To Our Shareholders
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383945_74233_CCM_2020_Annual_Report_v6_CVR_NARR_R1.indd 1-3 3/25/21 11:49 PM WWE THUNDERDOME DEBUTED ON SMACKDOWN FROM THE AMWAY CENTER ON AUGUST 21 TO OUR SHAREHOLDERS In 2020, WWE was confronted with unprecedented challenges as a global pandemic impacted our ability to produce content and engage with fans. While many of our peers across the sports and entertainment landscape shut down, WWE responded by adapting our business model to allow for the safe and uninterrupted production of content; and with WWE ThunderDome, recreated the spectacle our fans have come to expect. We capitalized on the growth in digital consumption to introduce new products and expanded our presence on existing and new platforms, which led to record-breaking digital engagement. Our success culminated with the recent announcement of a multi-year WWE Network domestic licensing agreement with Peacock, NBCU’s streaming service, achieving a key strategic priority and highlighting the value of the WWE brand. WWE achieved strong financial results in 2020, including record profits, driven by the increase in rights fees from our U.S. distribution agreements. Our results also reflected the implementation of short-term cost reductions and cash flow improvement actions, which substantially offset the impact of COVID-19 on our business and strengthened our financial position. As we look ahead, we continue to believe that WWE has significant long-term growth potential; is well-positioned to execute on its strategic priorities including content creation and distribution, product innovation and international expansion; and to drive long-term shareholder value. WWE NETWORK SECURES DISTRIBUTION ON NBCU’S PEACOCK In January 2021, we entered into a multi-year agreement to license WWE Network content in the U.S. to NBCU’s streaming service, Peacock. The agreement (effective March 18, 2021) represents a strategic change that builds on our history of leadership in digital media. 383945_74233_CCM_2020_Annual_Report_v6_CVR_NARR_R1.indd 4,6 3/25/21 11:49 PM From our early adoption of the pay-per-view model in the 1980s to our embrace of nascent social and digital platforms more than a decade ago, WWE has consistently demonstrated its ability to innovate, adopt new technologies and transform its business model. In 2014, we launched one of the first live (SVOD) streaming services, WWE Network, to connect with WWE fans. At a time when streaming was not part of the lexicon for traditional media companies, we were willing to cannibalize our pay-per-view business because we recognized the rapid growth of digital video consumption. In fact, our consumer research indicated that WWE’s audience was five times more likely to consume video online than on other platforms. In the ensuing seven years, however, almost every media company launched a streaming service. We began to realize that breaking through the clutter of these services would get increasingly difficult, consumers would prefer to subscribe to fewer services, and that emulating the features and functionality of the streaming behemoths would require significantly higher levels of investment. In order to be competitive, we determined to pivot our strategy from building the technology required for an optimum user experience to allocating our resources to what we do best: content creation, production, and storytelling. We selected NBCU’s Peacock service to be the streaming distributor of WWE’s most premium content in the U.S. because it not only provides a greater value proposition for our current subscribers, but it also enables us to deliver our content to a significantly larger audience, including Peacock’s 33 million registered users. Additionally, WWE and NBCU have a longstanding relationship that began nearly 30 years ago with Monday Night Raw on USA Network. Our partnership will provide WWE with greater access to NBCU’s best-in-class teams across sales, marketing, and promotion, as well as some of the most iconic franchises around the world. With NBCU and Peacock, viewers can enjoy the Super Bowl every three years, the Olympics every two years and WrestleMania every year. Most importantly for investors, we believe the partnership with Peacock will enable WWE to realize a greater economic return than as a stand-alone service while reducing the risk in WWE’s business model as a higher proportion of our future profits will be determined by contractual arrangements rather than transactional sources of revenue. As both the number of streaming households and Peacock subscribers expand further, viewership of WWE content could increase, supporting a higher value for WWE content on all platforms. 