Lengthy WWE Article

[Guest webmasterofwrestlegame]

Credit: http://www.stamfordadvocate.com/business/s...-wwedec28.story

 

WWE: Smacked down, but getting up again

 

By Mark Ginocchio

Special Correspondant

 

December 28, 2003

 

Predicting which formula will lead to another financial boom in the world of professional wrestling may be as difficult as learning to apply a figure-four leglock.

 

The doesn't mean the executives at Stamford-based World Wrestling Entertainment Inc. have given up. In fact, they are encouraged by recent financial results that show stabilization of television ratings, pay-per-view buy rates and live-event attendance, after experiencing a steady decline over the past two years.

 

"It's better sometimes to take a half-step back," said Chief Executive Officer Linda McMahon. "We need to concentrate on what we do best."

 

That would be wrestling -- rather than acquiring competitors or launching new sports leagues.

 

The WWE was on a roll in the late 1990s, with legions of fans and much-lionized superstars. After raising millions in an October 1999 initial public stock offering and experiencing a banner year for both financials and popularity in 2000, the company was eager to grow.

 

WWE bought out the competition, Atlanta-based World Championship Wrestling, and sought to diversify by creating the XFL, a new brand of extreme football.

 

It didn't work. The XFL folded after one season and cost the company more than $36 million. TV ratings for the WWE's wrestling programs and the company's stock price started to slide almost simultaneously with the WCW purchase.

 

It's been a tough road for the WWE ever since, but financial results for the second quarter ending Oct. 24 showed a promising increase in revenues and operating income after many down quarters.

 

Also halting their downward trend were TV ratings for "RAW," the program of wrestling matches aired Monday nights on cable's Spike TV, and "Smackdown!," Thursday's wrestling show on UPN.

 

WWE's stock price likewise has stabilized. After hitting a record high of $22.25 per share in July 2000, shares hit rock-bottom last October when they sold for $6.86 per share. Currently, the stock is hovering close to $13.

 

McMahon attributes the improvements to renewed attention to the WWE's core business and to reducing overhead and cutting costs. That's allowed the company to better focus on bringing the in-ring product up to par.

 

"I don't know if we can get to the 6s and 6.5s," McMahon said of current television ratings, which average about 3.8 for "RAW" and 3.3 for "Smackdown!," according to Nielsen Media Research. The ratings measure the percentage of the television households in the United States tuned to a program. Each point represents 1,067,000 homes.

 

"We're no longer in a decline (on TV), and our softest area, the live events, are sometimes the last to come back," McMahon added.

 

Adjusting to the expected slow rebound for its live wrestling programs, the WWE has cut back on "house shows," or nontelevised events, either by not holding them in large arenas or by blocking off sections at bigger venues such as the Hartford Civic Center.

 

Live event attendance currently averages about 5,500 per show, compared with 8,562 last year and 11,556 in 2001.

 

The wrestling cycle

 

Part of the overall problem affecting the WWE's industry is the idea that there is a "cyclical nature" to pro wrestling. Historically, after periods of great financial prosperity and popularity, wrestling appears to lose its momentum before eventually making a popular comeback.

 

"We clearly have cycles," McMahon said. "We have to produce a program 52 weeks a year that's fresh . . . it's a star-driven business that's better some times than others."

 

Jeff Jarrett, a former wrestler with WWE and WCW, said that history has shown the popularity of the business comes and goes. Jarrett's family has been active in the wrestling industry since the 1940s.

 

"Back in the '50s, there was free network television that helped out wrestling, but in the '60s, it was nowhere to be found," Jarrett said. "The same thing was true in the early '90s until the late '90s, when wrestling was beating the NBA playoffs in ratings."

 

Not everyone agrees that the successes and failures of the WWE can be explained with a simple ebb and flow chart. Some think problems with the business run deeper than popularity cycles.

 

"People who glibly state that 'wrestling is cyclical' as a kind of catch-all explanation for the state it's in are missing the point," said Scott Keith, a longtime viewer and author of "The Buzz of Professional Wrestling!," "Tonight . . . In this Very Ring! A Fan's History of Professional Wrestling" (Citadel Books), and the yet-to-be-released "Wrestling's One Ring Circus: The Death of the World Wrestling Federation."

 

"Wrestling is cyclical because promoters hit upon a hot formula, beat it into the ground, get lazy and then lose their entire audience as a result," Keith said. "No one has ever actually charted what the 'cycle' of wrestling is, how long it lasts, what the stages are . . . it's simply a catch-phrase to keep the executives from thinking about the deeper problems of the business."

 

The Rock in Hollywood

 

Some problems are impossible to ignore, like the loss of some of the company's top money-makers in the ring.

