WWE Q3 2020 Analysis: Revenue Stays Steady, Network Subscriptions Up, What To Expect In Q4

The third quarter of WWE’s 2020 can largely be summed up with two things, both related to each other: COVID-19 and the ThunderDome.

WWE has made numerous structural and production changes to the company and the way it does its television shows, Raw, SmackDown and NXT. Initially, all three shows were held either at the WWE Performance Center or Full Sail University. Some shows had a select number of people in attendance to watch the shows and some shows had no “fans” in attendance.

Fast forward to this summer when WWE announced a partnership with Orlando’s Amway Center to be the home of Raw, SmackDown and pay-per-view shows. The company transformed the venue into the “ThunderDome,” a set-up that allows fans from all over the world to watch WWE events live virtually and have their faces be shown in large monitors covering the entire venue.

It’s a similar set-up to how the NBA did inside its own “bubble” at Disney World, which allowed the league to play out the rest of the 2019-2020, albeit with an altered format. 

Much of what was written on Fightful’s 2020 second quarter earnings analysis remains the same for quarter 3. With no fans in attendance and live event touring in limbo, the finances and expectations for the future have been changed compared to this time last year.

WWE’S 2020 Q3 Continues Strong Revenue Run:

WWE generated $221.6 million in total revenue for 2020 Q3, which is slightly under the $223.4 million that Q2 generated, but still in line with what many projected. This year’s Q3 still did far better than 2019 ($186.3 million) and 2018 ($188.4 million), largely due to the increase in U.S. television rights fees from both NBCUniversal and FOX. 

Among core content rights fees consisting primarily of licensing revenues earned from the distribution of WWE’s flagship programs, Raw and SmackDown, as well as NXT, through global broadcast, pay television and digital platforms, WWE generated $132.4 million, nearly double what last year ($72.2 million) did. 

Despite the record revenues for Q3, the breakdown of the total revenues follows a similar pattern to what 2020 Q2 has shown. With no live event touring and ticket sales for those events, WWE missed out on tens of millions of dollars of revenue. But just like with the second quarter, this most recent quarter was able to somewhat make up for that loss in ticket revenue with an increase in licensing and WWE shop sales. 

Licensing this quarter ended at $10.8 million (up from 2019 Q3’s $7.8 million) and WWE Shop sales this quarter ended at $9.1 million (up from 2019 Q3’s $5.7 million). 

The company’s Adjusted OIBDA finished at $84.3 million, which more than tripled what last year’s Q3 did at $25.4 million. This quarter also did better compared to last quarter, which was $90.5 million, though it was to be expected when looking at trends for Q2 to Q3 in past years. 

As far as the Adjusted OIBDA is concerned, even though the company has declined to give any indication as to what its outlook for the remainder of 2020, it has already performed far better through three quarters than what past years did combined. 2018’s Adjusted OIBDA finished at $178.9 while 2019 finished at $180 million. Through three quarters, 2020’s Adjusted OIBDA is at $235.1 million, meaning there’s a good chance the Adjusted OIBDA for 2020 when it’s all said and done could break $300 million.

In terms of net income, WWE finished Q3 this year with $48.2 million, more than last year’s $5.8 million in Q3 and more than $43.8 million in 2020 Q2. Through three quarters, the company has made a net income of $118.2 million, which is more than last year’s $7.8 million around that same time and more than 2018’s $58.4 million.

“Our third quarter financial performance was strong and reflected our ongoing creativity in a challenging environment,” said Vince McMahon, WWE Chairman & CEO. “We continue to adapt our business, as demonstrated by the creation of WWE ThunderDome, focusing on increasing audience interaction and engagement to support the value of our content globally.”

Kristina Salen, WWE Chief Financial Officer, added, “In the quarter, we delivered revenue of $221.6 million and Adjusted OIBDA of $84.3 million based on increased rights fees for the Company’s flagship programming. With $638 million in cash and short-term investments at quarter-end, we believe WWE has substantial capital resources to manage challenges that may lie ahead and to deliver on key strategic initiatives.”

