Tuesday, March 20, 2007

WWE plans international expansion

One of the biggest stories in the past five years broke recently when it was revealed that the WWE is considering a true global expansion. CFO for World Wrestling Entertainment, Micheal Selick, discussed their developing plans in an interview with Financial Week. The idea centers on establishing separate WWE promotions which would run full-time in distinct international markets. Each region would have their own unique storylines and televisions tapings. In short, the WWE product would go from three North American-centered brands (RAW, Smackdown, ECW) to a series of brands on different continents across the world, each producing their own content for that area of the world.

Although the plan is still in the preliminary stages, the territories that are being considered for expansion are:
1) PACIFIC REGION covering Japan, South Korea, China, Australia
2) EUROPEAN REGION covering Europe
3) HISPANIC REGION covering Puerto Rico, Mexico, South America
As it stands, the idea is to export the Smackdown brand (which has shown strong rating & attendance drawing ability in the Southwest U.S.) to become the Hispanic Region brand. WWE would continue to operate two separate touring brands, RAW & ECW, in North America (covering USA & Canada). Additionally, there was mention of adding a Russian territory expansion at a later date.

These expansions would require that each region have a sufficient production team capable of creating their own weekly television programming within each of the regions. So, each territory would need an experienced TV executive (with region-specific familiarity), along with at least one senior agent and one television writer to run the territory. Of course, wrestlers for each brand would also be required to move full-time overseas. Understandably, there are plenty of questions, doubt, confusion and uncertainty internally in WWE with the prospect of having to uproot families to move across the world.

At this moment, Shane McMahon and Selick are responsible for developing the plan. Then they will present it to the executives at WWE, most notably Vince McMahon. Allegedly, Vince is very excited and interested at this international prospect. However, considering the extreme level of precision and control that Vince likes to exercise over his television, it’s questionable whether he’d allow such decentralization of production.

While the proposal is still being drafted, there have been a few discussions with specific people. Paul Heyman, who is at home, still under WWE contract but not being utilized, has been considered for the Pacific Region. Head RAW Writer Brian Gerwitz (responsible for the Rock’s most recent impromptu appearance) has been given specific assurances by Stephanie McMahon that he will not be required to move overseas. However, beyond that, much remains to be seen. There is certainly a measured amount of apprehension among the wrestlers who know they don’t have much say in whether they will be utilized domestically or internationally in such an expansion.

Obviously, the plan will call for hiring many more people with a wrestling background. In the most recent WWE annual report, they list having over 500 employees, but that doesn’t include the wrestlers (who are labeled “independent contractors” in the filing). On each RAW & Smackdown brand, you have about 27 active wrestlers. (ECW has around 18.) Additionally, there are two announcers, about four referees, and 4-6 other people (Midgets, Managers, Commissioners, people to say “DAMN!”). With all the Diva search hirings and swimsuit models, each brand has 6-8 woman and 3-6 agents and writers. In total, there at least fifty people per brand. So, these new territories would probably call for at least 150 new hires.

There are a lot of pros and cons to implementing such an ambitious and extensive expansion plan. WWE is an internationally recognized pro-wrestling brand. They are easily the biggest pro-wrestling company in the world and a market leader. Their international tours have draw strongly and over the last three years, the reality of the situation is that strong growth and support in markets outside of North America have really kept WWE financially solid.

However, there’s a significant difference when you move from sporadic international tours (coming to Europe twice or three times a year) to becoming a permanent, weekly entity. WWE’s latest plans for overseas tours have already begun showing signs of burn-out and disinterest in places such as Mexico and Australia. Are these territories stable enough to support a weekly promotion with the production values that WWE is accustom? For instance, while CMLL & AAA might draw tens of thousands of fans to major arenas in Mexico, the ticket prices are still quite low when compared to WWE. In such a fragile economy, can a brand be implemented that will be profitable at WWE’s production scale? If wrestlers will continue to receive North American wages, can the territory earn enough money to be profitable at all? Will WWE be able to strike deals with key television networks such as Televisa and replace lucha? Will the WWE style be popular in the country or will they need to change how they perform?

Japan also has established competitors with New Japan, All-Japan and NOAH. However, Japanese pro-wrestling has lost enormous popularity to MMA promotions and these former powerhouses have nearly collapsed. WWE would be entering an expensive and difficult climate where wrestling has already been pushed to the fringes of Japanese television. Again, their latest tours of the Far East have showed many signs of not drawing to expectations.

Europe’s appetite for pro-wrestling, especially in the UK, Ireland, Portugal, Germany, Spain and Italy has been exceptionally important for the WWE since the end of the boom period of the late 90s. Without a major European promotion (there are several independent companies in each country, but nothing that could be considered a legitimate competitor to WWE), less of a language barrier (English is widely understood in the EU), and a history of selling PPVs abroad, this region probably has the best shot. There are several European workers in the company (Fit Finlay, William Regal and Paul Burchill) who could work as strong lynchpins for helping establish the new brand.

The advantage of the territory system is that wrestlers can be rotated from one region to the next in order to prevent them from becoming stale. Recently, the WWE announced that for all PPVs going forth, members of all three brands (ECW/Smackdown/RAW) would be involved. While this is seen as a necessity to keeping B-level branded PPV buys strong, it will only contribute to further water down the distinctiveness of the brands and keep the same top talent consistently on the television screen. In the old territory days of wrestling, moving wrestlers around the circuit from promotion to promotion keep people fresh, but gave them experience working different styles in different types of crowds. One major criticism that veterans have for this generation of pro-wrestlers is their lack of experience working a variety of styles in front of significant crowds. In theory, a well-orchestrated system of rotation among the territories could give a vast wealth of experience and training to young wrestlers.

In the end, I believe that this expansion plan will probably be scaled back to establishing a European brand and increasing tours of the Southwest & Mexico using a more Hispanic-focused Smackdown brand. I have a lot of questions about what would happen to the developmental leagues (OVW in Kentucky & DSW in Atlanta) if these territory expansions continued (Would they send new talent overseas before bringing them on American TV?). Neither Japan nor Mexico has extensive history buying PPVs in order to really support a wrestling product. Will live attendance at events along with television rights fees be enough to support the product? Will the touring areas be too large in some case? A lot of questions remain to be seen. However, as WWE intends to compete with UFC (with their PPVs reaching over a million domestic buys, a number WWE hasn’t made in years) and PRIDE (with a faltering business that may have already been sold), they look to international markets as a source for creating new stars, new territories and new opportunities. It’ll be years before such an ambitious plan can be implemented, but it’s a very exciting idea that we’ll be following quite closely! Among industry insiders, the biggest fear is burning out or failing spectactularly in any of these international markets on a scale that would shake or destroy WWE’s reputation and confidence in global opportunities.

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