Thursday, August 08, 2013

What is TNA worth?

As TNA continues to cut costs (reminiscent of the dying days of WCW), I've seen the $20 Million dollar number tossed around as a proxy for what the Carter Family allegedly turned down to sell TNA.

I'm a little dubious about whether they'd actually get these numbers. In the dying days of WCW, suitors would line up and big numbers would get tossed around. However, if you followed the story to the conclusion, the reality was quite different.

For instance, when WCW was going under there was lots of reports that "Fusient Media Ventures" would buy World Championship Wrestling FOR $75 MILLION! Here's a quote from a Jan 15 2001 MultiChannel News article:
After claiming for months that it had no intention of selling World Championship Wrestling, Turner Broadcasting System Inc. last Thursday sold the beleaguered grappler to a new venture headed by former Classic Sports Network president Brian Bedol.
Bedol, Classic Sports co-founder Steve Greenberg and former WCW president Eric Bischoff believe they can return the company to prominence--despite rival World Wrestling Federation Entertainment Inc.'s dominance in the category.
The deal also purges TBS parent AOL Time Warner Inc. of a financial drain. Industry observers estimate WCW lost $50 million to $70 million in 2000 alone.
Fusient Media Ventures, a new company, will pay about $75 million for WCW, sources close to the situation said. TBS Inc. will retain a minority interest in the company, which has struggled to compete against the WWF.
However, two months later, the deal had fell through. Here's a quote from a March 19 2001 MultiChannel News article:
The final bell for World Championship Wrestling may ring as early as next week.
Turner Broadcasting System Inc. last week put the grappling organization on hiatus as a deal to sell the beleaguered company to Fusient Media broke down.
Newly appointed TBS Inc. chairman and CEO Jamie Kellner may have dealt the deal's fatal blow by indicating he had no interest in securing a primetime cable slot for the struggling wrestling organization, industry sources said.  
TBS Inc. and Fusient, headed by former Classic Sports Network president Brian Bedol, initially announced a tentative pact in mid-January. At the time, Fusient agreed to purchase a majority interest in the WCW in a deal worth about $75 million. TBS Inc. would have retained a minority interest in the company.
The agreement also included a multiyear television agreement under which Turner Network Television and TBS Superstation would carry WCW programming. Former WCW president Eric Bischoff was expected to return to oversee the day-to-day operations and storylines for the grappling group.
Fusient had expected to complete the deal within 45 to 60 days.
But sources said Fusient began to re-evaluate its position after taking a closer look at the WCW's financial ledgers. Despite a successful run against World Wrestling Federation Entertainment Inc. in the mid- to late-1990s, the WCW has been mired in red ink. Industry observers estimate it lost from $50 million to $70 million in 2000 alone.
"After taking a closer look, [Fusient] realized that the company was in much worse shape than it was led to believe," said the source.
The two parties continued to negotiate through March, but the deal-breaker apparently came when Kellner -- whom AOL Time Warner named two weeks ago to oversee a new TV-networks group that includes TNT and TBS Superstation -- nixed the television component.
"Kellner decided that he wasn't enamored with wrestling, and without distribution, the asset had no value," said the source.
Representatives from Fusient would not comment on the matter. A Turner spokesman labeled the reports as "speculation," and cited company policy in declining comment.

