Nick Khan on the WWE-ESPN Deal

0:04Congratulations! You made the Varsity, the podcast. My name is John Arand and I am Puck's sports correspondent and the host of this pod. And today, Nick Khan joins the pod. Nick is, of course, the president of WWE. And we got him on the Varsity this morning to break a little bit of news. ESPN bought the rights to WWE's package of PLEs. That's an acronym for premium live events. You know, WrestleMania, SummerSlam, Royal Rumble. Those rights had been with Peacock. But Bob Iger will announce on Disney's earnings call this morning that they will make up a big part of ESPN's planned direct-to-consumer app.

0:46Today is Wednesday, August 6th, and this deal is really what I'm focused on. The deal includes 10 of those PLEs, and it starts next year in 2026. WWE is going to continue to produce all of the events. And for ESPN, the deal makes a ton of sense, especially as the company rolls out its direct-to-consumer service. WWE fans are fanatical and loyal. And if you had listened to NBC executives at all over the past several years, they buy streaming subscriptions, especially if they want access to WrestleMania or SummerSlam. ESPN's streaming strategy is really starting to emerge. It has this WWE deal, and it's going to have exclusive content through its NFL deal, including NFL Red Zone, which is going to do cut-ins to all the games every fall.

1:37Jimmy Pataro has often said that he wants his app to be a hub for sports, and this is a start to it. This is really one way to get it done. And from WWE's perspective, timing is everything. This is more than just a chance to get in with Disney and ESPN. these rights came up just as ESPN is launching its service. Previously, WWE did a deal with Peacock during COVID when the Olympics were delayed and Peacock needed programming. Of course, we all know it's much more than just good timing. Nick Khan and Mark Shapiro, they know how to read the market better than anyone. And that's exactly what I'm seeing with this deal.

2:18Okay, enough from me. Let's get right to Nick Khan. nick conant it is always great to have you on the pod thank you very much for joining uh big news coming out of your world today why don't you just walk us through uh what's going on well second biggest news of the year first biggest piece you going to puck may have been last year but this pales in comparison to that i think you're getting more money for your deal than uh than i am nick listen all i know is you're a very rich man now I don't know about that. Look, we're excited, John. And before we get into all the Disney hype, I do want to say how amazing of a partner Peacock has been and continues to be, whether it's Rick Cordella or Mark Lazarus now at Versant, as you know, and Matt Strauss.

3:08We bet on Peacock early. They bet on WWE early. We think the bet paid off for both sides. And here we are now today with Disney. It's a whole new frontier for us. We're excited about it. Obviously, between Mark Shapiro, Ari Emanuel, myself, Triple H, we have extensive history with Disney. We think extremely positive history with Disney and the opportunity to take WWE there, we think will broaden the horizons and broaden the viewership with all of our fans and new fans coming in. Take me through this. PLEs, they're generally what, about one a month that WWE has? Give or take. There's about 10 of them a year and two of them, WrestleMania, our Super Bowl, if you will, and SummerSlam, which was this past weekend at MetLife Stadium in New Jersey.

3:58Those are both two night events. If I'm a subscriber to what we used to call Flagship, but the ESPN app, will that come as part of my subscription or will I have to pay extra for this? How is this going to look? Look, in 2014, WWE, this is far before I joined WWE, went off of traditional pay-per-view and onto its own OTT service, the WWE Network, which was$9.99 a month. There was no upcharge for pay-per-views like WrestleMania anymore. When we did the Peacock deal in 2020, same thing, no upcharge for what were pay-per-views. Same thing here with what has been referred to as ESPN flagship. You subscribe to that product.

4:41You get WrestleMania, SummerSlam, Royal Rumble, all of our other premium live events with no upcharge. You're taking the PLEs over to ESPN, but you're still in business with NBC and Peacock. Yes, NBC, Peacock, Versant. So we have Saturday night's main event, which will remain with NBCU slash Peacock. We have SmackDown, our weekly Friday show, which goes from 8 to 10 p.m. Eastern on USA, which is Versant. And of course, we have our mega deal with Netflix, which includes the global rights to Raw and the international rights for our PLEs, our premium live events, and SmackDown. Why is it that you made this move?

