Bad films cause WWE to lose $8.6 million in the final quarter of 2011

Despite WWE posting a healthy net profit of $10.6 million in the third quarter of 2011, there were some ominous signs for the future. Their profits were dragged down by a $5.1 million impairment charge (expected loss) from their failing film division, expenditure was set to increase to prepare for the WWE network and most of their core business streams were sluggish. Indeed, hefty losses were surely around the corner for the company, the only surprise is they came so quickly.

Yes, by their standards WWE's final quarter of 2012 was an absolute disaster, losing $8.6 million in those three months alone. The main cause was their film division once again, which had an impairment charge of an amazing $12.2 million, more than double that of the prior quarter. They also spent $4.0 million already on their postponed network, which will increase in the quarters ahead. But even excluding those costs, the company would have only made an adjusted net profit of $1.8 million, showing that their core wrestling business was uncharacteristically barely profitable too. WWE have been hurt over the last year by a decline in television rights fees due to the cancellation of both NXT and Superstars, decreased sales of toys, collectibles and novelty products, reduced advertising on WWE.com and their magazine continuing to struggle.

Unsurprisingly, most of the questions at their conference call focused on WWE Studios and the WWE network, given that those are the two divisions bleeding money with no return in sight. Vince McMahon said that scrapping their movie division had crossed his mind, but he was bullish that the changed direction their new Studio head Michael Luisi was taking where they will spread out expenses and risk with other production companies (similar to their original strategy which lost much less money than when they attempted to go on their own) would turns things around. But if his predictions prove wrong, then don't expect the division to be long for this world, as this sounds like a last ditch effort to make it work.

Regarding the network, McMahon still had no answers for a possible launch date, any potential cable partners that would be on board or any big name executive hires to run the station, but stressed the importance of getting it right off the bat, which possibly means that they won't launch unless they can get the major clearances that they are seeking. Indeed at one point in the call, in what may have been a Freudian slip, McMahon talked about the "potential creation" of the network. Despite promising that they have a business model and plan in place which they couldn't disclose at this present time, it's hard to take those claims seriously and not believe that they are in over their heads with this ambitious venture.

This is awful news for any WWE performer that isn't being pushed or used much at the moment, because when the company starts losing money they always trim the expendable fat from their roster. As Dave Meltzer reported in this week's Wrestling Observer Newsletter a round of cuts was rumoured even before the bad financial news was published:

Regarding potential cuts, there was talk internally of either cuts or repackaging of some of the bottom talent and some FCW talent that doesn't appear to be making it, but the feeling is not to expect any changes until after Mania because Mania is the prime focus of everyone's attention. There may be decisions made in Miami about the future of bottom talent, particularly since the next big thing will be the draft.

I'd expect at least a half dozen main roster cuts in April, unless WrestleMania 28 is such a booming success that they think better of it.

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