Airing "Smackdown" Live Is a Win for WWE Investors

Live sports programming is just about the only type of television left that people prefer to watch live rather than on a DVR or on-demand.

And while the outcomes of World Wrestling Entertainment‘s (NYSE: WWE) bouts are predetermined, making it not quite a sport, they still qualify as that type of must-watch-as-it-happens TV. For that reason, its flagship WWE RAW, a three-hour live show, draws 3 million to 4 million viewers to the USA Network each Monday night, an important factor in keeping the channel near the top of the cable ratings.

The company’s second major program, Smackdown, does not draw as many viewers, partly because it tapes on Tuesday for airing Thursday. That makes it easier for wrestling fans to read the results online beforehand, and then watch the program via DVR at their convenience later. Because it’s taped instead of live Smackdown does not feel as essential for viewers to watch when it airs. But WWE has plans to change that: The show is shifting to a live broadcast beginning with its July 19 airing.

That sounds like a small move, and it’s one that actually costs the company more money in production costs, but ultimately. it will pay off big for WWE shareholders.

It’s all about rights fees

WWE’s last television deal was considered a disappointment even though it raised the fees NBCUniversal paid to air RAW and Smackdown on USA and Syfy, plus Total Divas on E!, from $90 million a year to $150 million annually, The Los Angeles Times reported. That was a big increase, but well below twhat the company had predicted, and less of an increase than rival UFC received in its latest deal with FOX.

One of the reasons WWE received less was because only RAW aired live, in the fashion of traditional sports. UFC, by contrast, not only has regular live cards on FOX, but also under-cards, weigh-ins, and other live programming to fill time on FOX’s cable sports networks.

By offering more live programming, WWE should be able to boost the ratings for Smackdown while also driving up its value the next time that TV contract comes up for renewal.

The challenge for WWE is that wrestling carries a stigma with advertisers. Even though its shows draw impressive ratings, the ad rates they earn don’t match what traditional sports get for similar numbers.

Taking Smackdown live won’t solve that problem, but it should make the overall television package more valuable. It could also increase the number of bidders when the current deal expires. If that were to happen, it could lead to those broadcast rights not just inching higher, but exploding in value the way the UFC’s did.

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Daniel Kline owns shares of World Wrestling Entertainment, Inc..

Airing "Smackdown" Live Is a Win for WWE Investors