TKO gets smacked down as SmackDown set for USA Network return

Shares of TKO Group (TKO) slumped after the company announced that WWE’s SmackDown will return to USA Network beginning in October 2024 as part of a new five year deal. TKO Group, which is comprised of mixed martial arts organization UFC and WWE, is majority owned by Endeavor Group (EDR).

FIVE YEAR PARTNERSHIP: On Tuesday morning, WWE, part of TKO Group, announced a five year domestic media rights partnership with Comcast’s (CMSCA) NBCUniversal that will bring Friday Night SmackDown back to USA Network beginning next October.  Friday Night SmackDown has aired for on Fox (FOXA) since 2019. As part of the deal, NBC has committed to produce four primetime specials per year that will run on its broadcast network.

“NBCUniversal has been a tremendous partner of WWE for decades,” said WWE President Nick Khan. “We are excited to extend this longstanding relationship by bringing SmackDown to USA Network on Friday nights and look forward to debuting multiple WWE special events annually on NBC.” Meanwhile, Frances Berwick, Chairman, NBCUniversal Entertainment, commented that “It’s a privilege and thrill to continue NBCU’s decades-long partnership with WWE which has helped cement USA Network’s consistent position as the top-rated cable entertainment network in live viewership.”

USA Network is currently home to WWE NXT and WWE Monday Night Raw, the companies noted.

TOTAL DEAL VALUE OF OVER $1.4B: The deal between WWE and NBCUniversal works out to an average of $287M per year, or a total value of over $1.4B, people familiar with the matter told CNBC, Drew Richardson and Alex Sherman reported. WWE does not expect to reach a rights agreement for its flagship show “Raw” until next year, according to the report, which adds that the new Friday Night SmackDown agreement is roughly a 40% increase from the deal with Fox.

GUGGENHEIM WEIGHS IN: Guggenheim lowered the firm’s price target on TKO Group to $126 from $130 and keeps a Buy rating on the shares after the new five year deal was announced. Press reports indicate that the new SmackDown deal is a step-up from the prior deal with Fox at about $1.45B over five years versus the prior $1B Fox deal, notes the analyst. Under the current contract, Fox is paying roughly $100M per hour per year for SmackDown, compared to the about $88M per hour per year that NBCU pays for Raw, says the firm, which adds that it expects whichever network/platform lands the new Raw rights will pay “at least the new hourly rate as what was announced today for SmackDown,” or $145M per hour, as reflected in the firm’s updated model.

PRICE ACTION: In afternoon trading, shares of TKO Group fell over 12% to $88.48, while those of Endeavor Group are down 5% to $21.25.