WWE Q2 2021 Analysis: Revenue Up As Peacock Deal Kicks In, Live Touring Returns

In the current sports media landscape, broadcast and media rights demand are at an all-time high as well as the money being thrown around for those rights. WWE is no exception to this as the company is in the middle of two major U.S. broadcast deals with FOX and NBCUniversal to broadcast SmackDown and Raw.

WWE signed a five-year deal to have Peacock be the online streaming distributor of WWE pay-per-view and content that was previously on the WWE Network, effectively ending the Network inside the United States.

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All this contributed to the company’s strong run of revenue growth throughout the year. WWE President Nick Khan made it a point of emphasis in the early portion of the earnings call, highlighting not only WWE’s media rights deal, but also various sporting leagues and events such as Spanish soccer league La Liga and the Wimbledon tennis tournament.

As far as the immediate benefits to the Peacock deal is concerned, the additional revenue gained from that deal continues to grow a solid foundation for the company’s financials. Revenue for the company this quarter was up significantly compared to last year, largely thanks to the Peacock deal and the return of WrestleMania, the latter of which contributed to $9.2 million in revenue in WWE’s “Live Events” division (WrestleMania 37 ticket sales ended more than $6 million).

If one was looking for anything groundbreaking during this earnings call, they will be left looking for a long time because much of what was mentioned was projections and remarks of the already-existing numbers.

With that being said, there is still quite a lot to glean from the financial report, most of which is very positive from WWE's point of view.

WWE’s Revenue Returning To Pre-Pandemic Levels:

For this quarter, WWE’s revenue ended at $265.6 million, which is up 19 percent from last year’s Q2 ($223.4 million). Two big reasons for this are the aforementioned Peacock deal and WrestleMania, both of which last year did not have (WrestleMania did take place last year, but was held in front of no fans).

For the first six months of 2021, WWE's net revenue has been at $529.1 million which is up from last year's net revenue through six months at $514.4 million.

While the revenue was up, operating income was down, as expected. For the quarter, the operating income finished at $46.3 million, down from last year’s $55.7.

However, the operating income for all of 2021 ($111.4 million) is actually still higher than at this point last year ($109 million), which would beg the question as to why that is the case? There are several reasons for that.

Perhaps the biggest reason for the operating income not being higher this quarter was in its corporate expenses. Throughout the last few months, WWE continued its roster makeover from a talent, corporate, and management standpoint. As a result, severance expenses have been increased.

The biggest severance expense was an $8.1 package primarily related to the combination of WWE’s television, digital and studios teams into one organization in an effort to create “a more unified content strategy and more streamlined content production.” Such severance expenses were not a part of last year’s operating income.

Keeping things to this quarter, WWE has had to increase television and event production costs thanks to the ThunderDome and WrestleMania. It’s important to remember that the ThunderDome was not a thing during the second quarter of 2020 as the WWE aired programming from the company’s own facilities.

WWE’s Strong Start With The Return Touring:

Although WWE only had one live event this quarter (WrestleMania 37), the return of fans is already proving to be productive as far as ticket sales are concerned. During the earnings call, Khan said the live event in Louisville at the Yum Center was the highest grossing of any of WWE’s nine events there as well as the July 23 episode of SmackDown from Rocket Mortgage Fieldhouse in Cleveland.

Fans returned to WWE events in a live, in-person capacity on July 16 and the initial demand for tickets has been solid. WWE said in its earnings report that "the five events that aired through July 26 have been at or close to full capacity with current demand for future events at least on par with 2019."

If we’re to look at the “on par with 2019” statement in a literal sense, WWE’s North American live events ticket sales for Q3 in 2019 was at $18.3 million and in Q4, that number was at $17.8 million. Q3 could be off to a very strong start based on initial shows with fans back.

WWE CFO Kristina Salen says they're expecting large scale WWE international events in the second half of 2021 to match that of 2019. As far as ticket sales are concerned, international events generated $9.3 million in the second half of 2019 ($2.3 million in Q3 and $7 million in Q4), so that’s the number we should expect if we’re taking Kristina Salen’s words to heart.

Combining all those numbers plus the WrestleMania 37 ticket sales would equate to about $52.1 million for essentially two quarters plus WrestleMania.

Of course, this is all projections and there is no way to accurately predict ticket sales and the state of the world for the remainder of the year as the coronavirus pandemic is still at-large.

Peacock’s Impact On WWE’s Streaming Numbers:

Judging from WWE’s tone of voice during the earnings call, one can come to the conclusion that the Peacock deal, compared to the WWE Network, has been a resounding success in the first few months.

Content on the U.S. version of the Network, including live pay-per-view streaming, moved to Peacock this past March and the company did receive upfront payment for the deal. In addition, the amount of revenue generated from the Peacock deal and any international licensed partner agreements with the Network is up from last quarter.

As a matter of fact, the company’s media revenue was up more than $33 million year-to-year in the second quarter. 2021’s Q2 saw $61.5 million in Network revenue, $141.8 million in core content rights fees (such as the aforementioned TV deals involving Raw, SmackDown and NXT), $18.7 million in advertising and $11.9 in other forms of revenue. That adds up to $233.9 million this quarter.

All four categories inside the media revenue this quarter were up from last year, which added up to only $200.1 million. Through the first six months this year, WWE’s media revenue was at $475.9 million, up from last year’s $456.7 million.

