The Wrestling Post – 05.30.14

May 30, 2014

Before we head into one of the bigger combat sports Saturdays in a while, we welcome you to another edition of the Wrestling Post.

In a bit of bad timing for the WWE, this Sunday its Pay Per View event, Payback in Chicago will now go up against Game 7 for the Chicago Blackhawks as it plays the Los Angeles Kings to see who makes it to the Stanley Cup.  The card itself is not that strong and the importance for many Chicago sports fans will be centered around the hockey team.

Also on Sunday will be the Season Finale for Total Divas on E!  In its second season, (and renewed for a third) the episode culminates at Wrestlemania and Daniel Bryan’s wedding.  This season’s average through 10 episodes is slightly over 1.16 million viewers. It’s likely that it will not surpass its first season of almost 1.3 million viewers per episode.  For the second time this season, the episode will run up against its own brand so we might expect a certain segment of fans putting the finale on the DVR.

Regardless of the outcome of the finale, Total Divas has proven to be an asset for the E! network.  According to a recent press release, the network credited Total Divas for its 7% increase across key demos.

Via E! press release:

Returning series Total Divas is one key driver of growth, out-delivering year-ago programming across all key demos by impressive triple digit growth up to +135% in Total Viewers (1.0 Million), +103% in Women 18-34 (252,000), and +142% in Adults 18-49 (628,000).  Total Divas is pacing as E!’s best sophomore original series in two years (since May 2012) and is the network’s second-most watched original program after Keeping Up with the Kardashians.  Total Divas also ranks as a Top 5 ad-supported cable show on Sundays 9pm to 10pm in Women 18-34 (#3) and Adults 18-34 (#5).

Payout Take:  Despite what you may think about the reality show, it has become valuable to the E! network.  Even though there has been a slight decrease in viewership this season, it is doing well with key demos.  In its first season, it was positioned to succeed with a prime spot after its top series, Keeping Up with the Kardashians.  This season has gone without Kim and Chloe as a lead-in but still has produced on one of the busiest nights on television.

WWE in damage control after disappointing TV deal

May 21, 2014

The WWE conducted a special conference call on Monday in order to mitigate some of the damage that occurred with the announcement of its deal with NBC Universal.  Although terms of the deal were not divulged, investors took the news as bad and the stock has tumbled.

The conference call did not reveal anything new except for the fact that WWE CEO Vince McMahon stated he was “a little disappointed” in its new deal with NBC Universal.  He indicated that the deal altogether was “at about $200 million.”  McMahon was frank on the conference call stating that the deal was not what the company wanted or what its researched showed with respect to its domestic television deal.  He also admitted in the Q&A portion that launching the WWE Network had a negative impact on negotiating its TV rights deal.

One of the takeaways here is that the WWE may have underestimated the impact the loss of its PPV revenue may have on its core business.

It still projects that it will have 1 million network subscribers at the end of 2014 and the possibility of 2 to 2.5 million subscribers at the end of 2015.  With the subscriber projection of 1 million at the end of 2014, it would have an estimated 2014 OIBDA (Operating Income Before Depreciation and Amortization) loss of $40 million for the network alone and $35-$45 million for WWE.  If the WWE achieves its 2 to 2.5 million subscribers number by the end of 2015 it will have turned around the loss to an OIBDA of $105 million to $160 million for the network and $125 million to $200 million for WWE.

Despite the promising outlook, investors are not happy right now.   Marketwatch reports that the Former Attorney General of Louisiana has commenced an investigation into the WWE.  The crux of the investigation will seek “whether WWE and/or its officers and directors violated state or federal securities laws.”

Unless the investigation produces material information that the officers and directors knew that it was misleading investors, it’s unlikely that the investigation would produce much.  McMahon alluded to the fact that the company’s research reflected the fact that a TV rights deal could garner double the WWE’s current deal.  Obviously, if the research was flawed and/or not sound in its conclusions, there may be an issue.  But, I would not suspect any criminal or civil penalties as a result of a disappointint TV deal.

