A story about the owner of World Wrestling Entertainment losing a third of his fortune sounds like something that would have been scripted for one of the wrestling TV programs the company airs every week. But this was not a wrestling storyline; this was a shoot, not a work, as it’s called in the wrestling business.
The multinational wrestling and entertainment company became the story of Wall Street at the end of last week, and not in a good way, as WWE’s stock plunged nearly nine dollars a share to $11.27 per. The drop ended up costing chairman Vince McMahon a tidy sum of more than $350 million in personal wealth.
What’s more, this led to the investment management firm Lemelson Capital announcing a stake in the wrestling company and calling for new ownership and/or management. It should be pointed out that since Vince still owns more than 80 percent of WWE’s stock, this is pretty much not going to happen.
The drop was supposedly predicated on two issues. First, WWE’s new TV deal with NBC Universal to retain the two main wrestling shows, Raw on USA and SmackDown on SyFy, ended up giving the company just a 50 to 70 percent revenue increase rather than doubling to tripling it as McMahon boasted it might. But the biggest issue involves the WWE Network, a completely online streaming network launched in March where fans can subscribe to watch a huge library of past matches and the WWE’s current major shows that are aired on pay-per-view TV – all for a $9.95 monthly fee. Essentially, wrestling fans that normally must pay around 50 dollars each for the WWE’s monthly big events can now get them for a fifth of the price and access to classic matches as well, with the only caveat being that they must watch online. While there are still concerns with the streaming process (especially after the stream of WrestleMania XXX reportedly had breakup issues), the big criticism is that WWE would supposedly need at least 1.3 million subscribers to offset the lost PPV revenue but currently has only half that amount according to first quarter numbers. McMahon and WWE remain confident, though, that the subscribers will increase as the year goes on.
In a pessimist’s view, McMahon’s company may finally be getting hit back by the entertainment and business worlds that never really wanted him to begin with. WWE frequently boasts that its shows draw bigger TV audiences than most if not all the other Major League sports. But to some, those numbers aren’t the whole story. “WWE viewers skew toward less attractive demographics,” The Wrestling Observer’s Ben Miller told the investor website The Motley Fool. Its “audience fails to spill over into other USA Network shows and, frankly, the networks may have been eager to send a message in response to escalating rights fees.”
Critics of WWE, many of whom remain those who still look down on pro wrestling for its practice of scripting a live athletic event and determining the winner in advance for the purposes of entertainment and reducing injury, have been quick to fire shots at McMahon and his company as a case of gross mismanagement and leading to financial ruin. But what this may simply be is a case of a company looking to take a risk for long-term success and how that collides with Wall Street.
McMahon, normally a staunch conservative, will occasionally break away from the norm and try to innovate, and this appears to be another example. The man was among the first to move his big events from the closed circuit TV market to pay-per-view due to its chance at higher profit margins. Now, clearly after giving up on expecting cable/satellite providers to carry the network, McMahon appears to be putting faith in live streaming in the hopes it could all but eliminate a middleman carrier and allow him to keep almost all profits for himself. Logic dictates that all major parties in the company knew such a venture would lead to immediate losses (though they likely didn’t expect such a huge drop in stock value) but were willing to endure it in the belief that the network will profit in the long run.
That method doesn’t usually sit well with investors and stockholders, though. They want immediate gratification, and thus fat cats frown on risky gambles. It’s among the clashing principles that make one wonder if WWE going on the public trading market was ever a good idea to begin with. Nonetheless, McMahon has brazenly said “Wall Street can kiss my a**” before, and will likely do so again.
If there is something to be concerned about regarding McMahon, its may be the grumblings going on in the locker room.
Since 2010, WWE has been working to delegate authority away from Vince and allow others to run the wrestling operation, primarily Vince’s daughter Stephanie and her husband Paul Levesque, better known as wrestling star Hunter Hearst Helmsley or Triple H. Triple H is now WWE’s main talent director and supposedly in charge of running the actual live operations. However, word is that everything still has to go through McMahon, leading to things frequently getting changed at the last minute. While this shouldn’t be surprising given Vince’s history of micromanaging, it still sheds a new light on the turmoil that endured earlier this year.
WWE fans were hopeful that rising star Daniel Bryan would become champion at WrestleMania this year. But when Bryan was left out of the Royal Rumble (a special match in January where the winner goes to Mania’s main event) and the wrestler Batista was brought back after a four-year absence to win the Rumble, outrage exploded over the Internet, with rumors that Batista would beat Randy Orton for the title at Mania and Bryan would get buried in a mid-card match. When another star, CM Punk, unexpectedly walked out of the company weeks later, this seemed to confirm their suspicions of turmoil in WWE, especially after an emergency meeting was called to rewrite storylines with Punk’s absence. (Punk, never one to shy away from speaking his mouth, has not said much since leaving, but what he has said suggests injuries were the main reason he left and not any frustration with the company’s direction). The fans ultimately got their wish as Bryan was added to Mania’s main event and given the belt; whether or not that was due to the meeting and any rewrites may never really be known.
Triple H has long been a lightning rod for many fans who feel he used his relationship with Stephanie to become a 13-time WWE world champion; that and the fact that Batista and Orton have been friends of his (and supposedly how they were able to become stars) led many to blame him for the supposed burying of Bryan. But the reveal of Vince’s micromanaging sheds new debate over who is really behind any decisions, especially the ones unpopular with fans. Either way, it’s clear who the wrestlers themselves are behind; they view Triple H as one of their own for having been in the trenches before, and the word is that the shows he runs are often more relaxed as well as more up to date in terms of catering to current pop culture, while McMahon is supposedly stuck in the 1980s when he started in the wrestling business. Rumors are that even Triple H is getting frustrated with his father-in-law’s meddling.
At the moment, WWE on-camera and in the arena is in flux. Bryan recently had to undergo neck surgery and will be out of action for about three months; while that is shorter than some neck operations can cause, it leaves WWE without a champion for that period and likely means he’ll be stripped of the title (there’s an on-camera rule in WWE that a champion must defend the title in 30 days or lose it). There are few stars available that could really carry the belt in Bryan’s absence; Orton and Batista are locked in a feud with another group of wrestlers, John Cena is intent on helping build up younger stars, and a number of personalities like Roman Reigns and Antonio Cesaro are improving but don’t appear ready for the main event. With the hottest wrestler on the shelf and no one really available to take his place at the top, that could affect TV ratings and even ticket sales, which is what WWE needs to worry about more than anything.
In way, all this drips with irony. Wrestling fans have long accused McMahon and WWE of not caring for them due to bad storylines and popular wrestlers getting held back. Now, WWE does something that could be viewed as being done to benefit the fans – a way for them to pay less money for the biggest events – and they take a financial pitfall for it.
But anyone who thinks Vince and WWE are going to panic over this don’t really know Vince. His company was supposed to have folded by the turn of the century in the face of the Time Warner-backed World Championship Wrestling, and instead he ended up buying up that competition in 2001.
Anything could happen in the next few months in regard to WWE’s stock and the direction of the new network. But for now, there is nothing to suspect that Vince and his company are in this for the long haul, and they aren’t going to let Wall Street push them around. They need to focus on their paying customers more than investors.
And, to take a line from the former wrestling stable Degeneration X, if you’re not down with that, he’s got two words (“S*ck it!”) for you.