The greatest minds in the history of wrestling have always stated that the industry is cyclical, which means the current state of the business is said to be normal. I personally do not believe this is the case and that there will not be another peak similar to the era's surrounding Hogan and Austin in the future. My reasoning behind this? Even during the previous seemingly successful times, the attendance and employment levels of professional wrestling in America have consistently went downhill since the 1980's.
In the mid 1980's and before, the territory system ruled North America and ensured that regional territories were able to run shows on a monthly and weekly basis throughout their designated area. An excellent example of this would be the Mid South Coliseum in Memphis which ran weekly shows that often sold out a venue with the capacity of 10,085. These weekly shows were supplemented by "spot shows" in other medium to large venues throughout the Tennessee and Kentucky areas. While I do not have easy access to attendance figures, it would not be a stretch to state that the Memphis Territory in the 70's and 80's would draw about the same number of fans yearly as the WWE does today.
To sum this up faster:
Cable TV killed the territory system
The Internet severely damaged the traditional television based format of professional wrestling.
Neither one of these should necessarily be viewed as a creative success for Vince McMahon, but rather a success in predicting the future technology and the media habits that accompany them. Unfortunately it does not appear that Vince or the company has a clear vision of how to effectively capitalize on the market. Hindsight is 20/20 in cases like this, but World Wrestling Entertainment is not on a pace to return to anywhere near the levels of a decade ago. It seems as if creatively the company is waiting for a new Hogan, Rock or Austin to drive ratings and increase the profitability of the product, the financial side of the company seems to be throwing in all of their effort into the WWE Network. These are both terrible ideas for reasons I will explain.
1) Notice there was a 13 year gap between the emergence of Hulkamania and that of Austin 3:16. Also note that these two talents had been in the business for years before reaching the success that they would. In the current WWE creative environment, this would be impossible. It takes the right hero, the right villain (Piper, Vince), the right time and a considerable amount of patience to repeat this success. It is well known that Vince changes his mind every 30 minutes, therefore these situations are just not likely to happen.
2) The WWE Network is a 2001 idea in 2011, the brainchild of someone who has zero understanding about the future of media and content delivery systems. The powerhouse franchise that is Raw should be where the company is focusing all of it's attention rather than taking on $200,000,000 in debt (which I will touch on later). The biggest signal that this will not be successful would be the WWE Classics On Demand channel (Previously WWE 24/7). The channel had moderate success at first but has seen subscribers dwindle down as monthly content provided by the WWE was reduced. According to unofficial numbers, in 2007 the service had 115,000 subscribers, currently the subscriber base is estimated to be about half of that number.
2a) This is what I call alternate universe WWE where I am the boss and generating revenue through the tape library is implemented. The short-term standard model would be releasing matches, dvds and full events at an extremely low price via an on demand service. To supplement this would be weekly "compilation shows" that could stream for free online to gain awareness. Devices such as Roku, Apple TV, PS3, XBox 360, iPad, iPhone and various tablets/smartphones are providing convenient access this content. Rather than copying the NFL/MLB/NBA method of a full time cable network, WWE should instead emulate currently successful mobile video and streaming services such as MLB At Bat and NBA League Pass. Services like these would provide WWE with complete control over the production, price and delivery method while not needing to maintain a minimum subscriber base to stay on air.
Even in this much more desirable situation, I am unsure if the popularity of professional wrestling could sustain such a system.
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| Debt-to-Equity Ratio (Click to Zoom) |
The biggest hitch that could happen to the WWE Network would be regarding the $200 million in debt that would be taken on to launch. Vince may claim that the interest rates are great right now and it is a perfect time to take on debt, but that doesn't make the reason for taking on said debt a good one. Currently, WWE has a stellar Debt-To-Equity ratio of 0.01, this represents the ratio of Shareholder's Equity and debt that it is used to finance assets. While taking on debt is sometimes a necessary event in order to sustain growth, there does not seem to be a valid plan to utilize these funds to increase future revenues. The final confusing factor in this situation is WWE's relatively high Current Ratio of 3.96, this illustrates WWE's ability to pay short-term debts in the next 12 months. For every $1.00 owed, they have $3.96 in assets to cover this amount. This may appear to be a good situation, but in reality only speaks to the inability to efficiently utilize resources to their maximum potential.
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| Current Ratio (Click to Zoom) |
These are only a few examples of why current evidence is not pointing to success in the future of World Wrestling Entertainment. It is also important to note McMahon's lack of success in any business venture other than professional wrestling (World Bodybuilding Federation, IcoPro, XFL). As an outside analyst, it seems that changes in the creative process to boost efficiency and further progress in digital distribution methods would be a significantly lower risk business decision and could also provide more flexibility in the future if necessary.. There is always the possibility of success with the WWE Network, but the wise decision seems to be to wait it out a few more years to see how the media landscape and revenue streams change, unfortunately it seems as if this will happen in the near future, and that could be the beginning of the end for the company.
