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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: WWE and Netflix announced a 10-year, $5 billion mega deal earlier this week that is set to bring WWE’s flagship program, Monday Night Raw to the streaming platform. Many of you may not be wrestling fans, but this is one of the most interesting businesses in sports. Let’s understand the deal more and the vantage points of the various parties involved.

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”: The NFL’s strong playoff viewership is reaching unprecedented levels.

• 💪 Weekly Reminders that Sports are Awesome: The Detroit Lions are rewarding their long time fans during this playoff run, and TCU’s Women’s Basketball turns a challenge into an opportunity

Hey team,

WWE and Netflix sent shockwaves through the sports media space earlier this week, announcing a 10-year, $5 billion deal that will bring WWE’s flagship program, Monday Night Raw, to the global streaming platform.

This mega deal signals Netflix’s first major foray into live sports entertainment, gives WWE a major financial win while growing its global audience, and potentially resets the sports media market ahead of key deals — i.e., the NBA — that are coming up in the next few years.

In this week’s Sports Business Playbook, you’ll learn:

1. Yes, WWE is a legit business, and they’re one of the best in the game (ring?)

2. Monday Night Raw has proven it can go the distance, as it is the longest-running weekly episodic television program (by episodes) in the U.S

3. The components of this particular WWE-Netflix tag team

4. The vantage points on the deal from the perspectives of WWE, Netflix, and the rest of the sports media market — which is increasingly turning into a cage match (prepare for plenty more wrestling puns!)

5. A special bonus section at the bottom

Let’s dig in!

Wearing the Championship Belt in the Boardroom

Put aside your preconceived notions about wrestling, friends.

In addition to giving us The Rock and producing a hall of fame roster of gifs (bonus section at the bottom of this article), WWE is a massive business.

Since Vince McMahon bought Capitol Wrestling from his father in 1982 and took the once hyper-regional product to the masses, WWE has grown into a global “sports entertainment” phenomenon.

The wrestling outfit produced $1.3 billion in revenue in 2022, it was valued at $9.3 billion in 2023, and it counts 90 million fans of various ages, demographics, and socio-economic backgrounds in the U.S. alone.

Plus, it is an absolute force on social media. WWE surpassed 16 billion social video views in the final quarter of 2022, and here are a few key stats on its follower numbers:

• 81.2 million Facebook followers — significantly larger than the NBA (48.1m) and NFL (19.8m)

• 30.7 million Instagram followers — more than ESPN (26.7m) and the NFL (29m)

• 25.3 million followers on TikTok — that outpaces the NFL (12.8) and NBA (21m)

Where WWE social really shines is in longer form video, though.

The wrestling outfit’s channel boasts nearly 100 million YouTube subscribers and, according to Tubular Labs, its 2 billion minutes watched across YouTube and Facebook are double the NFL — the 800-pound, $20 billion gorilla of the sports world.

WWE’s events break down in two different ways.

It has its tentpole “Premium Live Events” (PLEs) — WrestleMania, Royal Rumble, Summer Slam, etc. — that currently air on pay-per-view and on Peacock (through 2026), and it also has events that run throughout every week of the year:

• Monday Night Raw: Touring model where events are held across the country each week. Currently airs on USA Network as a part of a 4-year, $1 billion per year deal with NBC Universal. Fun fact: Raw is the longest-running weekly episodic television program (by episodes) in the U.S. — having been on since 1993.

• NXT: WWE’s “minor leagues” that showcases up and coming talent and takes place across smaller arenas in Florida.

• WWE Smackdown: Same model as Raw. Currently airs on FOX.

Given the 40+ years of content, WWE also has a treasure trove of historical matches/footage, documentaries, and original content that is a part of its rights package.

Regardless of the setting or modality, at the heart of all of WWE’s content is storytelling and drama centered around the ring. And no one has been better at orchestrating ringside melodrama than Vince McMahon and team.

Run as a public company but with the McMahons firmly holding the reins for 40+ years, WWE charted a new course in 2023 when it joined forces with the Endeavor-owned UFC. The new conglomerate, TKO Group Holdings, is a combat sports one-two punch valued at $21.4 billion and is split 51/49 between Endeavor and WWE, respectively.

