TKO 2nd Quarter Earnings Call Highlights: Production Costs, Site Fees, Netflix & More

Welcome to Ringside News‘ live, ongoing coverage of TKO Group Holdings’ second quarter earnings call for 2024.

Seth Zaslow from WWE opened the call with a warm greeting to all participants.

Ari Emanuel delivered his prepared statement, highlighting TKO’s successful quarter fueled by high demand for immersive sporting events. He proudly announced record revenues and an upgraded financial outlook for the year.

This quarter saw exceptional performances from both UFC and WWE live events. Wrestlemania 40 set new records, and the momentum continued with a successful international pay-per-view event.

Significant strides were made in merging the live events departments of UFC and WWE, optimizing operations and enhancing event coordination.

Both brands have experienced a surge in site origination fees, bolstered by new agreements in Indiana and Minnesota to host WWE pay-per-views, alongside an innovative partnership with Call of Duty for both brands.

Emanuel underscored the strength and appeal of their brands, notably mentioning the lucrative Netflix deal with WWE.

Andrew Schleimer discussed the ongoing integration of WWE and UFC operations, anticipating further financial benefits and reporting substantial cost savings already achieved.

The call also covered the dismissal of the UFC fighter lawsuit and the departure of their auditor due to a technical issue, with a new auditor to be announced post-market close.

Highlights included increased ticket yields at WWE events, a 6% rise in sponsorship revenue, and the signing of numerous new sponsors.

Looking ahead to the third quarter, despite fewer UFC events due to scheduling, WWE is expected to see robust growth, thanks in part to the ongoing cost-saving initiatives.

The Q&A session began with Brandon from Lightshed inquiring about the optimization of WWE live events. The response highlighted ongoing revenue synergies, significant growth in site origination revenue, and the strategic impact of the Netflix deal, which is poised to attract new audiences and bolster both sponsorship opportunities and site fees.

Ben from Morgan Stanley raised a question about the notable reduction in WWE’s production costs amidst rising revenues. The executives explained that this quarter, which featured Wrestlemania and an additional pay-per-view event compared to the previous quarter, had seen significant production efficiencies. By streamlining production elements and reducing the size of the show’s staging—thereby increasing seating capacity—they managed to lower costs without compromising the event’s quality.

The team also highlighted the successful implementation of combination weekends, where WWE and UFC events are held consecutively, fostering better collaboration between the production teams of both brands. This synergy has been key in optimizing production across the board.

Furthermore, there was a discussion on the financial strategies regarding WWE. Acknowledging that WWE has been undermonetized relative to UFC, the executives expressed their commitment to narrowing this revenue gap by enhancing monetization strategies and exploring new revenue streams.

When asked about managing site fees long-term, Ari Emanuel emphasized the importance of enhancing the festival-like atmosphere of their events. The goal is to appeal not only to hardcore sports fans but also to transform these events into cultural highlights for host cities. By extending the duration of events in a city, they aim to maximize financial benefits from tourism boards and other local entities.

A significant strategy discussed was the competitive approach of pitting potential host cities against each other. For instance, the decision to host Wrestlemania in Las Vegas came after a close competition with Minneapolis, which was initially the frontrunner.

Moreover, there is a strategic push to expand WWE’s presence internationally, recognizing it as predominantly a domestic entity thus far. The plan is to elevate WWE’s global profile and footprint.

Regarding sponsorships, the executives see no limits to how they can creatively engage and utilize sponsorship opportunities for both WWE and UFC. While they are committed to never undermining the brands’ integrity, they believe that their creative approach to sponsorships remains the only boundary.

Nick Khan will announce more WWE short-form content in the near future.

Netflix is now available in 170 countries, focusing on expansion and attracting new fans. They are planning an intensive marketing campaign aimed at engaging new audiences and growing their passionate fan base. Additionally, they aim to increase female viewership for the UFC.

The market for premium content remains robust, as evidenced by the rights fees for the NBA and The French Open. Both WWE and UFC are strong contenders for linear and network TV, helping to reduce subscriber churn. Confidence is high regarding the renewal of UFC and WWE premium event rights, though timing is crucial. The market for sports rights is strong but could fluctuate by next year. Discussions are anticipated in 2025, though no specific timetables have been established.

Regarding TKO, there was no mention of including PBR at its inception, as Vince McMahon was firm that it would solely involve UFC and WWE.

That concludes the questions and the call.