WWE’s Mounting Problems: Audience Declines, Saudi Arabia, Andrew Yang

Storm clouds continue to gather for Vince McMahon’s WWE. VIP has covered its audience decline in detail, and while this continues and is a long-term concern, other issues are now rearing their head that threaten the company’s bottom line.

WWE stock is already trending down (the value on Sept. 24, $38.82, is down by -45.2% versus Sept. 23 of last year, $70.81), with a real possibility it will continue to fall over the next few months based upon analysis VIP has conducted around four issues the company is facing. 

TV DECLINE

WWE’s flagship show “Raw” has lost around 2 million viewers for most 2020 episodes versus 2015 levels, with Monday’s 1.67m viewers -50.1% lower than 2015’s show. McMahon has consistently blamed storylines for the ratings plunge, without acknowledging that he is the man who signs off on the stories. The most recent case was in July’s Q2 earnings call, when he gave the perennial claim that WWE would work on having better stories in order to win back viewers.

This was followed by farcical events on “Raw,” such as McMahon’s son Shane, previously forced to leave WWE in 2019, suddenly having an underground fight club, with no context as to why it exists or why wrestlers would want to take part. Q3’s key storyline has centered around a mysterious group of masked wrestlers with a vendetta, who WWE’s own website knew were about to attack the company seemingly without telling WWE security and whose motivations and actions were as damp a squib as could be.

Exclusive data from pollsters YouGov suggest the main reasons behind the audience decline concern lower-quality writing. If McMahon is serious about storylines getting better, the famed workaholic may need to admit he could do with going to a beginner’s screenwriting class in order to learn about story structure and character arcs to win back the sizable amount of former viewers.

DECLINE IN KIDS AUDIENCE

WWE reoriented itself in the mid-2000s to more family-friendly content. “Raw” and “Smackdown” carry TV-PG ratings, unlike the vast majority of shows on USA and FOX. This was a smart move at the time, as it opened the door for larger sponsors, who didn’t want to be associated with the sex and violence that fueled wrestling’s boom in the late ’90s.

Unfortunately, children are deserting TV at a far greater rate than overall viewing. Between 2016 and 2019, primetime viewing of the nine kids’ networks in the chart above fell by -49%. In comparison, CBS’s primetime audience fell by -19%, Fox and ESPN both by -9%, USA by -27%, and TLC’s viewership actually grew by 35%.

This is clearly not the only reason behind the overall audience decline for “Raw,” but it does illustrate the futility of not adapting with the times. With the core target audience deserting linear TV for streaming or video games, there will come a point soon where WWE has to decide to either target content to the audiences who do watch TV or pivot distribution strategies to where kids are watching. Continuing the status quo is akin to McMahon putting his head in the sand, at a time where long-term planning is most needed to avert further eroding the audience.

SAUDI ARABIA DEAL

WWE signed a 10-year arrangement with the Saudi General Sports Authority (SGSA) in 2018 for an undisclosed sum in return for running two special events on a par with WWE’s major events such as the Royal Rumble and Wrestlemania. The revenues from this deal helped boost WWE’s bottom line, which in turn fueled its stock value increase.

Wrestling analyst Brandon Thurston of Wrestlenomics provided VIP with exclusive analysis to ascertain the value of these events. Based on the increases for “Other Media” revenue in quarters where Saudi Arabian events were held, it appears each event nets WWE around $50M.

Digging deeper into WWE’s finances, data in the company’s SEC filings report on the total amount of money in accounts receivable — i.e., monies owed — and how much of that is owed by the largest customer. Analysis by Wrestlenomics has tied the sudden increase in Q2 2019 for the amount the largest customer owes with the Saudi Arabia events, with the implication that SGSA is that customer.

WWE is facing an obvious short-term financial hit as the COVID-19 pandemic rages on and Saudi Arabian events can’t be held. Assuming, as seems likely, that SGSA has its large balance of payment owed with WWE, COVID-19 is having a second impact on WWE’s bottom line. With the price per barrel of oil ($40) lower than the minimum level Saudi Arabia needs to balance its budget ($70-$80), it’s looking unlikely that the SGSA will be able to pay WWE anytime soon.

INDEPENDENT CONTRACTOR STATUS

The final issue facing the beleaguered McMahon is the WWE’s new nemesis, former Democratic presidential nominee Andrew Yang. A childhood wrestling fan, Yang took umbrage at WWE’s recent ban on their performers engaging with third-party outlets and sponsorships on social media platforms.

If I’m not the Secretary of Labor I’m pretty confident I’ll have his or her number to talk about the ridiculous classification of WWE wrestlers as independent contractors while controlling their name and likeness for years, even for something as benign as Cameo.

— Andrew Yang🧢🇺🇸 (@AndrewYang) September 5, 2020

WWE’s stance is that it invests time and money in the IP performers use on TV, who make up part of their big sponsorship deals with the likes of Mars and Mattel, and they don’t want this potentially jeopardized by wrestlers signing deals with rivals. 

Yang is not questioning this. Where he raises issue is that WWE has no right dictating to non-employees, given WWE wrestlers are not in fact employees of the company and thus don’t receive benefits like full healthcare and a pension plan. 

Instead, they are independent contractors, meaning they technically have the right to work elsewhere, although WWE contracts prohibit this. The status also means they aren’t eligible for business travel reimbursement and health insurance if they fall sick — but are covered for workplace injuries — and now are banned from selling T-shirts or making non-company-approved media appearances.

Should WWE’s wrestlers find themselves classified as employees, it would cost the company millions as expanded benefits are applied to them. With Yang vowing to take this to the very top, there is a chance WWE’s revenue will take a hit in future years should its wrestlers and performers be legally found to be employees.