Even with all the issues COVID-19 has brought to WWE, barring any financial pitfalls for the remainder of the year, 2020 will end up being the company’s most profitable year in decades.

WWE generated $221.6 million in total revenue and Adjusted OIBDA finished at $84.3 million for 2020 Q3. In terms of net income, WWE finished Q3 this year with $48.2 million, more than last year’s $5.8 million in Q3. pic.twitter.com/bCeFRhI2OH

— Carlos Toro (@CarlosToro360) October 30, 2020

Raw And SmackDown Viewership Down; How Will WWE Fix It?

Viewership numbers were once again brought up in the earnings call as the company is once again losing viewers fast on Raw. Per WWE’s own graphics, Raw averaged 1.766 million viewers per episode in 2020 Q3, down a staggering 29 percent compared to 2019’s Q3 at 2.489 million viewers per episode. 

In regards to top 25 cable networks, those primetime programs actually went up four percent this quarter from 900,000 viewers last year to 934,000 this quarter. 

SmackDown, on the other hand, has also gone down in terms viewership, though it is only by two percent. SmackDown averaged 2.022 million viewers per episode this quarter while last year’s third quarter drew 2.069 million viewers per episode.

Vince McMahon addressed the declining viewership and ratings in the earnings call and noted how ratings is just one of many measurements it looks at and that the company has more fans than ever before. 

He would go on to tout the critical reception of the ThunderDome, but did say that better writing and execution will be what brings people in. No doubt that the ThunderDome stabilized the ratings a bit, but it still hasn’t been trending upwards on a consistent basis, meaning that it will take more than a flashy new look and environment to bring ratings back up. 

How effective the current product will help ratings will be a question that will be answered months down the road. 

“When you look at television ratings, that’s what they are. With us, it’s one of our many measurements. When you look at total, when you get into YouTube, etc… We have far more fans now than we have ever had. When you look at television ratings, it is what it is. Not to say we don’t want to increase them, of course we do. Aside from that, our total audience is much bigger, so you can’t just hang your hat on ‘ratings are down.’ Without question, we have to have a mothership, and we do with Raw and SmackDown, and from there, clips and comments and other videos, take it to the next week or the next year. We’re never off the air. It’s fine to say ratings are down, I wanted to give you that bit of color in terms of overall viewpoint. As far as ratings getting higher, we’re doing everything we can. As far as the ThunderDome is concerned, it’s been received very well by fans and brought more back. It’s better writing, better execution and talent that people are interested in. That’s pretty basic,” McMahon said.

WWE President Nick Khan commented by saying that he doesn’t believe the rights fees will go down despite the declining ratings, pointing to WWE’s success against the NHL and NBA Playoffs in recent months. 

From WWE’s own metrics: Raw’s viewership this quarter is down nearly 30% compared to 2019 Q3 while SmackDown remained steady in that time frame, only down 2% this quarter. pic.twitter.com/jhrxcfaaK5

— Carlos Toro (@CarlosToro360) October 30, 2020

WWE Network Subscribers Up, But Still Not Reaching 2018 Peaks:

WWE Network subscribers for the third quarter of 2020 finished at 1.549 million, up from last year’s Q3 at 1.466 million subscribers. However, it is still down from last quarter, which finished at 1.69 million subscribers, though the drop in Network subscribers was to be expected when looking at recent history. 

With the renowned interest in online streaming as a result of the pandemic, WWE Network’s subscriptions were expected to perform better than last year’s Q3, but it still paled in comparison to 2018’s Q3.

However, WWE will look at the more immediate Q3 and tout this quarter as a success, despite subscribers still not being their best yet. 

