World Wrestling Entertainment (NYSE: WWE) lost $1.05 billion in market capitalization in one day last week.
To explain, WWE had a Market Capitalization of $4.89 billion on 30 January 2020 and a market cap of $3.84 billion on 31 January 2020, MacroTrends estimates. Thus, WWE’s Market Cap fell by $1.05 billion in 24 hours.
Consequently, WWE’s stock price fell from $62.29 on 30 January 2020 to $49 on 5 February 2020. World Wrestling Entertainment had a market capitalization of $3.849 billion on 5 February 2020.
Vince McMahon costs WWE $1.05 billion in stock value
Bloomberg blames WWE CEO Vincent K. McMahon Jr. for the market cap collapse.
McMahon fired co-presidents George Barrios and Michelle Wilson on 27 January 2020, Bloomberg reports. WWE has had a tough year with criticism from comedian Jamie Oliver and backlash from angry wrestling fans over dreadful events and shoddy storytelling.
WWE’s woes include low ratings for its SmackDown show on the Fox network. Comicbook.com estimates SmackDown had 2.529 million viewers on 31 January 2020. However, that number was up from 2.448 million on 25 January 2020.
On the positive side, SmackDown was the number one show with 18 to 34-year-old viewers on 31 January 2020. On the negative side, 0.5% of 18 to 34-year-olds watched SmackDown on January 31, 2020. That number was up from 0.4% a week earlier.
Is WWE losing viewers?
Ratings for WWE’s flagship show Raw fell by 6% between rd Quarter 2018 and 3rd Quarter 2019, Forbes estimates. In contrast, ratings for SmackDown fell by 4% during the same period.*
Therefore, McMahon’s decision to move SmackDown from the SyFy cable network to the Fox broadcast network looks smart. However, WWE still depends on two dying mediums; cable TV and broadcast TV for its viewers.
Thus, I conclude WWE is not attracting the younger viewers it needs. Sadly, WWE is doing nothing to attract those viewers.
Is the WWE Network Making Money?
WWE’s woes cast doubt on the future of streaming video. Remember, WWE was a streaming video pioneer with its WWE Network.
The WWE Network is losing viewers and money, Forbes claims. Forbes estimates the WWE Network lost 132,000 subscribers and 13% of its consumer products revenue between 3rd Quarter 2018 and 3rd Quarter 2019.
Thus, the WWE Network raises doubts about Disney’s emphasis on streaming video. Currently, Disney (NYSE: DIS) is betting heavily on the combination of Disney+, Hulu, and ESPN+.
Strangely, I think WWE’s cable and broadcast shows; SmackDown, Nxt, and Raw, could be responsible for WWE Network’s rows. Consequently, WWE is giving away the content it is trying to sell on streaming video.
How Disney Threatens WWE Network
In contrast, Disney is not giving The Mandalorian away through ABC or the Disney Channel. I think WWE needs to cancel Raw and Nxt and move a lot of its programming to WWE Network.
Another solution could be to cut Raw and SmackDown to an hour a week and show most of the matches on WWE Network. WWE could stage two or three championship matches; it only shows on WWE Network, each week, for example.
Another strategy for WWE to consider is distributing its content through Disney, Amazon Prime, or Netflix’s (NASDAQ: NFLX) platforms. For instance, they could add WWE Network to Disney’s streaming video package.
I think Disney is a huge threat to WWE because it offers Hulu, Disney+, and ESPN+ for $12.99 a month. In contrast WWE charges $9.99 for just wrestling. In comparison, Disney offers a wide variety of sports, movies, TV shows, cartoons, Pixar, Marvel, Star Wars, National Geographic, and Disney classics for $12.99.
Can Disney Save WWE?
Disney’s streaming-video platform could have between 25 million and 30 million subscribers, Variety claims. In contrast, WWE estimates the WWE Network had 1.53 million subscribers in 3 rdQuarter 2019.*
An obvious danger to WWE is AEW or New Japan joining the Disney platform. Perhaps Vince McMahon needs to give Bob Iger a call. Ironically, the Mouse could be WWE’s salvation.
In particular, Disney+ has some major league nerd street credit because of its Marvel, ESPN, and Star Wars content. I think WWE could fit right in with Disney’s content. WWE needs to move now before AEW or New Japan joins Disney.
Investors Need to Stay Away from WWE
I think investors need to stay away from World Wrestling Entertainment (NYSE: WWE).
I think WWE stock has no margin of safety because of the tiny size of the WWE Network’s subscriber base. Mr. Market is wrong about WWE, he overpriced the shares at $49 on 5 February 2020.
If you want to cash in on streaming video dump WWE and buy Disney. Disney is growing, and it has a high margin of safety. If Vince McMahon has a brain, he needs to make friends with Bob Iger.
*Source: WWE Key Performance Indicators — October 31, 2019.
Originally published at https://marketmadhouse.com on February 5, 2020.