While World Wrestling Entertainment (NYSE: WWE) had a strong third quarter that sent its stock price higher, the company still has its share of doubters. That makes sense, because WWE's top source of revenue remains television, and that market has been suffering an increase in cord cutting.
Shareholders and analysts worried about the company's next television deal in the United States have legitimate reasons to be concerned. Ratings have slipped, and as the cable universe shrinks, it's possible that there will not be heavy interest in the product from cable channels.
It's possible, but it's not likely -- because while ratings are down, they remain strong, and live sports (or in this case sports-like) events remain attractive because viewers watch them when they air. In addition to offering strong ratings, WWE also fills five hours of prime time with new programming 52 weeks a year.
A few years from now the cable market may have changed enough that WWE will struggle to match its current value, but that day is not here yet. And, the company has a lot of upside which pessimists should at least consider.
WWE has been adding performers from key markets around the world. Image source: Getty Images.
It's a global product
Through nine months of 2017, WWE made about 75% of its revenue in the United States. As you can see in the chart below, the money the company brought in from its three non-U.S. market groups actually stayed pretty flat year-over-year.
| 3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | |
| Net Revenues by Region: | ||||
| North America | $140.70 | 118.5 | $446.30 | $398.3 |
| Europe/Middle East/Africa (EMEA) | $24.60 | 24.7 | $87.80 | $88.5 |
| Asia Pacific (APAC) | $18.80 | 18.5 | $47.30 | $41.3 |
| Latin America | $2.30 | 2.5 | $8.00 | $6.2 |
Data source: WWE
Going forward, however, it's likely that global revenues will increase. WWE has smartly been cultivating performers from potential top markets. It has already hired a number of wrestlers who made their names in Japan and Mexico, and it has been working on training wrestlers from China. In addition, the company used a wrestler with Indian heritage as one of its champions this year, growing interest (though not revenue) in that market.
WWE has television deals around the world, and its streaming network is available in most countries. Turning visibility into revenue remains a problem, but in the wrestling business having stars with local ties has traditionally been a big draw.
It will take time for the company to train those performers, and not every star hired from another company who made his or her name outside the U.S. will click with WWE fans. Despite that, the company has clearly been playing the long game when it comes to global growth, and eventually those efforts will pay off.