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.
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.