In this turbulent economic climate, many businesses are struggling, and entertainment is no exception. Shaken up by the sudden explosion in streaming services, many content providers are operating at a loss in a race to the bottom to win viewers.
World Wrestling Entertainment Inc. (WWE, Financial), more commonly known by its acronym WWE, is a rare exception. While most stocks and indices have plummeted, WWE has seen its share price rise as it has continued to be a solid performer.
How WWE has remained successful
Unearthing the secret to WWE's success requires a look at its excellent management tactics. The sports entertainment company's focus on providing quality content has earned it a loyal following that extends across the globe. It has no equal when it comes to wrestling. With many recognizing that these days "content is king," it's an incredible sign of strength that WWE is continuing to join forces with streaming services and expanding its reach. This business model allows it to simultaneously offer solid returns for investors, as it's not wasting a ton of money on a wide variety of big-budget productions.
The year has not been without troubles for WWE, though. Vince McMahon, longstanding chairman and CEO of the company, had to step down amid allegations of improper payouts this year. The Wall Street Journal broke the story, and WWE reacted quickly. McMahon departed from his leadership position, and the rest of the management team assumed his responsibilities, leading to an immediate bump in the stock price.
Overall, WWE is performing very well, with bumper earnings and a healthy outlook for 2023 - success that can be attributed to the fact that WWE has truly got all of its ducks in a row. It has leveraged its content, production capabilities and global fanbase to create an attractive, marketable product. Not only that, but WWE has also ensured its talent is looked after with the fairest, most lucrative deals possible, thus increasing engagement from the performers and ultimately leading to even better viewership and fan engagement. All of this contributes to the great results WWE have achieved of late.
WWE will continue to do well in an era where content is king
The success of WWE is tangible, and it's clear that its licensing deals serve as the bedrock and primary driving force of its current prosperity. Due to higher viewership and content distribution deals, the company recorded a record $1.095 billion in revenue for 2021. The company does not believe that the Raw and Smackdown U.S. television rights expiration in 2024 will affect it much in light of new licensing deals.
The fantastic performance from WWE year to date is truly remarkable as well. The company's narrow focus on its niche of content is paying off. That's why traditional media companies such as Comcast (CMCSA, Financial) and Fox (FOX, Financial) have made major bids for WWE's library of streaming content. They're all competing to get views, after all. And although the company has moved away from its own streaming platform, that is a good thing because now it is capitalizing on this dynamic by providing its licensed IP to streaming giants. So far, it looks like WWE was wise in going this route as it's led to great viewership exposure and profits.
WWE just delivered an excellent third quarter earnings report that pushed annual operating income higher than expected. The company has been performing so well that the operating income target for this year was raised from $360 million to 375 million to $370 million to $385 million. This means that despite an unpredictable year and a tumultuous business landscape, WWE's efforts have been enough to propel the organization to an upper echelon of financial success.
The wildly successful wrestling enterprise hit record heights this past year in terms of viewership. Several of its WWE specials all had astounding year-over-year viewership increases. The company's Clash at the Castle event in the UK even held the record for the highest international viewership ever. This meteoric rise indicates that professional wrestling fans worldwide should expect more explosive competition from WWE in years to come.
Astounding capital appreciation and a small dividend to boot
WWE's incredibly successful business model has been great for investors. The company is adept at catering to its audience and providing an entertaining product that keeps people coming back for more. It benefits from having a passionate fanbase willing to consume content via various outlets such as traditional television, pay-per-view events, subscription streaming services and merchandise sales. Additionally, management has proven incredibly adept at handling day-to-day operations and overall financials, allowing for the continued success of WWE's stock price growth.
WWE's public company life officially began on Oct. 19, 1999, when the WWE debuted on the NYSE. At its IPO, shares were priced at $17 and are now being traded for over $71 apiece.
WWE also pays out a small dividend of 12 cents. Admittedly, that is not very much in the grand scheme of things, but it's better than the many companies on the market not paying a dividend at all.
Takeaway
This year had some monumental moments for WWE that its loyal fanbase - and its investors - will never forget. The company has shaped up to be one of the rare successful and consistently profitable names in an entertainment industry fractured by the streaming wars, and I believe its superior business model can help it acheive great things in the years to come.
