Despite missing target date, WWE still plans network
March 31, 2012
Despite a delay in its plans to get a network off the ground, the WWE is still working on developing an over the air network. Originally, the WWE had planned the network to launch in conjunction with Wrestlemania this Sunday.
The WWE’s CMO, Michelle Wilson, indicated to the News Times (a local paper in Connecticut) that the WWE is in late stage negotiations with a distributor. Its goal is to reach 50 million viewers with its network. Wilson stated that the WWE would charge a subscription fee from each distributor. Wilson’s comments addressed concerns in a New York Post article which identified the delay for the network noting the difficulties faced by the WWE.
The WWE recently posted a disappointing 4th Quarter with substantial losses from its film division – another WWE venture which has been the brunt of the financial freefall by the company. It also spent $4 million on building the network in Q4.
But the fact remains that the network must turn a profit sooner than later. Analyst Michael Kupinski emphasized the need for this to the News Times:
“It appears that the company will bear much of the cost. They have soft fundamentals, and the cable channel could lose money for a period of years,” he said, adding that having a financial partner would help. Kupinski had previously said developing the new cable network could cost $10 million to $15 million.
The network would need to convince distributors that it would attract viewers and advertisers for it to catch on. It may be hard to attract a financial partner with the current economic climate and the fact that the WWE, like the UFC, enjoys control over its product.
Payout Perspective:
Looking at the financial losses the WWE’s film division has had would give pause to distributors and investors about the potential success of the WWE network. It appears that the launching of the network at Wrestlemania was ambitious at best. Despite great ratings from its television shows, producing 24/7 content will need to attract more viewers than its core wrestling audience. While the WWE owns a vast library (which would be great for nostalgic wrestling fans), original content and WWE films might not get the job done. The WWE is cultivating its content on its YouTube channel but we will see if this translate to over the air success. Time (and its balance sheet) will tell whether the network will get off the ground and when.
WWE airs Rock-Cena special
March 25, 2012
With Wrestlemania one week away, the WWE is pulling out all the stops in ensuring that the biggest event of its year gets the full promotional treatment. The WWE is airing a one hour “Once in a Lifetime – Rock vs. Cena” special utilizing NBC Universal’s television power.
The first ever WWE behind-the-scenes-style look at the two main eventers will also air on Syfy, Bravo, E!, Oxygen, G4, Style, NBC Sports Network, mun2, CLOO and Universal HD.
Via WWE press release:
This lifestyle special is a candid and compelling look at two of the biggest icons in sports entertainment history as they prepare for their Once in a Lifetime main event match. From touring and training on the road to Hollywood movie sets to the 54th Annual Daytona 500, this in-depth look with exclusive footage gives viewers unprecedented access and a glimpse into the personal lives of these men.
The special will premiere on the USA Network one hour before Raw this Monday night.
Payout Perspective:
Putting aside your personal thoughts about pro wrestling, this is an interesting look at how the WWE has been influenced by the UFC. The WWE has had behind-the-scenes looks at wrestlers. Most of these happen when they are doing charity work or are visiting the US Troops in the Middle East. It will be interesting to see how the WWE will produce this special as it’s being billed as a “countdown” style look at Rock and Cena. The television special also shows the advantage of the WWE’s partnership with the NBC Network as it can play its special over multiple network partners. Sound familiar? The UFC has taken advantage of the network synergy in promoting its events. Of course, having the Rock as one of its key characters in the special will help with ratings. Is this a new level of promotion for the WWE or is the WWE concerned with how the PPV will do next week?
WWE Earnings disappoint for Q4
February 24, 2012
The WWE announced its Q4 2011 results on Thursday and the earnings were described as disappointing. WWE earnings were lower for the fifth straight quarter.
The main culprit for the poor performance of the company was its film division and television licensing decisions according to Vince McMahon. In addition, costs from starting the WWE Network were cited as reasons for the softening of its earnings.
With respect to its film division, McMahon indicated that the company would utilize different strategies to try to bolster the division’s profitability but if that did not work, the WWE would be out of the film business. The WWE lost $12.2 million in the Q4 alone due to film impairment charges.
The television licensing decisions were based on the WWE’s decision not to distribute two of its properties, WWE Superstars and NXT, which have been showing online.