Payout Perspective:

Monday’s Business Outlook Conference Call was a way for the WWE to calm its investors.  But the conference call probably did not make any holder of the stock happy considering McMahon expressed his own dismay on the new deal.  Earlier this year, the rights fee deal was thought to be a big boon for the company based on other sports’ rights deals such as NASCAR, but  it did not come to fruition.  Based on the huge hit the WWE took after news of its domestic television deal and the news that PPV revenue will contribute more than expected to the company’s losses, many investors are cutting their losses.  The steep decline in stock price caused an investigation and the possibility that executives will be removed to satiate angry stockholders that saw their portfolio take a huge hit.

Just a few months ago, the WWE stock was trading above $30 and now (at the time of this writing) it’s trading below $11.  The stock has been downgraded by analysts which can’t help foster confidence right now.  Now, analysts will take aim at its network to see if the company can come through with its projections.

WWE reports 2014 Q1 Earnings

May 2, 2014

On Thursday, the WWE announced its First Quarter earnings for 2014.  Despite a loss of $8 million ($0.11 per share) due to the WWE Network, it beat analyst expectations by 0.05.

This quarter in 2013, the WWE saw net income of $3.0 million or $0.04 per share.

The most notable news was the lack of news on a new domestic rights TV deal which was initially thought to be completed by late-April or early May.  Yet, there was no word on the status.

The WWE reported that despite the $4.4 million of network subscription revenue (based on 495,000 subscribers at quarter’s end), it was partially offset by $1.3 million decline in pay-per-view revenue.  Notably, Wrestlemania XXX was not factored into these numbers.  Here, we see the obvious cannibalization of its product. The announcements by DirecTV and Dish Network that it would not carry this Sunday’s PPV are a looming threat to the PPV revenue.  The concerns would be whether purchasers of the WWE PPVs could transfer to the WWE Network to view the PPVs and how much more PPV revenue could it lose if big distributors refuse to air its PPVs.

It reiterated its belief that it would have 1 million subscribers by the end of the year.  It also believed its expansion of the network to more platforms (e.g. Xbox One) and international markets will provide long-term growth over time.

WWE stock finished up 4% slightly over $20 for Thursday but is off 7% as of this writing on Friday.

Payout Perspective:

There was nothing earth-shattering about the losses as most knew that the WWE would be reporting this due to the Network expenses.  The lack of news of a new domestic rights TV deal is hard to read.  It could be good news or bad news.  Based on the stock price, it appears that investors are taking this as bad news. The Network remains the big news this quarter.  While Wrestlemania viewership on the Network and PPV did over 1 million viewers, we may not see these types of combined numbers again.  The news that distributors are beginning to backlash against the WWE for its Network is something to keep an eye on the rest of this year.

The Wrestling Post – 04.18.14

April 18, 2014

Welcome to another edition of The Wrestling Post.  In this edition we write about a new PPV announced, DirecTV plays hard ball and the latest ratings from Total Divas.

Ring of Honor tries PPV Sunday June 22nd

This week Ring of Honor announced that it would be holding its first PPV ever for the company Sunday, June 22nd.

Notably, the ROH PPV is the same weekend as Glory’s first PPV and a week after TNA Wrestling’s PPV, Slammiversary.  ROH had previously put on iPPVs with some noted difficulties.

The Sinclair Broadcasting-owned ROH have expanded its reach with its weekly show as more affiliates carry ROH.  Of course, it’s at 1:00 am on Friday night here in Seattle so you can still DVR the show. Hopefully promotion of the PPV will attract fans to buy the PPV.

Payout Take:  The PPV can be seen as ROH capitalizing on the WWE popularity and its champion – Daniel Bryan worked Ring of Honor for some time.  104,000 buys is the unofficial number of ECW’s very first PPV – Barely Legal in 1997.  We shall see if ROH can do better in 2014.  ROH has more financial backing and should put on more of a polished product.  Obviously PPV has evolved since the late 1990s and we will see which satellite/cable companies pick up the PPV but it will be an interesting comparison.