5:28I think, look, the marketplace dictates the price on all things, in my opinion. and you and I have had several conversations about this, both on the record and off the record. You know, the media rights marketplace, I think to any reasonable person looking at it, has sort of become reflective, relatively speaking, of course, of the U.S. economy, where the upper tier products continue to go up. The premium content continues to get premium pricing. And the lower tier content continues to sort of make its way. It's the middle that got squeezed a bit. And fortunately for WWE and our shareholders and our fans, we're not in the middle.

6:08So it's a significant step up. It's a great platform for us. And to have WWE, what we consider to be the number one sports entertainment product in the world on the most family-friendly apparatus is big for all of us. WrestleMania is a two-day event. I think you're the one that expanded SummerSlam into a two-day event and added some additional PLEs. What is Disney buying? What is ESPN buying? What changes are you expecting to this package moving forward? Well, me and a number of other folks expanded. I always like to give you the credit, Nick. No, no, no. I'll only take the credit when something's a disaster.

6:51I'm happy to take sole credit for that. But many other folks were across that. And again, that was this past weekend, very successful event for us, viewership-wise. revenue-wise, we think relevancy-wise. So what Disney is getting is our biggest events domestically in the United States. It's 10 events, but it's over the course of 12 nights, as I mentioned earlier, WrestleMania, two-night event, SummerSlam, now a two-night event. And we always pick the right dates for us. So of course, we're not going to go up against the Super Bowl, nor would anyone go up against the Super Bowl. But if you look at some of the date placement for our events.

7:29We think we found the ideal dates for our audience. And of course, we're going to be receptive to our new partners at Disney and ESPN in terms of what they think might be good for viewership. So just to clarify, are you saying that the Disney deal is for 10 events or could it grow? These things can always grow. It's going to start as 10 events, but 12 nights, again, with two of the events being two-nighters. And do you have, are these events set or can you, like I was going before talking to you, I was hitting some of the WWE blogs and there were rumors about, you know, an all-female event or, you know, some of these other ideas that were coming out.

8:08How set are you on the 10 right now? Well, look, assume WrestleMania were set. I don't know if I can say we're not changing that. SummerSlam and Royal Rumble in some order are second and third biggest events of the year. So that seems to be working quite well. Money in the Bank, Survivor Series, Survivor Series being our second oldest event following WrestleMania. Those work quite well. And then you look at the other ones that we've put in there, things like Clash in Paris, which is upcoming at the end of August, August 31st, which will still be on Peacock through the expiration of that deal. That event has done phenomenally well for us.

8:49So we're happy with event placement, event structure, but we're always looking to evolve at WWE and make sure that the product is best for our fans and for new fans. Nick, let me take a quick break. And I just want to go through the negotiations and take a look at how the market looks right now.

9:20all right so uh i know you you started negotiating on this uh just a couple of months ago this this actually was a relatively quick negotiation uh that happened what's the market like now i i We keep writing about, you know, the big streamers, the Netflix, the Amazons, the Apples, the Googles getting in there, sitting there with these gigantic pockets. But you have situations where you were just coming from NBC and Peacock and now you're going to like ESPN and their apps. As you go into the market, give me a lay of the land for other people that might have rights coming up. As all of the streamers that you just articulated continue to get further into the space, they have a significant advantage over many of the traditional companies, but not, in our opinion, Disney or NBCU.

10:09And allow me to tell you why. Those are the two companies of the traditionals that are poised best to compete for the future. So even when you saw Bob Iger years ago make the move to purchase MLB Advanced Media, MLBAM, to create the streaming service, and that was at a pretty high figure at that time, he saw what few others saw, but you certainly saw, and I believe I saw as well, that the future was in front of us and the future was streaming. It didn't mean exclusive from traditional. It just meant you had to be able to watch whatever you wanted, wherever you wanted, on whatever device that you wanted.

10:46He saw it. His board saw it. They got into it early. They went all in with Disney+. It's been a phenomenal success. They go in with ESPN +, and then as their MVPD deals come up, they look to expand that service, which what has been referred to as flagship, which should launch shortly. So I think Disney continues to stay ahead of the game. And for those who do that and who tend to look at the entire media landscape, not through rose-colored lenses, the future should remain bright for them. So as you went into the market with this package of PLEs, how interested were the – I know you got interest everywhere, but how real was the interest from the bigger streamers that I mentioned?

