World Wrestling Falls as Online Network Cuts Pay Per View

World Wrestling Entertainment Inc. plunged the most since its initial public offering after saying its new online TV network won’t make up for lost pay-per-view and streaming video-on-demand business until 2015.

WWE slumped 43 percent, the most since its IPO in 1999, to close at $11.27 in New York trading.

The $9.99-a-month WWE Network needs 1.3 million to 1.4 million subscribers to replace lost earnings from pay-per-view, the Stamford, Connecticut-based wrestling entertainment producer said yesterday in a statement. The WWE Network, which began operating on Feb. 24, finished the first quarter with almost 670,000 subscribers, while pay-per-view revenue declined.

“WWE was in the cable network distribution infrastructure and tried to add an incremental over-the-top layer,” Rich Greenfield, an analyst with BTIG LLC, said in a telephone interview. “You’re seeing the challenges of trying to do that. It’s a classic transitional battle.”

The company said in April it was confident the WWE Network will reach 1 million subscribers this year, a goal Chief Financial Officer George Barrios reiterated in an interview.

“If we got to a million by the end of the year, we’d feel pretty good,” Barrios said by telephone yesterday. “I make it a point not to comment on the stock price.”

Record High

The stock closed at a record high of $31.39 on March 20, as investors cheered the subscription streaming network and the company drew takeover speculation. Since then, the stock had slumped 37 percent through yesterday.

“The issue here is that investors do not have a good understanding on the path to profitability,” Paul Sweeney, a Bloomberg Industries analyst, wrote in an e-mail today.

Yesterday’s announcement included the signing of a new multiyear deal with Comcast Corp.’s NBCUniversal to continue airing the “Raw” and “Smackdown” shows on NBC’s USA and Syfy cable networks.

New TV agreements in the U.S., U.K. and Thailand, along with talks for distribution in India, could add $92 million a year on average in annual revenue, the company said. On May 1, WWE predicted a second-quarter loss.

Meanwhile, investors are closely watching Vince McMahon, the founder and chief executive officer of WWE, for succession plans and whether he may consider selling the company. McMahon controls WWE through Class B shares that have added voting rights. His daughter Stephanie McMahon Levesque is the company’s chief brand officer, and her husband, pro-wrestler Paul “Triple H” Levesque, is executive vice president for talent and live events.

Should McMahon ever decide he’s ready to sell, companies from Comcast to Madison Square Garden Co. may line up with offers, Albert Fried & Co. and National Alliance Capital Markets have said.

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