Friday, August 16, 2013

What are Brock and Rock worth to WWE - analysis by Chris Harrington (

Here's a quick look at WWE PPVs between 2006 and 2013, focusing on North American buys.

North American buys were collected from three sources - Jason Campbell's Pro Wrestling History, Dave Meltzer's Wrestling Observer Newsletter, and WWE SEC Filings.
Nich Lichter had an interesting piece at Voices of Wrestling discussing "Which WWE PPVs did better than they should have?"

Besides just looking at weeks between PPVs, PPV price and PPV type (Major or Minor), I also wanted to include possible competition factors - particularly did Boxing or UFC run a rival PPV that same weekend?  You can see in the examples below there are some significant overlaps such as Wrestlemania 2010, Night of Champions 2011 and Survivor Series 2012.

Lastly, I wanted to look at the information in another way to see what I could uncover - particularly around the impact of Brock and Rock.

From these factors, I created a regression:

Regression Factors
  • Intercept Term (base number of people who'd "buy" your B-PPV if it was free)
  • Weeks Build (looking to see if longer builds = better results)
  • Rival PPV Buys (did UFC or Boxing have a major PPV that weekend that could dampen results?)
  • Was it Wrestlemania?
  • Was it Royal Rumble or SummerSlam? (I chose not to give Survivor Series a special flag)
  • Was there stipulation such as Hell in a Cell or Elimination Chamber?

I didn't include Special Guest Stars intentionally.  For the purposes of this analysis, I'm going to try to attribute the variation between the model prediction and actual to those megastar appearances.

When I use my regression, the 2012 PPVs that performed higher than expected were:

+92,000 buys = 4/1/2012 WrestleMania XXXVIII Rock vs. Cena; HHH vs. Undertaker (cell) - expected 622,900; had 715,000 NA buys

+46,000 buys = 4/29/2012 Extreme Rules Cena vs. Lesnar (extreme rules); Punk vs. Jericho (street fight) - expected 
112,700; had 159,000 NA buys

+35,000 buys = 11/18/2012 Survivor Series 2012 Punk vs. Cena vs. Ryback; Sheamus vs. Big Show - expected 86,900; had 122,000 NA buys (this was the same weekend as a major UFC PPV with GSP that did 680,000 buys)

+24,000 buys = 5/20/2012 Over the Limit 2012 Cena vs. Laurinaitis; Punk vs. Bryan; Sheamus vs. Del Rio - expected 99,600; had 124,000 NA buys

The three 2012 PPVs that performed poorer than expected:

-40,000 buys = 12/16/2012 TLC 2012 - Cena vs. Ziggler (ladder); Show vs. Sheamus (chairs); Shield vs. Kane, Bryan, & Ryback (tlc) - expected 112,700 buys; had 73,000 NA buys

-19,000 buys = 10/28/2012 Hell in a Cell 2012 - Punk vs. Ryback (cell); Show vs. Sheamus - expected 172,700 buys; had 153,000 buys

-17,000 buys = 2/19/2012 Elimination Chamber 2012 - Punk won Raw chamber; Bryan won Smackdown chamber; Cena vs. Kane (ambulance) - expected 154,500 buys; had 138,000 NA buys

Since I didn't account for "special talent" like Brock and Rock, let's make the bold assumption they were the ones who moved the needle.

Let's look at Brock...

Then, this model suggests that putting Lesnar on Extreme Rules was worth 46,250 North American Buys (75,750 worldwide buys). In Q2 2012, WWE made about $21/buy, so on the North American side, that would imply Brock was worth about a million bucks (~$970,000) to that PPV. 

I'm not sure what his first deal was, but according to Dave Meltzer his new deal was $5M for 3 PPVs (no PPV percentage deal). So using that guideline, on a per capita basis, Brock didn't "pay for himself" - i.e. he was below his per PPV cost ($5M/3 PPVs = $1.33M per PPV)
However, if you weigh it by total NA buys (Extreme Rules + Summerslam + WM 2013 = 159,000 + 283,000 + 715,000 buys), only about 14% of his buys came from this event, so you could argue that he only needed to break $700,000 in incremental revenue for this event to justify his pay. 

The problem comes when you look at Summerslam; even without accounting for Lesnar, the model was right on!

+3,820 buys = 8/19/2012 SummerSlam 2012 Lesnar vs. Triple H; Cena vs. Punk vs. Show = expected 279,200 buys; had 283,000 NA buys.

So, Brock delivered a whopping 3,820 additional buys which earned WWE less than $100,00 and certainly didn't cover Brock's cost.

To finish the trifecta, there's WrestleMania 29.

-11,000 buys = 4/7/2013 WrestleMania 29 Rock vs. Cena; HHH vs. Lesnar; Undertaker vs. Punk (and HHH vs Lesnar) = expected 636,000 buys; had 625,000 NA buys.

In other words, this would suggest WM 2013 actually undelivered in terms of PPV buys by 11,000 NA (21,500 worldwide).
And that's before we even take into account having both Lesnar and The Rock (and Undertaker) on that card.

