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How financially healthy is WWE?

4K views 44 replies 21 participants last post by  Seafort 
#1 · (Edited)
The immediate thoughts of the conference call were that WWE was doing better than ever. Ratings were meaningless, and Roman Reign...or Adam Rose's Bunny could be the centerpiece as have no negative effect on the jugernaught that is the company.

However having worked upon this in the 90s, the key drivers for WWE revenue were the following:

1) House show gates
2) PPV revenue
3) Merchandising

Television network deals were not as huge of a driver, and syndication was a money loser, supported symbiotically by house show revenue. When house gates declined, syndication was pared down and ultimately done away with by 1996. House show attendance was key, as anything below roughly 3,500 was considered a money losing proposition. An attendance mark of 7,000+ was needed to allow for a live televised event (like a RAW) to be profitable when production costs were factored in.

With that said, twenty years later the revenue streams have altered. Now it could be rated in priority as:

1) Television Deals (primarily USA Network deal)
2) WWE Network Subscribers
3) House Show Revenue
4) Merchandise
5) Ancillary (vestigal PPV buys, Youtube revenue, DVD sales)



US/Canada House Show Attendance (average):
http://indeedwrestling.blogspot.com/2016/01/some-notes-on-wwe-house-shows-2015.html

2009: 4,887
2010: 5,174
2011: 5,139
2012: 4,804
2013: 5,035
2014: 4,892
2015: 4,868

Overall, house show attendance is down 1.5% versus the 2008 - 2014. The yearly number is bolstered by a strong Q1 2015, but overall nothing is catastrophic.


Network Paid Subscriptions:

Q1 2014: 495,000 (Domestic 495,000)
Q2 2014: 699,750 (Domestic 699,750
Q3 2014: 731,400 (Domestic 702,900)
Q4 2014: 816,000 (Domestic 772,000)
Q1 2015: 1,327,000 (Domestic 1,131,000)
Q2 2015: 1,156,100 (Domestic 939,300)
Q3 2015: 1,233,000 (Domestic 990,200)
Q4 2015: 1,217,000

Here is appears that the network has hit somewhat of a ceiling, but there is only eight quarters worth of data to look at versus years of PPV buy rates.
Also not shown is what are:

1) What are the operating costs for the WWE Network now that the initial ramp up is complete?
2) How much revenue does the Network produce on a quarterly basis?
3) How much are production costs for Network exclusive programming?
4) How do items 1 and 2 compare to revenue previously derived from PPVs?
5) What is the current break-even point for the Network (in 2014 it was believed I think to be 1.5M)?

Going forward, they two key factors for WWE's health are the Network and live event attendance. Ratings should serve to be more of a canary in the coal mine situation. RAW ratings of course have been gradually trending down since 2000. However the drop since WrestleMania 31 has been far more pronounced and seems to indicate a dissatisfaction or growing disinterest with segments of the audience, beyond cord cutting and DVR usage.

Will WWE crash? Not in the short term. They have locked-in television deals that provide huge sources of annual income for them that are essentially pure profit. The USA Network deal was estimated to be worth $142M - $155M in 2015. The important thing to consider is when that deal expires, and it is why ratings are still important. If ratings fall to an average of 1.5 - 1.2 when the current deal expires, it's reasonable to think that WWE will again get a deal that at best will only be fractionally better than what they received previously. And with growing expenses, that will badly hurt the company and lead to a bout of severe belt tightening (roster reduction, elimination of live specials, possibly closure of NXT). The key for WWE to overcome this is to either have stronger ratings, or to bring Network subscriptions into the 2M - 2.5M paid subscriber range.

A final point. While revenue itself was at a record level last year, net income the last three years has suffered.

 
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#5 · (Edited)
The conference call was interesting. I have tried to listen to most of it by piecing together bits you can watch for free, mainly the Q&A's.

What came from it, is that Vince is basically bullshitting his investors, by telling them that creatively, they are better than ever. On the conference call, there was lots of muted sighs, "okay's" and mumblings. On the other side of the coin, you can hear Vince being sarcastic a few times to the investors, as if he is annoyed with the questioning.

Another thing is, WWE outright refused to answer many investor questions, and deflected many questions.