Here’s a breakdown on the ending paid subscribers in terms of region per quarter per year:

• 2018 Q1 U.S.: 1.190 million
• 2018 Q1 International: 434,000
• 2018 Q1 Total: 1.624

 

• 2018 Q2 U.S.: 1.272 million
• 2018 Q2 International: 470,000
• 2018 Q2 Total: 1.742 million

 

• 2018 Q3 U.S.: 1.186 million
• 2018 Q3 International: 429,000
• 2018 Q3 Total: 1.615 million

 

• 2018 Q4 U.S.: 1.116 million
• 2018 Q4 International: 412,000
• 2018 Q4 Total: 1.528 million

 

• 2019 Q1 U.S.: 1.172 million
• 2019 Q1 International: 425,000
• 2019 Q1 Total: 1.597 million

 

• 2019 Q2 U.S.: 1.167 million
• 2019 Q2 International: 430,000
• 2019 Q2 Total: 1.597 million

 

• 2019 Q3 U.S.: 1.062 million
• 2019 Q3 International: 404,000
• 2019 Q3 Total: 1.466 million

 

• 2019 Q4 U.S.: 996,000
• 2019 Q4 International: 393,000
• 2019 Q4 Total: 1.389 million

 

• 2020 Q1 U.S.: 1.083 million
• 2020 Q1 International: 412,000
• 2020 Q1 Total: 1.495 million

 

• 2020 Q2 U.S.: 1.229 million 
• 2020 Q2 International: 461,000
• 2020 Q2 Total: 1.690 million

 

• 2020 Q3 U.S.: 1.137 million
• 2020 Q3 International: 412,000
• 2020 Q3 Total: 1.549 million

Average paid subscribers for this quarter sat 1.604 million, which is up nine percent compared to last year’s third quarter. Though it is an increase from last year, it still does not reach the highs that 2018 reached.

Here’s a breakdown on the average paid subscribers in terms of region per quarter per year:

• 2018 Q1 U.S.: 1.130 million
• 2018 Q1 International: 422,000
• 2018 Q1 Total: 1.558 million

 

• 2018 Q2 U.S.: 1.316 million
• 2018 Q2 International: 484,000
• 2018 Q2 Total: 1.8 million

 

• 2018 Q3 U.S.: 1.213 million
• 2018 Q3 International: 451,000
• 2018 Q3 Total: 1.664 million

 

• 2018 Q4 U.S.: 1.156 million
• 2018 Q4 International: 429,000
• 2018 Q4 Total: 1.586 million

 

• 2019 Q1 U.S.: 1.157 million
• 2019 Q1 International: 427,000
• 2019 Q1 Total: 1.584 million

 

• 2019 Q2 U.S.: 1.237 million
• 2019 Q2 International: 451,000
• 2019 Q2 Total: 1.688 million

 

• 2019 Q3 U.S.: 1.099 million
• 2019 Q3 International: 412,000
• 2019 Q3 Total: 1.511 million

 

• 2019 Q4 U.S.: 1.024 million
• 2019 Q4 International: 395,000
• 2019 Q4 Total: 1.419 million

 

• 2020 Q1 U.S.: 1.053 million
• 2020 Q1 International: 408,000
• 2020 Q1 Total: 1.461 million

 

• 2020 Q2 U.S.: 1.207 million
• 2020 Q2 International: 454,000
• 2020 Q2 Total: 1.661 million

 

• 2020 Q3 U.S.: 1.172 million
• 2020 Q3 International: 432,000
• 2020 Q3 Total: 1.604 million

In regards to the immediate future, subscribers are likely going down in the fourth quarter as it is typically the company’s lowest point as far as subscriptions go before it shoots right back up for the following year’s first quarter. However, it is hard to determine what the pandemic’s effect will have on subscriptions once we get closer to the Royal Rumble pay-per-view expected for January 2021 and WrestleMania in March 2021.

Back in February, WWE stated in the 2019 Q4 earnings call that it was open to selling the rights to WWE Network content to other major companies. Although WWE noted that it was still in conversations for that to happen, no further details were revealed and it is clear that there is no timetable for such a deal to be completed, if it ever does get completed.

