Monday, September 28, 2015

How much does it cost WWE to run a house show?

How much does it cost to run a House Show in North America?

WWE doesn't clearly break out their profit margins into house shows, TV tapings, and PPVs.
However, we can try to extrapolate based on their quarterly financial filings:

WWE Quarterly Live Event Revenue
2013Q1: $21.0 = $20.0 NA + $1.0 INTL / $4.4 OIBDA -- 77 NA EVENTS + 3 INTL EVENTS
2013Q2: $40.1 = $30.1 NA + $10.0 INTL / $17.2 OIBDA -- 65 NA EVENTS + 22 INTL EVENTS
2013Q3: $25.0 = $17.5 NA + $7.5 INTL / $3.9 OIBDA -- 62 NA EVENTS + 14 INTL EVENTS
2013Q4: $25.4 = $13.8 NA + $11.6 INTL / $5.3 OIBDA -- 52 NA EVENTS + 26 INTL EVENTS

2014Q1: $21.7 = $21.7 NA + no INTL / $3.8 OIBDA -- 80 NA EVENTS + no INTL EVENTS
2014Q2: $38.3 = $27.5 NA + $10.8 INTL / $15.5 OIBDA -- 54 NA EVENTS + 23 INTL EVENTS
2014Q3: $21.6 = $17.3 NA + $4.3 INTL / $3.9 OIBDA -- 73 NA EVENTS + 6 INTL EVENTS
2014Q4: $26.9 = $15.3 NA + $11.6 INTL / $4.6 OIBDA -- 57 NA EVENTS + 25 INTL EVENTS

2015Q1: $37.5 = $36.5 NA + $1 INTL / $17.6 OIBDA -- 73 NA EVENTS + 3 INTL EVENTS
2015Q2: $26.4 = $16.9 NA + $9.5 INTL / $6.7 OIBDA -- 65 NA EVENTS + 21 INTL EVENTS

What we want to concentrate on is the "cost" (we'll consider that the difference between Live Event Revenue and Live Event OIBDA) as a function of the total number of events held that quarter.

2013Q1: $16.6 "cost" = 2 PPVs + 25 TV tapings + 50 NA house shows + 3 INTL house shows
2013Q2: $22.9 "cost" = 2 PPVs + 1 WM + 26 TV tapings + 36 NA house shows + 22 INTL house shows
2013Q3: $21.1 "cost" = 3 PPVs + 27 TV tapings + 32 NA house shows + 14 INTL house shows
2013Q4: $20.1 "cost" = 4 PPVs + 27 TV tapings + 21 NA house shows + 26 INTL house shows

2014Q1: $17.9 "cost" = 2 PPVs + 25 TV tapings + 53 NA house shows + 0 INTL house shows
2014Q2: $22.8 "cost" = 3 PPVs + 1 WM + 26 TV tapings + 24 NA house shows + 23 INTL house shows
2014Q3: $17.7 "cost" = 3 PPVs + 27 TV tapings + 43 NA house shows + 6 INTL house shows
2014Q4: $22.3 "cost" = 3 PPVs + 26 TV tapings + 28 NA house shows + 25 INTL house shows

2015Q1: $19.9 "cost" = 2 PPVs + 1 WM + 26 TV tapings + 44 NA house shows + 3 INTL house shows
2015Q2: $19.7 "cost" = 3 PPVs + 26 TV tapings + 36 NA house shows + 21 INTL house shows

When you run a regression with no constant, it would suggest that the cost per show-type were around:

Multi-variable regression
PPV: $920,500
TV Taping: $420,000
NA House Show: $95,500
INTL House Show: $200,875

(I should note that while the adjusted R-squared for this is high - 0.83, the p-values on all the variables are terrible and that if you exclude the WM quarters, the regression falls to pieces. However, I can at least believe these numbers so I'm going to barrel on using them.)
You can quickly tell which quarter has WrestleMania just by looking at the implied NA Live Events / NA Event revenue each quarter:

Revenue per Live North American Event
2013Q1: $259,740
2013Q2: $463,077 (WrestleMania)
2013Q3: $282,258
2013Q4: $265,385
2013TTL: $317,969

2014Q1: $271,250
2014Q2: $509,259 (WrestleMania)
2014Q3: $236,986
2014Q4: $268,421
2014TTL: $309,848

2015Q1: $500,000 (WrestleMania)
2015Q2: $260,000

It's clear that WrestleMania is pretty distrotive (WrestleMania qtr: $490,779 / Non-WrestleMania qtr: $269,236) so let's focus on the non-WM quarters.

If it costs about $95,500 on average to run a house show in North America, based on the average ticket price over that quarter, how many people would you need to draw? Assuming about $44/ticket (our sample ranged from $39.40 in Q1 2013 to $46.45 in Q2 2015), that's about 2,170 people. We should probably assume lower ticket prices (closer to $35-$40), which would be 2,400 to 2,700 per show. Let's say 2,500ish people.

Break-even for an INTL house show was about 2,600 due to the high international ticket prices (median international ticket was $74). However, the NA house show break-even is probably a little more than because the average ticket price is a combination of house show attendance, TV tapings and PPVs.

The break-even for PPV and TV tapings is more complicated. WWE makes $210M+ in TV Rights for their TV tapings. WWE used to earn $80M+ in PPV rights. Also, ticket prices for those events are higher.

What's the average building size which WWE runs North American shows in?
Looking at the Capacities listed in the document with the WWE Schedule (March 2015-March 2016) which WWE filed back in March...

The average capacity of a building that WWE ran between March 2015 and Sept 2015 for a house show in North America was 9,681. (Overall, including international events, the A-crew with Cena was capacity of about 10,248/event and B-crew was capacity of about 9,001/event.)

The average capacity of a building that WWE ran between March 2015 and Sept 2015 for a TV taping (including UK tapings) was 11,943. For the 7 non-WM PPVs (excluding special events like Beast in the East or Hell in a Cell), was about 12,870. Again, these capacities were from WWE's own legal filing.

Overall, average North American attendance was about 5,770 in non-WrestleMania quarters. Again, that's a combination of events that are more packed (like TV tapings and PPVs) and less packed (average live events).

A few years ago, I looked at House Show attendance by brand (2008-2013) and found that Raw ranged from 5,600 to 7,110 and SmackDown ranged from 4,800 to 6,600. So, WWE is probably somewhere in the 5,000-5,500 range for North American House show attendance these days which is probably at twice as high as what you need to break event.

In reality, the costs of a house show are partially driven by the attendance itself since in theory you're paying talent a percentage of the gate based on their spot on the card and the building you use is also dictated by the attendance demands.

Analysis by Chris Harrington (chris.harrington@gmail.com)

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