DirecTV drops WWE PPVs

Earlier this week, DirecTV announced that it would no longer offer WWE PPVs to its subscribers per PW Torch.  WWE did release a statement acknowledging the move by the satellite company.  “Yes, DIRECTV has decided to stop offering our PPV’s residentially and commercially. The only other option would be to work through the local cable provider.”

DirecTV did leave an out that it may return to carrying WWE PPVs.  You may recall that the Dish Network first announced that it would no longer carry the company’s PPVs since it launched its digital network.  However, the distributor changed its mind and carried Wrestlemania XXX.  The domestic buys for Wrestlemania XXX, the first PPV carried on the WWE Network, drew 400,000 purchases.

Payout Take:  While the WWE is hoping for the success of its network, it still seeks its distributors to continue to carry its PPV.  Distributors such as DTV and Dish saw this as a direct hit against its profits from the WWE PPVs.  We all knew that the WWE Network would cannibalize its PPV profits but would benefit the WWE bottom line in the long run.  We will see whether DTV stands it ground. It has played hard ball in the past.  One need only look at the acrimonious negotiations between DTV and the Pac 12 Network and The Weather Channel to see it doesn’t back down.

Total Divas ratings

Episode 4 for the second season of Total Divas on E! scored 1.164 million viewers for a 0.5 rating among adults 18-49 according to Television By Numbers.   The episode was the first in two weeks having taken off for Wrestlemania XXX Sunday.

The 1.164 million is the second-lowest rating this season for the reality show.  This season’s average is at 1.26 million viewers.

WWE: Record 1 million U.S. households watch Wrestlemania

April 15, 2014

After the successful debut of Wrestlemania 30 on WWE’s Digital Network last week, WWE announced today taht the event did a record 1 million U.S. household reach along with PPV buys for the event.

WWE-WrestleMania-30

STAMFORD, Conn., April 15, 2014 – WWE® (NYSE: WWE) today announced that WrestleMania 30 reached a record 1 million households in the U.S. alone on WWE Network and pay-per-view combined, the first time WrestleMania has eclipsed this mark domestically. With more than 667,000 WWE Network subscribers in the U.S. and nearly 400,000 domestic pay-per-view buying homes for WrestleMania 30, WWE is confident that it will reach its goal of 1 million subscribers by the end of 2014.

WWE Network launched on February 24 in the U.S. and successfully streamed six hours of live coverage of WrestleMania 30 on Sunday, April 6. Additionally, more than 7.1 million hours of video content was viewed on WWE Network during WrestleMania Week from Tuesday, April 1 through Tuesday, April 8.

WWE Network will be rolled out in Canada, the U.K., Australia, New Zealand, Singapore, Hong Kong and the Nordics in late 2014/early 2015.

 

Payout Perspective:

If you add up the WWE Network subscribers (667,000) plus the number of Wrestlemania PPV buys (400,000), the total reach for the event results in 1.067M domestic households that purchased the event. The PPV price for a Wrestlemania event is $59.95.  It’s no coincidence that the 6-month WWE Network subscription price is $9.99 with a 6 month commitment, which is $59.94, or roughly the exact same price as the Wrestlemania PPV.  By doing so, the WWE can announce that they domestically sold 1.067M PPV buys for the event, which is an impressive number.  Once you add up international PPV buys, and in the future, international WWE Network subscribers, the number could substantially grow.

All the work that the WWE is doing in terms of their digital network co-inciding with the PPV model is interesting to watch.  Dish and a few other cable/dish PPV carriers have not been too thrilled about the WWE’s decision to start their own digital network and offer their PPV’s as well.  At this point in time, it was a big win for the WWE to keep the cable and satellite companies still offering the event as a PPV.  The UFC and boxing promoters will be watching this venture closely as they observe whether WWE’s new business model is sustainable.  A big part of that if WWE’s hope that they can increase their WWE Network subscription base from 667,000 to 1 million by the end of the year.