11:30It was real. And we happen to be in a good position of timing always matters on these things. And think about this, the Peacock deal, we struck at the height of pre-vaccine COVID. So a couple of factors, we always think you need a little bit of luck in these deals. The luck there, certainly, you know, COVID was a disaster for everybody, but the luck there was that the Olympic Games had been postponed for a year and Peacock needed content. UFC and WWE were the only two entities that continued to produce content on a weekly or bimonthly basis. So with those two entities, they sort of, in my opinion, set the course for other folks who then came back with their product.

12:16But the fact that WWE continued to go made it an attractive proposition of Peacock, which was up and running and needed fresh content. So boom, we did that Peacock deal. If you look at it now, what are a couple of things that you factor into any of these negotiations? Is there a new buyer? And what are they looking to do? And will the subs follow the product to whatever that new platform is? I think we've demonstrated to Peacock, Our subs will follow. They certainly all followed from the WWE network. And that expanded that subscribership extensively with Peacock. And there's obviously other product at Peacock to watch, which our fans who subscribe primarily for us were able to sample.

12:58Same will be the case with ESPN. And we're excited for that. You referenced Verson. You still have a deal with them. I've been writing about cord cutting for more than a decade now, I think. And you've been seeing it. When you say that Peacock and And ESPN, not Peacock, but Comcast, NBC, and Disney ESPN are well-suited. If cord cutting, that makes you less concerned about person possibly losing subscribers because you always have Peacock to sort of fall back on. Am I reading that correctly? Well, look, it's still a robust business, the cable business. It's just not as robust as it used to be. So it's divided by age, if you will.

13:38So I'm 50 now. I still have DirecTV. And of course, I have Netflix, Amazon, Paramount Plus, Peacock. I'll get the new ESPN product. I already have ESPN Plus. I have everything that I'm sure you have. Now, we happen to live inside of the media ecosystem. So perhaps that's one factor. But when I go into the homes of people who are older than me, I still see traditional cable. I still see DirecTV. I still see Dish Network. Or when I go into the homes of people younger than me, sometimes I don't see that traditional cable or satellite service. So I think these companies are equipped for both. Why would you lose the current revenue that's going to exist, certainly through our lifetime, even if it continues to decline?

14:22It's a lot of money. And why would you pass up the opportunity to go get that new revenue for the younger fan base? By the way, 50, you look like 10 years younger than that, Nick. My God. Hopefully you're trying to charm me up. Well, that's right. I need you to answer these questions. My goodness. You don't look a day over 38. You look great. All that money, you look refreshed. ESPN just this morning is, you know, they have the NFL deal. I don't know if that's actually going to be announced or not, but it's coming. If not, they're going to give a launch date for when the app comes out. This deal that they did with you helped paint the picture of what this means for ESPN's app and ESPN's direct-to-consumer service.

15:11What is their strategy moving forward? To get the best content that people will subscribe to. And I don't mean to be obtuse with that, but assume there's nothing at this moment in time like the NFL. People go where the NFL goes. They will find it. They will consume it. it's the shortest season of all of the sports as you know with the biggest audience it's become i read this quote so it's not my original quote what baseball was 30 40 years ago football is now it's a reflection of america if you will and it's wildly popular so all credit to the nfl and to espn for getting that deal done we all know it took a long time sometimes these deals take a long time.

15:54The WWE ESPN deal, as you mentioned, did not take as long. It was sort of clear, here's the subscriber base. Here's how we think we can grow it together. And hey, this is the perfect platform for us and our consumers. So all credit to them for getting that NFL deal done. We've all read about it. Not easy, but certainly well worth the wait. I am fascinated by this because usually Wright's deals take, because there are so many players right now. They take so long. What is it that made this an acceptable place for you to go? Disney's Disney and ESPN is ESPN. And look, as I mentioned earlier in this podcast, so many of us here have extensive history with ESPN.

16:33Mark Shapiro having run ESPN, you know, 15, 20 years ago, whatever that was at such a young age, you know, prior in his career, Ari with all of his dealings there. And also Triple H and I, I mentioned him earlier also, You know, we had talked to Disney extensively in the past in my prior profession when I had the good fortune of being one of the representatives of WWE about taking the product there. It just never worked timing wise for different reasons. This time it worked. Do you see the ESPN app as being complimentary to the linear TV network? I know Disney is suggesting that it's coming out as, you know, as a compliment.

