The Hamilton Ave Journal 10.14.10: Volume 2 – Issue 159

THE HAMILTON AVE JOURNAL
By JP Prag

Volume 2 – Issue 159

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.

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.

TOP STORY: WWE changing ways, revenues

While some blame Linda McMahon’s campaign for WWE PG and the youth initiative, they seem to have forgotten this started a long time before that campaign was even talked about as a possibility. The WWE decided they wanted the change their image to attract better and higher paying advertisers, add a younger audience with longevity instead of trying to captre a short term older audience that was moving away anyway, and to appease investors and partners alike. In many ways, the plan has worked well as the WWE has been able to increase profitability in a number of areas like television rights fees while others like PPV have gone soft.

Despite this, even those critics of Linda McMahon’s campaign are digging in to the WWE’s past and seeing how they got there, going as far to accuse the company of engaging in government manipulation by hiring APCO Worldwide, Inc. to change their image. APCO was quick to respond, telling the Journal Inquirer:

APCO said WWE approached it “to help improve public perceptions and present a positive, responsible image to appeal to politicians, the media, parents, advertisers, and the wider community.”

The firm said its strategy to enhance the WWE’s image involved developing programs to “engage young people in socially responsible activities,” “educate key political and community influencers,” and “demonstrate WWE’s commitment to empowering parents to make informed choices about children’s television viewing.”

APCO said those programs also included sending representatives to the national conventions of the Republican and Democratic parties, as well as a campaign “to introduce WWE executives to key members of Congress and address misconceptions about WWE and its programming.”

Those efforts, the firm said, resulted in the registration of 200,000 new voters across the country and “positive coverage from the national media, members of Congress, and youth organizations.”

“Participation in the national political conventions opened constructive dialog between WWE and policy makers,” it added.

Changing their image has helped the WWE in some of their departments as noted above. But that has not stopped the WWE from seeking out new sources of revenue. As such, they are moving towards new steams such as downloadable add-ons for their latest video game release. From THQ’s press release:

Fan Axxess will enable WWE SmackDown vs. Raw 2011 owners to obtain select downloadable content released throughout the life of the videogame for a one-time anticipated purchase cost of 800 Microsoft Points on Xbox LIVE(R) for the Xbox 360(R) video game and entertainment system from Microsoft or $9.99 on PlayStation(R)Network for the PlayStation(R)3 computer entertainment system.

Still, things are not entirely rosy. The WWE latest tour of Mexico saw dropping attendance compared to their last run through the country:

October 7, 2010 in Monterrey drew 15,000, 95% of Arena Monterrey’s capacity, but still the least attended in the past six years.

October 8, 2010 in Mexico City drew 9,000, 50% of Palacio de los Deportes’ capacity.

October 10, 2010 in Guadalajara drew 10,000, 70% of Arena VFG’s capacity.

This, of course, is in stark contrast to the ratings for RAW and SmackDown which are between 8-9 compared to AAA and CMLL’s numbers in 3-4 range. Some are attributing it to the WWE going to the country too often, which would be a similar affect to what the WWE saw in Europe over the last five years.

Further down the road, other outlets are starting to realize that the WWE’s operations are not matching the cash needed to pay their dividend, a point the Journal has been making for three years. From the Wall Street Journal:

Is that dividend sustainable? The annual payout of about $82 million isn’t consistently covered by its free cash flow, which ranged from $9.7 million in 2008 to $111 million in 2009. Indeed, in early 2008, WWE’s controlling shareholder, the family of CEO Vince McMahon (who is married to former CEO U.S. Senate candidate Linda McMahon), waived a 50% dividend increase for its stake until early next year. If the family doesn’t maintain that waiver, the dividend payout will rise by about $22 million.

It doesn’t help that revenue has fallen over the past 18 months. That’s at least partly the recession, as it has been most evident in pay-per-view revenue and consumer products. Longer term, though, WWE’s revenue has risen only marginally, $438 million in 2001 compared with $475 million last year.

Further in the article, the Wall Street Journal wonders about the McMahon family maintaining a tight grip on the company even after Chairman and CEO Vince McMahon with his daughter Stephanie and her husband Triple H. From a future stock perspective, the Wall Street Journal sees this company as a sell.

Newsbites

Some items of note in the rest of the wrestling business world:

WWE SmackDown appears to be doing something for SyFy that it could not do for MyNetworkTV, the CW, and UPN: deliver the audience to another show. From Rabiddoll:

The Season 1 finale of “Haven,” the new series based on the Stephen King literary work “The Colorado Kid,” earned 1.7 million viewers last week. While it wasn’t the same sized audience that “Smackdown” earned before it (they had 2.6 million total viewers), it seems the lead-in provided an 18 percent boost to “Haven’s” audience from the week before, according to Syfy.

While one week is hardly an indication, especially a season finale, it will be interesting if this can continue for the next show to go in the timeslot following SmackDown.