Wrestlemania XXX Perspective

April 10, 2014

Welcome to a special look at Wrestlemania XXX which took place at the Superdome in New Orleans, Louisiana.

Ultimate Warrior passes away

Perhaps the news of the death of Jim Hellwig (aka The Ultimate Warrior) has overshadowed the post-Wrestlemania news.  Hellwig was inducted into the WWE Hall of Fame, made an appearance at Wrestlemania, signed a deal to be an “ambassador” for the WWE and appeared on television on the company’s signature show, Monday Night Raw.  News broke late Tuesday night that he passed away in Arizona.

The Ultimate Warrior’s passing was picked up by mainstream news outlets as well as the UFC which sent out its condolences.  UFC fighters also chimed in to offer their sympathies.

Similar to the passing of Randy Savage, the outpouring of condolences for the death of The Ultimate Warrior likely brought back fond memories of a person’s childhood for many that grew up watching him.

Attendance and gate

According to a WWE press release, it was a sellout with a gate of $10.9 million with 75,167 in attendance.  Sunday’s event landed 5th in all-time Wrestlemania attendance.

For those in attendance, it may have been easier for fans to obtain unauthorized WWE merchandise as a Louisiana District Court denied the WWE’s motion to stop and confiscate bootleg merchandise from being sold in the area.  An order like this is usually allowed as a way to protect the intellectual property of the company.  However, the court decided it could not legally give the WWE this broad authority without identifying these potential infringers more specifically.

Don’t bet on pro wrestling

While we won’t necessarily get into the storylines from the night, it should be noted that The Undertaker’s win streak of 21 consecutive wins at Wrestlemania was broken by former UFC Heavyweight champion Brock Lesnar.  While this was scripted, a gambling web site lost money on the fight as it expected that the WWE would not let the Undertaker lose.  Fox Sports reported that the odds ranged from 14 to 1 and 8 to 1 for Lesnar to prevail.  The maximum bet was $100 although some people were allowed to bet “as much as $500 on Lesnar.”

UFC hypes Lesnar

Not only was Brock Lesnar a part of Wrestlemania, but the UFC took advantage of the hype of the event by having the Rock (below), Jim Ross and Steve Austin talk about the former UFC Heavyweight champion.   All of the videos were “Fight Pass Exclusives.”

Post by UFC.

WWE stock takes a hit

The day after Wrestlemania, the WWE announced its subscribers for the network.  To the dismay of investors, it announced it had slightly over 667,000 subscribers which were below Wall Street expectations.  While the WWE believes it will hit 1 million by the end of the year (the break-even point for the network), the stock fell almost 20% on Monday.  At the end of trading Thursday, it is down to $21.12.

The WWE received a lot of mainstream hype for the 30th edition of the biggest professional wrestling event of the year.  Most of this was focused on the new network and how it would fare airing such a heavily watched event.  To its credit, the video stream had no noticeable hiccups which were a good sign for the future of the product.  The question will be whether the negotiations for its rights deal will be affected in any way.

Payout Take:  Although the stock is taking a drop, the broader takeaway from the event was that it did not suffer any tech issues which was a major concern considering the amount of problems it had when it first launched in late February.  At least this shows that the product holds up.  The next big test for the company is a rights fee deal which is anticipated to occur sometime late April/early May.

UPDATED – WWE Network reports 667,287 subscribers

April 7, 2014

WWE announced in a press release this morning that it has 667,287 subscribers to its network which launched this past February and “is well on its way to reaching its goal of 1 million subscribers by the end of 2014.”

UPDATED 9:05am PT – 4/7/14:  It looks like that investors are not impressed with the 667K  numbers according to Deadline.com and the sell off  is more than just investors capitalizing on the stock price.  Deadline states that at least one analyst predicted the sub number to be between 500K-800K on Friday.  The original expectation was that it was to be at 1M after Sunday’s big event.