Via WWE press release:
Revenues totaled $112.9 million as compared to $122.5 million in the prior year quarter. Operating loss was ($13.1) million as compared to Operating income of $14.4 million in the prior year quarter. Net loss was ($8.6) million, or ($0.12) per share, as compared to Net income of $8.1 million, or $0.11 per share, in the prior year quarter. Excluding the impact of film impairments and network related expenses in the current year quarter, Adjusted Operating income was $3.1 million as compared to $14.4 million in the prior year quarter. Adjusted Net income was $1.8 million, or $0.02 per share, as compared to $8.1 million, or $0.11 per share, in the prior year quarter.
The WWE spent $4 million in Q4 on the creation of the WWE Network. However, the position on rolling out the new network was uncertain.
On the positive side, McMahon said during the earnings call that live attendance was up 7% for the quarter. Yet, this may be due to the fact that there were 11 fewer events in the quarter.
The PPV revenues were up 2% from 2010’s Q4 and up 6% over 2011. However, this can be seen as the result of a strong Wrestlemania PPV which is likely due in part to the return of Dwayne “The Rock” Johnson.
(H/t: Seeking Alpha)
Payout Perspective:
While overall revenues were up from 2010, it was mainly due to the success of Wrestlemania 27. It also looks like the WWE may need to see a significant turnaround if it wants to remain in the movie business otherwise it may continue to see huge losses. The gloomy numbers may mean some downsizing of the WWE talent roster which traditionally comes after Wrestlemania.
The other notable news coming out of the earnings call was McMahon’s description of the WWE Network as “potential creation” of the network. This is interesting considering the prior hype for the network which included commercials for it on Raw and the initial belief that it would roll out by Wrestlemania this year. It looks like the WWE wants to make sure it gets it right before unveiling it. However, its sunk $4.0 million alone this quarter into the creation of the network and has committed staff and other startups to this venture in prior quarters.
It will be interesting to see how the WWE will try to turn things around. Based on the great performance and impact last year’s Wrestlemania had on the WWE earnings, it will hope that this year’s Wrestlemania on April 1 will produce more of the same.
WWE Network set for April 1 launch
December 5, 2011
The WWE Network is set to launch on April 1st of next year. The Sports Business Journal reports that its in talks with In Demand and other cable operators to carry the network.
The WWE expects to reach 40 million homes with its network which would have the same reach as Fuel TV and the Fox Soccer Channel. However, it must reach carriage agreements with satellite and cable operators including Cox, Comcast and Time Warner.
Its expected that the WWE will follow the same model as other sports networks by having live events on its network. Notably, some of the WWE’s current PPVs will move over to the network.
The SBJ article notes that the WWE is considering programming beyond wrestling and there’s a possibility it would include some team sports.
In addition to the WWE Network on satellite and cable, it will also have a channel on YouTube.
Payout Perspective:
As the WWE network takes shape, it will be interesting to see how many PPVs will migrate to the network. As Cageside Seats suggests, the converted PPVs could be a value add to attract viewers to the network. By subtracting PPVs and leaving only its big draw PPVs (i.e., Wrestlemania, Survivor Series, Summerslam and Royal Rumble) it could help bolster PPV buys.
Its interesting to note that the UFC’s model differs from the WWE as the UFC relies on its PPVs whereas it appears that the WWE will focus on building its network through moving its PPVs to the WWE network. This is a good idea considering the content of some of the WWE PPVs were not PPV quality. As such, it has been reflective in its PPV buys.
As the WWE Network is taking shape, the biggest hurdle seems to be striking a deal with the satellite and cable operators to come to a deal that will land it on a tier that would be attractive to the casual viewer. Comcast has taken the lead in negotiating a deal on behalf of the WWE. This is likely due to the popular WWE Raw being on the USA Network, a Comcast property.
WWE announces third quarter earnings
November 5, 2011
The WWE announced its 3rd quarter earnings this past Thursday in a conference call hosted by WWE Chairman Vince McMahon and other WWE executives. Despite beating analysts expectations for Q3 earnings, net income for WWE fell to $10.6 million vs. $14.3 million in 2010.
The WWE announced that revenues totaled $108.5 million as opposed to $109.6 in 2010. A decline of 1%. Analysts expected adjusted net income of $0.15 per share. WWE announced its adjusted net income as $0.19 per share.
One of the bigger questions on the earnings call was the WWE Network announced to debut in 2012. Notably, there was no talk about the recent announcement that there would be a WWE channel on YouTube. So, it appears that the WWE will go forward with an over the air network in addition to its YouTube channel.
McMahon and other WWE executives were quite vague regarding the plans for the WWE Network. But here are some tidbits.
