wrestling / Columns
The Hamilton Ave Journal 11.29.08: Volume 1 – Issue 62
THE HAMILTON AVE JOURNAL
By JP Prag
Volume 1 – Issue 62
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.
WHAT’S NEWS
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: Linda McMahon hits the Street
WWE CEO Linda McMahon recently sat down with Debra Borchardt of TheStreet.com. Below are some highlights.
When asked about how the recession would affect the sales and if fans would plunk down dollars for the WWE’s product, Mrs. McMahon basically brushed the question aside saying that they had diversified products and international revenue streams, so she was not worried too much. Also, Mrs. McMahon went into further detail to say the WWE was a relatively cheap form of entertainment and that during “dismal times” people wanted to forget such matters and watch their product. Ms. Borchardt did not follow up with questions about there being 14 PPVs a year with high price points, nonetheless the costs of tickets, declining attendance, declining buyrates, fewer sell-outs for international shows or anything of the like, but the interview did continue.
After discussing the similarities between wrestling and movies as escapist entertainment, Mrs. McMahon moved the topic over to WrestleMania 25. According to Mrs. McMahon, dollar figures for the event are already ahead of WrestleMania 24, so in that respect are a complete success. She then moved on talking about the highly successful tour in western Europe, saying 14 of the 22 events were sold out as a positive statistic (neglecting to mention that last year 19 of the 20 events were sold out).
Ms. Borchardt then used this opportunity to ask Mrs. McMahon about launching into China next year with live events. Mrs. McMahon confirmed that the first live events for China will be in July 2009. Going into the history of the WWE in China, Mrs. McMahon stated that they have been on the air since last January and that they have been slowly building up the product there. They have been moving one province at a time and are now on in two to four provinces. After this, the WWE plans to be on in six to seven provinces by the end of next year.
Moving away from China, Ms. Borchardt then discussed the depressed stock price for the WWE, but hit in with the hard question of the WWE’s dividend. As a reminder, the WWE’s dividend is actually more than they are taking in in operating cash, so they are spending money from their savings in order to pay it. Mrs. McMahon stated the management team is committed to continuing to pay the dividend and mentioned the $20 million in announced operating savings (although once again there was no follow-up with the fact that the WWE is already $20 million higher in costs this year than last year, so the damage has been done).
Then Mrs. McMahon also let us know that the WWE will be dropping $30 million in capital expenditures. Nothing specifically was stated as being cut, but this will most likely come from pulling back on expansions in media production (DVDs, On Demand, etc…) and from WWE Studios. In other words, the WWE will actually be pulling back on the ways they have tried to diversify the product in order to save cash (these are non-operating transactions) so that cash will be available for the dividend.
All-and-all, it was a brief interview with mostly Mrs. McMahon in control of the message and the tone. If any of what the CEO had to see affected the stock performance, it is hard to say. But the stock did close up at the end of the week at $11.63.
Newsbites
Some items of note in the rest of the wrestling business world:
MARKETPLACE
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 Thursday November 27, 2008, here are the current standings of our shows:
RAW
Close (This Week’s Rating): 3.3
Open (Last Week’s Rating): 2.9
Percentage Change: ▲ 13.8%
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): 2.2
Open (Last Week’s Rating): 2.2
Percentage Change: UNCH
52-Week High: 2.9
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): 1.2
Percentage Change: N/A
52-Week High: 1.5
52-Week Low: 0.6
All Time High: 2.3
All Time Low: 0.6
TNA iMPACT**
Close (This Week’s Rating): 1.1
Open (Last Week’s Rating): 1.1
Percentage Change: UNCH
52-Week High: 1.2
52-Week Low: 0.9
All Time High: 1.2
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
Analysis:
This was the most relatively positive week for ratings in quite some time. Despite not hitting anywhere near where they were a year ago, it was an overall uptick or at least steady week for all of wrestling. SmackDown was once again able to tie their all time MyNetworkTV high with a second week of 2.2 ratings. At the same time, TNA did not slip and also held on to its normal 1.1. The big winner, of course, was RAW with a 13.8% jump to a 3.3, the highest rating RAW has had since August 18, 2008. The ratings jump came with a number of factors (John Cena’s return, more people being at home for the holiday, etc…), so it will be interesting to see if these numbers can be maintained. Given the recent track record of the WWE, that does not seem as likely, especially considering that the last two weeks in December tend to be down overall, making the new year harder to start off.
