The following is an attempt to model how COVID-19 related restrictions will impact WWE’s finances. Obviously, it’s uncertain how long WWE will be unable to run live events. This model considers the financial impact to WWE, at monthly and quarterly intervals, through the remainder of 2020.

Ultimately, I concluded that if WWE doesn’t run live events at any point for the rest of the year, WWE’s revenue would be impacted by as much as $218 million and operating income would be impacted by $42 million. In such a scenario, I estimated WWE would still report record-setting profits in 2020, with an operating income of $121 million and total revenue of $927 million — largely supported by continued TV rights fees, which I don’t believe are at risk.

Various parts of WWE’s business are at risk to various degrees.

We can roughly place each of WWE’s revenue segments into one of three risk categories that I’m making up for the sake of this explanation: immediate, moderate, or low.

Immediate risk:

WWE’s entire Live Events division (consisting of segments: North American ticket sales, International ticket sales, Advertising and sponsorship, and Other) is at immediate risk, and is already being impacted. Events can be postponed, but I don’t expect WWE will make up for the number of missed events in this year or the next — the company is already having struggling to make a profit with this division in non-Wrestlemania quarters, so surging the number of events later on doesn’t seem viable.

Venue Merchandise (within the Consumer Products division) is very much a function of live event attendance. As long as there are no live events, there will be no venue merchandise sales.

Moderate risk:

WWE Network may be affected by a few variable factors. Pay-per-view events are by far the strongest driver of Network adds and retention. I believe the longer the crisis goes on, and WWE is forced to deliver either no PPVs events or empty arena versions, the more strongly Network subscribers will cancel their subscriptions. There may be some offsetting effect from a lack of competition from other sports and entertainment, combined with increased time spent at home. However, the associated wider economic decline associated with a long crisis, may motivate some subscribers to consider canceling as incomes become more strained.

Media ads & sponsors may become more difficult to sell in a crisis economy where people are forced to stay home. Largely, this segment is driven by on-screen sponsors that WWE directly promotes (think KFC, Snickers, etc.). A minority of this segment is made up of ad revenue from YouTube. That area seems more secure. WWE had two of its biggest weeks ever for views on YouTube since stay-home orders went into effect.

eCommerce and Product Licensing: Sales of WWE-branded products may wane as the crisis goes on, due to economic strain on consumers and the weakening of WWE programming that promotes the products and the associated personalities and intellectual property. Like the WWE Network, I see these are being increasingly at risk the longer the crisis lasts.

Reality TV and WWE Studios: Production of some WWE reality series (Miz & Mrs., Total Divas, Total Bellas) and the company’s films may see their production schedules delayed, possibly pushing off airings and related payments into later quarters or into 2021.

Low risk:

Core content rights fees: Fortunately for the company, WWE’s largest revenue source is the least at risk and this area will likely allow the company to stay substantially profitable even if the crisis lasts for the remainder of 2020. WWE’s additional deal with Fox Sports, which seems desperate for more content in this sports-fee moment, can only raise revenues further. I don’t believe revenues related to broadcasts of Raw and Smackdown are at risk. Even if WWE is forced to air library content (which it has many thousands of hours worth), as long as the content has never before aired on the relevant networks, their TV rights fees will remain intact. And even if viewership of these programs falls significantly, WWE made clear on the earnings call in February that payments are not tied to viewership performance.

Saudi Arabia events: WWE runs two events per year, worth around $50 million each. One of those events already occurred on February 27. In a normal world, one would expect the next event to be about six months later, maybe in August. With large social gatherings in Saudi Arabia being rare to begin with, it seems likely the venues may not be in high demand and the government may be flexible with WWE about rescheduling the date of the year’s second event, if need be. Only if the crisis continues through November or December does the remaining $50 million WWE stands to collect seem at risk. November is the normal time for WWE’s last international tour, which a Saudi event could be tied into. However, given the large amount of revenue involved, it’s plausible WWE would travel overseas for a single Saudi event alone, as late as December.

