TKO Group Holdings’ Third-Quarter 2023 Earnings Media Call: TV Rights Deals, Sponsorship Deals, More

Welcome to Ringside News‘ live coverage of TKO Group Holdings’ inaugural earnings call, which delves into the highlights of the third quarter of 2023.

Seth Zaslow extended a warm welcome to all participants, setting the tone for the call.

Ari Emanuel took the floor, acknowledging the significance of this maiden call. He highlighted the impressive media rights fee increases for both Smackdown and NXT. Their primary focus remains on delivering sustained value to shareholders, bolstered by the year-round presence of their two unique properties. The immense potential for international revenue growth is a key driver, and they are diligently working on strategies to streamline operations and reduce costs.

Emanuel emphasized UFC’s remarkable sellout streak and their strategic expansion plans in the Middle East, specifically in the Kingdom of Saudi Arabia, aligning with WWE’s existing presence in the region. This partnership underscores Saudi Arabia’s interest in collaborating with UFC, despite prior investments in other MMA entities. Anticipated eight-figure site fees from this region are a testament to their expanding global footprint.

Emanuel also underscored the importance of their relationship with Anheuser-Busch as a significant driver of international growth.

WWE revealed its exciting plans for two new international PPV events and the highly anticipated return to Australia for Elimination Chamber, promising the largest-ever site fee for the event.

Ari Emanuel capped off the announcements by unveiling the remarkable NXT TV deal, boasting a substantial 70% increase in media rights fees.

In the realm of broadcast and streaming partnerships for Raw, discussions with potential collaborators are ongoing, with no immediate rush to finalize agreements.

Furthermore, Ari revealed a groundbreaking development in the form of WWE specials on NBC in primetime. This marks a historic moment as it will be the first time WWE programming airs in primetime on NBC since the live broadcast of WWF Main Event in February 1988, marking pro wrestling’s triumphant return to the primetime slot on the network.

They provided a comprehensive overview of their cost-saving initiatives, aiming to achieve savings in the range of $50 to $100 million. These measures involve staff reductions and the integration of various elements between UFC and WWE that can mutually benefit each other. The process is ongoing, with further actions anticipated in the coming year.

Additionally, they conducted a detailed examination of the financial figures within both the UFC and WWE segments, thoroughly reviewing the data presented in the earnings report.

Following their initial presentations, the call transitioned into the Q&A session with investors and analysts.

The first question centered on the integration of UFC and WWE, and how their positioning will evolve once cost-saving initiatives are fully implemented. The management team emphasized that their current strategic positioning will leave them in a favorable position once the cost-saving measures are completed. They hinted at providing updates on their plans during the next earnings call, including guidance for the entirety of 2024. They expressed confidence that their stock is undervalued at the moment, highlighting the unique and high cash-flow nature of their business. Returning capital to shareholders remains a key focus, with plans to unveil their strategy in February while remaining opportunistic in their approach.

Brandon Ross raised concerns regarding investor sentiment regarding sports rights acquisitions and its impact on Raw strategies and the company’s overall direction. Management responded by pointing out that they have observed an increase in viewership among key demographics, even as broadcast and cable viewership has declined. They emphasized the absence of content churn, highlighting their year-round content creation capabilities and flexibility regarding scheduling. The 40% increase in Smackdown rights, along with the addition of four specials, was mentioned as a significant positive development. WWE’s expansion onto the CW Network was highlighted, reaching 100% of the country and featuring WWE NXT, which was deemed crucial to WWE’s future.

Regarding Raw, they emphasized a patient, measured, and calculated approach to negotiations, drawing parallels to their handling of UFC rights. They emphasized that they are engaged in robust discussions with potential partners.

On the broader sports rights landscape, they noted significant deals in the market, including the Xfinity series on the CW Network and the NBA’s exclusive negotiating window with current partners until April. Other players like Netflix and Peacock are also making moves in this space. They highlighted Raw’s brand equity, passionate fanbase, and brand awareness, emphasizing their ability to swiftly transition to a new partner if necessary.

The urgency surrounding their sports properties, including events like Wrestlemania and UFC, serves as powerful incentives for people to subscribe to platforms like Peacock or ESPN+. These events drive subscriptions for their partners, who are keen on maintaining year-round urgency and subscriber growth. However, they reiterated their commitment to being patient in their approach.

Management expressed satisfaction with the progress of the WWE and UFC teams coming together, both in terms of cost reduction efforts and revenue generation. They anticipate achieving the upper end of the cost-saving synergies, even before fully integrating the two businesses. Furthermore, they envision opportunities for collaboration between UFC and WWE events in international markets, with China being cited as a potential destination. The prospect of crossover events, especially when considering the concierge side of their operations, was emphasized.

When questioned about the competitive landscape in MMA, they acknowledged that competition is not new to either WWE or UFC and noted that a rising tide tends to benefit all participants. They highlighted the strength and stability of UFC’s roster, emphasizing that UFC remains the preferred destination for fighters. They expressed confidence in their relationship with Saudi Arabia and their ability to navigate the competitive sports landscape effectively.

The management expressed their openness to other MMA leagues, mentioning organizations like PFL and BELLATOR. However, they emphasized that UFC remains the preferred destination for fighters, highlighting its strong appeal. They are supportive of other companies serving as pipelines and feeders to UFC and have shown support for UFC on ESPN. Additionally, they emphasized the strength of their relationship with Saudi Arabia.

Regarding sponsorships on WWE programming, they mentioned that Vince McMahon is open to having more sponsorship opportunities, indicating a shift from the previous practice of keeping the ring mat and arena relatively clean. However, they also noted their intention not to reveal potential partnership details prematurely, preserving their competitive advantage in negotiations.

When asked about the possibility of super weekends, they indicated that they are exploring the potential for Saturday-Monday event weekends that could feature both WWE and UFC, hinting at exciting possibilities in the future.