These questions were about how WWE expects to remain in profit, given poor creative, bad TV numbers, and their TV deal potentially going sour. WWE and Vince refused to answer all of these types of questions, apart from the WrestleMania questions, where they said it would be bigger and better than ever.

WWE are not some crazy company bringing in billions every year, because you also have to look at expenditure.

Currently, they are losing subscribers, losing investors, losing TV viewers. The stock goes up and down, but more recently has gone down.

WWE are basically okay. The positives outweight all these negatives, because they are still making money, just. 2014 was a terrible year for them, and this is attributed to poor creative, and the transitionary period between launching the Newtork.

But as things stand, they are a company that makes little over $2million a month. This isn't exactly as grand as most people would have you believe.

To expand upon the Television thing, the investors asked how WWE expect to stay afloat in the future given the likelihood of their Television deals going to shit, because of dropping viewers, bad creative, and injuries. WWE literally had zero answers for this. FYI, their current TV deals are worth $200 million a year, or in other words, around 30% of their overall revenue.

Even if their next TV deal was worth $175 million, they would be barely treading water, and in danger of going of out business. Things look absolutely terrible, based on this last conference call, and backs up everything I have been saying about TV numbers still being relevent to investors. Even if WWE keep casting away the importance of TV, in favour of other media, the fact remains that 30% of their income comes from TV, and investors are demanding better ratings.
 
#6 · (Edited)
The network numbers in the OP seem to be a bit incorrect. The Q1 2015 number is most probably of paid+trial. The paid subscriber count in the most recent report is the highest it has ever been.

As for your question, they're doing pretty good. The more quickly they shift their base to the Internet, the better it is in the long run. T.V as a medium has to become obsolete sooner rather than later, it's not even a question. The Internet is to TV what TV was to Radio, you would never see the resurgence of Radio just like you would never see the resurgence of Cable T.V from the moment significant shift of media starts taking place towards the Internet which can quite honestly start any year now.
 
#9 · (Edited)
The network numbers in the OP seem to be a bit incorrect. The Q1 2015 number is most probably of paid+trial. The paid subscriber count in the most recent report is the highest it has ever been.
These are the figures that WWE released. A significant portion of the recent conference call was based around investors wanting to know why there was a 16,000 drop.

The subscriber amount is not the highest it has been, it peaked in Q3 2015, and dropped in Q4.

As for the significance of a 16,000 drop?

To me, it doesn't sound very large. This is why you have to listen to what the investors think.

In 2016, investors view subscriptions as something that should never go down, and only ever increase. Even a drop of 1 subscriber would have been seen as bad from an investment point of view, because investors consider the subscription model to be something that continually expands.

So 16,000? Actually a huge, giant negative number, in the investors eyes.

As for your question, they're doing pretty good. The more quickly they shift their base to the Internet, the better it is in the long run. T.V as a medium has to become obsolete sooner rather than later, it's not even a question. The Internet is to TV what TV was to Radio, you would never see the resurgence of Radio just like you would never see the resurgence of Cable T.V from the moment significant shift of media starts taking place towards the Internet which can quite honestly start any year now.
This is the typical thing that Vince spouts.

Perhaps, in the future, TV becomes obsolete.

As of today, 13th February 2016, WWE rely heavily on Television as it makes up 30% of their income. This fact speaks for itself. As of today, it is not obsolete.
 
#3 · (Edited)
Very good analysis, you have explained everything yourself, perfectly. Is this your original Post or is it a quoted content? Great work either way.

Few things to note. Net-income loss during recent years is attributed to WWE Network start-up costs. The breakeven point originally was set at 1.5m but after major budget cuts, Vince Mcmahon managed to bring it down to 1.2m subscribers which the WWE surpassed recently.

Ratings still remain relatively important as you noted due to WWE's TV deal with USA. Key thing is the cost of producing a TV taping, RAW or SD. As per Dave Meltzer, the current cost of producing is at 1.02m per show. This can be up or down based on building rental costs, for example, Madison Square Garden charge exorbitant price pushing this number up big. This 1.02m production cost is main reason why WWE needs USA and their Television rights fees. However, if WWE network manages to surpass 3 million subscribers, analysts have suggested moving RAW and SD to the network itself can be a viable option. It would no doubt be a major game changer for future of WWE and television business itself.
 