Now, TKO makes one of its first big moves as the owner of WWE, and it’s a knockout.

Not a Raw Deal at All

Let’s look at the deal points of this tie-up.

The 10-year deal with Netflix is valued at more than $5 billion — effectively doubling the current agreement with NBCUniversal. Netflix has an option to either opt out after five years but also can extend it for another decade. So this deal could last 5, 10, or even 20 years depending on how Netflix feels it’s going.

Regarding content, beginning in 2025, the platform will have exclusive live rights to Raw in the U.S., Canada, U.K., and Latin America. Additional countries are expected to be added over time.

It’s important to note that Netflix will also gain international rights (all countries outside of the US) to the following:

• WWE shows and specials, including Raw, SmackDown, and NXT

• PLEs

• WWE documentaries, original series and forthcoming projects

In the U.S., the PLEs and other content will stay on Peacock through at least 2026, while NXT (CW — 5 years, $125 million) and SmackDown (USA Network — 5 years, $1.4 billion) will move into their new homes at the end of 2024.

The markets liked the deal, with TKO shares jumping 16% the day the deal was announced, and Netflix shares moving up 12% between the news and a strong Q4 report the following day.

Let’s now take a look at the key perspectives of the deal.

Vantage Points

WWE Leadership

You are Nick Khan, WWE President.

You oversee the WWE money machine, which right now means navigating a rapidly changing media landscape and securing the next big deal for your biggest revenue source.

While Raw has been on linear television for 32 years, you’ve had your eye on Netflix for awhile, talking about them in earnings calls as far back as 2022.

In your mind, you see the Netflix Raw deal serving three purposes:

1. Generating major revenue to the tune of $500 million a year, double the prior deal with NBCUniversal and nearly 40% of your 2022 revenue.

2. Fortifying WWE against the rapidly declining cable bundle. USA Network is in more 70 million U.S. homes, but that number fell 20% in the last 5 years and is expected to accelerate. You need to continue to find alternative paths. Plus, if things go well with Raw, you could also push Netflix (or another streamer👀) to pay for SmackDown, PLEs, and your other marquee content. Good thing both SmackDown and NXT are on similar five-year deals that end in the same year.

3. Tapping into Netflix’s 250 million global subscribers, including the 175 million outside of the U.S. and Canada. Similar to the Apple-MLS deal, giving your fans around the world one place to go for your content will be huge. Plus, this could prove to be a fertile ground for growth, as data from Tubular Labs shows the YouTube overlap between Netflix and WWE was under 3% last year, meaning existing Netflix users could become net new fans.

This deal is a win across the board, and you got an equally important win when you convinced your former boss to shave that god awful mustache as a part of the announcement.

Netflix Leadership

You are Netflix Co-CEO Ted Sarandos. You have been incredibly clear for the past several years that while Netflix has delved further into some aspects of the sports business, the $30 billion-platform is not interested in “renting live sports rights.”

Despite the rumors and external pressures that you should make this move, you have held off, stating that you “are not anti-sports; you are just pro-profit.”

Instead, you have looked for opportunities in the sports business where you believe Netflix brings the most value, which is the “drama of sport,” as you noted in a 2023 earnings call.

Drive to Survive and its comparable series in other sports, sports documentaries like Beckham, and even some live, novelty events like The Netflix Cup (golf) and The Netflix Slam (tennis) fit this mold and have become mainstays on the platform.

The WWE move is the “Goldilocks” strategy, as the wrestling platform is “sports entertainment” — a live sports event that is a scripted, episodic series with pre-determined outcomes that emphasizes storytelling and, you guessed it, drama. Given Netflix’s plans to spend ~$17 billion on content in 2024, $500 million on a tentpole franchise that reaches your global subscriber base and has the potential for spin-offs and other ancillary content.

Here’s why it works for your business model.

As with all other streaming platforms, you are not only concerned with subscriber growth, but also customer retention and limiting “churn.” WWE addresses both of those.

• Acquisition: WWE brings a large, rabid fanbase with it — 90 million in the U.S. alone. According to the crossover analysis done by Tubular Labs — YouTube overlap between Netflix and WWE < 3% last year — many of these fans may not be current subscribers, so they could join your new ad-based tier or even your premium tier.

