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Under the Spotlight Wall St: World Wrestling Entertainment (WWE)

Do you think wrestling is fake, or that the naysayers should be beaten in a ring fight? Love it or diss it, one thing is for sure: WWE Inc. profits are very real. Let’s put it Under the Spotlight.

Hulk Hogan. Randy Savage. The Iron Sheik. Dwayne ‘The Rock’ Johnson. André the Giant. John Cena. Brock Lesnar. The Undertaker. The WWE Hall of Fame is filled with names of great entertainers that captivated multiple generations and became icons of American culture.

World Wrestling Entertainment ($WWE) successfully managed to make fighting a family-friendly brand through the addition of soap-opera level drama. Unlike many other fights, wrestling airs on prime time and sells merch for fans of every age and gender. Much like superheroes, WWE fighters are admired by kids throughout the globe, with action figures and costumes being some of the most desired items.

In a league of its own

It may sound like a monopoly today, but it wasn’t always that way. Wrestling was a fragmented sport for most of its history, with many federations fighting to be the biggest. Back in the 50s, a man named Vincent J. McMahon amassed a lot of booking power during his time with the National Wrestling Association (NWA). After some feuds, he eventually left and started his own league, paving the way for what would become WWE.

By building an extremely successful brand mainly around the charisma of its wrestlers, the WWE managed to attain a huge edge over its competitors. To compete with the WWE, other associations would have to negotiate with TV channels, sponsors and, of course, the fighters themselves, the stars of the show. Not easy to achieve. Although All Elite Wrestling (AEW) has been a growing concern, WWE has steadily maintained a gross margin of profits well over 38% throughout the last five years. And earnings haven’t been slowing down either, growing at an average of 9.3% per year since 2018.

A repertoire of moves

Since 2017, there has only been a single year in which WWE’s earnings didn’t beat analysts' estimates. Unsurprisingly, it was 2020, when the industry was severely affected by the Covid-19 pandemic. Come 2021, a WWE-related YouTube channel was among the top 10 fastest growing channels while WWE’s own channel is one of the most watched ever.

There is no shortage of revenue streams for the company, from advertisers right through to merch sales. However the lion’s share of revenue and profits comes from the media. Content rights fees make up most of it: US$156m out of the US$304m grossed in Q3 2022.

The next generation

In 2022, amidst allegations of sexual misconduct and funds mismanagement, the founder’s son and iconic character Vince McMahon decided to step down from his position of chairman, leaving the throne to his daughter, Stephanie McMahon. She’s the third McMahon to run wrestling’s biggest federation and her mission is two-fold. To stay ahead of competitors while also fighting for stronger growth in overseas markets. WWE’s growth rate in the U.S. might be huge, but the untapped potential in other markets might eventually be the biggest game changer ever for this entertainment behemoth.

This does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.


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