The Hamilton Ave Journal 10.11.08: Volume 1 – Issue 55

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 Thursday October 9, 2008, here are the current standings of our shows:

RAW
Close (This Week’s Rating): 3.0
Open (Last Week’s Rating): 3.1
Percentage Change: ▼ 3.2%
52-Week High: 4.1
52-Week Low: 2.5
All Time High: 8.1
All Time Low: 1.8

SmackDown*
Close (This Week’s Rating): 1.9
Open (Last Week’s Rating): 2.4
Percentage Change: ▼ 20.8%
52-Week High: 2.9
52-Week Low: 1.6
All Time High: 5.8
All Time Low: 1.0

What are the top ten selling items for the WWE? From WWEShopZone.com:

1. Jeff Hardy 2008 YOUTH Halloween Package ($84.49, on sale $36.99)
2. Jeff Hardy 2008 Halloween Package ($87.49, on sale $39.99)
3. Hardys Purple Logo Pendant ($10)
4. Triple H Grey Skull Sweatshirt ($40, on sale $12.98)
5. WWE Black Gift Bag ($3)
6. Shawn Michaels Creation Sweatshirt ($40, on sale $12.98)
7. Jeff Hardy White Armbands ($20)
8. Stone Cold Steve Austin Destroyed That Sweatshirt ($40, on sale $12.98)
9. Hardys Twist of Fate DVD/Pendant Package ($39.95, on double sale $18.98)
10. Rey Mysterio Role Play Series #4 ($23.99)

Jeff Hardy has really shows his control of the Top Ten with 50% of all of the items showing, having two of the four full priced items, and premiering a new high-margin product. The white arm bands are the continuation of the old armbands ($15) with a higher price tag. It looks like the WWE realized there is more room to capitalize on Hardy and that he is their top seller while John Cena is out. Also making an appearance is a Halloween costume courtesy of Rey Mysterio, proving that he does draw in the kids as intended.

Other than that, the list was again filled with discounted items. The WWE Q3 and Q4 are going to see significant margin drops that will scare the market even more than it is scared now.

TNA now releases a weekly Top Seven list on their redesigned ShopTNA.com. According to the site the top selling items were:

1. TNA iMPACT Video Game ($39.99 to $59.99)
2. Beer Money T-Shirt ($19.99)
3. TNA Global iMPACT DVD ($19.99)
4. Post Yard Sale DVD Special ($29.99)
5. Christian Cage “It’s Like This” ($24.99)
6. The Beautiful People – 8×10 ($4.99)
7. Post Yard Sale T-Shirt Special ($39.99)

After a week away, TNA has started to release a Top Seven list of the best selling items seemingly of the week. The Journal will continue to watch to make sure this list stays up to date, but it does finally bring a new perspective to what is selling. Much to TNA’s benefit, their largest selling item is the new video game across various platforms. Also making a debut on the list are Beer Money and the Beautiful People who have not been able to bust in to the top sales positions before. Sticking around from the old list were the highly discounted items as well in the Post Yard Sale DVD and T-Shirt packages and the perennial top selling the Global iMPACT DVD. Rounding out the list is a high margin Christian Cage t-shirt, priced $5 above the usual TNA T-shirt.

How this list changes over the weeks will be quite interesting to watch, but TNA is most likely being hit by the same discount and margin killing bug that the WWE is.

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.

From the commentary section last week, when talking about Mike Tyson’s involvement in helping to turn around the business in 1997 Guest#0595 said:

Tyson’s reported payoff was $5,000,000, for his whole stint. He would have had to utterly bomb.

Once again, you need to look at the larger and longer picture. The $6.5 million in profit for the period ending March 1997 already included the purported $5 million that Tyson was paid. Now, WrestleMania in March 1997 only did 0.77 buyrate while the PPVs on both sides did a 0.50. Tyson’s involvement could have been responsible for nearly 0.27 buyrates, translating to a couple of million dollars there. But more important than that is what happened after. In the year that followed, the WWE had a profit of $8.5 million even though buyrates doubled and tripled in some cases (WrestleMania got a 2.20 buyrate). Without Tyson, the WWE might not have generated the same amount of initial interest that led to long-term watchers.