• Retention: The major selling point here — continuity. Streaming platforms have a churn problem when users cancel their service after they finish a hit series or a sports completes its season. This could very well be happening soon to Peacock after its $100 million bet on a single NFL Wild Card game, for example. But because Raw airs every week, Netflix will be able to mitigate one of the major risks of owning sports rights — the off-season. And if things go well, you can potentially take the rest of WWE content for U.S. consumers in 2026 after the Peacock deal is up.

Plus, WWE will handle all production for Raw and other events, as it has done for past media deals, so no additional costs to absorbed.

Sounds pro-profit to you.

Other Professional Sports Leagues

You are NBA Commissioner Adam Silver.

You have a major media rights negotiation coming up over the next few years, and you are hoping to fetch up to $75 billion in the new deal — 3x the current one.

Despite many positive tailwinds for the league, there are some rumblings about a “sports rights bubble” and if the rapidly shrinking cable industry is going to eventually cause the market to collapse.

What prevents these types of collapses? Competition.

Netflix’s entrance into the “live sports” environment, even if not truly apples-to-apples and a significantly lower amount of money, is a breath of fresh air amongst the doom and gloom and provides a literal and psychological reset on the market.

This deal announcement gives you and your team a strong comparable to take to market in negotiations, and hey, who’s to say Netflix wouldn’t be interested in NBA content (whether true or just conjecture to share with the other media companies putting together a bid).

Bonus: Top 5 WWE GIFs

Last, but certainly not least, a palate cleanser for everyone — the top five WWE-related GIFs.

Proud to say many of these are in my day-to-day usage with friends. Let me know if I missed any!

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: WWE and Netflix sent shockwaves through the sports media space earlier this week, announcing a 10-year, $5 billion deal that will bring WWE’s flagship program, Monday Night Raw, to the global streaming platform. This mega deal signals Netflix’s first major foray into live sports entertainment, gives WWE a major financial win while potentially growing its global audience, and potentially resets the sports media market ahead of a few key deals that are coming up in the next few years.

• Shot: Put aside your preconceived notions about wrestling, friends. WWE is a massive business, producing $1.3 billion in revenue in 2022, consistently outpacing the NFL and other major professional leagues on social media, and being valued at $9.3 billion in 2023 when it merged with the UFC to form the TKO Group Holdings.

• Shot: WWE’s events can be broken into Premium Live Events (PLEs) — i.e., WrestleMania — and weekly events — Raw, SmackDown — that run for essentially all 52 weeks of the year. The Netflix deal, beginning in 2025, will see Raw be broadcast live in the U.S., Canada, U.K., and Latin America, and Raw + all other events will be available to non-U.S. subscribers. U.S. subscribers will continue to have to use Peacock or linear TV for the other events.

• Chaser: Vantage point of WWE in doing this deal: you’re generating double the revenue from the prior Raw deal (pun intended), fortifying against the decline in the cable bundle, and potentially reaching new fans within Netflix 250-260 million global subscriber base.

• Chaser: Vantage point of Netflix: you’ve been staunchly against traditional sports media rights deals and have instead focused on scripted, drama-focused content in the sports world. Raw is the “goldilocks” scenario because it’s live sports but it’s also scripted and emphasizes storytelling. The biggest selling point here, though, is that it runs continuously throughout the year, which minimizes churn risk with subscribers.

• Chaser: Vantage point of other professional leagues: you’re thrilled with this deal. This provides a bright spot in the current doom and gloom around a “sports media rights bubble” and also gives you leverage for future negotiations because the WWE deal gives a new benchmark plus a potential competitor for live rights that can drive up bids.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. The NFL is putting mind boggling numbers this postseason. And you better believe they love the fact the Kelce’s + Taylor Swift are around for another week (no, there is no script).

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. Quite the few weeks for Michigan sports fans. The Lions have not won an NFL Championship since 1957 (pre-Super Bowl!, and of course there is a curse origin story to it). They’ve won two playoff games and reached the NFC Championship game for the first time in 32 years, and they’re helping longtime fans soak in the moment during this run.

2. TCU Women’s Basketball turning a challenge into an opportunity

Thanks for reading! Let me know what feedback you have.

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Until next time, sports fans!

-Alex