ECW ratings were not available this week at the time of article deadline due to a delay associated with the Thanksgiving holiday.
MONEY AND INVESTING
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 ten selling items for the WWE? From WWEShopZone.com:
1. John Cena HLR Academy T-Shirt ($25)
2. WWE Black Gift Bag ($3)
3. WWE Heritage IV Trading Cards ($2)
4. WWE Ultimate Rivals Trading Cards ($2)
5. WWE Magazine presents Wrestlemania 2009 Calendar ($9.99)
6. Hardys Purple Logo Pendant ($10)
7. John Cena Cenation Blue Sweatband Set ($12)
8. D-Generation X Illustrated T-shirt ($25, on sale $20, on double sale $9.98)
9. WWE Holiday Gift Wrap ($6)
10. Hardys WWE Shop and Jakks Pacific Exclusive Action Figure ($34.99, on sale $24.99)
And the champ is back. Wasting no time with his return, John Cena took over the number one and number seven spot. The number one spot is especially important not because of location, but because of margin. The $25 t-shirt is high margin amidst a large number of low price / low margin or discounted products. Although John Cena will not be the savior of the WWE entire bottom line, he will provide a nice boost when they need it.
TNA sometimes releases a list of top selling items on ShopTNA.com. According to the site the top selling items were:
1. Cross The Line DVD Triple Pack ($24.99)
2. TNA Ultimate Matches DVD ($19.99)
3. Beer Money T-shirt ($19.99)
4. Autographed Mick Foley & Sting Poster Combo ($49.99)
5. Autographed Sting Poster ($29.99)
Well look who updated their top selling products list for the first time in over a month. TNA dropped the number of top selling items from seven to five, but at least it is a new list. TNA has still not returned messages from the Journal, but it looks like someone gave the site masters a talking to. Not only is this list updated, but many of the extremely negative comments against the product have been replaced. As for the list itself, as imagined it included DVD sets which always sell well for TNA. This is how they move their old inventory and stops them from having high carrying costs. On the other hand, a new DVD set seems to cost $19.99 while the Beer Money t-shirt does the same. The T-shirt, though, it where the real money is as the margins are extremely high. The poster as well are high margin, so TNA is making some progress in the products that are being sold.
PERSONAL JOURNAL
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.
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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.
EDITORIALS
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, ROH is launching new media distribution deals which made think they could do more:
ROH needs to do monthly PPV and save up enough cash to make some of them live and 3 hours.
They need to bite the bullet with a TV show and do it.
At least a YouTube/Daily Motion show…
To this, Brett responded:
Why would ROH move to monthly PPVs? From a creative standpoint it is great, but financially it would probably kill the company.
And TAT responded:
ROH does not need to compete with WWE and TNA on a PPV level, as they still do not have a TV deal (which would be utilized to build a PPV audience).
Agreed, ROH cannot even think about going to a monthly PPV format without television in order to broaden the reach of the product. That said, “biting the bullet” with a TV show is not something ROH can just do! There has to be a network willing to take them on, and that has not come about yet. While some networks with lower distribution (like G4) have shown passing interest, ROH wants a partner like Spike is to TNA to take on the cost of producing a show like this. They cannot afford to do it on their own.
On the same token, producing a PPV is extremely expensive and you only reap the profit 6 to 8 months later when PPV companies pay out. This was one of the major factors that drove ECW to bankruptcy as they outlaid the cash to produce the PPV but did not have any float to carry them until they got paid.
Moving on to the merchandise arena, Steve307 wonders:
Whatever happened to simplicity in wrestling t-shirt design? Everything on both TNA’s and WWE’s site looks like it’s trying to be an Affliction shirt, with printing all over the place. Two of the biggest selling T-shirts of all time (nWo and Austin 3:16) were simple designs. Am I the only one that wants a simple logo on the chest of a t-shirt?
Two words: David Hardy. Mr. Hardy is a trend setter in t-shirt design and many wrestlers (like Christian Cage) and clothing designers are enamored with his work. Because of this, they assume that other people also want these designs and—in many respects—there is an audience that does. But yes, simple designs have not only traditionally done better, but cost a lot less to produce. This printing out to the collars and on to the sleeves actually double the production costs of the t-shirts, so the cost has to be made up in the price. There are still some simple shirts out there, but they are not quite as prominent as they once were.
