World Wrestling Entertainment stock plunged more than 40% on Friday, a day after it had announced a disappointing carriage deal with NBC Universal and warned investors it would need to attract more subscribers to its over-the-top network to make up for pay-per view losses.
WWE announced on Thursday that it has secured a multi-year deal with NBCU’s USA Network for its Monday Night Raw franchise and Syfy channel for Friday Night Smackdown.
The deal ended months of speculation regarding the future of the programs, but apparently fell short of expectations. Analysts had speculated that the shows – Monday Night Raw is USA’s top rated show and is one of the main reasons that network is tops with young adults – could double or even triple their rates. In a recent research report, CJS Securities analyst Daniel Moore said the Raw and Smackdown deals “will shape the direction of earnings and cash flow for the next several years.” In an interview back in March, Moore said that at least of doubling of those fees was already built into the stock price. WWE did not reveal what it received from NBCU in the new deal, but in a Friday note, Moore estimated the increase was about 85% above the old deal. Coupled with its announcement that it would need to add between 1.3 million and 1.4 million subscribers to its over-the-top channel to make up for Pay-Per-View losses, and investors apparently were spooked.
The NBCU deal is just the latest disappointment for WWE investors. In April, the company had said it added 667,000 new subscribers to its over-the-top network, far short of the 1-million-plus additions investors were hoping for. WWE has said it expects to reach the 1 million subscriber milestone by the end of the year.
“Given management’s more optimistic tone and the fact that other major sports franchises have garnered much higher increases, this outcome is likely to be viewed as disappointing by many investors,” Moore wrote in a note to clients Friday.
WWE stock fell as much as 47% ($9.38 each) to $10.55 per share in early trading Friday. The stock closed at $11.27 per share, down $8.66 or 43.5%.