Breaking Down WWE's New TV Deal and Its Fallout

David Bixenspan@davidbixFeatured ColumnistMay 16, 2014

Vince McMahon, chairman of World Wrestling Entertainment, gestures while speaking during a news conference at Madison Square Garden Tuesday, Nov. 21, 2006 in New York. Armed Forces Entertainment has invited WWE to perform a series of wrestling matches for U.S. Troops based in Iraq. (AP Photo/Frank Franklin II)
FRANK FRANKLIN II/Associated Press

As anticipated, WWE announced at NBC Universal's cable upfront event in New York that Raw and SmackDown were going to stay put as part of the NBC Universal family on USA Network and Syfy, respectively.  

A few hours later, after the stock market closed for the day, WWE released a "business outlook" that puts all new TV deals (domestic and international) at $200 million per year total.  If you remove the new deals, that puts them somewhere in the neighborhood of $160 million per year in the U.S., for an increase of about 50 percent.  Note that none of these numbers include Total Divas.

In a vacuum, that sounds like a pretty nice increase, but WWE had previously pushed the idea that they could double or triple the rights fees, with Vince McMahon even saying that analyst Brad Safalow could put a hammerlock on him if they didn't at least get a deal for double.  

The business outlook statement also noted that losses for 2014, a byproduct of network startup costs and pay-per-view revenue cannibalization, are being projected at $45 million to $52 million for 2014.  In light of the news, WWE stock is down 42.30 percent since Thursday afternoon as of this writing.

So, what happened?

Even with a more substantial increase, WWE would have looked bad by comparison because Major League Soccer's new TV deal was announced this week.  In spite of minuscule ratings, they went from $18 million annually to $90 million in their new deal.  Even though WWE is getting more money overall, they were never going to get anything close to five times their current levels.  So when WWE came in below their own hype, that devastated the stock.

But why did WWE come in so low, relatively speaking?  That was detailed last night on Wrestling Observer Radio (F4WOnline.com subscribers only).  MLS is getting somewhere in the neighborhood of 16 to 17 times what WWE is getting per viewer, which is completely ridiculous.  

Unfortunately for WWE, pro wrestling has historically been seen as cheap programming that delivers surprisingly strong ratings, and nobody wanted to set the precedent of it no longer being "cheap."

This goes back to the territorial system, when local stations and the wrestling companies wouldn't exchange money; the promotion would get TV time to promote the moneymaking house shows while the station sold the ad time.

That perception hasn't changed enough for anyone to want to make the first move in making the type of bid WWE wanted.  Yes, $160 million is a ridiculous amount of money, but in the grand scheme of scripted television, approximately $3 million per week total for both Raw and SmackDown is a bargain.

Combat Sports Fan Statistics
Income <$25K29.6%18.4%22.3%
Income $100-250K8.5%17.8%14.3%
No College65.6%51.5%54.8%
Scarborough Research

Wrestling has also, historically, gotten much less money for advertising than other shows with comparable viewership.  Some of this is based on the perception that pro wrestling is a fake sport that its viewers think is real (obviously not the case in 2014) or is, in general, low-brow entertainment.  

Some of it is rooted in reality: According to a Scarborough Research survey from last year that compared fans of WWE, UFC, and boxing, WWE has the most low-income fans and fans who didn't go to college.

That's the hump that WWE needs to get over more than any other in terms of perception.  How they do it, I have no idea.  

David Bixenspan is the lead writer of Figure Four Weekly. Some of his work can be seen in Fighting Spirit Magazine.