wrestling / Columns
The Hamilton Ave Journal 02.18.10: Volume 2 – Issue 125
THE HAMILTON AVE JOURNAL
By JP Prag
Volume 2 – Issue 125
ABOUT THE JOURNAL
The Hamilton Ave Journal is the only wrestling news report focused solely on the business of wrestling. Here in the Journal we not only look at the stories that are important to the investor and business-minded person, but also delve deeper into stories that most fans of wrestling would overlook. That is because the Journal is about getting the heart of the matters that affect the companies and outlooks of the wrestling world.
And where is Hamilton Ave? That is the location of the WWE Production Studio in Stamford, CT, and thus the most powerful place in the wrestling world. Besides, The East Main Street Journal just does not have the right ring to it.
Who am I? I am JP Prag: consultant, entrepreneur, businessman, journalist, and wrestling fan.
Now, ring the bell because the market is open.
The Journal’s front page area known as What’s News isn’t just about telling you what has happened. The stories in this section are about what will have an effect on the wrestling industry, individual federations, and the wallets of the fans.
LEAD STORY: WWE 2009 in Review
During a year in global recession, the WWE was hardly immune to pressures on their various revenue streams. The company has had to deal with dropping PPV buys, lower ticket prices and attendance, fewer subscription services, and fewer sales of consumer goods. All of this was happening at the same time that they were shifting their product from a young adult presentation to one that is more family friendly, a move that required shedding a part of their audience and building a whole new one.
While many companies have folded under fewer pressures, the WWE proved this year that they are a resilient beast. Cost cutting measures and finding savings across the board helped the company the past few quarters, including the forth one. Revenues overall decreased 1.4% from $119.0 million in FY08 to $117.3 million. This dip is much smaller then seen in the prior two quarters and led to a profit of $18.4 million compared to $16.9 million, an increase of 8.9%. For the year, those type of saving ended up causing a drastic differential over the prior year. Despite revenues shrinking 8.6% from $520.1 million to $475.2 million, the bottom line grew an astounding 21.6% from $63.9 million to $77.7 million. The WWE, despite everything, was able to make more money this year then last and bucked all other tends out there.
This 21.6% goal is part of the WWE five year objective of an average 15% growth per year. Having a big jump in their initial year will help their averages in later years when that type of growth becomes less plausible. But how did the WWE do it this time? Let’s break it down:
Even with more events, the WWE has been able to cut the cost of productions so much that the difference between the years was negligibly higher. This led to a year end profit contribution of $42.8 million compared to $38.6 million, an increase of 10.9%.
Buys for every PPV event increased, save Survivor Series. Despite the “themed” PPVs being panned by most visitors of the IWC, the buying audience was actually pulled into the scheme and made purchases. When looking at this quarter, one can see why the WWE has decided to discontinue Survivor Series and replace it with another theme. The Survivor Series brand no longer sells as much as it could, so it could be replaced with a cheaper brand.
What will be interesting to see if these numbers can hold on for another year, or if the theme only works once and then numbers retreat to prior levels. Meanwhile, these changes came late as the year end numbers show a decrease in PPV revenue of 12.5% from $91.4 million to $80.0 million. Still, the WWE implemented cost savings on PPV earlier in the year and ended up with a profit growth of 14.2% from $41.6 million to $47.5 million. So again, the WWE was able to make more with less. And with revenue actually on a rise for a change, PPV looks to be increasing in importance for the first time in years.
The additional of SuperStars helped boost the year end numbers 11.1% from $100.7 million to $111.9 million. But more amazingly then that, the WWE was able to cut the cost of goods margin from 75.3% to 63.4% resulting in a bottom line increase of 64.7% from $24.9 million to $41.0 million. This is the WWE’s biggest gain by far for the year and shows just how important television is to the WWE’s model. More than that, they have been so effective in making television more cost effective that it is taking an even larger part of the pantheon of profit.
As for how NXT will affect this, since NXT will be less expensive to product then ECW, cost savings should start to be seen in Q2 2010. Be sure to remember the margin number here for when the Journal reviews those numbers in August 2010.
However, in this last quarter the WWE actually increased the amount of DVDs shipped by 6%. At the same time, though, they decreased prices and had various promotions, far offsetting the gain. In this case, the WWE has been forced to drop prices to keep volume moving, but it has not resulted in a net gain.
