Perhaps executives at World Wrestling Entertainment said it best: WWE is not a technology company. Instead of operating as a streaming service, it now wants to go back to creating content.
WWE is hosting the Super Bowl of wrestling this weekend with its WrestleMania event on NBCUniversal’s Peacock streaming service. It is part of a more than $1 billion exclusive rights deal that repositions the old entertainment company to focus on its product and avoid the streaming wars.
“Ultimately, we’re not a technology company and we shouldn’t try to be,” WWE chief brand officer Stephanie McMahon told CNBC. “We are a content company at our core and we want to do what we do best.”
Chief financial officer Kristina Salen added: “Everyone has a plus. There’s Disney+, Paramount+, Discovery+, but not everyone has branded content with a huge fan base like WWE. So we saw that there was a huge demand for what we had to offer , and we could take that money and double it and do what we’re good at, that’s satisfied.”
The focus on content creation shows a sort of counter-narrative to the streaming wars in which companies create apps and services that are packed with movies and TV shows. WWE will shut down its own streaming service and will instead focus on creating new things for people to watch on Peacock.
The content game is just the beginning for WWE in this new decade as it prepares for a post-Covid world with new revenue opportunities. But the future will also raise questions about whether WWE is a smart investment and how it plans to face more competition looking to threaten its market share.
Like the rest of the entertainment world, WWE had to innovate on the fly after the pandemic hit last spring. The company moved events to Florida to continue operations and save media rights. It adapted to no spectators by transferring the pyrotechnic-filled content into a more cinematic production centered around wrestling matches.
“It’s like a movie,” McMahon said after describing a long character The Undertaker’s Cemetery Style competition last year. “And besides that, the real innovation came by investing in the Thunderdome” – an indoor complex built in Florida to host events.
“We’ve been experimenting with drone cameras, pyros, augmented reality that we couldn’t do before, mainly because of living bodies in the actual stands,” added McMahon. “It’s going to be a lot of testing and learning what makes sense to bring out and try different things.”
WWE’s real transition began before Covid-19 when Chairman and CEO Vince McMahon fired two critiques executives in January 2020. Talking about this change focused on a different view of the future.
In 2014, former WWE co-president George Barrios saw value in the new streaming service. It cost $10 a month and helped the company move away from traditional pay-per-view. But WWE failed to gain more subscribers, to about 1 million in the US. XFL.
WWE Network dismantled its US operations to begin 2021 and signed with Peacock. The move will provide live WWE events and a classic wrestling library for Peacock subscribers.
“It’s a big win for WWE,” said media rights expert Dan Cohen. “The price goes down, so you hope subscribers and eyeballs go up. They’ve stepped out of the technology space and don’t have to keep maintaining and updating the technology, which changes every minute.”
Salen, former Etsy’s CFO, was one or two new executives hired in 2020. She helped launch Etsy in 2015 and is now partly responsible for WWE’s financial future, including increased merchandising, e-commerce and corporate sponsorship, which will include new campaigns with longtime partner Procter & Gamble.
In his 2020 fourth quarter reportWWE said it had a hit of $84 million and earned $238.2 million in revenue. But even though WWE hosted most of the events last year without a fan, it still made $970 million thanks to Fox Corp. and NBCUniversal’s rights fees.
WWE currently has a market cap of approximately $4 billion and trades at approximately $55 per share. Salen said the WWE network didn’t lose any money, but again, the C-Suite consensus was aimed at raising licensing costs around the content and stopping it from working like Netflix.
“Just like we were the first in pay-per-view, first in direct to consumer, and now we’re the first to go back to aggregators,” Salen said. “We felt it was the right time. And over the next few years, we’re pretty sure we’ll be right.”
Salen said a question she often gets from Wall Street: Why should investors be interested in WWE stock?
“Investors know that I choose to spend my time in places where value is ultimately created,” she responded. “I think there is a great opportunity to create more value for shareholders in the coming years.”
WrestleMania 37 is scheduled for this weekend at Raymond James Stadium, the site of the National Football League’s Super Bowl LV in February.”
It is counting on 25,000 fans to show up, and McMahon said the event will mimic many of the NFL’s Covid-19 protocols: seating pods, distribution of masks, hand sanitizer. “Only the configuration is different because we can have people on the ground,” she added.
However, WWE needs to return to arenas, and perhaps more than professional leagues. The company makes a significant portion of its revenue from live ticket sales and travels more frequently throughout the year.
“Once the arenas are open for business, we can start with this,” Salen said. “But we need a critical mass of arenas that are open for business to be able to do that. And we’re just not seeing that right now.”
WWE must also monitor another company that wants to eat its market share. WarnerMedia’s Turner Sports ownership has reinvested in All Elite Wrestling (AEW) wrestling. The network last hosted a major wrestling company in 2001 when it owned World Championship Wrestling (WCW), which WWE Bought.
AEW is run by Tony Khan, son of National Football League team owner Shahid Khan, and has financial backing. And so far it is getting praise for its production.
“The theater is good,” Cohen said. “The quality is good. However, where AEW is missing, there is strength.”
Internet chatter suggests the WWE will spend money to stop AEW from accomplishing that mission. When asked about this, Salen said the rumors are not true. She added that AEW is more competitive for its NXT property. This division is like the NBA’s G League for wrestlers.
“We’ve always had competition, it’s part of the game,” said Salen. “Internally, we pay a lot more attention to a Game 7 of the World Series and whether Raw will encounter it.”
But while WWE could stop another major challenger, it can’t stop the future. And one of the key questions it faces: how long will Vince McMahon continue as CEO? And who will replace him?
His daughter, Stephanie, suggested it would be a collaboration of “institutional knowledge” who make the decisions when her father decides to step aside.
“Nobody has all that experience, expertise and passion to build and grow this business from a smaller regional company to this incredible growth company that it is today,” she said.
When asked to describe WWE’s long-term future, McMahon used the company’s slogan. “It sums up everything about WWE,” she said. “That is: then, now and forever.”
Disclosure: Peacock is the streaming service of NBCUniversal, the parent company of CNBC.