Hypothetical financials of WrestleMania 32 as a PPV-exclusive

As Dave Meltzer wrote in the August 10, 2015 Wrestling Observer newsletter: (subscription required)

"In case there were any questions, next year's WrestleMania is going to be on the network. They could make more money with it as a PPV exclusive but the bad blood they'd get from the customer base would be a disaster because the feeling is they've promised all PPVs going forward, including Mania, on the network. The production trucks got their WrestleMania 32 promo skins and it was pushed prominently as being live on the network."

I wanted to get at was big of a difference would WrestleMania 32 make for WWE's profits if they had decided to change course and only put WM32 on pay-per-view (exclusive or hypothetically offered it ala cart via the WWE Network for $30+).

I'll do my best to cite all of my sources since there's a lot of misinformation out there on the web and want to thoroughly document my assumptions. My primary source is WWE's own financial filings, particularly when WrestleMania moves a quarter because they do a pro-forma which explains the impact and it's easy to isolate the WrestleMania PPV revenue number.

Pay-per-view Revenue from WrestleMania as recorded by WWE in that quarter
WM2007: $24.6M PPV revenue (source: 5/8/08 10-Q) - 1,250k worldwide buys / 825k North American Buys ($49.95 domestic PPV price, see 4/6/09 WON)
WM2008: $23.8M PPV revenue (source: 5/8/08 10-Q) - 1,041k worldwide buys / 697k North American Buys ($54.95 domestic PPV price, see 2/23/11 WON)
WM2009: $21.0M PPV revenue (source: 8/9/10 10-Q) - 975k worldwide buys / 605k North American Buys ($54.95 domestic PPV price, see 3/5/12 WON)
WM2010: $19.0M PPV revenue (source: 8/5/11 10-Q) - 885k worldwide buys / 495k North American Buys ($54.95 domestic PPV price, see 3/19/13 WON)
WM2011: $24.2M PPV revenue (source: 8/5/11 10-Q) - 1,124k worldwide buys / 679k North American Buys ($54.95 domestic PPV price, see 3/3/14 WON)
WM2012: $27.85M PPV revenue (approximated based on the information in 8/7/12 10-Q) - 1,219k worldwide buys / 715k North American Buys ($54.95 PPV price, see 8/11/14 WON)
WM2013: $27.0M PPV revenue (approximated based on the information in 8/1/13 8-K) - 1,104k worldwide buys / 662k North American Buys ($59.95 PPV price + HD upgrades, see 5/11/15 WON)
WM2014: $17.8M PPV revenue (source: 7/30/15 8-K) - 684k worldwide PPV buys / 420k North American PPV Buys ($59.95 PPV price + HD upgrades, see 5/11/15 WON)
WM2015: $4.9M PPV revenue (source: 4/30/15 8-K) - 259k worldwide PPV buys / 104k North American Buys ($59.95 PPV price + HD upgrades, see 2/23/15 WON)

All of these PPV revenue numbers (except 2012 & 2013) come directly from SEC documents that WWE filed where the company provided a specific pay-per-view revenue number for the WrestleMania event. It's important to note that this only includes the revenue which WWE recorded in that quarter which is usually a little lower than the final numbers (which is what Dave is reporting). Buys that were reported later show up as "prior period buys" in the subsequent quarters so there usually a trailing PPV revenue impact on the following quarter.

Let's look at the Network division (WWE Network + PPV + Video-on-demand) revenue/OIBDA for the past ten quarters:

Latest WWE Trending Schedule
Total Network Revenue/OIBDA in the Media Division

2013 Q1: $16.0M ($15.1M in PPV + $0.9M in VOD) / $5.0M in OIBDA
2013 Q2: $38.2M ($37.0M in PPV + $1.2M in VOD) / $8.2M in OIBDA
2013 Q3: $15.5M ($15.5M in PPV + $1.0M in VOD) / $7.4M in OIBDA
2013 Q4: $16.6M ($15.7M in PPV + $0.9M in VOD) / $7.3M in OIBDA

FY 2013: $86.3M ($82.5M in PPV + $3.8M in VOD) / $27.9M in OIBDA

2014 Q1: $18.4M ($13.8M in PPV + $0.2M in VOD + $4.4M in WWE Network) / -$3.6M in OIBDA
2014 Q2: $43.3M ($23.8M in PPV + $0.1M in VOD + $19.4M in WWE Network) / -$7.3M in OIBDA
2014 Q3: $26.1M ($3.7M in PPV + $22.4M in WWE Network) / $2.3M in OIBDA
2014 Q4: $27.2M ($3.9M in PPV + $23.3M in WWE Network) / $6.8M in OIBDA
FY 2014: $115.0M ($45.2M in PPV + $0.3M in VOD + $69.5M in WWE Network) / -$1.8M in OIBDA