For the future, the WWE is expecting better licensing deals to offset the softness seen in the home video market. During the investors’ conference call, WWE CFO George Barrios specifically called out the relationships with Mattel and THQ being beneficial to the company in the coming years.
The WWE has been able to take what should have been a terrible year and make it into one of their best years ever. After years of excess and taking advantage of the market in general, they finally took a hard look at themselves and realized they could do things better. And from a business standpoint, they have made huge strides. Coming into a year expecting a drop in revenue, they did everything they could to buck the trend, keep revenues up as much as they could, but really concentrate on the true drivers of business health: profit and cash.
While many people will criticize the creative direction of the WWE, the decisions they have made have led to more revenue and profit. Even recent changes like the theme named PPVs have already started to pay dividends, and we know the WWE is fond of paying dividends. The WWE ended last year in decent shape with some shaky areas. This year, they end in strong shape with only a few more areas to work out.
As always, though, the WWE will have to remain vigilant. As noted above, it is quite possible that theme PPVs will burn out and buyrates will start to sink again. The WWE continues to see drops in digital media instead of growth, so there is work to be done there for the future. And if ratings decline, they may have a more difficult time renewing favorable TV contracts. What could cause ratings to decline? That answer is next….
Another case of the Mondays
Not wanting to buried under the WWE’s tremendous financial results, TNA made an announcement of their own. From the press release:
“TNA iMPACT!,” Spike TV’s highly-rated two-hour weekly series, is moving from Thursday nights to Monday nights beginning Monday, March 8 (9:00-11:00pm ET/PT), it was announced today by TNA President Dixie Carter and legendary pop culture icon Hulk Hogan at a press conference at the “TNA iMPACT! Zone” at Universal Studios in Orlando, Florida.
“TNA iMPACT!” will air live on March 8, with subsequent telecasts live every other week.
While this is a surprise to very few people, the date changes seems to coincide with scheduling issues on TNA’s front. Now that everything is settled, it looks like TNA is set to air a live broadcast every week and tape a second show the next day.
As far as going directly head-to-head with the WWE during the 9:00pm to 11:00pm timeslot instead of going on earlier at 8:00pm, TNA President Dixie Carter had this to say:
“You know… we could have done either one. Look, since we’ve been at Spike Television we’ve moved, I think, timeslots 3 different times, two days. That wonderful, amazing, wrestling fanbase that TNA has has always followed us and has always grown from the 600,000 we started with to the almost 2 million now. So, that doesn’t mean we can’t change it or we can’t tweak it, but I think this is the decision that we felt was best to start with.”
Hulk Hogan then said that his point of view was from “wrestlers point of view” and not the corporate one because he wanted to go head to head and see who is the best. He said that going head to head works best for him and “guys in the back” that like to fight.
Ms. Carter also went on to speak with several media outlets, including the Hollywood reporter. She had this to say:
“We feel strongly that Monday nights is where the majority of wrestling viewers have been historically… Having two Monday night wrestling shows with healthy competition between them can make for great TV… Our goal is not to beat ‘Raw’ immediately, but we feel confident this will accelerate our growth and make it fun for wrestling fans,”
As noted by the Journal, the last time the two shows went head-to-head, it showed that the combined audience is greater than the audience WWE sees every Monday night. Because of that, there is a potential for both shows to gain viewers just by having the competition. It did happen with WCW and WWF, so that part could happen again.
The WWE for the first time truly began to acknowledge TNA. Responding to the Hollywood Reporter, an unnamed WWE spokesperson said:
“It’s somewhat of a different audience… On Monday nights, we’re one of the top cable shows. We’re focusing on our new show for Syfy, ‘NXT,’ and ‘Wrestlemania XXIV.'”
In that respect this source is correct: the WWE goes after a different demographic then TNA, which is why both shows can succeed. There is definitely an overlap, but RAW and SmackDown only had a 30% overlap at one point, so iMPACT and RAW could share similar numbers.
One WWE spokesperson did not hide behind anonymity. Robert Zimmerman told Variety:
“We’re not too concerned… We’re in good shape.”
