wrestling / Columns
The Hamilton Ave Journal 12.13.08: Volume 1 – Issue 64
THE HAMILTON AVE JOURNAL
By JP Prag
Volume 1 – Issue 64
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: WWE CEO speaks again
On Wednesday December 10, 2008, WWE CEO Linda McMahon presented at the UBS 36th Annual Global Media and Communications Conference. The conference ran for three days this year (December 8 – 10) in New York City and included speakers from Discovery Communications, Virgin Media, CBS, Time Warner, and many other top media and commutations outlets. Those speaking were often the Presidents and/or CEOs of their respective companies, so Mrs. McMahon was among the most elite of the media and communications empire.
Mrs. McMahon’s speech began at 1:30pm. After trying to lighten the mood with a joke, she first began with a description of the company in broadest sense of the terms. Never using the word “wrestling” and just described it as “a company that creates and owns the content we create… an innovative marketing enterprise.” She also quickly mentioned the dividend and reiterated that the company intends to keep that dividend in place.
“We have a tried and true formula with WWE,” Mrs. McMahon began as she went on to describe the three brands (RAW, ECW, and SmackDown), although giving no description of the difference between brands other than their networks and times. The only piece she did mention is that being broadcast at 8pm on Friday nights gives them the ability to tap in to a slightly younger demographic.
Moving on from the television shows, Mrs. McMahon described the “next touch-points” for consumers to be involved with the product, part of the “three tiered” formula she began with above. This led to a discussion of several points:
Mrs. McMahon then showed the promotional video that often plays before live events showing celebrities giving their opinions and love of the WWE product and talent (mostly John Cena) talking about what they do. After showing the video, Mrs. McMahon described her own experiences in the ring and then talked about the Tribute to the Troops tour that just happened (to air December 20, 2008 on NBC).
The presentation continued with Mrs. McMahon describing the various revenue streams set up by the WWE, including live events. She again specifically mentioned that the WWE is hoping to do their first live events in China next year.
After this, she discussed how WWE television programs attract “15 million viewers in the United States” and many more millions around the world. The shows are now seen about 145 countries and in 28 languages. The CEO was amazed at how they can go anywhere in the world and the talent is recognized anywhere else in the world as easily as the United States. In a particular instance, she discussed how The Great Khali was recently sent to India for a promotional tour and “over 10,000 people showed up a the arena just to get an autograph.”
When describing the product, she said was happened in the ring was “the culmination of an entertainment product”, describing the WWE’s on-air and live events as soap operas and storylines.
Going through more consumer products again, Mrs. McMahon touched on the growing digital media and film divisions. Of total revenue, digital media is about 7% and film is about 4%. Although Mrs. McMahon believes that digital media has lots of room to grow, she also put over the upcoming DVD starring Mr. Kennedy saying that people who do not normally watch the program but would watch the DVD may become attracted to the main WWE products after seeing Mr. Kennedy in the film. She also mentioned the Marine 2 saying it would star an “up and coming” star, but neglected to mention who.
Linda McMahon rhetorically asked the audience, “So where’re we going to grow.” Saying the WWE can play to its strengths, she specifically mentioned “international expansion, continued growth of our consumer products, and the advance of our digital media initiatives, especially with our online advertising.” She then went on to say the company intends to “manage the company more efficiently” and that they will be cutting costs and “managing to the bottom line so that cash is available to pay [the] dividend.”
As far as international growth goes, she described the restructuring of the company around the EMEA region, the Asian/Pacific region, and emerging market areas (which she described as really just China and Latin America). In a specific instance, the CEO described her trip to Shanghai in 2007 to open up the WWE offices there and described the slow growth economy of China and how that has been beneficial to the WWE. In an interesting aside, Mrs. McMahon said that when she was there, the WWE had only been on the air in one province for six months, but consumers were already demanding more content. She further states:
“I doubled the television output while I was there and since then we are on in four or five additional provinces and we hope to be on more after the first of the year.”
Sticking in the international forum, Mrs. McMahon also said the company continues to “upgrade” the product, specifically talking about the new deals signed in Mexico that allow them to reach far more viewers.
Jumping back once again to consumer products, Mrs. McMahon discussed the new relationship with Mattel, even saying that the company was “moral” like the WWE, an allusion to the issues the WWE has had with JAKKs Pacific. The CEO claimed that although Mattel has many strong divisions, where they lack is in boys toys, so the WWE looks to fill that void by becoming the “Barbie” of the segment.
She also discussed the DVD sales and the library of film available as well as the publishing division (magazines) which is doing better than industry. She then moved on to say the company is working to figure out the best way to use their online and digital media, but they have recently brought on a new executive from Disney who should be able to help in that forum.