 

"Wrestling draws from name stars and many of them have disappeared," said Dennis McAlpine, an analyst from Scarsdale, N.Y.-based McAlpine Associates.

 

Most notably absent the past year has been The Rock, who has enjoyed success in Hollywood, starring recently in "The Rundown" and receiving offers to make other movies, including a remake of the 1973 film "Walking Tall."

 

"The Rock is a talented performer and when he's an on-air regular, that's good for us," said McMahon, who acknowledges that the WWE constantly needs to cultivate talent.

 

"Our business is about building new superstars," she said.

 

But finding a new superstar such as the Rock to attract wrestling and mainstream audience attention has been difficult. McAlpine said some of the new stars "are not ready yet," and Keith argued the WWE is "afraid" to push new faces.

 

Wrestlers who are starting to develop a following include Brock Lesnar, a former NCAA national amateur wrestling champion, and John Cena, who uses a "hip-hop" rapping persona that is catching on with fans.

 

McMahon, whose late father-in-law founded the company she runs, said it was hard to single out one or two wrestlers as top prospects. But, she believes, "we have a great group of young men and women that can be new, exciting stars."

 

Mario Cibelli of New York-based Marathon Partners, which holds more than 600,000 shares of the company, acknowledged that there is currently a lack of star power. But Cibelli's not concerned, he said, because WWE, "unlike NASCAR or Major League Baseball, arguably has more control over their fate," in terms of creating personalities that could appeal to a larger audience.

 

Its wrestlers, after all, assume outlandish characters and follow dramatically crafted scripts whose story lines are soap opera and shoot-'em-up combined.

 

Without competition

 

WWE acquired some new talent after buying out WCW in 2001, but attendance and ratings had already begun to dip at that point. Some believe that a lack of competition for WWE has contributed to a loss of viewers.

 

"Without a doubt, competition is good in any kind of business," said Jarrett. "When one group has a monopoly, there's a void that needs to be filled."

 

Jarrett is now a participant in the Nashville, Tenn.-based NWA-TNA, a pro wrestling organization that was founded in June 2002 and offers a weekly pay-per-view event on In Demand and Direct TV.

 

The new group has acquired other former wrestlers from the big two -- WWE and WCW -- and hopes that mixing established talent with some newer names will create a successful formula.

 

"Once WWE bought WCW, there was a downturn because the fan base was diluted," said Bob Ryan, director of talent relations for NWA-TNA.

 

"We are quietly, slowly, becoming an alternative. In this case, we're happy to be No. 2," he added.

 

McMahon also said that the one significant thing absent from pro wrestling today is "more competition in the marketplace."

 

Some think that once WCW faded from the picture, WWE television became less interesting because there was no one else out there to provide a challenge.

 

"One of the last things people believed was real was how much the two companies hated each other," said RD Reynolds, author of "Wrestlecrap: The Very Worst in Pro Wrestling," which analyzes some of the more shameful moments in WWE and WCW's history. "People tuned in because the television was so unpredictable."

 

Branded events

 

McMahon said the company has taken strides to create a sense of competition for the wrestlers and the fan base by splitting their roster into "Raw" and "Smackdown!" "brands."

 

In this format, wrestlers appear exclusively on one show, and each program has its own set of champions. Wrestlers can occasionally "jump" brands in story lines after being lured away by the show's general manager, and at special events such as "Wrestlemania," wrestlers from opposing WWE brands can square off in a cross-promotional match.

 

The company was aware that there would be an initial risk to the two-brand structure, McMahon said, but numbers are starting to indicate the move was for the better.

 

"We knew that splitting the talent roster would reduce the audience at first," McMahon said. But the buy-rates for "brand-exclusive" pay-per-views are now identical to programs that featured wrestlers from both shows.

 

"This shows that it's working," McMahon said.

 

Wrestling around the world

 

The brand split also has given the WWE the opportunity to expand itself internationally to audiences it has yet to fully tap.

 

"There is no doubt that we are a global brand," McMahon said. Expanding the product internationally "is a part of our growth strategy."

 

According to McMahon, the 30 international events the company produced this year, up from 17 the year before, accounted for $4.5 million in additional growth.

 

Because of the brand split, the company can afford to send a group of its wrestlers abroad and still have others on hand domestically to produce its weekly television programs.

 

WWE has put on shows in Korea, Singapore and Australia. Currently, WWE television can be seen in 115 countries and in 11 languages.

 

And when the shows are live, the international fan base is as rowdy and raucous as in the United States, McMahon said.

