WWE Finds an Unusual Tag Team Partner in the Streaming Game

By Markets Fool.com

The rapidly changing media industry has thrown up numerous unexpected partnerships. Example No. 237, World Wrestling Entertainment (NYSE: WWE) and edutainment purveyor Discovery Communications (NASDAQ: DISCA).

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Image source: WWE

The two are teaming up in the latest round of financing for FloSports, an intriguing early stage company that focuses on niche athletic endeavors. Let's see if we can tease out why these two seemingly disparate media enterprises are giving money to this small enterprise.

Investment Flo(w)

WWE and Discovery Communications were the two publicly traded companies out of the five entities that participated in FloSports' latest round of capital raising. All told, this brought in just over $21 million for the fledgling company. This gives FloSports a total of $32 million in funding from a variety of sources.

The monies will be used, in FloSports' words, "to improve our digital platform and add OTT apps like Roku and Apple TV. We'll be enhancing your user experience and adding new features to our live streams. And we'll put more resources toward research and development."

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The live streams are the core of the company's offerings. These broadcast athletic pursuits such as collegiate wrestling, martial arts, volleyball, fastpitch softball, and even cheerleading; there are currently 14 in total. The company also produces video features on various aspects of these pursuits.

In addition to video, FloSports also runs complimentary websites that offer news and feature stories on the chosen sport or activity. The idea is to make each streaming/web portal combination the go-to choice for devotees of that pursuit.

Its service costs $20 for a monthly subscription, and $150 for a full year.

The company isn't in the giant, billion-dollar sports tier that covers pro football, baseball, or basketball, but that's the point. The activities it tracks boast fan bases that are just as devoted, albeit much smaller.

In a recent article in The Wall Street Journal, FloSports' CEO Martin Floreani said that "[t]raditional media companies go a mile wide and an inch deep, but there's a whole slew of sports outside football and basketball."

Discovering the future

Neither Discovery nor WWE has made any public statements on their respective investments. FloSports latest capital raising was small compared to that of some higher-profile enterprises. Perhaps, then, the two companies see little reason to discuss their contributions, or what they will/might get from them.

The amounts in question might be modest, but they represent a bet on the future. Discovery Communications runs a host of cable channels, while WWE's flagship shows Raw and Smackdown appear on cable's USA Network, owned by Comcast.

Meaning that WWE and Discovery are both anchored in a dying medium; cable keeps shedding subscribers, while streaming services like Hulu continue to grow their numbers.

One prominent example of the growth of streaming comes from the WWE itself. The company's WWE Network grew its subscriber count by 25% on a year-over-year basis to just over 1.5 million, in the most recently reported quarter. That helped deliver record quarterly revenue of almost $200 million.

Snooker and sharks

I think both WWE and Discovery have read the writing on the digital wall, and realize that getting more widely involved in streaming is not only a smart move -- it's a matter of survival. FloSports represents a potential outlet, and conveniently it needs investment just now.

It's also a compatible partner, as it has a multi-faceted streaming operation with offerings that are not too far from those of WWE and Discovery.

The former is, of course, a purveyor of the staged, theatrical version of the amateur wrestling FloSports broadcasts in one of its verticals.Discovery is the owner of Eurosport, a Europewide broadcaster of sports both major (professional soccer) and niche (golf, snooker).

Of course, if FloSports' business goes in the right direction, it can branch out into offerings that aren't sports and related activities. It could feature a stream of the critter shows that air on Discovery's Animal Planet channel, for instance, or one that airs the Discovery Channel's lineup of automobile-themed series.

So, WWE and Discovery investors, consider this a low-cost and opportunistic investment from your company that can potentially help it leap successfully into the digital future.

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Eric Volkman owns shares of World Wrestling Entertainment. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.