And as the numbers above show, Mr. Zimmerman is quite correct in his assessment of the company. However, just because they are in good shape does not mean they will stay there. Complacency is the quickest way to failure in business, and the WWE would do better to be proactive instead of reactive. Once WCW started growing, it took the company three years to recover and move ahead. Obviously, they still have that ability, if they are willing to exploit it. Because if they don’t, the same man behind WCW’s rise may be able to help a more agile TNA do something similar. Says Eric Bischoff:
“This is a great opportunity for TNA to step up and get noticed and showcase their product. I’ve said since the moment I started talking to Dixie, in my opinion we should go head-to-head with ‘Monday Night Raw.’ To me, it’s a battlefield — and to win the battle, you have to be on the battlefield.”
Mr. Bischoff and Mr. Hogan both see this as a battle, and battle they want to win. Whether WWE views them as competition or not, TNA wants to fight with them. In other words, it does not matter if the WWE wants to be in a fight or not, on March 8, 2010 they will be in one.
Newsbites
Some items of note in the rest of the wrestling business world:
“WWE was proactive in working with us to come to mutually agreeable terms on the release of the NXT trademark once it learned of the potential conflict. The timing was right for us as we were planning on renaming the NXT brand to SWA:Source to be closer aligned with the SWA parent brand.”
This statement is in conflict with the one last week where SWA stated NXT was renamed so that it would have the ability to plan its own future and be less aligned with SWA, but the end result is the same. It would not be a far assumption to say the WWE was able to give SWA a form of compensation and all parties have agreed to speak nicely about each other.
DeVito has been with the Company over the past 25 years. Since 2003, he has served as Senior Advisor, Business Strategies, in which he has obtained placement for WWE television programming in North America. His tenure with the company began in 1985, when he created WWE’s first marketing group. He subsequently managed several WWE departments, and served as its Chief Operating Officer from January 1997 through June 1998. DeVito was also President of the XFL™, WWE’s former professional football league.
In addition to his duties at WWE, DeVito held senior positions with the National Basketball Association, The National Thoroughbred Racing Association and Breeder’s Cup Ltd.
Also, according to the SEC filing:
Mr. DeVito, as a management Director, will not receive additional compensation for his service as a Director.
On November 10, 2009 this SEC note was filed:
On November 6, 2009, Linda E. McMahon resigned as a Director of the Company due to the continuing demands on her time resulting from her campaign for the United States Senate, representing the State of Connecticut.
It would appear, then, that Mr. DeVito is actually filling the space Mrs. McMahon once held.
In the Marketplace we look at the trends in television ratings. This section is less for critical analysis by the Journal but more for the reader to see what is really going on and to draw their own conclusions.
As with stocks, here in the Journal we track the progress of television ratings. If ratings are the barometer by which we judge the product, then over the course of 52 weeks we should be able to see patterns, trends, and anomalies.
For the week ending February 17, 2010, here are the current standings of our shows:
RAW
Close (This Week’s Rating): 3.4
Open (Last Week’s Rating): 3.6
Percentage Change: ▼ 5.6%
52-Week High: 4.5
52-Week Low: 3.1
All Time High: 8.1
All Time Low: 1.8
SmackDown*
Close (This Week’s Rating): UNAV
Open (Last Week’s Rating): 2.1
Percentage Change: N/A
52-Week High: 2.3
52-Week Low: 1.6
All Time High: 5.8
All Time Low: 1.0
* SmackDown! ratings may include fast overnight if final ratings are not posted. Also, SmackDown! ratings are for the prior week as overnights are not available before this article goes to print.
ECW
Close (This Week’s Rating): UNAV
Open (Last Week’s Rating): 1.0
Percentage Change: N/A
52-Week High: 1.4
52-Week Low: 0.7
All Time High: 2.3
All Time Low: 0.6
TNA iMPACT**
Close (This Week’s Rating): 1.2
Open (Last Week’s Rating): 1.2
Percentage Change: ▲ 0.8%
52-Week High: 1.5
52-Week Low: 0.7
All Time High: 1.5
All Time Low: 0.6
** TNA iMPACT’s are for the prior week as ratings may not be available at the time of the Journal’s posting
SuperStars***
Close (This Week’s Rating): 1.0
Open (Last Week’s Rating): 1.0
Percentage Change: ▲ 5.2%
52-Week High: 1.1
52-Week Low: 0.7
All Time High: 1.1
All Time Low: 0.7
*** SuperStars ratings may include fast overnight if final ratings are not posted. Also, SuperStars ratings are for the prior week as overnights are not available before this article goes to print.