383945_74233_CCM_2020_Annual_Report_v6_CVR_NARR_R1.indd 7 3/25/21 11:50 PM INNOVATION ACROSS WWE AS KEY TO BRAND STRENGTH & PERFORMANCE Innovation across all businesses enabled WWE to continue content production, develop new products, and expand its presence in global markets. Despite restrictions that inhibited our ability to stage ticketed live events, WWE never went off the air; but instead innovated to bring fans into events virtually We responded to the cancellation of ticketed events in mid-March 2020 by moving the production of our flagship programs to our MIZ & MRS. COMPLETED ITS SECOND SEASON ON Performance Center in Orlando, allowing us to remain one of the USA NETWORK few sports and entertainment companies to produce live content uninterrupted. Further demonstrating our creative ability, we held the first-ever, two-night event in history for our annual marquee extravaganza, WrestleMania. The event generated historic levels of engagement with record weekend subscriber additions, record viewership of more than 967 million video views (+20% y/y), and a record 13.8 million social media interactions, making it the most social event in WWE history. In August, we transitioned the production of Raw and SmackDown from our Performance Center to a state-of-the-art environment, WWE ThunderDome, which brings thousands of live, virtual fans into our show and surrounds them with pyrotechnics, laser displays, augmented reality and drone cameras. Over the period from August 21 through year end, which covers our move to the Amway Center and subsequently Tropicana Field, Raw viewership was unchanged and SmackDown viewership increased 8%, compared to the prior CRITICALLY ACCLAIMED SERIES, UNDERTAKER: THE LAST RIDE, three-month period. Further applying this innovative spirit, we created WAS AMONG THE MOST WATCHED ORIGINALS ON WWE NETWORK the Capitol Wrestling Center, which enhances the production value of NXT in a similar manner. WWE not only stayed on the air, but we also increased production by nearly 40% Despite a challenging environment, WWE continued to produce a significant amount of content – creating 2,370 hours of programming for the year across television, streaming and social/ digital platforms, representing an increase of nearly 40%, or more than 650 hours, from 2019. For television, in addition to our flagship programs, we completed the 6th season of Total Bellas on E! and the second season of Miz & Mrs. on USA Network, and announced a new series, The Quest for Lost Treasures, to air on A&E. We also expanded our reach, with networks eager for additional programming, providing historical premium content to FOX Sports and ESPN. WWE’S MOBILE GAME PORTFOLIO HAD 140 MILLION INSTALLS AT YEAR END 383945_74233_CCM_2020_Annual_Report_v6_CVR_NARR_R1.indd 8 3/25/21 11:50 PM ACTIVATIONS BY NEW GAMING PARTNERS CONTRIBUTED TO THE GROWTH IN WWE’S ADVERTISING REVENUE For digital platforms including WWE Network, we produced compelling original content highlighted by WrestleMania and the critically acclaimed series Undertaker: The Last Ride. In partnership with Netflix, we launched the feature film, The Main Event, and the series, The Big Show Show, which both ranked among the top 10 most watched shows during their premiere weeks, and recently announced the groundbreaking Vince McMahon documentary. On digital and social platforms, consumption of WWE content increased 10% to 38 billion views (+25% excluding the impact of geographical restrictions in India). We surpassed 50 billion views on YouTube, making WWE the 5th most viewed YouTube channel in the world. And, we expanded our presence on Snapchat Discover, Twitch and TikTok, where WWE is the second most popular sports brand behind the NBA. WWE capitalized on the elevated growth in digital consumption and e-commerce spurred by the pandemic We continued to take advantage of the growth in digital consumption, promoting content sampling and subscription with the free version of WWE Network. Since the June 1 launch of the free version, 3.9 million viewers watched more than 86 million hours of content across tiers (up 7% y/y); and ending paid subscribers to the network increased 6% to 1.5 million. WWE’s e-commerce revenue grew 38% in 2020. Demonstrating our commitment to product innovation, we released 2,000 new products on our e-commerce platform, including 18 new championship title belts, which generated category growth of more than 100% for the year. As we introduced new products, we also expanded our video game portfolio. New game content included the launch of WWE 2K Battlegrounds with Take-Two and a multiplatform integration with Microsoft for the Gears of War franchise. Our mobile game portfolio had 140 million installs at year end led by WWE SuperCard and WWE Champions. Activations by new gaming partners contributed to the growth in WWE’s advertising revenue, which outpaced industry trends throughout the year.