I ask can WWE survive in the 21st Century because World Wrestling Entertainment (NYSE: WWE) relies on a dying legacy media for viewers.
Specifically, that legacy media is cable television which is losing viewers at an incredible rate. In fact, WWE’s flagship cable show, Monday Night Raw, lost 25% of its audience between April 2018 and 2019, Wrestling Inc. estimates.
In detail, the post-Wreslemania edition of Raw broadcast on 8 April 2019 had 2.923 million viewers. However, the 2018 Post-Wrestlemania Raw drew 3.65 million viewers.
Under these circumstances, the USA Network’s Raw broadcasts could have no viewers within four years. Thus, WWE cable TV is suffering from a catastrophic ratings loss. Moreover, this rating loss explains, WWE’s decision to move its other show Smackdown to the broadcast Fox Network.
Is Fortnite behind WWE’s Catastrophic Ratings Loss?
Strangely, Epic Games’ Battle Royale Shooter game sensation Fortnite could be partially responsible for WWE’s ratings woes.
Notably, the number of registered Fortnite players grew from 125 million in June 2018 to over 250 million in March 2019, Business Insider estimates. Moreover, 63% of iOS Fortnite players are ages 18 to 24; and 72% of iOS Fortnite players are male, Business of Apps estimates. In addition, 84% of desktop Fortnite players are male.
Hence, Fortnite is stealing WWE’s core audience; young men. Moreover, a Fortnite game between star players Drake and Ninja attracted 635,000 concurrent viewers on Twitch.
To explain, Twitch is an Amazon (NASDAQ: AMZN) service that lets you watch other people play video games. Supportingly, Business of Apps estimates Twitch viewers watched 8.9 billion minutes of Fortnite as of 25 March 2019.
Can WWE compete with Games Platforms?
Battle Royale shooter games like Fortnite and Apex Legends compete for WWE’s audience with similar elements.
To explain, the Battle Royales offer colorful larger-than-life characters, over the top storylines, and lots of action. Additionally, games offer players direct control over the characters.
Finally, modern multi-player games like Fortnite are always on and constantly updating the action with new characters, weapons, situations etc. Meanwhile, WWE offers the same boring match every week and 50-year-old wrestlers with gimmicks that were tired 20 years ago.
Can WWE compete with Fortnite?
Under these conditions, I have to wonder if WWE can compete with Fortnite or its many imitators. Notably, gaming-industry observers think one of those competitors; Electronic Arts’ (NASDAQ: EA) Apex Legends, could rival Fortnite’s success.
To add to WWE’s woes, tech giants like Alpahbet (NADAQ: GOOG), Amazon, and Apple (NASDAQ: AAPL) are launching major gaming pushes. For instance, Alphabet’s (NASDAQ: GOOGL) gaming platform Stadia collects data about gamers to make games more competitive, One Zero reports.
I think WWE could find itself with a tiny audience of middle-aged wrestling fans – if the gaming industry’s growth continues. This could occur, because younger people are spending all their extra cash on gaming.
In fact, Business of Apps estimates 70% of players spend $85 on Fortnite regularly. Thus, young men could not afford $9.99 a month for the WWE Network.
Is WWE Making Money?
WWE (NYSE: WWE) is making money despite the Fortnite attack. However, it is not making much money.
For instance, WWE reports a gross profit of $103 million on revenues of $273 million for 4th Quarter 2018. In contrast, Apex Legends creator Electronic Arts (NASDAQ: EA) records a gross profit of $816 million on revenues of $1.289 billion for the same period.
In addition, WWE reports an operating income of $53 million and a net income of $41 million for 4th Quarter 2018. Moreover, WWE reports an operating cash flow of $65 million and a free cash flow of $54 million.
Finally, WWE had $167 million in cash and equivalents and $192 million in short-term investments on December 31, 2018. In comparison, EA had $3.87 billion in cash and equivalents and $1.274 billion in short-term investments on the same day. Thus, Electronic Arts had $5.161 million in the bank compared to WWE’s $359 million.
Hence, video games platforms generate large amounts of cash. Thus, game platforms have the money to constantly upgrade their product while WWE does not. Therefore, WWE will have trouble surviving.
Can WWE Survive?
My guess, is the only way for WWE to survive is to concentrate on its unique products, live shows and digital, and forget about everything. In particular, invest more in the WWE Network, and abandon cable television.
Notably, the WWE Network streaming service had 1.59 million paid subscribers in February 2019, Fierce Video estimates. Hence, the WWE Network’s viewership is approaching that of Raw.
However, the WWE Network had 1.8 million subscribers in 2nd Quarter 2018. Hence, it looks as if Fortnite could eat away at WWE Network’s audience too.
Thus, WWE could survive as a successful niche product but not a major entertainment brand. Instead, the major entertainment brands of the 21st Century have names like Fortnite and Apex Legends.
Is the WWE a good Investment?
Not surprisingly, I do not consider the WWE a safe investment right now. In particular, Mr. Market overpriced WWE’s stock at $96.10 a share on 12 April 2019.
Moreover, WWE’s dividend of 12₵ a share is low for that stock price. The 48₵ annualized payout and 0.51% dividend yield are also low. Furthermore, WWE has not increased its dividend since 2013.
In the final analysis, WWE is a poor investment but its current fate offers an important lesson for investors. The lesson is that the sudden appearance of new media like Battle Royale Games can disrupt decades old sports and entertainment venues.
Fortnite is coming for all of Entertainment
Strangely, Fortnite appeared in July 2017, and was first noticed by the Big Media in 2019. Hence, destructive competitors to established entertainment brands can come from anywhere and explode overnight in today’s digital world.
Investors had better watch Fortnite’s rise carefully, because gaming platforms are now a threat to every other media. Thus, we are likely to see major carnage in the entertainment industry in coming years and lots of opportunities to short stocks.
Under these conditions, WWE is a good stock to watch because it is very vulnerable to innovative games. In addition, one overpriced stock likely to take a bigger fall than WWE is Netflix (NASDAQ: NFLX) which Mr. Market grossly overpriced at $351.14 a share on April 12, 2019.
Understanding what is happening to WWE now is vital if you want to understand entertainment’s future. Games like Fortnite could change everything for entertainment companies like WWE.