Martha Hart has been granted an extension until October 25, 2010 to respond to the WWE’s request to dismiss her suit. Originally she was to respond by October 11, 2010.

TNA has started using overruns on iMPACT to promote ReACTION in other countries now, too. In the UK and Australia this past week TNA ended the iMPACT in the same point the US, which would be in the middle of the main event. Of course, this could be an issue since ReACTION does not air in these markets.

During Bound for Glory, TNA also had issues with their stream on their new on-demand site. Says TNA:

“International Fans: Due to technical issues beyond our control, we will be unable to stream tonight’s PPV online. Anyone wh ordered the PPV on TNAOnDemand.com will be refunded in the upcoming days.”

Meanwhile, TNA has been getting some attention from mainstream media outlets for having the Jersey Shore’s “JWoWW” appear on this week’s iMPACT. TNA has gotten plenty of mainstream press before for other guest appearances from Chris Rock to AJ Pierzynski and none have ever moved the dial, so do not expect any major jumps this week.

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 time we should be able to see patterns, trends, and anomalies.

For the week ending Wednesday October 13, 2010, here are the current standings of the shows:

Analysis:

After a good bounce back last week, RAW dropped 13% to a 2.9, marking the third sub-3 rating in a month and making the 18th sub-3 rating since 2001. In 2008 the WWE saw 7 of these ratings and 2007 saw 4, so the WWE is still away from the records of those years for now. Still, there is quite a time left in the year and a lot of three hour specials that tend to bring down the average.

On the other end of the spectrum, TNA iMPACT surpassed a 1.3 rating for the first time since January 28, 2010 (1.4). The 1.32 this week marks only the third time this year TNA has seen a 1.3+ rating, whereas 2009 had 10. The move to Mondays certainly took a toll on the company’s ratings figures for this year, but it looks like they are finally getting to the point of regaining all of that lost audience.

SmackDown is also looking a little better this week, rising 4% from its premier on SyFy to a 1.81. As noted above, SmackDown also looks to be helping as a lead-in, which is not something it ever did for MyNetworkTV, the CW, or UPN.

And even with NXT gone it does not appear that the audience is craving more wrestling as SuperStars has basically stayed in the same range for the 10th week in a row. With little follow-up on RAW and SmackDown, SuperStars looks to be staying in this range for some time to come.

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 selling items for the WWE? WWEShopZone.com releases a list of varying numbers to show what is selling for them:

1. John Cena 2010 YOUTH Halloween Package ($64, on sale $36.99)
2. John Cena Cenation Sweatband Set ($11.99)
3. Nexus Logo T-Shirt ($24.99, on sale $19.95)
4. John Cena Cenation T-Shirt ($24.99)
5. Nexus Armband ($7.99)
6. John Cena 2010 Halloween Package ($67, on sale $39.99)
7. John Cena Cenation Baseball Cap ($19.99)
8. Randy Orton Viper T-Shirt ($24.99)
9. John Cena DELUXE Youth Halloween Costume ($42, on sale $16.80)
10. John Cena Cenation YOUTH T-Shirt ($21.99)
11. The Miz My Name Is T-Shirt ($24.99)
12. Randy Orton Lobotomy Basics YOUTH T-Shirt ($9.99, on sale $8.95)
13. Rey Mysterio 2010 YOUTH Halloween Package ($36.99)
14. WWE Red/Blue Reusable Bag ($3.99)
15. John Cena Never Give Up T-Shirt ($24.99, on sale $19.95)
16. Nexus 2010 Halloween Package ($63, on sale $39.99)
17. Triple H Return to Fear Baseball Cap with Mask ($25, on sale $6.25)
18. John Cena Never Give Up Sweatband Set ($12.00)
19. Randy Orton Lobotomy T-Shirt ($19.95)
20. Drew McIntyre Basics Series #6 Action Figure ($13.99)

It would appear that the WWE has changed their pricing model for most of their items. T-shirts are now coming in one cent lower from $25 to $24.99. This type of psychological pricing is typically done to convince consumers they are paying less for an item, thus increasing sales. The WWE would appear to be heading in that direction in order to give their merchandise a boost.

TNA sometimes releases a list of top selling items on ShopTNA.com. According to the site the top selling items were:

1. Don’s Insane Brown Bag Special ($20)
2. Jeff Hardy “The Ring Is My Canvas” T-shirt ($19.99)
3. Mr. Anderson………People Are Fake T-Shirt ($19.99)
4. Jeff Hardy Enigma T-Shirt (Glow In The Dark) ($19.99)
5. TNA Knockouts Special ($29.99)
6. Jeff Jarrett Autographed Bound For Glory Poster ($19.99)
7. Kurt Angle “Warrior” T-shirt ($19.99)
8. Slammiversary – 2010 ($19.99, on sale $14.99)
9. RVD – Video Wall T-shirt ($19.99)
10. Mr. Anderson “Donkey” T-shirt ($19.99)

One has to wonder if Jeff Hardy is still the top seller after Sunday? Guess it will be many more weeks until we know.