Analysis:
Steady continues to be the name of the game, and this was beneficial for much of the WWE. SmackDown has slowly been building up a strong streak where the February 5, 2010 edition made the fifth week in a row with a 2.0+ rating. This is now the longest streak since the twelve week one from November 7, 2008 to January 23, 2009 ended. SmackDown has a long way to go to beat that number, but they are off to a decent start.
SuperStars has now scored a 1.0+ for the third week in a row, the first time they have ever done that. Obviously the show has continued to perform well enough for WGN America and—as noted in the numbers above—has significantly helped the WWE’s top and bottom line.
TNA again came in just below 1.2 (1.19), but with the rounding ends up there. They have an uphill battle going in to Monday nights, but as their January show demonstrated there is audience to be gained by just going against the WWE. During the two hours the shows were head to head iMPACT did score a 1.3, so that is at least possible starting on March 8, 2010.
ECW’s final ratings are delayed this week due to the President’s Day holiday in America (not Family Day in Canada). The Journal will bring that next week, along with the initial ratings for NXT. Watch the chart above as ECW will remain on for a comparison point with NXT for the next year.
We all know that wrestling is a business, but we don’t often pay attention to what sells and makes money. Money and Investing looks into the top selling items in the world of wrestling and any interesting figures that may have come out this week.
What are the top selling items for the WWE? WWEShopZone.com releases a list of varying numbers to show what is selling for them:
1. John Cena Never Give Up T-Shirt ($25.00)
2. Santino Cobra T-Shirt ($25.00)
3. John Cena Never Give Up Sweatband Set ($12.00)
4. John Cena Never Give Up YOUTH T-Shirt ($22.00)
5. WrestleMania 26 Red T-Shirt ($25.00)
6. Bret Hart Emblem T-Shirt ($25.00)
7. WWE Championship Spinner Toy Belt- Mattel ($14.99)
8. John Cena Never Give Up Baseball Cap ($20.00)
9. Bret Hart Emblem Sweatshirt ($40.00)
10. John Morrison Rock Star DVD/T-Shirt Package ($21.99)
11. D Generation X MEN’S Slippers ($14.99)
12. Raw Superstar Ring- Mattel ($15.99)
13. D Generation X Worlds Biggest Member T-Shirt ($25.00)
14. Miz I’m Awesome T-Shirt ($25.00)
15. John Cena Attitude Adjustment Basics YOUTH T-Shirt ($9.99)
16. John Cena Attitude Adjustment T-Shirt ($25, on sale $14.98)
17. John Cena Illustrated YOUTH T-Shirt ($9.99)
18. John Morrison- Rock Star DVD ($24.95, on sale $14.85)
19. WWE Black Gift Bag ($3.00)
20. Undertaker Original Deadman T-Shirt ($20.00)
While John Cena may take up 35% of this list, there were a few surprises this week. Starting off at number two was the debut in the top selling list by Santino Marella and his “Cobra” t-shirt. No word on his Hasbro (owners of GI Joe) have any issue with this, especially considering the WWE’s relationship with their main competitor Mattel. Also holding on to his spot for the past month is the Miz, coming in at number fourteen. His former tag team partner John Morrison returned to the list with a strong start to his DVD coming in at numbers ten and eighteen. Bret Hart also held on to his two spots while the Undertaker made a rare appearance at number twenty.
Surprisingly it was DX who suffered the most by so many other talents being in the top selling list. The duo saw their products drop to just two spots, showing that perhaps this incarnation has also saturated the market.
TNA sometimes releases a list of top selling items on ShopTNA.com. According to the site the top selling items were:
1. Hulk Hogan – Change T-shirt ($19.99)
2. Don’s Insane Brown Bag Special ($20)
3 HOGAN JOINS TNA – Limited Edition Plaque and Card ($39.99)
4. “Hulkamania” T-shirt ($19.99)
5. Beer Money T-shirt ($19.99)
6. Emergence CD ($14.99, on sale $9.99)
7. Bound For Glory 2009 DVD ($19.99, on sale $17.99)
8. AJ Styles “Phenomenal Brand” T-shirt ($19.99)
9. Hard Justice 2009 DVD ($19.99, on sale $9.99)
10. Sting “Discharge” T-shirt ($19.99)
Hard to believe the administration before Hulk Hogan and Eric Bischoff was better at updating this list.
