The Smackdown deal

Social media was buzzed this week as it was reported that Smackdown, the WWE's Tuesday night show that currently airs on USA, will move to the Fox network in October of 2019 for a new TV deal worth a rumored $1 billion for a five year contract that will see the show return to Friday nights. The staggering number is nearly three times what USA pays for the franchise right now, which suggests that the Universal-owned network will pay an even more expensive number to maintain the rights to broadcast Raw, the WWE's flagship show.

The amount of money involved in the new TV rights fee deal is really a game changer for the company on a few different levels, which was made possible with the current climate of the television business. The diehard fans that are inside the "wrestling bubble" that complain about the product constantly on social media don't understand the big picture. To put it in perspective, the WWE's B-show will generate a billion dollars in rights fees alone during the duration of the deal, and that translates to triple the value annually of its current contract. At this point, it has less to do with the actual content and more to do with the interpreted value of the WWE brand. Don't get me wrong, WWE management isn't perfect, but it speaks volumes to their ability to build and market a global brand when they can secure a billion dollar deal for a secondary show.

How did such a major deal become possible?

The answer to that question can be somewhat complex depending of how someone views the situation. Television ratings across the board have declined slightly in recent years with the addition of on-demand programming and an increased availability to streaming services. However, those that claim that "cord cutting" will be the downfall of TV are very misguided. Traditional television is still used exponentially more than streaming by the general public to watch programming. The major differences are the amount of channels and outlets available that draw viewers to different shows. The amount of competition in terms of the content available has made it more difficult for any particular show to maintain its viewership. Another factor is that DVR can skew ratings when viewers decide to record a show instead of watching it when it's scheduled to air.

In many ways, sports entertainment provides an answer to the problem.

Most importantly, pro wrestling provides a consistent, steady rating. In the TV business, that's exactly what a network wants from its programming. While there's undoubtedly an entertainment aspect, the loyalty from the pro wrestling fan base is similar to that of sports teams. Even the most jaded wrestling fans will continue to watch because they want to see a good product the same way some downtrodden sports fans watch their hometown team even if the results are disastrous. Again, this has nothing to do with the actual wrestling content and more to do with the business aspect. Comparatively speaking, if a series airs eight seasons, it's considered a long term show. WWE programming airs weekly for the entire year and in this scenario, Smackdown has been on the air for nearly twenty years. The consistent ratings are the major key. Some of the biggest series in the modern era either concluded within the typical time frame for a TV show or saw a ratings dip as it progressed. For example, "Breaking Bad," the drama that chronicled Walter White's transformation into a kingpin criminal, generated rave reviews before its finale after five seasons. HBO's "The Sopranos" that told the story of a New Jersey mafia family was extremely popular for the eight years span (minus an extra year for production) that it was on the air. On the flip side, "The Walking Dead" on AMC declined noticeable in the ratings during its most recent season. The general consensus is that sub par writing caused a drop of nearly a third in the ratings for the eighth season finale as compared to the finale of the previous season. Obviously, the zombie apocalypse show peaked in popularity a few years ago and is on the down slide.

The steady ratings that pro wrestling delivers weekly translates to lucrative ad revenue. One of the ways that networks can combat the DVR skew is live programming that will get viewers to tune in during the actual broadcast. By nature, live sports lends itself to that situation. For example, how many people are going to DVR a football or baseball game? Sure, professional wrestling has its own value in terms of watching classic matches again for the performance, but as far as the weekly storylines, the premise is to watch the angles unfold as they happen on the show. The bottom line is, live programming draws the most consistent numbers, and aside from other major sports, WWE draws those consistent numbers every week. The TV networks need those consistent numbers to maximize ad revenue, which is why Fox is willing to pay such a major amount for the rights to air Smackdown.

So, what effect will this contract have on the product?

In theory, there are pros and cons to the situation. The possible negative is that as is sometimes seen with the WWE today, there tends to be some complacency because of the dominated market share and the virtual monopoly the organization has in the United States. This TV rights deal will bring the company guaranteed money of $200 million for each year of the contract so they basically just have to maintain the status quo, which is easier to do now than any other time in the history of the industry because of the lack of competition. Sure, management will still promote the WWE network and will generate revenue from merchandise and ticket sales, but the rights fee contract basically provides the promotion with a profitable safety net before any of the other revenue streams are a priority. So, there isn't exactly an incentive for WWE to change plans if the fans voice discontent with the product because the TV contracts are guaranteed money for at least five years. The other major factor is that if Smackdown, the secondary show, landed a $1 billion deal, Raw will definitely get an even more profitable contract so again, that emphasizes the financial security the promotion has for the next few years.

The biggest aspect of the Fox deal and the ripple effect it will have for the company is obviously the major money. The bottom line is, the WWE is a major financial success and from a business perspective, management's plan is successful. Granted, the fans will continue to boo Roman Reigns, but as long as they pay for tickets or network subscriptions to boo him, the result is profit for the WWE. Is the WWE at its most popular? No, but the climate of the TV industry has allowed them to cash in, which is something that was made possible with the global brand they built during the past several years.