So, what happened to that SEVENTY-FIVE MILLION? Well, here's the reality... (MultiChannel News August 13, 2001)
It was only four years ago that World Championship Wrestling produced the top-rated show on basic cable and beat its main rival, the World Wresting Federation, on a weekly basis.
And when World Wrestling Federation Entertainment Inc. acquired WCW from Turner Broadcasting System Inc. in March -- after pounding it into submission in the ratings battle over the last few years -- news reports put the price tag at up to $20 million. That marked a big drop from the reported $75 million that Fusient Media Ventures had offered for WCW during January, in a deal that later fell apart.
As it turns out, the WWF -- which has seen its ratings for fall since it moved to new cable home TNN: The National Network -- only paid a measly $2.5 million for WCW, plus an additional $1.8 million in related costs, the company revealed in a recent earnings report.
That's $4.3 million in total: the same price that Los Angeles Dodgers outfielder Gary Sheffield was seeking for his Tampa home, the exact amount it recently cost to build a new air traffic control tower at Central Illinois Regional Airport, or the cost of a couple of Super Bowl commercials.
How did WCW's value fall from a reported $75 million offer to $4.3 million? The $75 million was a bogus number leaked by Turner executives "to save face," a source familiar with the deal said.
In reality, the source said, Fusient's original WCW offer in January was for $10 million, which included a guarantee that it would be allotted 5 percent of the primetime schedule on Turner Network Television and TBS Superstation for WCW programming.
Fusient agreed to pay up to an additional $65 million in seven years if WCW hit certain benchmarks, including increasing the value of the business to $1 billion, the source added.
Fusient later pulled its offer after it reviewed WCW's books, and made a second offer for WCW, which included no up-front money and an agreement to spend $5 million in advertising on properties owned by AOL Time Warner Inc. (Turner's parent company), a source said. Turner ended up taking WWF's offer.
TBS and Fusient executives declined to comment on the offer. All WWF president Stuart Snyder would say about the bargain price WWF paid for its longtime rival was, "It was the right number for both parties, and we've moved on."
In other words, Fusient was willing to give $10 million for all of WCW IF that included the Turner Channel timeslots. The other 87% of the money was basically if WCW could become an entity about the size of WWF. Likewise, if someone was offering $20 million for TNA, I would imagine that includes the timeslot and probably a substantial amount of back-end money if the company was actually worth what they were pretending it was.

tl;dr version = When WCW was almost sold to Fusient the number circulated was $75 million. Turner later said that number was made "to save face" and instead it was only $10M (which had to include the timeslot) and $65M later on if they could become as big as WWF.
I've been thinking about how TNA makes money.

I'd offer the idea that first we look at how WWE makes theirs.

WWE in 2012

Live and Televised Entertainment: $353.8M ($135.2M in profit) = 38.2% margin
* Live Events: $103.7M ($29.2M profit) = North American Live Events: $72.1M (248 events) + International Live Events: $31.6M (66 events) = 28.2% margin = 1.9765M people
* Venue Merchandise: $18.8M ($7.8M in profit) = 41.5% margin
* Pay Per View: $83.6M (4.02M buys worldwide) = $46.0M in profit = 55.0% margin
* TV Rights Fees: $139.5M = $88.9M domestic + $50.6M int'l = $57.3M in profit = 41.0% margin

Consumer Products: $87.8M ($53.8M in profit) = 61.3% margin
* Licensing: $46.3M ($36.0M in profit) = 77.8% margin
* Home Video: $33.0M ($16.7M in profit) = 50.6% margin
* Magazine Publishing: $6.0M (2 million copies) = $0.7M in profit = 11.7% margin
* Other: $2.5M ($0.4M in profit) = 16% margin

Digital Media: $34.5M ($14.2M in profit) = 41.2% margin
* $19.7M ($10.6M profit) = 53.8% margin
* WWEShop: $14.8M ($3.6M profit) = 24.3% margin

WWE Studios: $7.9M ($3.6M in losses) = negative
* Self-Distributed Films: $1.9M ($4.1M in losses) = negative
* Licensed Films: $6.0M ($1.5M in profit) = 25.0% margin
* (In Development: $1.0M in cost) = negative

Total: $484.0M ($199.6M in profit) = 41.2% margin

According to Wrestling Data, TNA had 227 shows in 2012. Annual Report for WWE notes they ran 314.

Average attendance for a WWE show was 6,000 (NA) / 6,700 (int'l) - from annual report. I pulled out the 2012 WrestlingObserver Results section for TNA shows, and about sixty of them had an attendance number. TNA median attendance was 800 and average was 1000. Now, this isn't completely apples to apples because WWE's # includes big PPVs (including WM) while Results section of WO is mostly smaller shows. Still, it seems about right to say a TNA house show is doing about a 1/6 of the average house show that WWE is doing.

So, if WWE held 314 shows which had live attendance which WWE counted as slightly under two million people. Meanwhile, TNA probably had about a quarter of a million people attending a live show (or about 1/8 of the # of WWE crowds). Average ticket price to WWE was $40 (NA) / $60 (Int'l). I did a quick Ticketmaster searc for TNA and saw something about a 4/$40 deal for TNA ticket. I will assume that they get about half to 2/3 of what WWE does for a live show though TNA obviously books smaller, cheaper places than WWE, so there is some cost savings there.

