The Wrestling Post – 03.23.14

March 23, 2014

Welcome to another edition of The Wrestling Post.  This week we look Total Divas ratings, WWE stock and Dish Network plays hardball with the WWE.

Total Divas Ratings for Season 2

The first episode of the second season of Total Divas on E! debuted last Sunday with an average viewership of 1.07 million viewers.  The ratings are below the season 1 average of 1.34 million.

Payout Take:  The one hour premiere likely did not do as well due to the lack of the lead-in of “Keeping Up with The Kardashians.”  Still, to think that this show is doing over 1 million viewers on the biggest night of television (Sunday night) for the week are remarkable.

Would the WWE Sell?

Things are bullish with the WWE stock nowadays as the launch of the WWE Network and the potential for a huge payoff with a new rights deal expected later this spring.  But, would the WWE sell to the highest bidder?  This is the question posed by Bloomberg in a blog post earlier this week.

The short answer to the hypothetical question is no.  WWE stock is parsed into two distinct groups, Class A and Class B.  The Class A shares are held by regular stockholders while the McMahon Family owns Class B stock.  With Class B stock comes 10 votes per share which means essentially Vince McMahon controls the voting power of the company.

But rumors of AMC Networks merging with the sports entertainment company have been brought up although it appears that these rumors are only “fantasy matchmaking.”  While neither AMC or WWE have commented on the rumors, this does not mean much but for bloggers to speculate and generate page views.

Payout Take:  Perhaps a conspiracy theory but rumors that the WWE would sell could be the WWE themselves generating rumors to drum up “newsworthy” items as it postures in rights fees negotiations.  It would be hard to believe that the WWE put itself in this position in order to sell.  Moreover, the perception of Vince McMahon is similar to that of Dana White as the leader of their respective organizations.  Neither one would want to lose control of their companies.  The company was built by McMahon and no matter how much money is offered, it’s unlikely that he will sell or merge.

Something wrong with WWE Earnings?

Seeking Alpha penned an article questioning whether WWE’s earnings quality come from sustainable sources.  The web site cites Thomas Reuters research in coming up with its concerns for the stock.

First, the research indicates that the operating profit margins have been decreasing steadily over the last three years.  Secondly, the company has poor free cash flows in its last five quarters.  This is likely due to the investment into establishing the WWE Network.  Of course, the investor concern is that the network will impact the PPV revenues.  Notably, the report cites “other programming like the UFC’s “Ultimate Fighter.” Finally, there was a concern of bad debt. The question here is that the WWE’s allowance set aside for accounts receivables that it does not expect to collect from clients had fallen over the last three quarters.

Payout Take:  The article is an interesting look at concerns over the stock.  However, there are questions regarding its questions.  A lot of money it has spent in the recent quarters has gone to the development of the WWE Network.  There are other expenditures as well including the opening of a new state of the art training facility in Florida for NXT (development territory).  There is also the issue of its WWE Studios which has seeped money over the quarters after failed attempts to make stars out its own WWE characters and its attempts to revamp that unit.

Dish Network gets chesty with WWE

Dish Network announced this past Thursday that it would not carry Wrestlemania XXX according to Cageside Seats.  The move by Dish appears to be in reaction to the launch of the WWE Network.

In its official statement, Dish indicated the move was due to the WWE “not willing to adjust PPV costs to satellite/cable companies, which is unfair to their customers.”

Payout Take:  With the network launch, distributors such as Dish and DirecTV were likely upset that the WWE is putting its PPVs on its subscriber-based network.  This directly affects revenue the distributors usually shared with the WWE.  Thus, the distributors are losing out on the $60-$70 it anticipated fans would pay to watch the PPV.  While there was a likelihood that those not subscribing to the network, yet still fans of the WWE would order the PPV, the number is likely to shrink exponentially due to the popularity of the new network.  We will see if DirecTV follows in not carrying Wrestlemania XXX.

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