Last week, as it is virtually every week, the WWE's "Monday Night Raw" was one of the most watched television shows on cable,posting the second, third and fourth most watched hours on cable television. The only cable hour that had more viewers was HBO's "Game of Thrones." The WWE beat every NBA playoff game on cable by nearly a million viewers. Look at the ratings and it's readily apparent, the WWE brings big time viewers. Interestingly enough the WWE is also in the midst of negotiating new television rights deals, aiming for in the neighborhood of $200 million a year, a big increase over the $139.5 million a year which the WWE currently receives from its broadcast partners.
Why the big increase?
Because sports on television means big ratings. (Yes, I'm counting the WWE as a sport). Ninety percent of the WWE's viewers watch live. Right now the WWE's television package, in addition to Monday Night's "Raw," includes Syfyâs âFriday Night SmackDown,â âMain Eventâ on ION Television, the CWâs âSaturday Morning Slamâ and the reality show âTotal Divasâ on E! That's a lot of programming. I've been paying a lot of attention to the WWE recently and, full disclosure, I am a shareholder in the company. (There's nothing like telling your wife that you've invested part of your retirement savings in the WWE). With the launch of their new over-the-top network. I wrote about the WWE network extensively a couple of weeks ago.
As I've spent more time researching the company, I've come to a conclusion that makes so much sense I don't know why no one has acted on it yet -- the parent companies of Fox, NBC, or CBS should buy the WWE. Why? For the millions of viewers it would bring to their new sports networks. (It would also make sense for Turner, and might even be a better fit there since TNT isn't an exclusively sports network). Let's face it, thanks to the variety of their properties, ESPN has a massive viewership edge in cable sports right now. Fox Sports 1 is number two, followed by NBC Sports Network and then, way behind, is the CBS Sports Network. (The only way the CBS Sports Network might ever get picked up by most cable operators is to buy the WWE. I'm not even kidding about this. Otherwise what programming will it ever have to make people watch?)
What's more, at present prices the WWE would be a tremendous bargain, just from a programming perspective. If you run the company at break even you're making tens of millions off the additional ratings points. Plus, the programming is still comparatively cheap.
Last year NASCAR inked a new deal with Fox and NBC that pays $820 million a year.
You can get the WWE for a quarter of that price. And the WWE offers better ratings and better demographics.
"Combined, the (WWE) air(s) 156 episodes a year that average a 2.2 household rating. Nascar airs 154 races and averages a 1.38 household rating among viewers, who are 92% white and over 50. WWEâs audience is far more diverse and broken out fairly evenly among age groups. A selling point is that 44% of them are under 34."
So you can get better ratings, younger viewers, and better demographics with the WWE than you can with NASCAR? And the WWE costs a quarter as much?
That sounds pretty impressive to me.
Combine these WWE ratings with the fact that there are only two major sports properties left on the market for the remainder of this decade -- the NBA and the Big Ten.
That's it.
Figure that the NBA splits its package three ways among ESPN, TNT, and Fox Sports 1 and that the winner of the Big Ten's auction is another joint bid between ESPN and Fox to keep NBC out of the college football game and that's it for the rest of the decade. (These are both educated guesses on my part, I'm not giving you insider information here).
That's a long time to play catch-up. Indeed, how do you cut into ESPN's lead without big-ticket sports programming? The easy answer is, you can't. So why isn't one of these companies considering making a bold move and buying the WWE? (You could also bid in the neighborhood of $200 million a year just for the TV rights, but wouldn't it make more sense to go ahead and lock up the WWE forever? Otherwise you could have a five year deal, pay a billion dollars and then have someone else swoop in and steal away the rights). The WWE would be a ratings bonanza, bringing in millions of viewers and likely locking up ratings wins on multiple nights a week for Fox Sports 1, NBC, or CBS.
Right now the WWE's stock is trading at a market cap of $1.68 billion dollars. That's a steep valuation relative to earnings, but is it really that steep when you consider the value of sports programming on television right now? Next year ESPN will pay the NFL over two billion dollars for a single year of football, that's more than the entire WWE would cost to buy. If you're nervous about putting wrestling on a sports channel, just stop. Do you remember what ESPN's programming looked like back when it started out? How many times did those strongest man competitions air? What about the log rolling contests or poker? Don't even get me started on the crazy hunting shows. The WWE would be far from the worst programming to air on a sports network.
Plus, you want to get even bolder? What if you put the WWE's main events on television for free as a way to drive up subscriber fees through increased ratings? You think Wrestlemania on Fox Sports 1, NBC Sports Network, or CBS might bring in a decent crowd of viewers? Uh, yeah. The WWE made around $70 million selling Wrestlemania XXX on pay-per-view, but how many people would have watched for free? At least eight or nine million people, right? That's at least triple the largest audience to ever watch NBC Sports Network or FoxSports 1. And about a billion percent more than have ever watched anything on the CBS Sports Network.
What's more, it's not like this is a bad fit -- the WWE's fans are sports fans. Do you know a single WWE fan who doesn't also love sports? I don't. So many of these viewers are likely to stick around the station that airs their events and watch other programming. The biggest battle these new networks face is getting people on their channels to begin with -- right now if you put a game on ESPN and you put the exact same game on FS1 or NBCSN or CBS's cable channel, the vast majority would watch on ESPN. Not because ESPN is doing something better with the game, just because it's easier to find ESPN for most viewers, the channel's become a habit.
With only the NBA and the Big Ten left to bid on for the rest of the decade, it will take a bold and unconventional move to challenge ESPN's ratings dominance in cable sports. Buying the WWE is that bold and unconventional move. If Fox, NBC, CBS, or even Turner's parent companies want to snag market share, bring in millions of new viewers, and give ESPN a true challenge, buying the WWE is the smartest decision any of them could make. Of course, based on past history, what's likely to happen is that Disney will swoop in, buy the WWE, park it on stations other than ESPN, and ensure that none of the upstart sports networks can make this move. That's why Fox, NBC, or CBS ought to act fast.
Remember, fortune favors the bold.
Not just in the Royal Rumble, but in life too.