This actually shifted to a discussion of the WWE Kids Initiative (although not called that term) saying the WWE is actively courting children. She also went on to compare the WWE to the church, saying the company is looking for a way to bring you in young and find ways to keep you for the future.
Mrs. McMahon wrapped up with thoughts on international expansion and the commitment to the dividend, and then opened the floor up for questions.
The organizer actually then asked, “Did I hear you correctly when you said it was all scripted?” To this, Mrs. McMahon said, “Most of it is scripted.” She further went on to say, “Though the storylines are really scripted—while we know who the winners and losers are going to be—the real pros in this business get in the ring and they know how to interact with one another. Quite often we have what’s called a ‘ring general’ who’s really working and saying, ‘ok, let’s change the call.’ They are reading the audience as they go.” This was a rare time when anyone from WWE management has described the art form in wrestling, especially in approval. Although Mrs. McMahon seems quite happy with the idea, it does seem to go against the corporate backstage layout of having writers for all lines and agents laying out entire matches.
A question was then asked if ticket sales can keep up given the macro environment. The CEO said that while the company is not immune to what is happening, they are quite resilient. She then pointed out that the company is not dependent on one particular revenue stream like ticket sales or PPV buys, so they have a margin of safety. Despite this, she did say that she expects to see some softening, but that she expects to remain strong.
Another question then asked what segments are going grow faster than others. Aside from what was mentioned before, Mrs. McMahon did think any segment was going to rocket ahead of others.
When asked specifically about growing in China, she discussed many of the same points as above, but also said that the company is being careful with the government because they do not want to have any issues with censorship there.
The CEO was then asked to specifically give areas she believes cost cutting can be achieved. She stated that many of their vendor contracts are coming up and the ones that have already they put out to bid in the marketplace and were able to achieve cost savings there. She also started talking about operating costs that could be reamed in including “new hires” and “marketing dollars”. She also stated that the company was working to maintain their cash level and said there were several capital projects the company was going to invest in but has decided against at this point, including an expansion of the media center. Despite conditions being cramped in there, she still said that was discretionary spending.
An audience member wanted to know about the talent development cycle and how the company is driving down costs for talent. Mrs. McMahon said that the pool of talent stays at about 160 talents between the development and the main brands, but that talent fills rolls in television, live events, and internationally. In a big note, Mrs. McMahon said that there may come a time when it makes sense to use a different pool of talent internationally for television and live events. She then said:
“Our talent are independent contractors. While they do have a flat guarantee of a certain amount of money, most of their income is derived on a percentage basis from licensed goods that bare their image and participation in live events and PPV.”
This was quite an allusion to the pending lawsuit against the WWE by Scott Levy, et al., where Mrs. McMahon was trying to demonstrate how the talent are independent and that by maintaining that the WWE can add more talent easily because the costs are variable.
Another audience member then wanted to know how the board had agreed to the current dividend and what can put that dividend at risk in the future. To the latter point, Mrs. McMahon basically avoided the question saying that the company is committed to manage cash and that the 2009 budget is now finished and shows that they should be able to continue it (Mrs. McMahon was actually quite relieved and actually thanked G-d that the budget was done). But she did give a global catastrophe scenario where everyone stopped watching, attending, and purchasing the product, then they would revisit it.
Mrs. McMahon was then asked about the THQ / JAKKs lawsuit and gave not many new details outside of saying that the relationship with THQ is good and that THQ and the WWE continue to try to put out a good product. The CEO then said the WWE is committed to working with the THQ in the future despite the lawsuit.
Sticking in the licensing arena, an audience member wanted to know where the CEO would like to be that the company was not. She specifically stated that apparel was an area that has been soft for them compared to toys and videos.
The conference wrapped up with some discussion of the video library and what to do with it. Mrs. McMahon specifically mentioned WWE Classics on Demand being available on every cable system in America except Time Warner. She said it was the “test case” for what they might do in the future, but did not know what that would be.
With no more questions, the speech was finished and Mrs. McMahon faced the audience.
Overall, it was a presentation we have seen many times before with very little new points given. The information about China was quite useful, as well the specific capital projects that are not going to be done. The swipes at pending lawsuits piqued this reporters interest, but no one in the audience seemed capable of following up. For someone now knowing the WWE’s product, this was a fine presentation that drove home the point that the WWE has revenue from many different sources, is larger than more people think, and is growing in some of the largest markets of the world. For those who wanted to know more about the company and understand inner-workings and the decision making process, there was nothing much of note to be found.