Wrestling isn’t just about watching and reading. The best way to be a wrestling fan is to experience it live. Where is wrestling coming to in the next 2 weeks? The Personal Journal answers that question.
| Sunday | Monday | Tuesday | Wednesday | Thursday | Friday | Saturday |
| 21 (Feb)
|
22
|
23
|
24 | 25 | 26
|
27
|
| 28
|
1 (Mar)
|
2
|
3 | 4 | 5
|
6
|
Do you know a wrestling event coming up? Send one in to The Hamilton Ave Journal and we’ll be sure to add it to the list.
The Editorials section is designed for you, the readers, to respond to the views presented in the Journal, send an important news item, or talk about another overlooked business related item in wrestling. Just beware: the Journal reserves the right to respond back.
From the commentary section last week, even though Destination X is already not going to be an X-Division only PPV, Goafer asked before we knew that for sure:
Let me pose a question, since this is all about financial matters.
How smart is it to have an all “X-division” PPV?
Guest#2044 had his thoughts on this one:
It can be very smart, depending on the real motive of the decision makers. Even setting aside your personal bias.
First off, TNA does not do much in the way of PPV buys. While there may be many reasons for this, they are contractually bound to provide a PPV shows. So they have to do something. Having a theme show may increase buys. Your tastes aside, many people do like cruiserweight action. They have little to lose, because they have a low buy rate. They may gain. Classic low risk scenario.
This is the exact point: for TNA this is a no lose situation. PPV is not as important to TNA as it is to the WWE, so they can afford to have a PPV with a low buyrate. If it does poorly, then they move on and never do it again. If it does well, they try to take advantage. If the WWE were thinking about having an all mid-carder PPV, then it would be a bad financial decision as they make much more on PPV. For TNA, though, there is not much to worry about. It would appear that TNA has changed their mind anyway and it will be an X-Division friendly PPV, but not the complete show.
This would have been a fine answer, but our Guest decided to continue on with some points that are just not true:
Second, Hogan and Bischoff have traditionally not liked cruiserweights. By having an all X-Division show, they can show there isn’t enough interest to continue the division. They can even load the dice by not properly supporting the PPV – no properly built up feuds heading into the show, no card announced until late in the game, and jobbing out X-Division wrestlers.
Bischoff has shown not to like Cruiserweights? It was Eric Bischoff in WCW who introduced America on a grand scale (ECW was not a grand scale in 1995) to Cruiserweight wrestling, as well as Lucha Libre, modern strong Japan, and many others. Sure, Mr. Bischoff would rarely make these wrestlers the center of the show, but that is not how he operates. Mr. Bischoff follows a model of there needs to be a little bit of something for everyone, and he understood that it was important to have good action wrestling mixed in with drama, comedy, suspense, and various other aspects. Every WCW show under his watch had a large amount of cruiserweight action. If it wasn’t for Mr. Bischoff introducing those styles of wrestling to a mass audience in the mid-90s that there would probably not be an X-Division today.
Continuing the confusion of what people do and how it affects the world, HOF 2010 stated:
Pretty sure WWE owning NXT changes nothing….
And again a guest (this one being Guest#7636) provided the response:
It does in Scotland. Since WWE has/will trademark the name, SWA can no longer use it for its feeder company. Any attempts to do so will be answered with legal filings.
SWA may claim that they have built up the name recognition and value, but that isn’t going to hold. The promotion is less than five years old and by their own admission tours largely in Western Scotland. That isn’t even the whole of a country that is smaller than most states in the US. So, unless there is significant home court bias they will lose.
And really, is SWA large enough to even spend time in court? Barristers aren’t cheap. The larger import of the VPW example is that WWE may just for SWA to back down or go bankrupt trying to answer accusations.
If they go the last route, WWE may even buy the SWA rights to close all loopholes. Michael Bolton did this to musicians he stole from, so this approach works.
So this changes the entertainment value of WWE’s business dealings, if nothing else.
