WWE stock smacked down over 40% after disappointing TV deal
FORTUNE — World Wide Entertainment, the producers of wrestling extravaganzas like WrestleMania, took a body blow on Wall Street today. Investors sent the company’s shares tumbling 43% after it announced a new television contract suspected to be less lucrative that expected along with an uncertain financial outlook.
Comcast Corp.’s NBC Universal (CMCSA) signed a multi-year deal to continue broadcasting WWE’s “Raw” on USA Network and “Smackdown” on NBC’s Syfy Network. The financial terms were not disclosed. Investors had anticipated a big bump from the $100 million in annual revenue WWE earned from the previous contract. But in the end, they concluded that the company negotiated much smaller payoff.
Furthermore, WWE issued a disappointing outlook that suggested uncertainty about its future business. Profits excluding certain charges will double or triple to $125 million to $190 million by 2015, the company said. Such a wide range of possible earnings outcomes based on different business scenarios spooked investors.
Vince McMahon, WWE’s chief executive, remained positive about the deal by pointing out that domestic and international television rights are for a combined $200 million, which is nearly double from the recent past. “The rising value of our content coupled with the global expansion of WWE Network will provide the foundation for long-term growth that continues to transform our business over the coming years,” he said in a statement.
Meanwhile, Bonnie Hammer, NBCUniversal Cable chairman, said, “USA Network president Chris McCumber, Syfy president Dave Howe and I are incredibly pleased to renew this strategic partnership with WWE.”
Another reason for the big blow: the company’s WWE Network, an online streaming service, is cutting into pay-per-view revenue with little improvement expected. Around 700,000 people have subscribed since February, but the company needs over one million by end of 2014 to meet its internal goal.
In an email to the WSJ, McMahon said: “There should be no confusion on Wall Street as it is extraordinary to have reached more than 660,000 WWE Network subscribers only 42 days after launch, putting us on track to reach 1 million subscribers by the end of the year. We feel good about nearly doubling the value of our four largest TV deals around the world.”
The company said its online service will lose $45 million to $52 million for 2014 if it attracts one million subscribers, a larger loss than investors had anticipated.
A spokesman for WWE (WWE) declined to comment about the company’s decline in share price. The company has scheduled a conference call with analysts on Monday to be led by McMahon and George Barrios, the chief strategy and financial officer.