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 December 11, 2008, here are the current standings of our shows:
RAW
Close (This Week’s Rating): 3.0
Open (Last Week’s Rating): 3.4
Percentage Change: ▼ 11.8%
52-Week High: 4.0
52-Week Low: 2.5
All Time High: 8.1
All Time Low: 1.8
SmackDown*
Close (This Week’s Rating): 2.1
Open (Last Week’s Rating): 2.1
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): 1.2
Open (Last Week’s Rating): 1.3
Percentage Change: ▼ 10.4%
52-Week High: 1.5
52-Week Low: 0.9
All Time High: 2.3
All Time Low: 0.6
TNA iMPACT**
Close (This Week’s Rating): 1.2
Open (Last Week’s Rating): 1.1
Percentage Change: ▲ 9.1%
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:
As predicted by the Journal, after a few good weeks of growth RAW dropped back down to a 3.0 because of the 3-hours special. Most would believe that is because the first hour drags down the overall rating, but even during the main two hours the show dropped to a 3.2. The audience simply becomes burned out and uninterested, especially when there was plenty of other competition from Monday Night Football, Terminator, Heroes, Boston Legal, and plenty more. The audience feels like it has had enough and it not compelled to continue watching. Although WWE management has been doing these three hour specials to appease USA Network (whose parent company NBC-Universal has been looking to cut costs across the board), the company needs to stand up to their partner. They know these specials are bad for business and need to start pushing the WWE’s long term needs over USA’s desires.
Meanwhile, TNA had their best week ever by tying their all-time high rating of 1.2. But with that 1.2, it actually ended up having an audience of 1.8 million, TNA’s largest ever. Despite all the criticism of the product (and there is plenty), TNA has had a very successful second half of 2008. In this year, TNA has hit their all-time low and all-time high, showing quite a breadth of change. Although it appears that TNA has grown their overall audience, in more likelihood they eliminated part of the audience they had at the beginning of the year and gained in a new audience in the second half. The audience that was eliminated has been vocally critical, but the new audience has had yet to make themselves known with their pleasure with the product.
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. Jeff Hardy Armbands ($20, on sale $10)
2. Hardys Purple Logo Pendant ($10)
3. Hardys WWE Shop and Jakks Pacific Exclusive Action Figure ($34.99, on sale $24.99)
4. WWE Black Gift Bag ($3)
5. Jeff Hardy Armband Package ($80, on sale $29.99)
6. WWE 2009 Day Dream Calendar ($13.99)
7. WWE Holiday Gift Wrap ($6)
8. John Cena HLR Academy T-Shirt ($25)
9. John Cena PPV #18 Action Figure ($10.99)
10. Jeff Hardy Basics YOUTH T-Shirt ($15)
What a time to be named Jeff Hardy or John Cena! The two completely dominated the list with Hardy having the most items, but Cena having the generally more expensive and/or non-discounted items. Still, both are extremely impressive (no pun intended) and show their drawing power in this tough environment.
TNA sometimes releases a list of top selling items on ShopTNA.com. According to the site the top selling items were:
1. Autographed Sting Baseball Bat ($149)
2. Cross The Line Triple Pack DVD Set ($24.99)
3. TNA Ultimate Matches DVD ($19.99)
4. Beer Money T-shirt ($19.99)
5. Mick Foley – Bang Bang T-Shirt ($19.99)
6. TNA Christmas Ornament ($9.99)
7. Autographed Mick Foley & Sting Poster Combo ($49.99)
8. Autographed Sting Poster ($29.99)
The ever highly suspect TNA top selling list once again made an update, perhaps due to Jeff Small dropping Bill Banks a line and letting him know that the site is inconsistent. Or perhaps Mr. Banks has read it in the Journal time and time again. Either way, an interesting list this week that would make one believe that Sting and Mick Foley are earning their paycheck. Except, of course, the top selling item has a limited quantity of 100, which let’s you know about the volume for the other items. Still, autographed and out-of-the-box items continue to do well for TNA. What is more interesting is that Beer Money has stayed on the list, the only “TNA Original” to have done so. AJ Styles and Samoa Joe with four times the amount of air time are not showing these sales numbers right now. Than again, as stated, this is a highly suspect list.
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.
| Sunday | Monday | Tuesday | Wednesday | Thursday | Friday | Saturday |
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15
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17 | 18 | 19 | 20 |
| 21 | 22 | 23 | 24 | 25 | 26
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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, Guest#6472 wants us to know:
“Couple that with the fact that in a few weeks RAW will go into a year-end review, which took the ratings from 4.1 to a 3.5 to a 2.5 over just three weeks.”
There will be no 2008 year-in-review shows.
WWE will be running normal TV shows over the holidays as they have TV tapings scheduled for every Monday in December and Tuedsay tapings on December 9th, 16th, and 30th.
