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WWE’s Vince McMahon: ‘We Were a Little Disappointed’ With NBCU Deal

Wall Street wasn’t impressed last week with WWE’s new multiyear licensing deal with NBCUniversal to keep its popular shows “Raw” and “SmackDown” on USA Network and Syfy. Neither was WWE chairman Vince McMahon.

“We were a little disappointed with our NBCU deal,” McMahon said during his first conference call with analysts to discuss the deal on Monday. “Whether we failed or not, I’m not certain.”

The call took place several days after investors punished WWE’s stock, lowering it 43% on Friday — dropping it $8.66 to $11.27 — after the NBCU deal was announced Thursday. McMahon is estimated to have lost $357 million himself on the single-day stock sell-off.

Specific financial terms of the NBCU deal have not yet been revealed, but analysts had expected WWE to at least double its licensing fees as live event programming is commanding not only strong ratings but interest from advertisers. WWE earned around $106 million of revenue from domestic broadcast rights in 2013 and $55 million from its deals overseas.

Deciding to shop all of its TV shows at once, starting in January, was new territory for WWE — and a way to determine the value of its programming after raising the profile of the brand over the past five years by making it more family friendly and attractive to advertisers.

SEE ALSO: WWE Aims to Pin Down Rich New TV Rights Deals (EXCLUSIVE)

While WWE didn’t comment on the talks during the negotiating process, it also didn’t dissuade analysts from speculating that WWE would land a significantly richer deal.

Still, the final pact “is still a good deal but not what we wanted,” McMahon said. “Internationally, we did better than we did domestically,” citing the company’s new deals in the U.K. and Thailand. A new deal in India is forthcoming.

While WWE has been able to renegotiate its other TV deals in international territories and nearly double revenue to $200 million, the new NBCU pact will not come close to what professional sports orgs like Nascar and soccer are recently commanding from their new TV deals.

“The company estimates that it will increase the average annual value of these key television agreements to approximately $200 million, representing an increase of more than $90 million, that is nearly three times the increase achieved in the previous round of negotiations,” WWE said in a statement.

SEE ALSO: WWE Closes Deal to Keep ‘Raw,’ ‘SmackDown’ on USA Network, Syfy

The time frame of the new NBCU deal was not disclosed but is said to be less than five years, WWE said.

“Maybe we gave you too much information or not enough,” referring to the strong reaction on the deal last week from investors, McMahon said from London, where he is producing tonight’s episode of “Raw.”

To clear up “any degree of misunderstanding of what we’re trying to do,” McMahon stressed that WWE’s core business of live events and TV shows is “rock solid,” and that moving forward is looking to grow its all-digital streaming service, the WWE Network, to reach a global subscriber base of at least 1.3 million to 1.4 million to make up for any canniblization of its pay-per-view business, whose events are now streamed on the digital platform as part of a $10 a month package. WWE generated $40 million from PPV buys in 2012, it said.

Overall, WWE’s TV revenue will increase $65 million to around $120 million in 2015, it said.

McMahon added that the launch of the WWE Network in February “definitely had a negative impact” on its negotiations with NBCU and other potential TV partners on its programming. He wasn’t sure just how much, however. “That was part of a lighter number in terms of television rights. That’s a fair thing to say.”

Had WWE not launched the service when it did, though, “it would have taken us another year,” given that it wanted to have it ready before “WrestleMania,” its biggest PPV of the year, McMahon said.

On the network, WWE cautioned that “we’re still getting our sea legs,” especially when it comes to the costs it takes to run and grow the network’s offerings, according to George Barrios, WWE’s chief strategy and financial officer.

WWE has been one of the first entertainment players to make the leap into the OTT space and commit to go around traditional cable and satellite providers and launch an all-streaming network. The NFL will launch its own service, NFL Now, in July.

Companies are clearly looking to launch new businesses around the 42 million U.S. homes that are now connected to the Internet through TVs or other content devices — and take more control in how their entertainment is distributed and monetized.

As a result, Barrios stressed that there’s little to compare it to when it comes to success.

“There isn’t a model to gauge success; there are not a lot of benchmarks to compare to,” said Barrios, who added it might take two years to fully comprehend what it takes to launch a successful OTT service. “You need to see it and live it to get perspective. We’re at the beginning of the beginning.”

To grow subscribers, WWE said it will focus on creating compelling new content, launch the network in new international territories, expand its availability on other digital platforms, introduce new features and launch a marketing campaign.

“At the company’s core, we’re promoters and marketers,” Barrios said.

WWE said it doesn’t expect to reach a stable rate of subscribers — of around 2.5 million to 3.8 million worldwide — until two to three years from now. A regular update on subscriber counts will be provided during WWE’s quarterly earnings reports, it said. It announced more than 660,000 WWE Network subscribers the day after “WrestleMania” in April.

When asked about AT&T’s interest in investing in similar OTT services, now that it’s buying DirecTV, and whether there were talks with WWE, McMahon said, “Everyone’s going to recognize OTT is the future and you will see a lot more of this. We’re wide open to listening to and (potentially dealing) with everyone else. It’s not our way or the highway.”

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