Netflix is taking a massive gamble on 'WWE Raw'

The deal sees WWE leaving traditional television for the first time in their history. Yes, in the U.S., "Smackdown" will still air on the USA Network, and "NXT" will be on The CW, but their flagship show is no longer accessible via cable. For the rest of the world, you need a Netflix account to watch WWE content. 

On paper, the deal makes sense. Outside of the U.S., fans can simply cancel their WWE Network subscription and sign up to Netflix to consume their wrestling content. Within the US, fans may choose to focus on "Smackdown" and "NXT." Currently, "Smackdown" is the hotter property with the fanbase anyway. Furthermore, U.S.-based fans will still need a Peacock account to watch Premium Live Events such as Wrestlemania. 

Splitting the content across four different broadcasters to the company's biggest fanbase is a risk. Netflix is undoubtedly expecting a surge in sign-ups once the rights deal takes place as they look to get a slice of WWE's untapped fanbase through the door. However, fans' money isn't endless. They may choose to forgo "Raw" and continue consuming "Smackdown and NXT." Or, they could move over to watching AEW on Warner Brothers Discovery. 

There are no guarantees when striking a deal like this one. Netflix needs new users to make the deal viable financially. They will get that surge in Europe and Latin America. However, the American user base must grow, too. Otherwise, the deal may not represent the value Netflix is hoping for. 

In recent years, it's been clear Netflix has wanted to enter the sports space. Professional wrestling is a good starting point. Now, Netflix needs to make the deal work. Otherwise, this could be a $5B gamble that doesn't pay off, and that would be catastrophic to the streaming giant's financial stability moving forward.