Revenue risk assessment

The degree of impact to WWE depends greatly on how long the company is unable to return to normal business. As shown in the earlier “WWE COVID19 Losses Estimate” table, WWE stands to lose as little as $41 million, if normal business returns around April 30. Or if normal business doesn’t return for the remainder of the year, WWE could lose as much as $218 million in expected revenue.

Operating income risk assessment

Even without considering possible cost cutting, WWE remains profitable, even if there are no live events through the rest of 2020. Expected operating income is down from an estimated $163 million for the year (in the event there was no COVID19 crisis) to $121 million — breaking last year’s record operating income of $116.5 million. Again, $121 million is an estimate for the full year of 2020 in the case that there are no live events through December 31.

What about WWE’s PPV rights deal?

The prospect of WWE making a “transformative” deal with a major streaming player for the rights to WWE’s monthly pay-per-view events (currently primarily offered via the WWE Network) seems to have been interrupted. ESPN+ and Peacock seemed like the likeliest buyers. Dave Meltzer reported WWE and ESPN were far apart on a money offer, with WWE asking for more than the $150 million AAV ESPN+ gave UFC for a similar deal.

WWE today announced a deal with Fox Sports to sell Wrestlemania as a standalone PPV for $59.99 through Fox streaming platforms. FITE will also offer the two-day event as a PPV at a similar price point.

Many customers will realize the events can be streamed for far less by subscribing to the WWE Network for $9.99/month. (There’s no limit on canceling right after the event airs.) So this doesn’t seem like a strong offering. Rather this is probably a way for WWE and these partners to weigh how viable Wrestlemania is as a standalone PPV event, should a future deal take PPVs away from the monthly subscription service.

I wouldn’t rule out future bidding for WWE PPV rights after the company is able to run live events, later this year or in 2021. I would expect ESPN+ and Peacock to continue to be interested parties, possibly with the addition of Fox Sports, maybe Amazon as well. I estimated the value of a potential deal last month to be between $105 million and $161 million.

What about AEW?

All Elite Wrestling is a private company, so less is known about the new organization’s financial picture. Suffice to say AEW will be impacted by being unable to sell event tickets and venue merchandise, like WWE, for the duration of limits on public gatherings.

AEW’s TV deal with WarnerMedia, reportedly worth $45 million AAV (through 2023 with an option for 2024), is probably not at risk. Like WWE, as long as AEW can continue to deliver content that hasn’t aired before on “Dynamite” in their Wednesday night timeslot, AEW will likely still receive its expected payments.

AEW has taped some content in advance that will be aired on Dynamite in the coming weeks. Longer term, AEW doesn’t have the benefit of a huge library of past events like WWE has. Still, AEW has six PPV or special events, consisting of 42 matches that haven’t aired before on Dynamite. Additionally, there are 26 mostly one-hour episodes of “Dark”, that have match content and have only been aired on YouTube.

Like the possible impact WWE faces with its WWE Network, AEW revenue may be compromised if the company is unable to conduct what would be bi-monthly pay-per-view events. AEW PPV events of late have attracted around 100,000 buys with a price point of $49.99. AEW could possibly do PPV events with no audience, like WWE is choosing to do with Wrestlemania. Depending on WWE’s results, though, that may not be an attractive offering to fans.

As COVID-19 cases continue to rise in the U.S., there’s risk associated for WWE and AEW in continuing to conduct empty venue matches, if they’re not prevented by government restrictions. While both companies are reportedly giving talent the option of not participating in match tapings, the risk of transmitting the virus among wrestlers could shut down any further match tapings and create bad press for those involved.

EDIT: Post note:

I didn't consider: Media division's operating income margin is higher if for months, say, Raw and SD air library content or interviews or video packages, while still collecting expected rights fees. Normal event content is more expensive: talent pay, production, venues, etc. https://t.co/9GOsfuFKrV — Wrestlenomics (@wrestlenomics) April 2, 2020