Conversely, if we look at Rock's performance, Wrestlemania 2013 is the only card that he was on which underperformed model expectation:

+ 92,100 NA buys = 4/1/2012 WrestleMania XXXVIII Rock vs. Cena; HHH vs. Undertaker (cell) = expected 622,900 buys; had 715,000 NA buys

+ 62,200 NA buys = 11/20/2011 Survivor Series 2011 Rock & Cena vs. Miz & Truth; Punk vs. Del Rio; Show vs. Henry = expected 107,300 buys; had 170,000 NA buys

+ 61,800 NA buys = 1/27/2013 Royal Rumble 2013 Cena wins Rumble; Rock vs. Punk = expected 292,200 buys; had 354,000 NA buys

+ 56,100 NA buys = 4/3/2011 WrestleMania XXVII Cena vs. Miz; Undertaker vs. HHH; Rock host = expected 622,900 buys; had 679,000 NA buys

+ 20,500 NA buys = 2/17/2013 Elimination Chamber 2013 Rock vs. Cena; Swagger wins chamber = expected 154,500 buys; had 175,000 NA buys

If 60,000 additional NA buys is worth around $1.2 million to WWE, then these five events represent about $6 million in additional revenue. However, there were attractions beyond the Rock on some of these cards.

Last excercise: How much is WWE paying Rock?

Again, we can look at the financials...

Q1 2013 PPV REVENUE: $15.1M / OIBDA: $6.6M / 725,000 BUYS + 20,000 PRIOR PERIOD BUYS = +$8.5M IN PPV COST (OIBDA/REVENUE = 43.7%); 2 PPV events

Q1 2012 PPV REVENUE: $13.5M / OIBDA: $7.9M / 621,000 BUYS + 64,000 PRIOR PERIOD BUYS = +$5.6M IN PPV COST (OIBDA/REVENUE = 58.5%); 2 PPV events

There was a specific mention in the 1st Quarter 10-Q filing about OIBDA* "decreased by 16% primarily due to a $3.3 million increase in talent related expenses."

*) The Company defines OIBDA as operating income (loss) before depreciation and amortization, excluding feature film amortization and film impairments

Rock & Punk were on both RR & EC in 2013. Looks like PPV cost went up about $2.9M year-over-year. Obviously, there is going to be fluctuations with cost due to arena booking, other talent agreements, etc. However, you'll got to assume that The Rock's salary played a significant role, especially since WWE explicitly noted talent costs increasing.

Further evidence comes when you look at the quarter when Survivor Series 2011 took place and the Rock & Cena teamed up:

Q4 2011 PPV REVENUE: $14.6M / Profit Contribution: $6.4M = $8.2M cost (Profit Contribution / Revenue = 43.9%); 4 PPV events
Q4 2010 PPV REVENUE: $13.8M / Profit Contribution: $8.4M = $5.4M cost (Profit Contribution / Revenue = 60.9%); 4 PPV events

Again, $2.8M increase in PPV cost. (Rock only wrestled on one PPV in Q42011 as compared to twice in Q12013 so it's not as simple as saying his fee is $2.8M or anything. The quarterly report for Q42011 does note that one reason that profit contribution went down was "increased Pay-Per-View production".)

However, from this, it's clear that Rock is getting at least a million for each PPV.  And when you look at what he did, with the exception of Wrestlemania, he brought in at least $1.2M in North American buys alone!

Here's another slice:

PPV 2Q 2013: Revenue $37.1M / OIBDA: $9.8M / PPV Cost = 27.3M (OIBDA/REVENUE = 26.4%); 3 events
Wrestlemania: Rock, Brock
Extreme Rules: Brock
Payback: n/a

PPV 2Q 2012: Revenue $40.8M / OIBDA: $19.5M / PPV Cost = 21.3M (OIBDA/REVENUE = 47.8%); 4 events
Wrestlemania: Rock
Extreme Rules: Brock
Over the Limit: n/a (Camacho?)
No Way Out: n/a (Rob Grymes?)

The difference between the second quarter of 2012 and 2013 was +6.0M in cost. The other difference was Brock was Wrestlemania 2013 and there was additional PPV held last year during that quarter.

Let's first estimate the average cost for a PPV that doesn't have Brock or Rock. If we look at the fourth quarter of 2012 (since Q3 2012 had SummerSlam which had Brock), the average cost for a PPV was (13.0-7.7 = 5.3 for 3 events) 1.8M/PPV.

So, if we assume that it cost around $2M to put on Over the Limit or No Way Out, that leaves about $4M in cost increase. That wasn't just adding Brock to Wrestlemania. It's possible that Cena/Rock made a lot more in 2013 than they did in 2012. It certainly was Arena-related fees.  But overall, you're looking at a significant drop in Wrestlemania quarter profitability and it's certainly partially affected by the fact that they had Rock & Brock on that card.

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