#27 · (Edited)
If it is to happen eventually, then their only hope is India and China. 3-4 years is optimistic, given India's current internet woes. 8-10 years is more realistic. Meaning they still require television, in a big, big way, alluding to my previous point.

It's funny, because Vince spent a good portion of the conference call downplaying the relevance of TV, in favour of other mediums. However, when the lucrative nature of TV was brought up and the fact WWE rely so heavily on this, he backtracked. "Uh, of course TV is still very relevent. But......" was basically the line Vince towed.

Nobody is debating how mediums change over time. But the time is not now and the less WWE focus on quality television, the less subscribers they will have for future mediums.

In 50 years time we might have holographic rooms where you feel like you are at the event. Still, if the event is creatively vapid, nobody is going to care.

In 100 years time we might have direct to brain stimuli. Again, if the content is creatively vapid, nobody is going to buy in. Television MUST be WWE's biggest focus, and yet it is one of their lowest priorities. This is why I am leaving the product after WrestleMania, and I am urging everybody to do the same, I just don't want to make a big smarky deal out of it, and whine like a bitch. I refuse to support this atrocious company in any way whatsoever until they cater and provide for my needs. I believe it is very important that WWE don't pull the wool over anybodies eyes, and their financial figures be exposed for what they truly are: Dangerous, frightening, worrying, embarassing, and woeful.

Vince will respond to negative equity, that's it.
 
#28 ·
If it is to happen eventually, then their only hope is India and China. 3-4 years is optimistic, given India's current internet woes. 8-10 years is more realistic. Meaning they still require television, in a big, big way, alluding to my previous point.

It's funny, because Vince spent a good portion of the conference call downplaying the relevance of TV, in favour of other mediums. However, when the lucrative nature of TV was brought up and the fact WWE rely so heavily on this, he backtracked. "Uh, of course TV is still very relevent. But......" was basically the line Vince towed.

Nobody is debating how mediums change over time. But the time is not now and the less WWE focus on quality television, the less subscribers they will have for future mediums.

In 50 years time we might have holographic rooms where you feel like you are at the event. Still, if the event is creatively vapid, nobody is going to care.

In 100 years time we might have direct to brain stimuli. Again, if the content is creatively vapid, nobody is going to buy in. Television MUST be WWE's biggest focus, and yet it is one of their lowest priorities. This is why I am leaving the product after WrestleMania, and I am urging everybody to do the same, I just don't want to make a big smarky deal out of it, and whine like a bitch. I refuse to support this atrocious company in any way whatsoever until they cater and provide for my needs. I believe it is very important that WWE don;t pull the wool over anybodie's eyes, and their financial figures be exposed for what they truly are: Dangerous, frightening, worrying, embarassing, and woeful.
Which again brings me to my original point:

What is your explanation to Ratings being 1/3rd of what they were in 2001 but the WWE still commanding astronomical TV figures every successive deal? The standard of viewership expected isn't something etched in stone for eternity and is a dynamic parameter dependent on the times. What I mentioned isn't something up for debate, it's a non-negotiable, non-reversible change that has already started to take place and will only become stronger in the future once high speed Internet manifests itself in the far corners of the world.
 
#38 ·
I'm still kind of shocked they only pulled in 300k network subs from around the other parts of the world they opened up to, I mean I wasn't expecting people to flock to it, but I expected more than 1/3rd of what came from the states, I thought WWE was more popular than that world wide.
 
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#39 ·
Time zone differences are a bitch. Imagine having to be up till 4am to watch a PPV live when you got work the next day. Also if you factor in currency differences foreigners are paying more.

All I wanted was to download AE episodes and I did just that for free and will do so again for free when they give out another free month.
 
#2 · (Edited)
Is this a rhetorical question?

Things are at best OK financially. They were getting double the net income in 2010 than in 2015 so the Network hasn't panned out. They have lied to their shareholders about being able to get to 3m but its not a disaster. They may not be making as much money but they have an easier life by trading in PPV's, which is an outdated method of making money, in exchange for the WWE Network where they don't have to do as much worrying or have to work very hard.

Things right now economically are in the eye of the storm. Germany recently announced loss of GDP. China is cooling down. There is way too much debt private and government. If we get into a recession it will be very interesting to see how many remember to unsub to the Network.

