The Great WWE Stock Crash of 2014

[pipGofern]

 

I remember when I was in school, I would just respond to "you know it's fake right" by saying "so is ER" to the point where I didn't even have to think about it.

 

Usually someone would respond with something along the lines of "that's different" but nobody could ever explain how it was different.

 

 

 

They're not.  Neither one was ever able to make new stars.

 

 

Personally, I think hotshotting John Stamos' main event push while confining Scott Grimes to the midcard is where everything went terribly wrong.

[blitzkrieg]

I would have thought that people would only had to have looked back to CW dropping Smackdown to see why the WWE wasn't going get a ton of money for the US tv rights. Either that or how the much touted NBC specials have been reduced to a WM special and a Tribute to the Troops special that are both given death spots. I'm not even sure what network WWE programming would fit on. As it stands it doesn't even fit with the identities(which seem to be everything these days for cable networks) of the two networks it is on.

 

Really what was paid for was five hours of not having to develop original programming for and bragging rights from the ratings for the ratings that the WWE brings in. 

[Bustronaut]

Really what was paid for was five hours of not having to develop original programming for and bragging rights from the ratings for the ratings that the WWE brings in. 

This is what is known in the TV industry as "How television works"

[blitzkrieg]

 

Really what was paid for was five hours of not having to develop original programming for and bragging rights from the ratings for the ratings that the WWE brings in. 

This is what is known in the TV industry as "How television works"

 

I thought it worked by airing programming that advertisers want to spend lots of money to air commercials during and also help your others show do better in ratings, neither of which the WWE does. 

[muhammedboehm]

Not any more. thou at the same time it's not like USA would have trouble filling Raws slot, how hard is it to put on three more episodes of NCIS?

[JohnnyJ]

In WWE's defense, if the deal they got was the best deal on the table, it is absurdly low for the value of the product.

 

I think the problem is sports right fees only go for lots and lots of money because there are a bunch of sports stations and broadcast stations that want them.

 

If a sports station was to carry WWE programming, it would be very expensive and also cause a shift in the perception of their network as a "real sports network."

 

The broadcast networks did not indicate any interest in WWE programming even though Raws ratings are quickly approaching network tv shows.

 

This shrinks down the list of possible suitors and somehow leave the WWE crawling back to USA.

 

My take is that the only way the WWE get the true value of their product is by going into business for themselves. The WWE network is that step.

[Bustronaut]

Not any more. thou at the same time it's not like USA would have trouble filling Raws slot, how hard is it to put on three more episodes of NCIS?

Without Raw, USA slips from the #1 cable network (at times #2) to #7.  Sure WWE fans don't stick around for much of the rest of their programming, but being able to say you're consistently the highest rated cable channel brings up the ad revenue among other shows on the network.

 

I wonder how the Raw/Smackdown replays do, ratings wise, on Universal HD.

[Ramsey]

I do have to wonder what happens with the Network in the next 12 months. Does Vince stay the course or do something radical and panicky and/or brilliant done to start turning it's status from 50 million dollar anchor to "see, we told ya, fuckers?"

[blitzkrieg]

I think it was a bit of a misstep to do the six month commitment. I think a monthly option with maybe a discount for subscribing for an extended period of time would have been a better direction.

Also they need to roll out subscription cards for the Network that can be purchased in stores.

[offspring515]

The problem with the Network seems to be that staying the course and slowly building a subscriber base is going to be very costly. On top of that it now looks like the early break even number was inaccurate. A big change (large price increase, removing PPV, removing Mania) and you start hemorrhaging the subscriber base you have now.

I assume we see small price increases within the first year (probably accompanied by a "re-up now for six more months at the original price") and increases every year/six months from here out.

[Ace]

I'm saying it's full of assholes!

 

I was one of those assholes! We chanted for Teddy Long!

[Greggulator]

I think the Network is way ahead of its time. It's the first time anything in the entertainment industry has taken control of both content and large parts of its distribution. It makes so much sense because less-and-less people are watching and using free television, let alone television you have to pay $60 a month of so for. Of course, that's not a big percentage of people by any stretch of the imagination in terms of people who consume entertainment, but it's still totally true.

What's also interesting is the gigantic consolidation between media companies and telecommunications -- i.e, the gigantic AT&T/DirectTV deal that just got announced; Comcast's incursions into becoming the behemoth of ISPs, etc. Content and distribution are really merging quickly.

