The recently-high-flying WWE lost nearly half its value in pre-market trading before Friday’s opening bell, after the company announced a new deal with NBCUniversal, and said it would need 1.3 million to 1.4 million subscribers at its new online network to make up for lost pay-per-view revenues.
In trading on the New York Stock Exchange Friday, shares World Wrestling Entertainment barely budged — opening at $10.94 and closing at $11.27, down 43 percent from Thursday’s close of $19.93.
The new TV deal, including flagship shows on USA Network and Syfy, brings WWE cable revenue to about $200 million a year. “With the favorable renegotiation of our largest television agreements, WWE transitions to a subscription-based business model for future growth,” said George Barrios, WWE’s chief financial and strategy officer, in one of the two releases.
The problem is that in the transition, WWE is giving up pay-per-view and video-on-demand revenues. In a detailed outline of what it needs to do to make up for that, WWE said it could sign up between 2.5 million and 3.8 million subscribers to its online network, at $9.99 a month. In addition to the United States, the online network is rolling out this year in the United Kingdom, Canada, Australia, New Zealand, Singapore,Hong Kong and the Scandinavian nations, WWE said.
But with a break-even point of about 1.3 million subscribers, and well under 1 million now, investors remain skeptical — and so we have a standoff between Vince McMahon, the founder and majority shareholder, and Wall Street.
The $200 million TV deal is larger than previous contracts but was less than Wall Street anticipated. In a video, Jeff Macke of Yahoo Finance suggested that WWE chief Vince McMahon had wanted a deal more in line with the 10-year, $8.2 billion NASCAR TV package reached last summer, on Fox Sports and NBC.
WWE shares closed at an all-time high of $31.39 on March 20, as the TV deal was being negotiated. From that peak to Friday’s trading value, WWE has lost about $1.5 billion in market value, leaving it with a market value of less than $850 million.
That means Vince McMahon could lose his newfound status as a billionaire on the Forbes list. He owns about 55 percent of the company and his wife, former WWE CEO and U.S. Senate candidate Linda McMahon, owns a smaller share.