a conference call with investors, Chief Strategy & Financial Officer, George Barrios, made clear WWE has been planning to follow suit for years.
"Vince [McMahon] has said it many times. Five, six or seven years ago we thought it was really important to make sure we staked out the social digital landscape as well as direct to consumer. We've done that, so now we have options. Do I think a digital player will become more realistic to step up in the level of rights fees we've seen from traditional players? I think eventually. I couldn't tell you whether that's tomorrow or five years from now, but I think eventually. Certainly over the last two years we've seen a steady progression. From our end, the reason we've invested so much in having a position on these platforms is to take advantage of that eventuality. That's a long-winded way of saying 'Could we see that happening? Yes, absolutely.'"
Raw and SmackDown Live! are coming to a tablet near you. It's a matter of when… not if.
WWE News & Notes
- Overall revenue was up 8 percent to a record $214.6 for the second quarter.
- After testing the waters with a live show on Snapchat during WrestleMania, WWE and NBC Universal are moving forward with plans to co-produce a series on the platform in the future. More than 5 million people tuned in for the pilot in April.
- A record 1.95 million households worldwide streamed this year's WrestleMania on the WWE Network. Even without the addition of traditional pay-per-view buys, the show was the most-watched WrestleMania in history.
- The number of WWE Network subscribers is expected to drop by nearly 100,000 during the third quarter. The company is projecting roughly 1.54 million paid subscribers, down from the 1.63 million during the second quarter.
- It should come as no surprise that the push continues for Jinder Mahal as the WWE Champion. India is one of two global markets where WWE launched original programing over the last three months. WWE Sunday Dhamaal is the name of the show. The company is planning to expand original native-language programing in additional countries.
- Moving Raw and SmackDown Live! exclusively online will be tricky on a global level. The transition would also likely have to be staggered geographically to time out with current television contracts. WWE recently completed a multi-year agreement to air the shows on Africa's SuperSport Channel. It marks the first time the shows will be broadcast live in more than 50 countries.
- Vince McMahon said the women's division and developing female superstars are priorities for WWE: "The Mae Young Classic is really an opportunity to bring up young female performers, which is vital to our overall product. Many of the quarter-hours you see on television reflect our female superstars. This is an opportunity to grow that base which we haven't done all that well in the past."
- Despite an absence from television, interest in The Bella Twins remains high. The Bella Twins YouTube channel grew by more than 50 percent last quarter and now has more than 750,000 subscribers.
- No mention was made of WWE's recent cost-cutting measure to cease using pyrotechnics during live shows, including television broadcasts.
Chuck Carroll is former pro wrestling announcer and referee turned sports media personality. He once appeared on Monday Night RAW when he presented Robert Griffin III with a WWE title belt in the Redskins locker room.
Follow him on Twitter @ChuckCarrollWLC.
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