 

Local sports teams make a large amount of money with local sports rights. But how sustainable is that business model over the next 20 years or so? Live sports programming is at a huge premium for distributors. But here in Philly -- the biggest TV market in the country that has four pro teams (NYC/Chicago/LA all have five or more) -- the only game in town is Comcast. And Comcast is headquartered here and owns the government, essentially. The Phillies options for broadcast rights were so incredibly limited -- it was Comcast SportsNet, maybe the launch of a local Fox SportsNet or the start of their own sports network that would only work if you could convince the Sixers and Flyers to move to those networks once their Comcast deal expired.

And even with a new Phillies owned sports network, then you have to deal with Comcast blocking access to its system unless rights fees are agreed to completely in their favor. That's what happened between TimeWarner and MSG and the YES networks. I had DirectTV for years and I couldn't watch Philly sports games since Comcast owns their broadcast rights.

The Phillies signed a new TV deal within the past year. It's $2.5 billion over 25 years with Comcast. That's an astronomical amount of money and the team also owns 25% of Comcast SportsNet Philly. It's $100 million annually, plus whatever that equity stake is.

But some are saying it's the first sign of the Local Sports TV Rights market bursting. The Angels inked a $2.5 billion deal over 20-years, with a 25% equity steak, when they signed their contract a few years ago. The Angels TV ratings are below 2.0 -- they're some of the lowest in MLB and they share a market with the Dodgers. The Phillies ratings in 2011 were at a 9.0, second only to what the Yankees got. They're down now since the team's no longer the juggernaut it was, but they'll probably be really good again at some point over the next 25 years and will draw a gigantic rating. Yet the Angels deal is worth a lot more per year.
 

The world of distribution is changing so much so rapidly. I could see at some point in time a local team decided to screw the Local Sports TV Rights market and model. Right now, billions of dollars are still in play. But if that bubble bursts and some team somewhere -- think of a small market team with huge popularity like the OKC Thunder -- doesn't think the local TV rights aren't what they can get since they can't play one network off each other, why couldn't they ape the WWE's model? They might be able to think they'll get more for an annual subscription for people to watch online (and at their leisure) than via traditional TV.

We're a long ways away from getting to that point in time but it's definitely something that could happen.

[Greggulator]

Go back and watch Royal Rumble 1999 and look at that crowd. Dial it up on the network and watch the first five minutes. We don't really want that again.

 

I think an overwhelming portion of wrestling fans in the 90s were raised in and as garbage. It was so ridiculous and shameful to love wrestling but have to sit next to dudes with tribal tattoos and abused women at live events -- and that's not even counting the scum at ECW.

The WWE, I think, has morphed into Acceptable Geek Culture. The audience is a lot more ComicCon than DUI-forced weekend jail. I'm certainly not shamed to watch wrestling PPVs in public anymore, since at least two posters on here were in the same room with me and everyone looked like a nerd who most likely have owned albums released by Merge Records at some point.

[Matt D]

 

I'm saying it's full of assholes!

 

I was one of those assholes! We chanted for Teddy Long!

 

 

You're more of a Spaceball.

[MORELOCK]

I'm saying it's full of assholes!

I was one of those assholes! We chanted for Teddy Long!

You make a very strong case for Matt here.

[Charlie M.]

 

Go back and watch Royal Rumble 1999 and look at that crowd. Dial it up on the network and watch the first five minutes. We don't really want that again.

 

I think an overwhelming portion of wrestling fans in the 90s were raised in and as garbage. It was so ridiculous and shameful to love wrestling but have to sit next to dudes with tribal tattoos and abused women at live events -- and that's not even counting the scum at ECW.

The WWE, I think, has morphed into Acceptable Geek Culture. The audience is a lot more ComicCon than DUI-forced weekend jail. I'm certainly not shamed to watch wrestling PPVs in public anymore, since at least two posters on here were in the same room with me and everyone looked like a nerd who most likely have owned albums released by Merge Records at some point.

 

 

Rise Above Hate, gregggg

[Ramsey]

Merge Records? HA! My music nerd cred laughs at your music nerd cred. I like PROG ROCK...the most reviled form of music on the planet. And I like it NON-IRONICALLY might I add.

[ben.]