Via Seeking Alpha:
(McMahon) Capital expenditure is about $10 million to $15 million mostly in equipment and construction for our network. And we believe that, obviously we have finally turned the corner on where we are with our network, and we’ll soon be making a very big announcement as it relates to that.
So that we are generally speaking of where we are with the quarter this year. And notwithstanding that, again, we are taking advantage as we always do with all of our strategic opportunities as well as I’ve said before, including launch of the WWE Network, so with that we can achieve meaningful growth as far as that in other aspects of our company is concerned.
We expect our fourth quarter 2011 results will reflect $46 million in startup operating expense and $10 million to $15 million in capital expenditures for equipment and construction. This investment will provide space for additional staff and production equipment and allows for a redesign of enhanced interactive website to support a full range of network programs.
- McMahon indicated that the network would not partner with distributors. The network will be wholly owned by the WWE.
- WWE entered into a revolving credit agreement of $200 million based on favorable conditions in capital markets. Although the WWE indicated no plans to borrow at the time, it could utilize the agreement for the WWE network.
Other information:
- Q3 saw an impairment charge of $5.1 million coming from its film division
- PPV buys increased domestically by 3%, TV ratings were flat compared to Q2 and live attendance saw a 6% decline.
- Excluding the impact of the film impairments in the current quarter, Adjusted Operating income was $21.0 million as compared to $20.3 million in the prior year quarter. Adjusted Net income was $14.1 million, or $0.19 per share, as compared to $14.3 million, or $0.19 per share. (via WWE press release)
- Although the WWE announced a shift in its business strategy earlier this year. there are no threats of a takeover.
- Analysts actually take issue with the WWE’s creative team as it cites the lack of taking advantage of wrestler C.M. Punk’s anti-hero storyline. However, the return of The Rock to the WWE this quarter, it should help with ratings. McMahon addressed the fact that the WWE could address these “creative challenges”
WWE stock price was up to $10.70 but closed down slightly for the week at $10.58.
WWE Network will have channel on YouTube in 2012
November 2, 2011
The Hollywood Reporter reports that the WWE Network will be a part of You Tube’s initiative in creating 100 different channels online with the site. Although initial speculation was that the WWE Network would be on cable television, the unprecedented move allows the WWE to circumvent negotiations with cable providers.
Via the Hollywood Reporter (h/t Cageside Seats):
In a low-budget early effort to compete with satellite and cable TV providers, YouTube announced Friday that it has partnered with several entities to roll out television-style channels with professionally produced shows that will strike a sharp contrast to the short videos of crazy cats, skateboard wipeouts and other amateur content that made the site famous.
Insiders said the Google-owned property has shelled out some $150 million in advances for the creation of about 100 channels, with a maximum $5 million going to any single channel. Financial details were sketchy on Friday, though The Wall Street Journal reported that deals call for YouTube recouping its advances then giving as much as 55 percent of the ad revenue to the content creators.
The WWE began airing commercials for a network earlier this year with the start date being in 2012. The network is planned to roll out around the next Wrestlemania this spring 2012.
Payout Perspective:
For WWE fans, this is not what was expected but it is probably the best strategy for the WWE at this point. As we have seen from the Direct TV-Fox contract dispute, the task of placing its network and negotiating a contract with cable distributors would have been difficult especially with its target roll out of this spring. If given the choice, fans would likely check out the channel on YouTube rather than pay extra money on their cable bill.
The bigger story here is YouTube (a Google owned entity) and its move to compete with satellite and Cable tv. How many people will adapt to watching television on their computers? How many will know that they can hook up their computers to televisions?
Triple H calls out the UFC
September 16, 2011
WWE star Triple H stated in an interview with AOL Moviefone that the WWE does not need to evolve in response to the growing popularity in the UFC and MMA. In fact, he suggests that the UFC product needs more of an entertainment component.
Via AOL Moviefone (h/t MMA Fighting) :
Moviefone: How do you think WWE and pro wrestling needs to evolve as UFC and MMA grows in popularity?
Triple H: I don’t think we have to evolve. It’s two totally different things. I think now especially there’s this thing like, “oh it’s very similar.”
I don’t see us needing to evolve to what UFC does because quite frankly sometimes the fights are long and boring, guys lying around and sometimes the fights are fast and over in five seconds. I’ve always thought one of the things about us, if you look at us solely from a sports standpoint, is that we always give you a good show. We’re never going to give you a crap game.