I don't know about the USA Network. I doubt they are happy about the ratings but they have Smackdown, too so they probably have the best looking horse in the glue factory mentality with WWE. If it goes sub 2.0 things might be different. I don't know who is in charge of USA Network but if he or she gets fired then the new boss might look to change strategy. Right now the current strategy is to just brag about the ratings RAW gets because they think it makes them relevant. All their other shows have flopped so they are dependent on WWE.
 
#7 ·
I asked Chris Harrington who does all the wrestling finances and stats. He says that there will be no more significant cost/infrastructure right offs. Basically 2015 will be 2016 for Network expenditure so it hasn't panned out well at all.
 
#11 ·
WWE's doing OK, for now. Revenues are up, debt is low and they're making money. They were in trouble in mid 2014 when the network was in trouble but since the start of 2015, that went through the breakeven mark and it's largely profit after that.

Two big events coming up. First WM. Will network numbers go up after that and can they keep them? That is WWE's biggest chance to get new subs. If they do, then that is hopeful for further growth. If they don't get them then that looks like a ceiling for sub numbers in the current markets. They will have to do something huge in Asian markets to move it after that.

Then there is the tv contract renewal but that is some way in the future. It looks like the market underestimated the value of the current one (probably overreacted as it wasn't as good as UFC's) but if ratings continue to sink, it's hard to see a lucrative one next time. TV is still the biggest revenue stream and that could be serious.
 
#14 · (Edited)
Healthy like no one other and it will grow even more if you still keep eating the shit from them.
If you/we wanna change this shit product stop buying merch,stop attending events & stop giving 9,99 per month and watch it silently illegally.)
Thats the only thing you can do to make a clear message to wwe that you/we hate the product.
 
#19 ·
Excellent post! I would like to point out that in any discussion of ratings, we have to consider the overall performance of shows in this era. While there are programs like Walking Dead and Sunday Night Football that perform well above the averages, the WWE, even with their current downward trend in viewers, consistently comes in near the top in ratings.

As long as they manage to level out the drop off and remain somewhere near that position when renewal comes up, I have no reason to believe that we'll see a significant decrease in revenue generated from the television deal.
 
#20 · (Edited)
An interesting snippet I found from whatculture article..

Many pointed to the fact that Monday Night Raw is often the top rated show on Monday Night cable. It regularly deliverers four million viewers (three million households) and WWE produces original content all year long. Those are important facts, but that overlooks another stunning fact – wrestling gets lousy advertising revenue. Despite all of those dedicated fans, advertising rates for professional wrestling remains exceptionally low. According to Scarborough’s research, slightly more than a quarter (28%) of WWE avid fans earn more than $50,000 annually – that compares to 51% for the U.S. adult population. Compare as one might to NASCAR, you don’t see Car commercials and Beer ads during wrestling broadcasts.
WWE despite their great weekly numbers don't appear to be all that valuable to advertisers.
 
#30 ·
The huge stock price dive in mid 2014 was due to the network sub figures disappointing and the tv deal being way less than was expected after the UFC deal. So the tv deal is certainly not astronomical. It is not as bad as thought at the time and that is one reason behind the stock getting back into the mid-teens when the year-on-year revenue increases kicked in. WWE has very low debt levels so for the next couple years it is doing OK.

But how it grows revenue is not obvious unless international markets do something huge. They have thrown a lot at the network over fall/winter. Big Brooklyn and London shows, indy guest stars but nothing moving. Looks like they are now going all in and buying up the really top stars like Styles and Aries. All this cannot be cheap tho and they must have totally busted the old NXT budget to pay for them
 
#31 ·
Don't care how healthy/unhealthy they are, if they folded tomorrow (which is insanely unlikely) people would still view the WWE as the industries equivalent to the Premiership.

My personal investment in the product diminished along (long) time ago but for every old school wrestling fan in their 30's who just occasionally googles WWE's news feeds (usually leading up to the "big 4 PPVs"), there are at least 20 people born after the year 1990 who are still willing to dream that things will get better for the brand (kind of like that love sick girl hoping her unfaithful boyfriend will one day stop fucking around).
 
#32 · (Edited)
And if they aren't healthy, they would do what every other Company would do, shrink.

