Shore's Blog: What the WWE quarterly earnings realy tell us about the state of the company

Posted in: Shore's Blog
Feb 12, 2011 - 04:11 PM

By Chris Shore

Saturday, February 12, 4:11 PM (CT)

Let me get the disclaimer out first thing. I am not a business analyst. I hold no degree in business. And other than a Principles of Management and Accounting classes, I have no formal business training. So if you clicked on this to find some eye opening breakdown of WWE financials and what they mean for investors, well I'm afraid you will be disappointed.

But what I do have is common sense. And in that respect, I think some of the numbers are very telling for WWE. And what they are telling is that while people absolutely love WWE, they are not so hot on the actual product WWE is producing. Let me explain.

The only two profit contributors that grew for WWE this quarter compared to last year were television and licensing. Every other part of the business made less money this year than last. And what can these raises be attributed to? First, Universal paid a lot of money to re-up Raw and then to acquire Smackdown. Second, the new licensing deals with Mattel and THQ are finally in full swing with the first holiday season of the new deal.

In essence, WWE made their money this year on the WWE brand. Mattel, THQ and Universal lined up to be able to stick the WWE logo on their action figure, video game and nightly lineup (respectively). None of these companies care exactly what WWE gives them as long as it sells on the shelves or the advertising market. Mattel doesn't care if it sells one million John Cena figures or one million Wade Barrett figures. In other words, they just want the best the WWE has, whatever it is.

In those same numbers however, we also see three huge money losers (as compared to last year). They are house shows (including merchandise sales), pay-per-views and home video. Home video was the worst, producing only 40 percent of the profit it did last year. But PPVs were down almost 20 percent, and house shows were down a staggering 30 percent.

Of course the question here too is why are those numbers down. And here is where I think we see the difference between WWE the brand, and WWE the product. I believe these three sectors of the business being down point to strong distaste from the traditional, or hardcore, wrestling fans for the current product.

Look at home video. WWE has blown almost their entire load on nostalgia videos, so the only new videos to be made would be about current stars. And video sales are down. With PPV prices on the rise, more people are watching communally. (I know McMahon tries to paint the needed increase on communal viewing, but I think he's trying to make the tail wag the dog). But I know of many people who don't even bother to watch anymore because they don't feel like they get their money's worth.

But for me, house show numbers are the most telling. The average WWE house show attendance is 5400 people. That's a staggering low number. My local coliseum annex seats 4500 when setup for wrestling and that thing was built in the 1950s. And who do you see at these events? Families primarily. As Jason said, going to a house event now is like going to the Ice Capades, there's nothing special there for a wrestling fan.

And so what the numbers tell us is exactly what we as fans have known for some time, WWE doesn't really care about us. They take us for granted. They know we will show up and take whatever they deliver. And time and time again this has proven to be true. But there have been exceptions. And when Vince has realized it, he has made changes.

Maybe now these numbers, as bad as they are, are telling WWE a story. Maybe they are telling Vince that we won't take his garbage anymore. Maybe they are saying we have finally reached our fill of the same stale stars and lame storylines. Maybe they are saying that you better not screw this up because there are other options out there for our wrestling dollars.

And maybe, just maybe Vince will listen.

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