Going back to Peacock, not only has that deal resulted in a financial benefit to the company but also from a viewership standpoint. According to Khan, several pay-per-views were seen by more people on Peacock compared to last year on just the WWE Network. Khan did not say specific numbers other than percentage increase, but if we’re dealing with just the U.S. version of the Network, there is a way to figure out a max number of Peacock accounts who watched those pay-per-views.

Even if we don’t know how many people watched pay-per-view events on either platform, WWE has released subscriber details for the Network in the past, breaking it down between U.S. subscribers and non-U.S. subscribers (listed as “International” in WWE’s financial reports).

Here are the specific examples Khan said on the earnings call where pay-per-views were seen more on Peacock than last year on the Network:

  • Backlash - up 26 percent from the Network last year in Q2, which averaged 1.207 million U.S. subscribers. At best, 26 percent up from that number is 1.521 million on Peacock.
  • Hell In A Cell - up 25 percent from the Network last year in Q4, which averaged 1.104 million U.S. subscribers. At best, 25 percent up from that number is 1.38 million on Peacock.
  • Money In The Bank - up 46 percent from the Network last year in Q2, which averaged 1.207 million U.S. subscribers. At best, 46 percent up from that number is 1.762 million on Peacock.

Again, these are the best-case scenarios and there’s a very good chance the real number on Peacock is lower. Still, it does present some type of quantifiable figure to look at Peacock.

That being said, no numbers were given for other WWE content on Peacock, which is still in the process of migrating everything from the base U.S. Network version that’s no longer a thing.

"These viewership numbers are also up considerably from our pre-pandemic WWE Network numbers. When we announced the Peacock deal, we said one of the key reasons for the partnership was to bring the WWE product to a wider audience to those subscribed to WWE Network. We expect viewership of WWE to continue to increase, particularly as Peacock grows its base of users," Khan said.

WWE On AEW As “Competition” And The Decreasing Gap In Viewership:

As is often the case in these earnings calls, the subject of AEW was brought up during the Q&A portion of the call.

This time, it related to the investments regarding talent and AEW’s recent viewership surge, having averaged at least one million viewers for the past three weeks, a number only matched by AEW Dynamite’s first-ever three weeks.

WWE’s viewership has been going down, though not as much as one would think compared to last year. Per WWE’s own graphics, Raw averaged 1.751 million viewers per episode this quarter which is down five percent year-to-year. The USA Network, where Raw is televised, is seeing steeper drops in viewership for other primetime programming at an 11 percent drop year-to-year.

SmackDown on FOX is seeing a similar situation. In this quarter, SmackDown averaged 2.038 million viewers, down three percent year-to-year. However, FOX’s primetime programming on other days is down 13 percent year-to-year.

There’s a good chance that the return of fans in venues as well as John Cena will ultimately result in a slight increase in viewership, at least for this quarter.

It still would be a bigger viewership than anything AEW has ever produced up to this point, but there is no denying that the overall viewership gap continues to decrease with time.

AEW’s talent acquisition has seen quite an uptick this year with the signings of former WWE stars Big Show (now Paul Wight), Christian Cage, Andrade, Malakai Black. Vince McMahon addressed this during the earnings call and still doesn’t really see AEW as competition, looking back at his wrestling war with Ted Turner and WCW more than two decades ago.

"It's certainly not a situation where it's rising tides because Ted Turner was coming after us with all of Time Warner assets as well. It was a different situation. AEW is where they are. I don't really know what their plans are, all I know is what our plans are. I don't consider them competition in the way that I considered WCW back in the day. Not even near close to that. I'm not so sure what their investments are as far as their talent is concerned. Perhaps, we can give them some more." McMahon said.

Other Notes From The Earnings Call And Financial Report:

  • WWE’s revenue from online sales to venue merchandise is up this year compared to the first six months of 2020. Even with venue merchandise sales this year so far being down thanks to the lack of shows compared to last year’s first six months, online merchandise sales have been able to more than make up for it. For the first six months of 2021, total consumer products revenue finished at $43.5 million, up from last year’s $39.2 million.
  • The ongoing talks to close a media rights deal in the MENA (Middle East and North Africa) region continue as there was no real update given during the earnings call. WWE did say it hopes to have a deal done soon, but there really is no exact timetable for such a deal to be completed.
  • Media consumption is at an all-time high, skyrocketing this quarter compared to the first quarter of 2021, in AVOD. AVOD is defined as ad-supported video on demand. Consumption includes videos viewed on third-party (Facebook, Instagram, Snapchat, TikTok, Twitch, Twitter, YouTube) and WWE platforms (WWE.com and WWE App). This quarter saw 11.2 billion AVOD Global Views, up from last quarter’s 9.4 billion views and dominating the previous quarterly all-time high which was 9.9 billion views in the second quarter of 2020. The increase in views means an increase in hours watched, which this quarter also set a company-record for. This quarter saw 394 million AVOD global hours viewed up from last quarter’s 367 million hours viewed and up from the previous company high at 374 million set in the second quarter of 2020.
  • The company’s Adjusted OIBDA finished this quarter at $68.1 million, down $5.2 million year-to-year, and the primary reason for that is the aforementioned severance expenses from this quarter. Under “Corporate” in the financial report, WWE ended at a loss of $27.6 million in Adjusted OIBDA compared to last year’s Q2 at $20.9 million. The company’s previous Adjusted OIBDA guidance of $270 million to $305 million remains unchanged as the company is still exercising caution in regards to projections and how it changes thanks to COVID-19’s impact.

Tables and graphs provided by WWE. You can follow Carlos Toro on Twitter @CarlosToroMedia.

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