2015 Q1: $37.6M ($9.0M in PPV + $28.6M in WWE Network) / -$1.5M in OIBDA
2015 Q2: $40.1M ($3.5M in PPV + $36.6M in WWE NetworK) / $17.2M in OIBDA

To compare, first half of 2013/2014/2015:

2013 Q1+Q2 = $54.2M ($52.1M in PPV + $2.1M in VOD) / $13.2M in OIBDA (implied "cost" is $41.0M)
2014 Q1+Q2 = $61.7M ($37.6M in PPV + $0.3M in VOD + $23.8M in WWE Network) / -$10.9M in OIBDA (implied "cost" is $72.6M)
2015 Q1+Q2 = $77.7M ($12.5M in PPV + $65.2M in WWE Network) / $15.7M in OIBDA (implied "cost" is $62.0M)

In general, this puts the "cost" for the Network division (PPV+WWE Network) for a non-WM qtr around $23M. The "cost" for a WM qtr is higher (it was $50M in 2014 and $40M in 2015). I'll take the higher end because I'll assume that high-value wrestlers (such as The Rock) are performing. Still, that's large variance, and this $10M delta matters. I will assume that first half of 2016 would cost around $70M for the Network division (PPV+WWE Network).

Steady State (WrestleMania 32 is on WWE Network)
January 2016: 1.40M WWE Network subscribers = $14.0M (Royal Rumble has interest); $2.4M in PPV revenue
February 2016: 1.30M WWE Network subscribers = $13.0M (Fastlane again); $750k in PPV revenue
March 2016: 1.40M WWE Network subscribers = $14.0M (interest returning for WrestleMania); no PPV event - assume about $150k from prior events
April 2016: 1.60M WWE Network subscribers = $16.0M (WrestleMania held at beginning of April); $5.5M in WM PPV revenue + $750k in PPV revenue
May 2016: 1.30M WWE Network subscribers = $13.0M (drop-off after WrestleMania); $700k in PPV revenue
June 2016: 1.25M WWE Network subscribers = $12.5M (leveling off); $750k in PPV revenue
H1'16: $82.4M in WWE Network Revenue (+26% vs prior half year) + $11M in PPV revenue (-12% vs prior half year) = $93.4M / $23.4M in OIBDA

Alternative State (WrestleMania 32 is a PPV exclusive)
January 2016: 1.35M WWE Network subscribers = $13.5M (Royal Rumble has interest); $2.4M in PPV revenue
February 2016: 1.25M WWE Network subscribers = $12.5M (Fastlane again); $750k in PPV revenue
March 2016: 1.20M WWE Network subscribers = $12.0M (subscribers are dropping); no PPV event - assume about $150k from prior events
April 2016: 800k WWE Network subscribers = $8.0M (WrestleMania is only available on PPV); $25M in WM PPV revenue (about 925k worldwide buys) + $750k in PPV revenue
May 2016: 900k WWE Network subscribers = $9.0M (subscribers can watch WM32 on PPV - brief bump); $700k in PPV revenue
June 2016: 800k WWE Network subscribers = $8.0M (leveling off); $750k in PPV revenue
H1'16: 62.9M in WWE Network Revenue (-4% vs prior half year) + $28.5M in PPV revenue (+128% vs prior half year) = $93.4M / $23.4M in OIBDA

Again, there's a lot of assumptions. I figured that it would still cost $70M to run the WWE Network for 6 months even if average subscribership dropped from 1.375M in H1'16 to 1.05M in H1'16. One of the reasons that the WWE Network costs $20M-$30M more than prior years is because WWE is spending so much on "programming". I figured that they would only lose about 50,000 subscribers off the base for January-February if they weren't going to offer WM on PPV in April. I figured that WWE could get almost a million wordwide buys for their PPV and generate well north of $20M for their share of revenue from the event (they made $18M in 2014 when they were competing with the WWE Network and $27M in 2013 between $60 pricetag and HD buys). I figured that WWE would get a post-WM bump as people came back to see the replays of WM. I figured that the steady state of year-round subscribers if you don't offer a lucrative carrot like live WrestleMania is 800k-900k people. As you can see, there's a lot of moving parts.

WWE loves to give assumptions for overall company OIBDA based on the WWE Network subscribers numbers but doesn't ever provide direct Network segment OIBDA based on subscriber numbers. What do you think?

The Online Encyclopedia of Integer Sequences (and wrestling)

One of the more unique resources for number geeks (like myself) is the OEIS (The Online Encyclopedia of Integer Sequences), created by Neil Sloane.

If you're unfamiliar with the idea, there's a good piece online from Quanta Magazine talking with Sloane about the website.

About a year and half ago, I started working on a chapter for my now-cancelled Kickstarter book called, "Babyface, Heels and Graph Theory". One of things I wondered was how many "traditional" pro-wrestling matches were possible were possible with wrestlers.

