WWE Smacked Down as Online Subscribers Short of Estimates

Apr 07, 2014 4:26 pm ET

(Updates with analyst’s comment in fifth paragraph.)

April 7 (Bloomberg) -- “WrestleMania” didn’t lure enough fans into the ring.

After airing the annual slugfest’s 30th edition yesterday, World Wrestling Entertainment Inc. reported 667,287 subscribers for a new online-video service it’s counting on for growth. That fell well short of the average estimate of at least 800,000 compiled by Benchmark Co.

WWE founder and Chief Executive Officer Vince McMahon is relying on fan loyalty to make the $9.99-a-month online service a success as he negotiates a new TV deal. The company is seeking a new home for its “Raw” and “SmackDown” shows after failing to renew an agreement with Comcast Corp.’s USA and SyFy cable networks.

Shares of WWE sank 15 percent to close at $23.90 in New York, the biggest one-day drop since July 2001.

“They have a lot riding on over-the-top subscriptions,” Rich Greenfield, an analyst at BTIG LLC, said in an e-mail. “The question is simply how many will ultimately subscribe.”

The online WWE Network is “well on its way” to reaching its goal of 1 million subscribers by the end of this year, the Stamford, Connecticut-based company said.

Some investors forecast WWE’s streaming service will eventually attract more than 2 million subscribers as the company expands the offering globally, Greenfield said. WWE is currently only providing service in the U.S.

WWE was expected to announce 800,000 to 1 million subscribers, according to Mike Hickey, an analyst at Benchmark in Denver. In an April 4 online post, Hickey said he lowered his estimate to 500,000 to 800,000.

Hickey, who has a buy rating on the shares, said some investors expect the WWE service to amass 3 million subscribers by the end of 2015.

“Several momentum investors are probably disappointed today,” Hickey said in a phone interview. “We believe this subscriber number still supports our $31 price target.”