I think if anybody needs to evolve, it’s them. Give more of an entertainment standpoint. Give more form; they just have fighters who walk in in T-shirts and shorts and just stand there and then they fight and then they win and then they go “thanks, I’d like to thank my sponsors” and then they leave. The whole world was up in arms when Brock was flipping people off and was cussing at the beer company because they didn’t give him any money and everyone thought, “oh my god, he’s disrespectful,” — the whole world was talking about it. They couldn’t wait to see him get beat up. And then he did well, and he beat some guys and then people jump on his bandwagon going “Brock’s the greatest.”
Payout Perspective:
If you put aside credibility issues MMA fans may have for a pro wrestler critiquing the UFC product, is Triple H’s assessment valid? The one thing that the UFC and WWE have been quick to mention in the past is that the two are not competing organizations. One is sport (UFC) and one is entertainment (WWE). While the latest Diaz (and now Penn) drama may segue into WWE-type drama, comparing the two products is not fair. This criticism may be the start of a rivalry between the two as the UFC heads to Fox.
Triple H’s critique comes from the perspective of an outsider and what one sees on television. Its obvious that the WWE can control the match whereas the UFC cannot. Triple H also calls out the fact that there is no pomp and circumstance with most UFC fighters. No pre-entrance show, no post-entrance show. His theory is that sports is entertainment. And from his perspective, that’s what the UFC is lacking.
Is Triple H’s criticism that the UFC needs to be entertaining something that the UFC is concerned with? The UFC’s move to Fox was great for the business but will there be a concerted push for entertaining fights. We saw exciting fights at UFC 134 in Rio with several knockouts but no submissions. In fact, most fights rarely saw the ground. For those not accustomed to MMA, ground grappling can seem tedious as the fighters work for position.
As far as the outrageous personalities, there are several MMA fighters that are entertaining and can sell fights. MMA fighters do not play characters, they are athletes. It will be interesting to see the first Fox Primetime and how the product is different from Primetime’s of past. How will the show be produced and how will the UFC/Fox sell Cain and JDS?
WWE Network coming in 2012
September 6, 2011
Cageside Seats reports that the WWE Network is coming to cable systems in 2012. A teaser played on this week’s episode of Monday Night Raw on USA and a story followed on WWE.com.
Via WWE.com
It’s the WWE Network. And, as the world learned this week, it’s on its way in 2012. All we know is that it’ll be a brand new day for watching the greatest matches, moments and Superstars in sports-entertainment history.
The MMA tie-in here is that it is being reported by the Wrestling Observer that the WWE pushed plans for the announcement of the network as it was feared that the UFC would jump the WWE’s plan and announce its own network. Concerned that it would be perceived as a copycat, the WWE made the announcement this week.
Payout Perspective:
There are three things that don’t mesh with the theory that the WWE rushed the announcement of its network. First, the UFC announced its partnership with Fox on August 18th. Secondly, Vince McMahon noted that a WWE Network was coming in an early August company earnings call. While he did not state that it was coming 2012, he did state that the network was imminent. McMahon indicated that prior to the UFC-Fox deal. Finally, Dana White and Vince McMahon met this summer as White paid a visit to McMahon at WWE headquarters. While both blew off the media for the reason for the visit, its now obvious that a portion of their get together was to discuss the future of their respective businesses.
Notwithstanding the theory, the Wall Street Journal story about the UFC seeking to purchase the G4 network, the near-deal with NBC Sports and the Fox deal all point to the possibility that the UFC could have its own network. Seeing the possibility, the WWE felt compelled to make the announcement. Its interesting considering the fact that both White and McMahon have made it clear that the respective organizations are not competitors. UFC is sports, WWE is entertainment according to both heads. Yet, the WWE cannot help but be concerned about the UFC coming to Fox. The Ultimate Fighter series will air the same night as WWE’s Smackdown. As a result, Smackdown aired live last Tuesday with the prospect of moving from Friday to Tuesday presumably to avoid competing. Although both parties claim not to be competitors, both seek the same male demographic audience.
As for the network, the teaser on WWE.com shows the extent to which the WWE could use for programming. The WWE has much more of a library to carry a network as opposed to the UFC. Basically owning the wrestling universe: WWE, WCW, ECW, AWA, et al. there is ample content for a network. Thinking about the network, one could only imagine watching Hulk Hogan’s Rock n Wrestling on Saturday mornings once again. But, from a business standpoint, there are still many logistics that need to be answered regarding distribution. One need only look to today’s headline of the Tennis Channel-Cablevision/Verizon dispute over carriage fees and tier placement to see the obstacles ahead for a WWE Network. We will see how soon, or how late in 2012 the network comes to fruition.