I go into greater detail in the PDF (I put the work-in-progress chapter up for free via PayHip yesterday), but when I asked a math professor friend for help, he explained that the sum of the partitions we were calculating was actually the same as a OEIS sequence #A023998.

If you had 8 wrestlers (4 faces, 4 heels) and followed the conditions that I outline (book them in matches where each team is only compromised of babyfaces or heels and everyone wrestles once in either a singles, tag or multi-man tag match), you find there's 131 different "cards" you can put together (before you start accounting for the order on the card). By the time you have a dozen wrestlers, there's well over twenty thousand. And then things start growing even more rapidly.

n	wrestlers	cards
1	2	1
2	4	3
3	6	16
4	8	131
5	10	1,496
6	12	22,482
7	14	426,833
8	16	9,934,563
9	18	277,006,192
10	20	9,085,194,458
11	22	345,322,038,293
12	24	15,024,619,744,202

Links:

http://oeis.org/ - Online Encyclopedia of Integer Sequences
https://www.quantamagazine.org/20150806-neil-sloane-oeis-interview/ - interview with OEIS creator Neil Sloane
https://payhip.com/b/dmpT - a free 10-page from the chapter that was going to be, "Babyfaces, Heels and Graph Theory"

WWE Q2 Analysis and WWE Wrestler Pay

I have posted some serious Wrestlenomics and analysis on WWE's Q2 '15 results over at Voices of Wrestling.

This includes:

• 3,000 words about WWE Q2 results
• 90-minute podcast about WWE Q2 results

I hope you'll check it out if you haven't already.


Also, I was poking around in the WWE financials looking at wrestler pay. In a thread over at F4W/WON (subscription required):

Dave Meltzer wrote, "Wrestler contract money is listed elsewhere."

I wanted to expand on that comment from what I've found.

Under "Talent and other commitments" in the 2014 Annual Report, WWE lists $11,952,000 for 2015. This is "aggregate minimum payment obligations under these contracts as of December 31, 2014" for "Service contracts with certain vendors and independent contractors, including our talent with terms ranging from one to twenty years."

I would assume that's the sum of all total of downside guarantees for WWE for contracts with last past 12/31/15. Obviously, WWE pays out a lot more than that each year. This is just the minimum amount they'd have to provision for.

Earlier in the report WWE notes that "we currently have approximately 140 Superstars and Divas under exclusive contracts, ranging from multi-year guaranteed contracts with established Superstars to developmental contracts with our Superstars in training."

The "average" downside (if you assume that all 140 contracts are in the $12M bucket and all of them last until end of 2015 - both assumptions are probably wrong) would be $85,000 but that's going to be skewed on the top and bottom ends. There's still only a handful of people who have exceptionally high downside guarantees over $1M (HHH, Cena, Orton being the top ones). Unsure how contracts like Lesnar, Undertaker, Sting or even Rock/HBK/Austin are being accounted for. When wrestler's contracts have become public knowledge through lawsuits or SEC filings (for company officers like McMahons and Triple H), I throw them on my website.

I also wonder whether the "developmental contracts" are considered part of the Corporate & Other Expenses as part of the "talent development" function (which includes the costs of the WWE Performance center). The "All Other" part of "Corporate & Other Expenses" was a hefty $45.3M in 2015.

For instance, I've heard that NXT's contacts will pay for travel/hotel when they are touring whereas the main roster contracted talent has to pay for that out of pocket. So, it would make sense that the two contracts might be structured separately and even accounted for in different buckets. Still, 140 contracts certainly includes both the main roster and developmental folks. I would assume road agents and NXT coaches are considered staff. I'm not certain where referees, commentators or ring announcers would fall in this mix.

Also, there's quarterly/annual accounts payable breakdown which includes a line item for, "Talent related" which was $6,446,000 in 2014 and $6,304,000 in 2013. I always wonder if this is the revenue that they paid out on top of the guaranteed downsides for talent, or whether this is something else.

For comparison, Dave noted in the July 27, 2009 WON that "The total downside guarantees for all talent this year is $16.2 million with approximately 101 performers under contract between roster contracts and developmental contracts. " For comparison, the 2008 annual report (published 2/27/09) listed "Talent, employment agreements and other commitments" for 2009 at $18.1M and 2010-2011 at $24.0M.

In 2013, WWE's "talent philosophy" page used to claim:

WWE has approximately 150 performers who are independent contractors, same as actors or actresses on television dramas, soaps or comedies. They do not have corporate responsibilities or duties. The average full-time, main-roster WWE performer works four and a half days per week, which includes travel and appearances, and has an average annual compensation of $550,000. Each year, WWE receives thousands of inquiries from talent wanting to be considered for the WWE roster.

In December 2013, they dropped the average compensation calculation from the page. I think it was the result of a skewed calculation driven by top-end earners. The median compensation for a WWE talent is likely far below $550k annually.