Sticking with merchandise, Mike pontificates:
I am betting that part of the reason WWE’s low-priced items are near the top of the list is that they often offer free shipping for totals over a set amount. Maybe it’s cheaper to toss a gift bag or a couple packs of cards into an order than pay for shipping in some cases.
Yes, that is part of the reason and why we see the WWE Black Gift Bag almost every week. But that doesn’t explain two things: First, there are now three or more (depending on the week) items in the Top Ten under $3, so that means that the cheap items are not just being used to push over a threshold but also are being bought beyond the products themselves. Second, there have been an usually high number of discounted items on the list. This means that people are not buying things at full price and are instead doing the bargain shopping. While this is great for the consumer, it does nothing but hurt the WWE’s bottom line while inflating their top line.
Moving away from merchandise, Davis wants to clarify:
WWE only has roughly 550 employees?
Yes, although some people have been laid off recently, according Google Finance and Hoovers, the WWE has about 570 employees. Although you may only think of the wrestlers as employees (which the WWE does not, they only consider the 140 wrestlers [that includes people in development] to be independent contractors), there is a whole slew of back office employees at Titan Towers. Not only that, but the WWE has offices in:
All of these offices have staff that do local and international jobs. Also, there are very large production, merchandising, and warehouse departments. The WWE is $485 million in revenue per year company and it does take quite a few people to make that run. If it takes all of those people is up to debate, but the Journal has previously stated those costs are more on the top than at the bottom. There is still a support and development staff that needs to be fully in place to continue to function and grow.
Finishing us off this week, theHomewrecker wants to know:
Can the WWE track viewers from cable companies & DVR recordings or is that an invasion of privacy thing? I always DVR Raw & Smackdown due to work & play so I think viewership might be higher than what figures project. Plus, how out-dated & unreliable is the current ratings system? I’m sure you’ve covered this but thanks for humoring me if you decide to answer! And how do you know if you’re in a “Nielsen rating”?
To this, Iron Knee responded:
They ask you to be part of the ratings system and provide you with the necessary equipment. The historically system under-represents Hispanics and is riddled with geographic irregularities. All in all, it does a shitty job, but the networks are afraid to do anything about it b/c advertisers are so familiar with the methodology.
Let’s clarify: Nielsen asks 10,000 (5,000 until just last year) homes to be part of the tracking survey. The representative track their usage through journals, specially designed boxes, and tracking devices that can be worn. This is group is supposed to be a cross section representation of the United States population, but critics of the system say that the base leans heavily against minorities (especially Latinos and blacks) and in favor of mid-west communities. So a show could be very popular within a small physical area that has a lot of Nielsen homes, and that will increase its rating even if physically less people are watching. In other words, ratings are an estimation of the amount of people watching based on statistics, not on actual counts.
As far as time shifted (DVR) shows, Nielsen does now track that figure. RAW is consistently in the top ten most time shifted show, usually accounting for an additional 0.1 to 0.3 ratings points. This hardly accounts for the missing ratings seen just 6 months ago when the WWE last scored a 3.9.
Now, is the Nielsen system outdated and unreliable? While they have made significant strides in the last year alone to capture more accurate ratings, the Journal stands behind the idea that 10,000 people is not a true representation of the 300,000,000 million diverse Americans. There are alternative companies developing their own systems, but most have not had much luck. Tampa Bay, FL based erinMedia had developed a system similar to what was described above using regular digital set tops to send back viewing habits to a central computer, but they failed to secured $25 million in financing in February 2007 and left the television ratings game. They are still involved in an anti-trust lawsuit with Nielsen that has been going on since 2005, but that does not look to be ending soon.
One of the reasons erinMedia failed to secure financing was because Nielsen formed a new subsidiary called “DigitalPlus” which would do what erinMedia was trying to develop. So it looks like even Nielsen knows there are flaws I their system and are working towards creating better methods, but it will be some time before they implement them all.
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!!
CLOSING BELL
This concludes Issue #62 (Volume 1) of THE HAMILTON AVE JOURNAL. Join us next week as we get ready to ring the bell again.
Till then!