Looks like the guests are doing the work of the Journal this week. Since NXT has already changed their name as covered above, it looks like they were happy with whatever settlement came their way and did not want to fight. As you noted, going to court with the WWE is not cheap and not something the SWA could financially go through. Now it appears that all parties are happy with the result.
Sticking with the WWE and their potential lawsuits, Nate asks:
I seem to recall reading that the “Billy Gunn” and “Road Dogg” names were no longer owned by WWE as intellectual properties. Granted I think I heard this about 2-3 yrs ago, and I’ve had concussion #4 since that time…
Apparently, in the United States the “Billy Gunn” trademark was abandoned on June 7, 2006 and nothing was readily available for “Road Dogg”, but that doesn’t mean that both marks are not still alive in the UK. On top of that, WWE doesn’t actually need the trademark as much as they have copyright of any use of the characters as they are shown on WWE TV. WWE actually owns all of their history that they show and talent sign contracts stating that the WWE has control of that footage and that all acts they do are property of the company. This is similar to when someone works for a software company all ideas they come up with related to that particular technology actually belong to the company and the person cannot walk away and create their own organization based on the idea.
Moving on in the WWE’s business dealings, Captain Charisma Carpenter wonders:
How many sales of The Miz’ shirt can be put up to the fact is says “I’m Awesome”?
I’d love an “I’m Awesome” t-shirt, it would cover my low self-esteem wonderfully.
Probably few as the vast majority of sales of WWE merchandise take place at WWE.com and live events. However, there is still the K-mart contingent to deal with.
Back to PPVs and their importance, indianguy wants to understand:
From a Marketing/ Marketer’s perspective, how is it that the UFC is garnering the PPV buys??
Is it the novelty factor that’s working for them (as it goes mainstream) i.e. it’s a passing phase or is it clever marketing in itself (4P’s which means the product as well unfortunately for the E and TNA).
The UFC is a totally different model them wrestling. Right now, wrestling is based primarily on television rights fees and then makes additional funding from other streams. For the WWE, PPV represents 17% of revenue and 22% of profit, so it is very important but less so then other areas. For TNA those numbers are most likely less than 5%, a far less important figure. UFC, on the other hand, is based in PPV and it works that way. The company grew out of PPV and their audience understands that. Where wrestling has big events on free television but still tries to convert the audience, UFC has all their big events on PPV and puts minor events on free television.
Could the model change in the future for the UFC? Absolutely. If the company starts to see PPV buys dip or if they find they can get more money from television rights fees, that is the model they will move in to. And yes, while the sport has seen tremendous growth the past few years the rate of growth is not sustainable. They may be reaching a point of market saturation where there is not much more growth and they have their audience. Do not forget that within a few months of having an event with 1 million buys that the UFC has an event with 280,000 buys. They are not guaranteed anything right now and still have to put on a compelling product to draw viewers in, and that is not always an option for them.
Going in to the messed up world of TNA distribution, Loki wants to know:
Despite it happening in November, Turning Point 2009 still isn’t available to buy on DVD – surely not selling PPV DVDs is not a smart business move.
Perhaps they plan to sell it as part of a 3 disk ‘Cross the Line’ bumper set like last year. If that’s the case why isn’t that available for pre-order, or hasn’t been formally announced.
Also, is it wise to put both Main events from Turning Point on the Best of 2009 DVD if they want to sell Turning Point DVDs?
To summarize – what the fuck is going on from a TNA PPV NTSC DVD POV?
There is usually a 2-3 month gap between PPVs and when they are available on DVD. This has a lot to do with the time it takes to make the packaging and the DVDs themselves, as well as legal contracts with PPV companies. That said, Guest#4059 brings up an interesting point from the regime change:
Probably TNA has been so chaotic with Hogan and Bischoff that they have let too many things slide. Though if Eric is such a business man, you would think he would straighten out his revenue streams.
See Money and Investing for the past five weeks and you will know exactly where the Journal stands on letting little things like this slide.
Plenty more was written, so be sure to take a look. And if you enjoy the Journal, why not bookmark 411wrestling.com and make it your home page? You can do that by clicking here.
This concludes Issue #125 (Volume 2) of THE HAMILTON AVE JOURNAL. Join us next week as we get ready to ring the bell again.
Till then!