17:14It's not going to take bundled subscribers. And I happen to agree with them. At$30 a month, that's a pretty steep price point to take people out of the bundle. Obviously, you feel the same way. Same. I think, again, ESPN delivers the content. So you're going to go where the content is. And if you have the luxury of being able to afford it, then you're going to do both. So I'm bullish on on people, you know, staying ESPN traditional subscribers and subscribing to the new product. Hey, Nick, one more quick break. And then I want to I want to ask you also about some other aspects of WWE.

18:02so to me uh one of the deals of the year um was wwe and netflix i mean you were able to convince netflix to come in for a weekly uh wwe series and um uh and you know something that they they haven't done before and even now they you know like i brandon reeg was just quoted in um the new york times saying like he doesn't know if he wants a full season of a of a rights package and you know he not only has a full season he has you know a a match a week in wwe raw so my question to you first is streaming is so different than linear tv just in terms of audience and everything else what have you learned what is different to you and wwe raw from usa to uh netflix So by the way, a couple of things on that.

18:52How about that Brandon Rieck piece that you're referencing? Not only what a phenomenal quote by Reed Hastings about Brandon and Brandon was the executive years ago, again, in my prior profession when I was an agent at CA in helping to represent WWE, who told us this was pre-COVID. this was many, many years ago, he said, hey, Netflix is not entering live now, but assume it gets there at one point. You want to make sure that your international media rights deals at WWE are lined up because Netflix is not going to get into live and say, hey, great news. We got into the WWE business live in one country.

19:30They're going to want international rights or at least the majority of the international rights, which WWE, to its credit, and once I got here to our collective sort of, benefit, align those properly to be able to do the Netflix deal. That's so interesting because it seems so obvious now. But when did he tell you that? Back in 2017, nobody was thinking that way. Correct. He was way ahead of the game. As that article indicated, he has been throughout his career on some of the different programming decisions. So for us with the Netflix deal, also a quick negotiation. Part of our advantage at TKO is there's no bureaucracy here.

20:07It's the folks I mentioned to you earlier. Ari Mark, Andrew Schleimer, our CFO, who's much more than a CFO here. He's a terrific operator as well. Ari Mark, Andrew, myself, Triple H on the WWE side. If we all agree, hey, this is the right move, boom, then we do it. There's no having to check with other owners. There's no making sure this box is checked. It's contractually, can we do it? If we can do it, do we like it? Is it the right home for our product, for our fans, for our consumers? If it is, we're in. Netflix deal was quick. Disney deal was quick. I think that's a testament to how the executives at TKO have set up the company.

20:44Similarly on the UFC side with Dana White and Lauren Seppstein and others, no bureaucracy. And we just think that's a better way to collectively run a company. So in terms of some of the results that you're seeing from the show, how is it performing differently than it was on linear television? Look, our international ratings are up everywhere. Our domestic viewership up. in certain countries, we're up like a thousand percent. So you're going, and by the way, a lot of folks outside of our ecosystem, I don't think realize this, and it may sound simple to you and your audience, but the Netflix interface is the same wherever you go in the world.

21:23So if you subscribe, subscribe or sign in, pardon me, to your account in Saudi Arabia, it's going to look exactly like it does in Maryland. And there's something, again, so far ahead of the game that makes it comfortable. Because as you know, having traveled to international countries on business, on pleasure, whatever it is, by the time you find a channel that has programming that you're accustomed to, you're thrilled. It was one of the brilliant things early on about CNN International decades ago, getting into that space was, hey, there's a large American contingency that wants English content that they're semi-familiar with.

22:00Netflix took that and expanded it a thousand times fold. So it's been a phenomenal partnership. They're great executives. We're also doing that September 13th Canelo versus Crawford boxing event with Netflix, which has global distribution on it. It'll be from Allegiant Stadium in Las Vegas. That's Mexican Independence Day weekend. Ticket sales are brisk. Dana White's the promoter of the show. Turkey I'll Shake, who's a longtime time WWE partner, eight-year partner of WWE is across the entire event. There's not simply financing the event, they're doing the event with us. And so far, so good in terms of what the outlook on that looks like.