WWE Network subscriber count for 2020 Q3:
Ending paid subscribers:
2020 Q3 U.S.: 1.137 million
2020 Q3 International: 412,000
2020 Q3 Total: 1.549 million

Average paid subscribers:
2020 Q3 U.S.: 1.172 million
2020 Q3 International: 432,000
2020 Q3 Total: 1.604 million pic.twitter.com/Z3hvzdZrLw

— Carlos Toro (@CarlosToro360) October 30, 2020

What To Expect In 2020 Q4:

As with the last quarter, WWE refused to give any outlook as to what its full year 2020 figures are projected to be thanks to COVID-19. However, one can have a very rough estimation as to what those numbers could look like. 

With the core media rights fees, WWE’s revenue remains very positive as we head into the fourth quarter. One thing to watch out for is what the company will be investing in with the ThunderDome and any potential venues WWE will be in after its current deal with the Amway Center expires. 

WWE noted that it is expecting an incremental $22 million – $27 million investment in the fourth quarter compared to the third quarter, primarily associated with the creation of WWE ThunderDome, and increased personnel expenses as employees return from furlough.

With no live events and ticket sales likely not happening in the fourth quarter, WWE could miss out on upwards of $27 million (Q4 last year generated $27.4 million while 2018 generated $34.4 million). They will still likely offset some of that revenue loss with increased licensing and WWE shop sales.

However, with the aforementioned $22 million – $27 million WWE is expecting to invest, it’s possible that the Adjusted OIBDA and revenue will end up being lower than last quarter. 

With no live events, the fourth quarter of this year will more than likely end up generating less revenue than 2019’s fourth quarter. It should be noted that 2019 Q4 had not only the benefit of live event revenue, but also the new core content rights fees kicking in at that time. 

It’s hard to make any real predictions as far as what the finances for 2020 Q4 will be. It’s not just due to COVID-19, which is always a variable that constantly changes the way companies conduct business, but also the immediate future of the home for Raw and SmackDown. WWE is not expected to remain at the Amway Center for very long and the company is actively looking for other venues to relocate to. 

The issue is that it is unknown how much WWE would have to pay for the new venue it will inevitably go to after its time at the Amway Center is over. In the larger picture, whatever WWE would have to pay will probably still end up not causing any concern over the long-term financial future of the company.

WWE Stock Outlook:

WWE stock closed at $37.33 per share when the stock market closed on the afternoon of October 29. The stock has actually gone down in recent months despite the ThunderDome’s introduction and the company still projected to be very profitable in spite of the pandemic. 

This time last year, WWE’s stock sat more than $66 per share but the company was still riding the massive high that came with SmackDown’s move to FOX and the new deal with NBCUniversal resulting in higher rights fees.

Could the move to a new venue and new incarnation of the ThunderDome boost the stock up in a few months? Possibly, but it doesn’t look like it will get back to the peaks the stock reached from the summer of 2018 to the early fall of 2019.

Other News And Notes:

• WWE’s AVOD (Ad-Supported Video On Demand) Consumption dropped a bit this quarter (9.2 billion views) compared to last quarter (9.9 billion views), but it is better than last year’s Q3 (9 billion). It should be noted that beginning in 2020 Q1, AVOD data included Twitch and Snapchat Discovery and in 2020 Q2, those figures included consumption on the Free Version of WWE Network.
• Khan announced WWE will be partnering with Sony in India to bring fans an event that will primarily feature the development of Indian superstars. The event will air on Sony platforms in India and be distributed domestically in the United States, but a platform was not officially announced. 
• Khan also announced a multi-part Vince McMahon docuseries will be heading to Netflix. Bill Simmons will serve as the executive producer for the series while Chris Smith, the director behind Fyre: The Greatest Party That Never Happened, will be the director of the series. 
• During the three and nine months ended September 30, 2020, WWE recorded $5.5 million in severance expenses resulting from a reduction in force due to COVID-19. The Company did not record any such expense during the three and nine months ended September 30, 2019.
• In regards to WWE returning to Saudi Arabia for a major show in 2021, Salen noted that the company is still working on 2021’s operating and financial plans with more details coming out in the next earnings call, expected to take place in February 2021.

Tables and graphs provided by WWE. Television viewership numbers provided by Showbuzz Daily. You can follow Carlos Toro on Twitter @CarlosToro360.