I don't know if this has been touched on but I have heard a lot of people through my social media talking about how WWE would make a lot more money off of monthly $60 PPVs compared to $10 monthly subscriptions and that really is not the case. PPV takes something like 50% of the revenue of PPVs whereas WWE gets an 80-90% return for their Network depending on which Streaming Device they have to pay dividends to. You figure that they have 650K+ on the Network, they had a lot more people purchase Wrestlemania than they expected with the inclusion of the Network, and more people are watching the PPVs, they are not that far off from what a lot of people I've read have been assuming. 

 

I think this stock crash is temporary (I bought 3 stocks at around $11) but I expect them to go up soon. People act like Vince McMahon doesn't know what he is doing but at the same time he has been essentially the only game in town for over a decade and has done things nobody ever expected of professional wrestling.

[Phantom Lord]

Not any more. thou at the same time it's not like USA would have trouble filling Raws slot, how hard is it to put on three more episodes of NCIS?

 

Don't doubt the drawing power of Leroy Jethro Gibbs aka Mark Harmon: the greatest actor who ever lived.

 

As for the tv deal, I knew the projected tv contract was gonna be trouble. The WWE honestly thought they could get something huge like NASCAR did. Nothing in the Billion dollar range, but something in the $200 Million range which would be insane for them. While they have a much larger audience, advertisers don't care because its not the "right" kind of audience as mentioned above. It's always gonna be lowly rasslin no matter how much they try to brand themselves as anything but.

 

While the Network will be the blue print for online streaming in the future that other networks will follow, it's still gonna be a giant albatross for them.

[Craig H]

I saw there was going to be an emergency investors call today so Vince or someone can chill some fools out. Does anyone know if that's open to the public to listen to just so someone can recap it?

[JohnnyJ]

There is definitely a tv rights bubble which WWE somehow ended up on the outside of. Those local tv sports deals are going to look comical in a couple of years. By the time those 25 year deals run out, tv is barely going to resemble what it is now.

 

We are moving more and more towards an on demand, a la carte model. Since the technology is here, people are going to want to just pay for what they want to watch vs. pay so other people can watch what they want.

 

There is no good reason why each cable subscriber is paying a couple of bucks a month for a local sports station only a couple hundred thousand people are watching.

 

And of those people who are actually watching, only a percentage would actually pay hard earned money for a subscription plan if the games were not part of their cable package.

 

Exhibit A: The WWE Network.

 

The WWE Network is essentially the future of tv realized. All of the content a WWE fan could ever ask for, available on many platforms at an affordable price. And even waving the carrot of wrestlemania in front of the fans, they were only able to get 15% of their viewing audience to sign up for it.

 

I don't view the WWE network as a failure. It is an excellent product, and I do believe that the international rollout will bring in a lot of subscribers, but it is a sobering reality check to content owners about the true value of their property.

[odessasteps]

As someone who has advocated for a la carte cable since the 1980s, i will believe it when i have it.

I loved Jonah Keri explaining to Chris Hardwick how much he pays a month for sporta channels.

[Phantom Lord]

Here's a recap of the conference call.

 

http://www.cagesideseats.com/wwe/2014/5/19/5731374/vince-mcmahon-disappointed-with-new-television-deal-wwe-investor-conference-call

 

 

On the subject of the new television deal, Vince said that were "disappointed" and that it was a good deal, but not what they had hoped for.  He mentioned that they did better in their international renewals and are particularly excited about prospects for the still in-progress India deal.  The call was largely absent of details; for example, Barrios answered a question on the length of the NBCU deal by saying that their television contracts are typically for five years or less.

 

McMahon acknowledged that the launch of the WWE Network probably hurt the negotiations for television rights, but that they felt they needed to launch during WrestleMania season, and failing to start when they did would have meant waiting another year.

 

He spoke about blazing trails with over-the-top distribution, a direction that he feels everyone across the entertainment and television business acknowledges that the market is headed in, while at the same time believing their core business to be "rock solid".

 

As for a la carte, I don't think it's going to happen anytime soon. As long as the cable companies have people they can pay off in congress we will still be stuck with 75% of channels we never watch because they're forced on us.

[Playa Shunna Ver 3.0]

Vince could salvage this whole thing if he goes on CNBC and slaps come clipboards out of some fool's hands.  Vince could just repeat this whole response...starting at the 2 minute mark.

[Greggulator]

The irony.

The WWE's launch of a product that could become the template for future content distribution causes it to lose XXXX!!!!! percent of its market capitalization since it hurts the current model.

I wonder what would have happened if they waited until the deal got done? Vince was right in using WrestleMania as the hook to get subscriptions.