22:40Nick, your answer to that is wild to me. You didn't talk domestically at all. You just talked about the international markets, which is from when I started, not from when I started reporting on this, from even a couple of years ago, that it would have been unthinkable. When did that change occur to you? I think to us, what we decided years ago here at WWE was you can't just pipe out American content internationally, expect that people are going to show up. So it's why we're boots on the ground in many other countries. I think 40 % of our premium live events this year took place outside of North America.

23:16And our audience, whether it's at 3 p.m. Eastern or our standard 6 or 7 p.m. Eastern start time or 12 p.m. Eastern, the audience shows up. One thing we also think that's exclusive to WWE, because it is sports entertainment and it's not just a sport, our delayed viewership is significant. So it's not, oh, well, I saw an ex who won the match, so I'm not going to watch it. It's seeing the storyline play out and why that person won the match that is as important as the outcome of that match. Live viewership, significant, delayed viewership significant. Earlier this year, I believe it was in the run-up to WrestleMania, you had a big European tour, which went, pardon me, I should know this, but it went, what, three weeks, four weeks?

24:02Three weeks consecutively for Raw and SmackDown, all from European locations live. And just gauging from your answers here, I'm going to guess that you're going to be doing the same thing in years going forward. By the way, we have a European tour coming up again this fall. and ticket sales significant. And again, viewership, we expect to be significant. We bought a Mexican-style Lucha Libre wrestling company called AAA. We're waiting for that deal to close, close. And then we're gonna have another product in the marketplace. We did, indulge me here for a second, John. We did two shows back-to-back in Los Angeles on June 7th.

24:42We did Worlds Collide, which was AAA, at 12 p.m. Pacific at the Forum. And then down the street four hours later at 4 p.m. Pacific, we did a PLE called Money in the Bank, which is one of our bigger PLEs. Back-to-back shows, two different products, two different audiences. 44 % of the people who bought tickets to Worlds Collide, the AAA event, were Latino. Massive Latino viewership and significant YouTube viewership. We aired it exclusively on YouTube. significant, significant viewership. Once this deal, the PLE deal is locked and loaded and up and running, then we go out in the marketplace with AAA.

25:23Give advice to other leagues. I mean, all the other leagues are, of course, going to international. I mean, that's an old story. Are they not committed enough or should they be doing more? I mean, it seems like you're doing more than most. Well, thank you for saying that. We think a lot of leagues are doing great work in this. If you look at what the NFL is doing with their international expansion years ago, Some would say, oh, we just wanted to make sure, the NFL just wanted to make sure that they had international fans. I don't think that's what Brian Rolap was purely thinking, and I have a lot of respect for him and have congratulated him for the new role which he earned with the PGA.

25:59What I think Brian Rolap and the others at the NFL were thinking is let's create a fourth Sunday window. So if you think about it, and you're an East Coast person, I'm a West Coast resident. And if you think about it, if you say, well, 10 a.m. Eastern, that seems too early to start football. Not true. Look at the West Coast viewership and share. It's significant. If you say, OK, but, you know, on the West Coast, the West Coast and mountain time zones are 40 percent of the audience. That's going to be too early. Also not true. If you look at Hawaii and Alaska, I get it. Two smaller states, ratings and share just as significant.

26:35So by doing this big international expansion, it not only got them new fans in new countries. The NFL is a legitimate product in London. Now, through the NFL roll app, the commissioner, obviously, their hard work, but it's also created this opportunity for the fourth Sunday window, which should be significant for them. I appreciate all your time today. Two more questions. One is, I'm going to enjoy watching you try to dodge this one, Nick, but I know you're not in the middle of the UFC negotiations, as you've referenced Mark Shapiro and Dana as well. Can you give us some sort of update in terms of what's going on?

27:12No. Not even a dodge, just a direct answer. I appreciate that. I told you, I don't know why you thought I would dodge that. Everyone who is across and is positive about it. You know, let's see. Finally, I just wanted to tell you, I referenced you. I was out to dinner with a couple of my wife and two other couples the other night. And your story about the out of office message and how you hate it and will never put that on. I just don't understand why any human would do that. So basically, if someone emails you, typically it's because they need a question answered or they need something. So you want that person.