McMahon denies any ties with UFC in company earnings call
August 6, 2011
WWE announced its 2nd quarter earnings on Thursday as it beat analyst expectations. In its earnings call, Vince McMahon dismissed any partnership with the UFC for a television network.The question came as a result of Dana White’s recent visit to WWE headquarters. White was vague about the reason for his visit while McMahon indicated that the UFC head’s visit was purely social.
The second quarter ended June 30th and included this year’s Wrestlemania, which contributed to the financial success for the company this quarter. Among the other findings:
- Wrestlemania was big for the WWE this year as it offset some of its losses (mostly in its home video sales unit). Its likely that the return of the Rock was the single factor behind that.
- The WWE All-Stars video game was another key positive for the WWE revenue as sales of the game have been strong.
- July’s WWE PPV “Money in the Bank” was 20% above its initial projections. The CM Punk factor probably contributed to the numbers. McMahon indicated that overall PPV revenue for the WWE is on the upswing.
- RAW TV ratings are up 3% from 2010. The WWE will begin a one hour WWE program prior to RAW which McMahon believes will contribute to revenue.
- Although live event attendance is down for 2011, there are positive signs of fans coming back.
McMahon spoke about the WWE Network (via Seeking Alpha):
From a content strategy, finally we’re rolling out the WWE Network after all these many years. In terms of putting it all together, we have I think the most compelling startup network in the history, which is saying a great deal, because I understand what other networks have started out as, we have an extraordinary leverage with all the content distributors.
And again, we’re finally rolling that out. And with meetings coming up actually this week and next, so we’re very proud of that. And we think again that’s going to be a significant bottomline number to us going forward.
McMahon was asked about whether he cared about the potential of the UFC having its own television network (via Seeking Alpha):
No, frankly I think they fell on their butt recently, trying to do network with NBCU Comcast. I don’t know if it makes any sense for them. I can’t speak to that, but it makes a great deal of sense for us. Again, they’re totally different than we are. We are in the entertainment business, which gives us formal leverage as far as networks are concerned.
He also dismissed any partnership with the UFC as he distinguished the UFC as sports and the WWE as entertainment. This mantra was stated both times when questioned about the UFC and it was said during the WWE’s feature on Bloomberg TV.
Most analysts list the WWE stock as most list it as a hold.
For those interested, the transcript of the earnings call is here.
Payout Perspective:
The WWE’s earnings announcement came on the worst financial day since 2008. Its easy to see that the addition of The Rock at Wrestlemania and its new WWE All-Star game, which features new and old WWE wrestlers, were big reasons for its earnings success this quarter. Also, RAW ratings continue to impress. It was interesting to note that while McMahon may respect the UFC, there is no way that it partners with the UFC on a network.
McMahon made some interesting comments about the UFC as he questioned whether a network would be the right direction for its business. He noted the UFC “falling on its butt” with “trying to do network with NBCU Comcast.” An interesting take and we will see what will happen with the UFC’s next television deal. With the news of the UFC-Fox Latin America television distribution agreement, there is speculation that Fox may be the new leader for the UFC television deal. Stay tuned.
Bloomberg TV profiles WWE
July 4, 2011
Last week Bloomberg TV’s show “Bloomberg Enterprise” profiled Vince McMahon and WWE. One of the more interesting quotes from McMahon was stating the difference between MMA and WWE.
Notably, McMahon stated that MMA is “sport” whereas WWE is “entertainment”. This is in line with the change in business strategy for the wrestling organization with more of a focus on entertainment as opposed to “sports entertainment” which was the moniker of the brand for years. Also, McMahon neglected purposefully failed to acknowledge that Impact Wrestling (formerly TNA Wrestling) shown on Spike TV was a competitor. He did mention Ted Turner’s run at him with WCW.
Payout Perspective:
The episode is online here. Its great insight into WWE’s business and how it sees its consumers. Its a definite departure from what you may watch on Monday or Friday night. While the WWE relies on revenue streams similar to the UFC: PPV, merchandise and live events. The report focuses on the live events as the key to WWE’s success. What’s interesting is the talk about a WWE television network on the strength of its wrestling programming and the reinvented Tough Enough. The WWE indicated the complexity of addressing the needs of the various stakeholders in putting together a network. McMahon said the network should be up by next year.