The press release comes just one day after Wrestlemania 30 aired without major tech issues on its network.  The news appears positive for the company long term although short term WWE stock is taking a hit.  In morning trading Monday, the stock is down almost $4 as it appears that many investors are selling off the stock.

The WWE also announced that it broke the record for the Superdome (Mercedez-Benz or Silverdome if you are Hulk Hogan) as its highest grossing entertainment event for the venue.  The announced attendance was 75,167 for a gate of $10.9 million.

Payout Perspective:

UPDATE:  It looks like Wall Street is not impressed with the 667K announcement as it expected a higher number of subscribers.  The stock is taking a big hit as shares have gone done at least 20% today.  We will see how this number is spun as the WWE is set to announce a new rights fee agreement in the coming weeks.

The network announcement for its subscribers should be seen as a success as there were many concerned about tech issues that would scare many away.  However, there were few reported glitches on any platform for yesterday’s big event despite the fact it was likely the most watched day for the network as most WWE subscribers and many curious non-wrestling fans tuned in to see it.  Looking at this strategically, the timing of the announcement makes sense since one would think many signed up close to Wrestlemania to take advantage of the streaming as opposed to paying $70 on PPV.

The real test will be how (and if) the WWE can retain these subscribers.  Wrestlemania was the big carrot for the network this year and realistically a one-time thing.  How will the WWE continue to grow its subscribers to reach 1 million?

Based on this information, can we assume that UFC Fight Pass is having similar success?  While the UFC will not release any information, the speculation is that it is doing well with its digital network and since it is now available for international fans, it probably continues to grow its subscriber base.

WWE denied motion to stop sellers of counterfeit merchandise

April 3, 2014

According to the Hollywood Reporter, the U.S. District Court for the Eastern District of Louisiana denied the WWE’s request for a temporary restraining order granting the sports and entertainment company the opportunity to protect it from anticipated bootleggers that will sell unauthorized and infringing merchandise at Wrestlemania, the biggest weekend in the company’s year.

Judge Helen Berrigan issued the ruling which reasoned that since the WWE could not name the potential infringers (the lawsuit was filed against John Does) or at least provide some information, it could not grant the WWE the authority as a “judicial imprimatur” to determine “when and from whom seizure (of alleged infringing goods) is appropriate.”

The WWE requested, like other leagues and touring music acts have done in the past, for a Court order granting it the ability to stop and seize unauthorized vendors selling unlicensed merchandise which infringes on one’s licensed trademarks.  Many fans of the WWE are in New Orleans for the 30th edition of the WWE’s Super Bowl.  It’s the biggest event of the year for the company and its expected that there will be bootleggers selling counterfeit WWE goods.

While Judge Berrigan sympathized with the WWE and acknowledged the unenviable position it was in as a company which knows a wrong will happen but cannot tell the Court anything more than this, the Court could not grant it the relief it sought.

Judge Berrigan certified her ruling for interlocutory appeal which is an appeal of a ruling by a trial court that is made before the resolution of the claims.  According to the THR article, the WWE has filed a motion for reconsideration.  But, this motion will likely be heard by Judge Berrigan once again and unless there is something that was not brought up in the original WWE motion, it’s unlikely to succeed.

So, the WWE may still file the interlocutory appeal but this would have to happen now (the rules state it has 10 days but since Wrestlemania occurs this Sunday it’s now or never.)

Payout Perspective:

The overarching legal issue is that the Court would not grant the WWE the right to enforce its trademark by allowing it the right to go around and stop non-licensed vendors and confiscate their merchandise.  This was due the fact that it could not specify or identify the potential bootleggers.  To give an example of how much may be lost; investigators on behalf of the NFL seized $21.6 million in counterfeit NFL merchandise at this year’s Super Bowl.  The WWE claimed that their merchandise sales are “expected to be at least $19 million” per THR.  The WWE is not the NFL but this should give one a snapshot of how much may be at stake.  We will see what legal move the WWE does next but this ruling may be of concern for other big events where opportunists will try to make money selling counterfeit merchandise.