Let’s say that Tyson did not get involved and that the WWE did not get as many new viewers. That $8.5 million profit could have been much less. The WWE was paying down a large amount of debt and amortization. Without the growth in the business, the WWE might have even been cash flow negative. So although the top line grew 54%, the bottom line grew 30%. The disparity is cost that were coming to fruition. Let’s say the top line only grew 25% while costs grew at nearly the same rate. If that were to happen, the WWE could have easily lost money in 1998. Dealing with Tyson was not a one-time thing but had a grand effect down the line for years to come.

Away from this subject were some new questions, starting with Gavin Napier:

What ever happened with the TNA shirts in Wal-Mart on a trial basis thing? I heard quite a bit about it a few months back, then nothing. Is it still on, or did Wal Mart think better of it?

It is still on, but on a test market basis. TNA merchandise is available in 5-10% of Wal-Mart stores as they see if t-shirts and other merchandise will sell. Most Wal-marts do carry the video game and select TNA DVDs, though, so that you should be able to find. If the test markets go well, Wal-Mart will ship TNA merchandise out to rest of their stores. But do no expect anything to happen until after Christmas as Wal-mart has more pressing concerns in the merchandising department at this time of year.

In another question, huh wants to know:

What happened to Raw at the 51 week mark?

To answer the question simply: Christmas. RAW aired on Christmas Eve and New Years Eve this year. The former was the Tribute to the Troops while the latter was a clip show so they did not exactly gain much in the ways of viewship. The lower rating was expected so it was not a big deal for the WWE, USA, nor the Journal.

And still in the new topic area, 3MW wants to know:

Every time I read (and enjoy) your column I wonder why TNA’s financials or business model are almost never discussed or looked at.

Therefore, it’d be nice if you commented on TNA’s business model from time to time, and shed some light on that.

The Journal is unsure what you have been reading, but this reporter often has talked about excessively of TNA’s business model. Specifically, the Journal has covered TNA President Dixie Carter saying the company is profitable and brought up many of the same points you said above.

The WWE is a public company and releases financial data on quarterly basis, making them much more open to scrutiny. The other thing is that the WWE is a company with decades of history and is in a completely different place than TNA. What is something the WWE should be criticized for (spending excessive cash flow, for instance) is not something TNA as an entrepreneurial company would be held as accountable for. Do not misunderstand: TNA does not to reign in spending and should be watching cash flow on a daily basis. That said, at the end of the year if TNA is cash flow negative it may just be the cost of expansion for that year and be completely understandable.

Now, what needs to be understood is how the WWE and TNA model differ on cost and revenue buckets. TNA makes the vast majority of their funding through international programming contracts where they take the existing TNA programs and retool them for a local market at a very low cost. The WWE, on the other hand, makes the vast majority of their money from PPV buyrates, domestic television licenses, and merchandising fees (characters for toys, video games, t-shirts, etc…).

From a cost perspective, the WWE has much more overhead than TNA because of their office, production facilities, and being a public company. TNA pays their talent far less than the WWE, does not tour as much or like the WWE, and does not have diversified interests like the WWE.

The models of the WWE and TNA are not comparable on the baseline, but can be examined in their own right. TNA’s core issue, though, is that they act like a bigger company than they are. This causes them to book arenas they are not ready to play to, host PPV events in cities that do not know them, create excess inventory that they have to sell off at a discounted price, and react much slower to the market than they should. TNA often forgets they are an entrepreneurial company and acts with the bureaucracy and dollar waster of a company five to ten times their side. TNA would be served to pull back, create a logical slow-growth model (not try to make giant leaps and wait for the “next big thing”), and work to keep costs (especially overhead) down.

And with more profit, it would be time to increase the pay of many baseline wrestlers as this reporter has directly spoken to many of the TNA contracted talent about it and knows that the pay is a sticking point. This is especially true because they are now doing more public appearances and events that were not part of the deal when they started and are not seeing any additional pay for it. TNA has the opportunity to create and do things differently than the WWE does and WCW did and it is disappointed to watch them make many of the same mistakes.

Plenty more was written, so be sure to take a look. And of course, a week would not be complete without a good dose of JP Prag’s own HIDDEN HIGHLIGHTS!!