 

"In Japan, Shane McMahon was addressing the crowd with an interpreter, and they started booing," McMahon said, said of her son, who along with husband, Vince, and daughter, Stephanie, is an important player in many WWE story lines "They wanted to hear Shane speak without the interpreter."

 

Aversion to risk

 

No matter what the language, it's still a priority of the company to secure and perhaps expand on its fan base domestically.

 

"It's (international expansion) only the half of it," McAlpine said. "They're still clearly not getting the draw at home."

 

Recent attempts to diversify the company, including the XFL and The World restaurant in Times Square, which folded this past spring because of poor management, have led to significant losses for the company.

 

That won't stop WWE from exploring new options, albeit cautiously, according to McMahon.

 

"We are not averse to taking risks," McMahon said. "Even with the XFL, it was a calculated risk we took with open eyes . . . With the right mix, we would not be averse to an acquisition."

 

Cibelli said when the company addresses its shareholders, WWE executives play down the prospect of branching into new markets and say they are more geared toward improving the wrestling.

 

"The desire for risks is lower," Cibelli said. "They've been stung twice."

 

The company's caution in the long run, is probably better financially than taking more chances, McAlpine said.

 

"It's not where they want to be," he said. "Some of these things have been a disaster."

 

Uncool, but popular

 

Still, the film industry appears to be a point of expansion for WWE, which recently opened an office in Los Angeles and is looking forward to releasing feature films and direct-to-video productions.

 

The films WWE produces will feature its own superstars, but McMahon said that should only add to the movies' overall appeal.

 

"WWE has a bulk of actual stars that Hollywood is looking for," McMahon said.

 

Besides the Rock, other WWE wrestlers are making their presence felt in Hollywood, including Triple H, who will be featured in the next "Blade" film, and Goldberg, who made an appearance in the recent "Looney Tunes" film.

 

In terms of home video sales, the company has taken advantage of the wrestling archives of the WCW. DVD compilations featuring "best of" matches of many wrestlers have become popular, and the November release of the "Ric Flair Collection" sold so quickly that there was a back order of 10,000 copies that needed to be filled.

 

Others don't agree, holding that there's a stigma attached to anything WWE produces that is not related to wrestling. Scott Keith, who resides in Edmonton, Alberta, Canada, said that in the United States, "Wrestling is ridiculed by the legitimate media, and fans are considered uncool."

 

It remains to be seen if WWE personalities will continue their penetration into mainstream movies, or if the company's own nonwrestling productions will capture an audience.

 

Turning the corner

 

Despite the setbacks, industry experts tend to agree that after a rough patch, the WWE is again headed in the right direction, and that once the elements are right, another cultural explosion could occur.

 

Recent additions to the board of directors such as Robert Bowman, chief executive of advanced media for Major League Baseball, who was brought in this past September, also have contributed to the optimism.

 

"I'm very encouraged by the steps taken," said board member Michael Solomon, managing partner of New York-based Gladwyne Partners LLC. Solomon joined the board two years ago and was immediately "struck with the integrity and honesty" of the McMahon family.

 

"They have faced their mistakes and are always challenging themselves . . . those are traits for continuing success," he said.

 

From a shareholder perspective, Cibelli said, "It appears they they've turned the corner. There's a chance with the right combination of characters it could become very popular again."

 

"I don't see any reason why it can't happen," McAlpine agreed. "You'll see it start with the ratings and then the pay-per-view buys, and once they start going up, you'll know someone new has arrived."

 

McMahon is confident of that.

 

"We've been steady for a whole year now," McMahon said. "We're already well on the path to beat our estimates, and our business should continue to grow."

 

Predicting which formula will lead to another financial boom in the world of professional wrestling may be as difficult as learning to apply a figure-four leglock.

 

The doesn't mean the executives at World Wrestling Entertainment Inc. have given up. In fact, they are encouraged by recent financial results that show stabilization of television ratings, pay-per-view buy rates and live-event attendance, after experiencing a steady decline over the past two years.

 

"It's better sometimes to take a half-step back," Linda McMahon said. "We need to concentrate on what we do best."

 

That would be wrestling -- rather than acquiring competitors or launching new sports leagues.

 

Booing Shane'O Mac because he was not speaking English, eh? Whatever.

[LucharesuFan619 0]

Scott Keith, who resides in Edmonton, Alberta, Canada, said that in the United States, "Wrestling is ridiculed by the legitimate media, and fans are considered uncool."

[Guest Anglesault]

"In Japan, Shane McMahon was addressing the crowd with an interpreter, and they started booing," McMahon said, said of her son, who along with husband, Vince, and daughter, Stephanie, is an important player in many WWE story lines "They wanted to hear Shane speak without the interpreter."

 

Perhaps they were booing because he was a manager type taking up their time