McMahon featured in Forbes

March 26, 2014

Forbes.com posted an article which features WWE chairman and CEO Vince McMahon.  The article boasts the achievements of McMahon while cautioning about the risks of the WWE Network.

The article, written by Lifestyle editor Michael Solomon, is an overall positive piece on the McMahon success story.  The piece highlights the company’s big investment in the network which is underscored by the fact that revenues “have barely budged (remaining at $500 million since 08) over the last few years.”  This may be due to the $75 million it has reportedly spent on setting up the WWE Network.  It also writes about the company’s failed attempt to establish its network as a “premium” channel to be distributed on the network. The Forbes.com piece spins this in the positive for the WWE and mostly everyone has bought into the“over the top” strategy of the network.

As it is currently set up, the network needs 1 million subscribers to break even.  At 2 million subscribers, it projects adding $50 million to its EBITDA.  The first numbers on the network will come out after Wrestlemania.

Due to the network, the WWE has cannibalized its PPV business which will change how the company will do business.  The shift has drawn the ire of DirecTV and Dish Network.  DirecTV had some harsh words for the WWE and Dish Network actually told its subscribers that it would not carry Wrestlemania XXX this April 6th.  However, it has since backtracked on its stance and will now carry the show.

The article will be published in the print edition of Forbes the week leading up to Wrestlemania Sunday giving it a prime PR piece leading up to its biggest event of the year.

Quick strikes…

Television by Numbers reports the second episode of Total Divas (9pm ET/6pm PT) scored a viewer average of 1.28 million viewers on Sunday night.  Thus, it did better than the last hour (936K average) of UFC Fight Night 36 although the last quarter hour featuring Rua-Hendo did 1.25 million.

Last week the WWE and Mattel, Inc. announced new kids property called WWE Slam City.  In addition to merchandise, the WWE has launched a series featuring WWE characters which appears on WWESlamCity.com, YouTube and its Network. The obvious hope is that this property will facilitate continued growth in its consumer products division.

The Wrestling Post – WWE hits all-time stock high and its CEO is worth $1B

March 5, 2014

Welcome to another edition of The Wrestling Post.  In this post we look at WWE stock, the net worth of Vince McMahon and a move in programming for the WWE Network.

WWE Stock at all-time high

Despite the rocky start to its network launch, WWE stock is trading at an all-time high.  The stock price went up as high as $27.43 on Wednesday and was at $27.10 in after-hours trading.

Payout Take:  The buzz around the WWE Network and the anticipated media rights deal has investors seeing value in the company.  There are some that have been displeased with the network due to the many glitches during the first week but the WWE has done a good job in quelling the uprising of negative reviews and for the most part the tech issues have been addressed.  This spring will be the biggest in the company’s history as its rights fee deal will likely occur sometime in April and it will reveal the first set of subscriptions numbers for the network.  Both will be key indicators for the stock in 2014.

Vince McMahon is a billionaire

Forbes.com came out with a list of “notable newcomers” of billionaires based on net worth for 2014.  WWE CEO Vince McMahon made the list with a net worth of $1.2 billion.  Forbes.com describes McMahon’s source of wealth as the WWE and states, “…transformed the World Wrestling Federation from a regional operation into an international phenomenon.  WWE went public in 1999 and today its programs are broadcast in nearly 150 countries and more than 30 languages.”  McMahon returns to the list as his net worth had dipped in 2012-2013.

Other newcomers to the billionaire club include Michael Kors, Drew Houston (Dropbox founder) and Brian Acton (WhatsApp founder who was turned down by Facebook for a job. Four years later Facebook paid him $3 billion for his company).

Payout Take:  With the WWE’s stock at all-time highs, the hopes of the potential Network revenues and an anticipated rights fee deal this spring that should double (if not more), McMahon’s wealth will only go up in the near future.

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