And what about December 22, 2008? There is no show scheduled for that day and there have been no tapings since December 16, 2008 (nor are there any until December 26, 2008). The Tribute to the Troops is airing on NBC, so that day is left for a recap show, is it not?
Moving away from TV schedule to WWE-owned media, Guest#4318: ponders:
“But, as you can imagine, it is more than a full time job to keep up with those postings and it is actually costing the WWE more money than they would earn in revenue for holding on to those clips.”
Getting the clips removed costs WWE money or WWE is missing out by not cutting a deal?
Usually, YouTube doesn’t put up much of a fight. They typically just remove videos when asked to do so by the copyright holders.
ICTimer chimed in with the appropriate response:
The actual process of the WWE requesting clips to be removed doesn’t directly cost money (as in there is no fee for them to make such a request), but they do have to pay employees to actually do it, when the employees could be doing things that effect the WWE’s bottom line much more than removing the videos. In a time where the WWE really needs to be cutting costs, paying someone to check sites like YouTube, Dailymotion, justintv, not to mention torrents and the like doesn’t make sense if it costs them more in salary in the long run then they earn from getting these files removed.
This is the exact point that Journal was making. Having an employee do this for their job not only cost the WWE money, but it also means the employee is not doing something productive to earnings. And there is a lot of WWE owned material out there, so it could very well be more than one person’s full time job to keep up. But there is one more point on YouTube that King Soprano wants to make:
I had to correct you on one thing though. The WWE has indeed introduced a channel on You Tube. You can find them here:
http://www.youtube.com/user/WWEFanNation
Yes, the WWE started a working relationship with YouTube and MySpace earlier this year (a divergence from their previous stand on the sites). That said, they still have not worked out a revenue sharing deal with the company. For instance, CBS has a deal where if they find their copyrighted material on the site, they just flag it and receive a cut of the advertisement revenue that YouTube takes in. As of yet, the WWE does not have this deal set up. If they did, it would make sense to pay a full-time person to go around and do the tagging because then they would be able to generate revenue from it.
Last week, the Journal covered the idea of TNA having local distribution centers in different counties. As an aside, TNA may also consider using existing chain stores to store their inventory and do all the distribution. Donners wanted to let us know:
TNA do have local distribution of DVDs in Australia. Red Ant is the distributor, through JB HiFi and Big W – both major chain stores.
This began in September, with quite decent shelf-space and ads. Sadly, it has really dropped off since then, and the stores rarely have the latest DVDs. I have seen one copy of Ultimate Matches and three each of Global Impact, Lockdown 08 and Knocked Out across five stores over the past few months.
Not sure if the problem is with the stores or the distributor, but I know many TNA fans are frustrated by this.
Or it could be a problem with TNA themselves. TNA is not know to have the greatest global (or even domestic) logistics. On top of this, TNA is not doing what was suggested last week: do all shipping through these local distributors. Instead, TNA’s warehouse in Nashville, TN is sending out items one at a time to Australia and other locations. Instead, they could put the purchase order to Red Ant and have them take care of it. This would significantly cut down on shipping times and costs.
Moving on to wrestling in a recession, Chapman Baxter wrote:
I bet Houston can’t wait to coin in their $???? from WM25. With that kind of money, they can afford to give $?? in tax relief to hard working middle class families.
Good catch! Apologies from the Journal. That was a note to go back in put in the actual figure of over $50 million. The Journal is not written in the order that you read it, so that point was written early and never unfortunately went back to to correct. But Chapman Baxter continues:
I don’t have any actual data on this so I stand to be corrected, but surely WCW’s greatest period of growth was 96-97?
To which Guest#9989 (a high number indeed for a Guest) responded:
Maybe that was a period of max profit or max revenue? Growth is different. Dunno for sure, but just a thought.
To which the original purveyor wrote back:
I understand that growth is different from max profit or revenue (as an aside I would guess that 98 was the high point for revenue at least), but I can’t imagine that the period when WCW went from being a regional rasslin company to the biggest Sports Entertainment company in the world wasn’t their largest period of growth.
I agree that it will toatally depend on the metrics used. I suppose JP will explain his rational next week, and like I say, I stand to be corrected.
Actually, you both misconstrued the point. The Journal was not contending that WCW had its greatest period during the 1990-1991 recession, but that WCW came into existence during and because of that recession. The overall point was that recessions can lead to growth, and yes, WCW’s major growth came six years later. But in reality, they went from not existing at all to being a growing company in the early 1990’s through a recession to the largest wrestling company in the world. So just because a recession is a time of contraction and possible destruction, it does not mean something cannot start growing out of it.
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 #64 (Volume 1) of THE HAMILTON AVE JOURNAL. Join us next week as we get ready to ring the bell again.
Till then!
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