Talk about a smack down: WWE shares tumbled about 44% this morning after the company disclosed disappointing terms for its new TV agreement — and laid out the potential risk of continuing losses as its new $9.99-a-month WWE Network online video service cannibalizes its pay-per-view business. The entertainment company says the value of its U.S., UK and Thailand TV agreements now comes to about $200M a year. That suggests a 50% increase in the licensing deal with NBCU unveiled yesterday to renew Monday Night Raw on USA Network and Friday Night SmackDown on Syfy says Benchmark Co analyst Mike Hickey — which is “meaningfully below the guided multiple of 2X to 3X.”
Meanwhile, WWE didn’t update subscription numbers for the online service as it discussed its potential financial performance. That follows last month’s report showing lower-than-expected 667,287 subs — not including “potential failures to comply with subscription terms.” Hickey fears that the “limited visibility to where subscribers are currently tracking or where churn will ultimately settle” leaves investors with “an uncomfortable silence that will likely extend until early August.”
That’s important: WWE says the network will need to average as many as 1.4M subs globally to offset PPV cannibalization. The adoption rate for this year suggests a cash flow loss of as much as $45M and a net loss of as much as $52M, the company says. CEO Vince McMahon remains optimistic saying that 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.”
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