Thursday, July 03, 2014

Another lousy Forbes article on WWE

Yesterday I had a conversation yesterday on twitter about the latest Forbes article on WWE. Basically, someone tried to correlate who was WWE Champion with WWE Financials.

 Rich of Voices of Wrestling (@voiceswrestling), Aaron Taube of Business Insider (@aptaube) and I (@mookieghana) discussed about how disappointed we were with this sort of piece. Personally, it bugs me that Forbes lets half-baked stuff like this run on their website. Maybe I'm just annoyed because Forbes talked up Laura Martin's insane projections for WWE without recognizing how little she seemed to understand of how the network even functioned (hence the need to title my response, "Needham's WWE Analysis Is Grossly Overestimating Future Revenue").
If you want to look at specific indicators - House Show Attendance, Raw Quarter-hour Ratings, PPV Buys - and correlate them to who was in major title pictures during that time, I think it makes a lot of sense - at least that you can investigate and it may be meaningful.

If you want to look at general WWE financials (here's my quick breakdown here), it really doesn't make any sense to focus so myopically. And that's not hard to understand why - WWE receives escalating TV rights payments regardless of who is the champ in accordance with their contracts. WWE gets Videogame Royalties at a certain time of the year (and this year's drop had a lot to do with the new publisher more than even declining sales). Wrestlemania is usually in Q2 (and there's lots of corresponding noise with that). They're going to sell a bunch more stuff for WWEShopZone during the last quarter of the year (aka Christmas). They have a very erratic schedule for receiving revenue from WWE Studios. Hell, they made more money last quarter in Home Entertainment (up $3.5M Year-over-year) than Live Events (up $0.9M Year-over-year) because jargon like "recognition of minimum guarantees” and “higher current sell-through rates than expected”. That sort of variation shows how "who was champ in Q1?" had next-to-nothing to do that quarter's financial results.

Chris Smith's Forbes article strikes me as woefully insufficient for a serious financial website/magazine.

This isn't the first (nor will it be the last time) that Forbes is going to seriously disappoint me when it comes to covering the business of WWE.  Remember the nonsensical "article" about how launching the WWE Network was going to force NBCU to give them more money? I ranted about that piece back in January.

The writer could have chosen to break out specific segments of WWE revenue. The data is all there.
The whole idea of what is "best for business" for the WWE is really tricky. For instance, as pessimistic as I can come across about the WWE Network, I still think the premise is a good idea for WWE. They're a pro-wrestling company with a limited base of regular full-price PPV purchasers, who completely own their own IP and have a virtual monopoly in their industry. I believe that in several years, they'll be thrilled they got into space. However, right now they sacrificed a large and profitable revenue stream (PPV) for so service that is not close to breaking even. That's a bold choice, to say the least.

If you listen to host of the Bernstein Future of Media Summit interviewing WWE CFO George Barrios, a lot of companies want to do something like an OTT network, but the challenges have overwhelmed/scared others away.

Did they WWE launch it at the right time? Debatable, especially since it clearly impacted their NBCU negotiations (something Vince McMahon himself admitted). On the flipside, it only made sense to launch with a strong hook and Wrestlemania only comes but once a year.

What about the market expectations they've circulated? Telling people that 60M US households have an "affinity" for WWE content and that 14M watch weekly (when you count every replay and include anyone who watches 6 minutes of programming) is misleading at the very least.

The stock shot up. The stock shot down. Were there speculators manipulating the stock price?

Do these things have to do with whether or Cena should be champ? I think it's a peripheral conversation, but certainly not a true driver.

Was spending (and eventually losing) millions with WWE Films/WWE Studios "best for business"? Not really, but perhaps the new model will pan out.

If we want to have the "should Cena be the champ?" conversation, I think we have to specify what elements of WWE's business plan we want to look at when we say "best for business". Are we including.... Live attendance? PPV buys (not really so much a thing)? WWE Network subscriptions? WWE TV Rights Deals? Licensing deals? Merchandise sales? Ability to get crossover attention and publicity? Ability to market stars to sponsors? Cena as the face of the WWE certainly plays a role in all of these. But his presence as champion isn't the sole, monolithic driver.
Honestly, I saw the piece on Tuesday night and shook my head. I hoped that no one was going to notice it and for a few days, no one did. I didn't want to be mad hatter who was shouting in the comments section about how ludicrous (and inadequate) the piece was. But now, that's who I've become.

LINK: "Is Making John Cena WWE Champion What's Really Best For Business?" by Chris Smith

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