By the way, I find it amusing that they plug ads for the Network ON the Network. Seems very efficient. If I were them, I'd put some effort into marketing.
But, oh well, at least Steph has her own campaign.
 
#35 ·
Good enough to hire 50 new indy wrestlers this year (Y)
 
#43 ·
Only to waste him in midcard purgatory and release half of them at the end of the year to free space for another bunch. :vince$
 
#36 ·
WWE has, for awhile now, had alot more ways to make money other than just ratings/TV Deal. They made a ton of money in those other ways (non-TV deal/ratings related) in 2015. No one killed the business despite the booking of the promotion from top to bottom being pretty shit. Rollins was jobbed out as a WORLD CHAMPION on Live TV over and over and over again; and guess what? They *STILL* made a ton of money. The only stat/measurable statistic that directly tells us the state of WWE as on an air product is the ratings. That's the only thing that's been shit for awhile now for WWE. If ratings somehow didn't exist; there'd be practically nothing to get on WWE about from a business standpoint; outside of stagnant WWE Network subs; but even still with that; they are still at least in the 1.2-1.3 million range.
 
#37 ·
pro wrestling has a stigma. Sponsors don't really like it out of prejudice. Is that fair? No but its life. Also fans tend to have less income than other sports audiences so its considered less valuable.
Tell that to Vince, Barros, Staph and co. They actually thought that by going PG they would be able to overcome that stigma and get the tv deal they were expecting. LOLWWE. Individual pro sports teams have better deals then they do(Lakers), never mind leagues.

Doesn't help their audience isn't valuable enough to potential advertisers. Also being publicly traded is all that cracked up to be since they pay out dividends to their shareholders.
 
#45 ·
Interesting figures from the following website:

Year Total Revenue Profit/Loss
94-95 $87,352,000 -$4,431,000
95-96 $85,815,000 $3,319,000
96-97 $81,863,000 $6,505,000
97-98 $126,231,000 $8,466,000
98-99 $251,474,000 $56,030,000
99-00 $373,100,000 $68,937,000
00-01 $456,043,000 $15,987,000*
01-02 $409,622,000 $42,233,000**
02-03 $374,264,000 -$19,455,000***
03-04 $374,909,000 $48,192,000
04-05 $366,431,000 $39,147,000****
05-06 $400,051,000 $47,047,000*****
’06 $262,937,000 $31,617,000******
’07 $485,700,000 $52,137,000*******
’08 $526,457,000 $45,416,000
’09 $475,161,000 $50,303,000
’10 $477,655,000 $53,452,000
’11 $483,921,000 $24,832,000
'12 $484,000,000 $31,400,000
'13 $508,000,000 $2,800,000
'14 $542,600,000 -$42,200,000
'15 $658,800,000 $24,000,000

http://www.gerweck.net/information/wwe-business-history/

* Wrestling profit was $84,981,000, but WWE’s share of the 50% of the XFL losses (the other 50% was covered by NBC) was $68,994,000
** Wrestling profit was $42,498,000; also figured in was a tax break of $4,638,000 for shutting down the XFL; offset by $4,903,000 in losses for the year from the operation and closing of The World Restaurant
*** Wrestling profit was $16,362,000; offset by losses of $35,557,000 through operation and closing of The World Restaurant.
**** Wrestling profit was $37,778,000; also figured in was a tax break of $1,369,000 for shutting down The World Restaurant; Not figured into the bottom line were $28,340,000 in expenses on producing two movies and $8,078,000 in other expenses and liabilities amortized over time
***** Not figured into the bottom line were $7,323,000 in expenses on early production costs of one movie
****** An eight-month fiscal year total. For a comparison, prorated over 12 months, the revenues would figure to be $394,405,500 and profits at of $47,425,500, so numbers were equivalent to the prior year, but without a Wrestlemania figured in. The figure doesn’t include $17,466,000 in costs of one movie and $2,726,000 in costs of purchasing videotape libraries.
*******Does include $16,000,000 in profits and movies “The Marine” and “See No Evil” and $15,700,000 in losses for “The Condemned.”
*******Includes $23,400,000 in losses in the movie division and $4,000,000 in start-up costs for the new WWE Network.

source: The Wrestling Observer Newsletter
 
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