HomeArticlesWWE: Has Vince McMahon Lost His Midas Touch?

WWE: Has Vince McMahon Lost His Midas Touch?

The mainstream media likes to ignore World Wrestling Entertainment wherever possible, but they can always make an exception for a bad news story.  And make no bones about it, the loss in value of WWE in the region of $350 million is a bad news story. 

There has been a palpable sense of glee in some of the reporting, largely ignoring the fact that even with those losses the WWE is still worth a huge amount of money and that it’s unlikely Vince or his family will be visiting the Soup Kitchens of Stamford, Connecticut any time soon. However, it does bear making a little bit of a deeper dig into the facts and figures to understand exactly why Vince McMahon is now no longer a “billionaire” (on paper, at least).

The main reason for the share price fall is the fact that the WWE, and by extension Vince himself, drastically overhyped the potential returns from both the WWE Network and the new TV deal that they have just signed with Universal.

In the modern economic climate the 50% increase in the TV deal from the last contract is good business.  The problem is that the WWE tried to convince investors that they could double or treble the figure they had previously got so even if you take the bottom end of that equation at face value the new deal only increased by a quarter of the WWE’s own projections.  As many long term WWE viewers will know, it’s not the first time that Vince has made a failure from a relative success.

Having seen the vast increases that proper sports got for their TV deal in the USA, Vince thought that his “sport” was a comparable venture when in fact all known studies show a very different figure.  Even though Raw helps the USA Network to become the number one watched station on basic cable, the advertising rates during Raw are the lowest of any show that station airs. It’s also stated that the average income of Raw viewers is lower than that of other sports fans and a higher percentage of them have never been to college.  In brutal terms, that is not the demographic a lot of big money companies are chasing.

It also didn’t help negotiations with television companies that it came just as the WWE had started up their online Network.  In basic terms it would be obvious to most that that would be the case (a fact Vince has begrudgingly admitted since) as companies would surely be nervous about the effect it would have on the TV ratings.  It may seem preposterous to think that people might not watch the current product on a Monday night because they could catch old shows from the “glory days” on their PC or tablet, but that is the way that companies think.  And anything they can use to bring the price that they pay for a product down will be used in evidence against you.

The situation is pretty clear cut in that a doubling of TV revenues was never feasible.  The only question that remains was whether or not Vince and the WWE ever believed them, or were, in wrestling parlance, working the crowd for their own benefit.  We’ll come back to that towards the end because it’s also a similar situation with the WWE Network.

Now I was never convinced the WWE would get anywhere near their own break-even figure of 1,000,000 subscribers.  Admittedly with the addition of WrestleMania XXX within the $9.99 monthly fee they got a hell of a lot closer than I ever imagined they would but at around 650,000 they are still a third short of their old projections (which have since been revised even further upwards, with around 1.25 million subscribers now needed).

According to the advance publicity, the WWE had 52 million homes in America with an “affinity” for the company.  That ignored the fact that only around 5 million people watch Raw each week (a free product, lets not forget) and that other than the Royal Rumble and WrestleMania, the two biggest PPV shows of the year, in 2013 the biggest number of “buys” for a PPV show was 296,000 for SummerSlam.  Battleground was bought by as few as 114,000 fans.  Yet those figures didn’t perturb Vince.

You see if only 4% of those 52 million households subscribed to the Network, there would be a profit after expenses of at least $50 million per annum. This even allowed for upto $60 million being lost in other areas by the company as a result of the Network (such as PPV income disappearing).  As investors rubbed their hands together and waited for the fat profits to roll in anyone with any common sense and knowledge of the product could see that those figures were pie-in-the-sky and frankly, implausible.

(It’s worth noting that they’ve tried this before with the ludicrous claims during conference calls that the Raw and Smackdown audiences were a different set of fans).

Once a year a million or so households worldwide pay for WrestleMania.  As shown in the 2013 pay-per-view buy rates, most other shows don’t get a quarter of those figures.  Why would someone who watches Raw once a week but never spends a dime on the product otherwise suddenly want to commit to a $60 purchase for six months of the Network.  Even with WrestleMania XXX on there, they couldn’t reach their break-even point even though in monetary terms a deal like that seemed like a “no-brainer”.

So we get back to the point of whether the WWE and Vince ever actually believed their figures.  At this point it’s worth reiterating, Vince was only ever back into the billionaire bracket because of his own hype and as such has only lost what wasn’t there in reality in the first place.  Some argue Vince knew and have backed this up by Stephanie selling some of her shares at the inflated price before things came crashing down.  Quite apart from the fact that this would be fraudulent misrepresentation and would appear to be a clear-cut case of insider trading if it could be ever proved, its telling that a lot of the people saying that are the same people who have been saying for years that Vince now longer has “it” when it comes to booking his promotion.  Come on guys, either Vince is a genius or he’s not…

So the question is, did Vince and those within the WWE “bubble” believe their projections or was it a “work” to make some money and get some investment.

My own belief is that they believed it. This is wrestling after all, where lies become the truth.  I believe they had convinced themselves that the figures stacked up and were perhaps shocked when they realised things weren’t quite as they saw them.

If the WWE Network was Vince’s last big gamble, so far it hasn’t paid off.  That’s not to say that it will derail the company and hopes will be high for a huge international take up when it becomes available elsewhere. But the one thing that you could usually always rely on, even when outside ventures like the XFL, the WBF and The World restaurant were crashing down, was that when it came to Wrestling, Vince had the Midas touch. Fewer people believe that today.

– By Matthew Roberts | @IWFICON

What do you think of WWE’s massive $250,000,000 loss? Will the WWE Network reach it’s 1.4million subscribers by the end of the year? Will the stock price ever recover? Do you think it’s all panic over nothing? Share your opinions in the comments section.

Matthew Roberts
Matthew Roberts
"Who's your daddy, Montreal?" - Shawn Michaels
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