WWE SEC Filing Lists Unexpected Loss of Vince McMahon as Risk Factor, Cites Important Partnership With Saudi Arabia

Posted By Caroline Walsh on 02/08/19

Following WWE announcing its fourth quarter earnings this week, the WWE issued its full 10-K SEC filing yesterday (Feb. 7). You can read the complete document at SEC.gov. The filing addressed WWE’s relationship with Alpha Entertainment for the new XFL, the risk factor of the unexpected loss of Vince McMahon, and the upcoming move to FOX for Smackdown Live.

The filing did list The General Sports Authority of the Kingdom of Saudi Arabia as a very “important partnership” for WWE. Per the WWE filing, the General Sports Authority, “among other things, hosts our live events in the Middle East.” Here are some choice notes from the filing (h/t PWInsider).

On WWE’s move to FOX in October 2018: “We have reached an agreement under which beginning October 2019, the domestic distribution of our program, SmackDown Live , will move to broadcast television on the Fox Network, which will result in our being responsible, directly or indirectly, for compliance with certain additional FCC regulations and statutory requirements. Any failure by us to meet these governmental policies or regulations and private-sector expectations could restrict our program content and, in the case of government regulation, result in monetary liability. Such failure could also adversely affect our levels of viewership and/or number of WWE Network subscribers. Any of these could affect our operating results.”

On a risk factor being the unexpected loss of Vince McMahon: “In addition to serving as Chairman of our Board of Directors and Chief Executive Officer, Mr. McMahon leads the creative team that develops the storylines and the characters for our programming (including our television, WWE Network and other programming) and live events. From time to time, Mr. McMahon has also been an important member of our cast of performers. The loss of Mr. McMahon due to unexpected retirement, disability, death or other unexpected termination for any reason could have a material adverse effect on our ability to create popular characters and creative storylines or could otherwise adversely affect our operating results. Mr. McMahon has established Alpha Entertainment LLC, to explore investment opportunities across the sports entertainment landscapes, and Alpha Entertainment LLC plans to launch a professional football league in early 2020 . While he has provided the Company assurances that his focus on WWE will not be diverted by these efforts, any such diversion or perception of such diversion could adversely affect our operating results and could have a material adverse effect on our stock price.”

On the relationship with Alpha Entertainment and the return of the XFL: “On April 3, 2018, the Company entered into transactions with Alpha Entertainment, LLC (“Alpha”), an entity controlled by Vincent K. McMahon, granting Alpha rights to launch a professional football league under the name “XFL”. Alpha has announced that it expects that this launch will occur in early 2020. Under these agreements, WWE received, among other things, an equity interest in Alpha without payment by , or other financial obligation on the part of, WWE. The investment will be accounted for under the equity method of accounting. WWE’s equity interest in the net assets of Alpha at the transaction closing date on April 3, 2018 was insignificant. After Alpha’s formation, we recorded our proportionate share of Alpha’s reported net losses which exceeded the carrying amount of the investment and reduced the investment value to zero as of June 30, 2018. Subsequent losses after that date are not required or provided for, after which we will resume accounting for the investment under the equity method if Alpha subsequently has net income and our share of that net income exceeds the share of net losses we did not recognize during the period the equity method of accounting was suspended. In addition, WWE entered into a support services agreement to provide Alpha with certain administrative support services with such services billed to Alpha on a cost-plus margin basis. During the year ended December 31, 2018, the Company billed Alpha $1,305 for services rendered under the support services agreement. As of December 31, 2018, the Company had $474 of current receivables for amounts billed to Alpha under the support services agreement.”