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World Wrestling Entertainment (WWE) held an hour-long conference call on August 2, 2012 to discuss their second quarter. It was an opportunity for Vince McMahon and WWE to calm the fears of the shareholders and further promote their standings in the industry. While we here at Cageside Seats have made sure to keep you apprised of the latest information on profits, WWE Network, and pay per view (PPV) buys, there have been a few nuggets that deserve a closer look.
Perhaps the biggest one is, when asked if someone watching something on YouTube would cannibalize the television viewership, Vince McMahon responded:
"No, it's all enhancements. I mean it is all additive. There is an insatiable thirst for the genre. And we ARE the genre."
Emphasis mine. A bold statement, but one would expect nothing less from the Chairman/CEO of WWE. This can be taken two different ways depending on how you look at it.
First, Vince McMahon could be speaking towards all of pro wrestling. Yes, there is Total Nonstop Action (TNA), Ring of Honor (ROH), and numerous other independent promotions. But when the average person thinks about professional wrestling, they think about the number one promotion in the world. Even if they think about the days of World Championship Wrestling (WCW), those memories have been absorbed into WWE. If you want to watch an old Starrcade match or see Sting in his glory days, WWE owns the rights to those tapes. In many people's minds pro wrestling equals WWE, and everything else is placed in an "other" category.
There is perhaps a subtler meaning to Vince's words, though. WWE has been focusing more and more on the "entertainment" in its name and offers much more than just pro wrestling. So much more that it could potentially be considered its own thing. WWE produces drama, comedy, impressive feats of athleticism, and some of the campiest moments in modern American television. When Vince speaks towards the "WWE Genre" he is envisioning all they cover, not just pro wrestling.
Or, he could honestly not care about any other promotion besides his own. Both lines of reasoning are entirely possible.
A few more thoughts after the jump.
It isn't a secret to anyone that WWE has been pushing social media hard in the past year or so. Every other bump coming from commercial seems to talk about how many people ‘like' their Facebook page, how many followers they have on Twitter, and how many nonsensical phrases are trending worldwide. The recent use of Tout as a tool to interact with the WWE Universe is simply another way to further their goal to be a leader in social media. There wouldn't probably be much debate as to the wisdom behind this logic; if more people are talking about your product, then more people are likely to tune into it.
Though it may be a little surprising how much emphasis they are placing on it in their overall business model. On the corporate website and in the conference call, their social media presence was constantly referred to. While it's nice that #Raw1000 was the number one trending hashtag on Twitter or that their Facebook page has 9.7 million 'likes'; there is no money in it. WWE has a stake in the ownership of Tout (although they have refused to announce the exact percentage). Facebook, Twitter, and YouTube have created revenue streams by the use of ad space. it's not clear yet if anyone will want to sit through a 15 second ad for a 15 second video.
The only real revenue coming into WWE is from YouTube. The original content WWE produces for YouTube earned a few million last quarter ($4.8 million, but that also including sales of on-line advertisement on WWE.com). While some may believe that will increase greatly over the years, it is essentially a drop in the bucket at this point in time.
WWE Network, now a punch line to the average pro wrestling fan, has become a point of contention to shareholders. The launch date, which was originally slated to launch April 1 to coincide with WrestleMania 28, has constantly been pushed back and there has been yet another delay in even announcing the basic business model behind it. There understandably comes a point when those that have invested money in the company are not going to sit by without raising a fuss.
WWE has already poured millions of dollars into the network, could potentially spend up to an additional $45 million for content, capital expenditures, and operating expenses; all that without any type of plan set in stone on their distribution model.
It is easy to understand WWE wants to increase their presence in the average home. It's one thing to produce 85 hours a quarter through television and YouTube, it's quite another to be on 24/7 in every home that carries the network. If this does manage to get off the ground, there is a lot of money to be made, both in terms of direct revenue and the potential of gaining new fans that stumble upon the network.
This is a huge risk for any business though, and WWE still has to answer to their shareholders. No, Vince is not going to be forcibly removed from the board. But if WWE continues to pour money into this project with no returns, or even the hint of a return, those that have spent money investing in the company are going to be pissed. WWE Network will be debuting, eventually. They've sunken too much time, energy, and money into this dream to let it simply fade away.
A final point is the breakdown in revenue. WWE greatest revenue / profit sources for the second quarter are as follows (in millions):
Live Events/Venue Merchandise: $40.8 / $15.5
Pay-Per-View Buys (PPVs): $40.8 / $19.8
Television: $32.4 / $11.1
It's fascinating to see that PPV buys are still the greatest source of profit for WWE and by a pretty wide margin. Although Vince McMahon was quick to point out that television revenue would be increasing when overseas markets are able to add the extra hour produced for ION's Main Event, it is still a PPV driven business. So when people start worrying about buy rates, there will be some solid ground for them to stand on.
All of this is the business side of WWE, and that may not be fun for certain people to think about. But WWE sees itself as more than a professional wrestling company. It is a global entertainment business. It wants to be everything to everyone. Sometimes it may succeed in this aspect. But often it pisses off the traditional fan base. I think we can all agree a 3-hour Raw sucks. It brings in more money though, with a small increase in operating costs.
So, the fans will be getting more hours of WWE, an increase in social media presence, and a network that will be forced to launch whether it's entirely ready or not.
It's not whether the fans want it. It's whether or not they can, or think they can, make money off it.