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 upcoming weeks? The Personal Journal answers that question.

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.

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. Now, let’s break down the topics from last week’s commentary section:

What is WGN?

“The WWE cannot have a program on a cable station outside of the NBC-Universal family in the United States.”

And yet SuperStars is on WGN AMERICA, which is… Dun, Dun, Dun… A Cable station.
– Guest#5505

Is WGN considered a cable station or a local “superstation?” I have always wondered how they got WWE programming, too, but the only thing I could think of was they use the “superstation” definition, a nationally broadcasted local station, they have to get around being a cable station
– Guest#9620

Guest#9620 is the winner here. WGN America is a “superstation” which the FCC defines as:

Nationally distributed superstation. The term “nationally distributed superstation” means a television broadcast station, licensed by the Commission, that–

(1) Is not owned or operated by or affiliated with a television network that, as of January 1, 1995, offered interconnected program service on a regular basis for 15 or more hours per week to at least 25 affiliated television licensees in 10 or more States;

(2) On May 1, 1991, was retransmitted by a satellite carrier and was not a network station at that time; and

(3) Was, as of July 1, 1998, retransmitted by a satellite carrier under the statutory license of Section 119 of title 17, United States Code.
– Title 47, Sec. 76.120, Page 610 of the Code of Federal Regulations, Volume 4

To translate, the term “superstation” is controlled by the FCC and has to meet a guideline that includes being a “network” not a “cable station” which has a totally different definition.

PPV

As far as WWE PPVs go, they seriously need to cut down on how many they offer. They have over saturated the product with too many too closely aligned. No, they cannot compete with the NFL, those days are gone. No, they shouldn’t even try to compete with UFC.

They need to go back to the Big 4 (Mania, SummerSlam(Fest), Survivor Series, and Rumble) with maybe 1 or 2 PPVs in between. Increase the quality of your TV shows, which will increase the viewership (people will like the shows, be more inclined to watch), which will increase PPV buys (both from being spread out which is easier on the wallet and from having proper builds to feuds that will have proper blow offs). Of course, that last point is purely on creative and we know how they can be…
– MPMoore

Although these numbers are a little out of date, the story remains the same from Issue #96 of the Journal:

From Royal Rumble to Armageddon, the WWE has 14 events that yield nearly 4.4 million buys and $195 million in gross revenue (the WWE only gets 50% of this; 50% automatically goes to the PPV companies). If you break it down to just what the “Big 4” do now, they equate to 2.2 million buys and $109 million. Assuming the price stays the same for these PPVs, the WWE would have to do an additional 1.8 million buys among the four PPVs. Breaking it down:

Royal Rumble did 450,000 buys last year and would have to do an additional 360,000 buys

WrestleMania did 970,000 buys last year and would have to do an additional 774,000

SummerSlam did 465,000 buys last year and would have to do an additional 371,000 buys

Survivor Series did 320,000 buys last year and would have to do an additional 255,000 buys

As you can see by this, the WWE would need to have an increase of nearly 45% per PPV, a number that is highly unlikely just by people saving up. More than likely, if people had more disposable income in a given month they would spend it on something else. Whether that is a TNA PPV, and UFC PPV, a video game, a couple of DVDs, or something else is irrelevant. It would just be money the WWE would not recover.

So how could the WWE maintain the same revenue with only four PPVs and the same number of customers? Well, they would have to raise the price. Right now, the “Big 4” have an average price of about $50. In order to get the same revenue number, the WWE would have to raise the price to nearly $90 for these shows. When you change the price, you also have work in the numbers of how many people leave because of price. Given the amount of people that would not buy the product because of the price and working backwards, the price of these PPVs would have to be about $140 per show.

From that you can see the WWE is in a much better position, even with an overabundance of PPVs. Focusing on increasing buyrates and finding other methods for delivery should be their main goal, not looking for ways to make up revenue by manipulating the drivers.

Anything else
Most of the rest of the comments didn’t have much interest in a business editorial (some were, but no follow-up was needed), so this sums up the Journal’s thoughts:

Perhaps a bit strong to label him a liar but still the guy doesn’t seem to understand that you don’t have to be spot on when offering an opinion/estimate/guess, but if you’re going to present it as fact you need to be able to substantiate it with more than “because I said it is”, thus the Journal’s reply was entirely correct.
– V

Also, some readers have seem to think “TNA blows”, “Too much TNA/WWE/ROH/etc… love”, “people see through this crap now”, and “answer the criticism! [no topic provided on what is being criticized]” are talking points. For the Journal, they are not really interesting.

Plenty more was written, so be sure to take a look. And if you enjoy the Journal, why not bookmark 411wrestling.com and make it your home page? You can do that by clicking here.

This concludes Issue #159 (Volume 2) of THE HAMILTON AVE JOURNAL. Join us next week as we get ready to ring the bell again.

Till then!