So, TNA in live event revenue (pretending that people paid to go to every show - weren't the Orlando tapings free?) would be ($100M/8)x66% = $8.5M in annual live event revenue. That's money in the door before you have to take care of expenses and it assumes (big assumption!) that you're getting money at every show. Honestly, I would be stunned if TNA was making more than $5M in Live Event revenue to be honest.

However, as it was pointed out, "doing a quick count of that wrestling data list tna had 95 shows in 2012 that they could possibly have made revenue on, the shows in orlando were all free entry and xplosion is taped prior to impact"

I'll use a proxy for Venue Merchandise. Since it was 18% of Total Live Event for WWE, we'll assume a generous 15%. So, .15 x $8.5M = $1.3M in Venue Merchandise (again, feels high to me).

Pay-Per-View Buys were 7k to 10k for most events, right? Assuming 12 PPVs, that would be 102,000 buys annually (versus four million worldwide for WWE). My guess for 100k in PPV buys would be about $2.1M in PPV revenue (after the split with the cable companies).

That's leads us to the big variable: SpikeTV and other Television Contracts.

It's really hard to guess what Spike is paying them. Like WWE, the network is keeping the advertising time for themselves, so that's similar.

WWE gets almost $140M for producing about 6.5 hours weekly and TNA is creating 2 hours (and a bit more for int'l purposes). So, let's just start by cutting WWE's number down - say a third (down to $43M). Now, I can't imagine they're getting close to WWE rates especially considering TNA is barely pulling above a 1.0 rating, and WWE is doing (on average) three times that. If you're generous, you'd cut the TV contract in quarter and reach about $10M. While this includes both domestic & int'l contracts) but $10M seems like the high end to me.

Mookie's TNA Estimate:
* Updated Live Events Estimate: (100,000,000 x (100k / 2 million) )x(40% to 60%) = $2 million to $3 million
* Venue Merchandise Estimate: 375k (calculated as 15% of $2.5million)
* Pay Per View Estimate: $1.7M (assume they only have 80% of the revenue split deal that WWE gets)
* TV Rights Fee Estimate: $8M (Spike) + international contracts

In the other categories, all you have left is: Licensing (very profitable) and Home Video (is what it is).

Where TNA is only about 1/10 the size of WWE in live events, I imagine they do better when it comes to Consumer Products as a percentage - probably between $5M and $12M. I don't know enough about their revenue streams when it comes to Video Games or Licensing , but I really don't know! Digital Media would probably be paltry and they don't have a Studios (lucky them).
So, we quickly see that over 60% of estimate income comes from TV Rights (maybe even as high as 80%) whereas WWE is more like 40%.

Where can they make more money? If they're a $40M company (all told), it doesn't seem like they aren't in a position to be running hundreds of shows a year profitably. They are pretty much completely dependent on TV Rights keeping them afloat.

I spent a long time trying to find any Viacom numbers that even allocated their Media Empire into specific Channel Budgets. Best I could do was:

* I finally found an estimate of Spike TV Advertising Revenue: ... inment.php
Spike ranked 23rd among cable networks with $323 million in ad revenue in 2012, according to figures from SNL Kagan. That was down slightly from $330 million in 2011. By contrast, TNT's ad revenues in 2012 were $1.05 billion, second only to ESPN.
"Spike paid UFC 35 million and were broadcasting 10-20 hours of programming per week. They were doing two hours of TNA, which, no matter what the ratings, were not attractive to sponsors." - Dave Meltzer
* A few years ago, Spike was running Entourage episodes and paid $600,000/episode: ... nd/145853/

* NYTimes reported that Viacom spent about $50 million when they bought the majority stake in Bellator: ... ?hpw&_r=1&

In fall 2011, the company paid around $50 million for a majority stake in Bellator Fighting Championships, according to people with knowledge of the deal who did not want to be identified discussing internal company business.

All together, that's barely $13M on a promotion that probably costs at least upwards of $15M to run. With tight talent budget control, using double-shots for taping, gets some live event revenue instead of just freebies and some international distribution, they could be breaking even, but certainly not banking anything relevant every year. There's a small amount of licensing and other commercial products that they might have.

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