Among the critical community of the wrestling universe, there have been a frequent series of comments made over the years about the WWE's financial success since the Attitude Era ended, often generalizing the fiscal numbers as being far inferior. It is an easy conclusion to draw, on the surface, given the steady drop in television ratings and pay-per-view buyrates since 2001. Other than Wrestlemania and its associated events such as the Royal Rumble, the data surely appears to favor the argument that the WWE is struggling in 2013. However, I have hypothesized, in the past, that the fans championing that side of the debate were ignoring the shades of gray that define economic success. Recently, I set out to study the matter further, either proving my hypothesis correct or preparing the crow for my own consumption.
Doctor's Orders: An Analysis of WWE Financials
By The Doc
Oct 19, 2013 - 2:19:32 PM
WWE Business - Is it Good or is it Bad?
Before we get down to business, there are a few key points to consider that the layperson may not fully understand about economics. So, for my readers whose fortes lay outside of the fiscal world, the two key things that will be discussed in the coming words are revenue and profit. Revenue is the total amount of money that you make, simply put. All the WWE live events (PPVs, TV tapings, and house shows), their cut of the pay-per-view market, the sponsorships (for TV/PPV and otherwise), and the merchandise sales (T-shirts, toys, etc.) combine to create a year-end number. Profit is the amount of money left over after covering all of your expenses. The WWE has considerable overhead in producing their shows, fulfilling their contractual agreement to their independent contractors/wrestlers, paying their employees (and the coinciding taxes), keeping Titan Towers up-and-running, funding their developmental performance center, and other various expenses (from WWE Network to WWE Studios).
What made the Attitude Era so groundbreaking, from the business end, was not just the incredible revenue, but more importantly the total profit. For instance, from October 1, 1999 to September 30, 2000, the WWE made $373 million in total revenue. They had a huge profit that fiscal year of $68 million. Average weekly TV ratings and average monthly PPV buyrates were never higher. The following year, the WWE totaled their highest total revenue number of the era, raking in $456 million. However, their profit took a major hit because they were financially tied into the ill-fated XFL. The final year of the Attitude Era was a huge success in drawing money, but they had nearly as much going out as they did coming in, leaving them with "just a" $15 million profit. The late '01 to late '02 period, despite business falling off its ridiculously high Monday Night War perch, was a great year, garnering $409 million in revenue and a profit of $42 million.
Since that time, it has been assumed - through the aforementioned decreases in PPV buys and TV ratings - that WWE business has tanked compared to where it was during the Attitude Era. In the year that immediately followed the transition away from Steve Austin and The Rock as full-time top stars to Triple H and Brock Lesnar leading respective brands with separate (Raw and Smackdown) identities, the WWE did have a bad economic year. They made a lot of money ($374 million), but their profit was just $16 million - then, they took a huge hit from their New York City restaurant tanking and lost $35 million. Therefore, the 10/2002 to 9/2003 fiscal year netted a loss (negative $19 million). The WWE averaged profits of $55 million during the height of wrestling's popularity with the Austin-Rock-HHH triad flanked by a lot of other young and/or hungry stars. A $16 million profit (taking The World restaurant out of the equation) was nothing to write home about and showed the effects of the most profitable period in wrestling history coming to an end. These numbers are consistent with the arguments for WWE business dropping tremendously since the Attitude Era. If we just took into account that fiscal year, then they would be right. However, the business numbers thereafter tell a different story.
From 10/2003 to 9/2004, the WWE made the same amount as the previous year ($374 million), but profited to the tune of $48 million. '04-'05 yielded $366 million with a $39 million profit. Obviously, these figures were lower than their Attitude Era predecessors. Though, considering that the Triple H/Brand Split era in the WWE has often been cited as being a horrifyingly terrible business period, they were actually quite successful.
The TV ratings and PPV buyrates continued to drop as the distance grew from the Monday Night War. However, business numbers did not. John Cena, with the likes of Batista, Edge, and Randy Orton as other new stars ascending to the top spots, boosted revenue back above $400 million (with $47 million in profits) for 2005/2006. Since 2007, revenue has never dropped below $475 million - higher than the greatest amount of revenue ever produced during the Attitude Era ($456 million). Profits have dropped in recent years, but the WWE is spending more money on the returning stars, the WWE Network, and further expanding their enterprises. They still have a $41 million net income average in the last 5 years and 2012 hit a four year high in total revenue.
It may come as a surprise to WWE detractors who swear by the past and have used ratings and buyrates to boost their claims, but the numbers do not lie. The WWE makes more money and spends more money, but the profit is still substantial. The WWE business is looking great, by all accounts.
The natural follow-up question is: how do ratings and buyrates go down but the revenue goes up and the profits hold fairly steady?
"Between 2000 and 2009, the public company, founded in 1982 by chairman Vince McMahon, increased its revenues outside North America from $9 million to $127 million" said Austin Kelly of the Wall Street Journal's dotcom in a 2010 article. "International income now accounts for nearly 27 percent of WWE’s total revenue, and it is televised in 145 countries, in 30 languages. WWE stages about 80 live events overseas each year, selling out shows from León, Mexico, to Lyon, France, with ticket prices averaging $70." Those numbers have only increased since 2010.
The TV ratings in the United States may be down, but the audience has never been as far reaching. The WWE and the NBA are on parallel courses. Have each brand experienced higher TV ratings, domestically? Absolutely, but they are companies being run by visionaries who consciously recognized that when their products were peaking in popularity at home, they had the chance to expand their brands abroad. With international expansion has come the need to recruit stars from far and wide. WWE and basketball are more popular across the globe than ever as a result. Today, what they lack in American input to their economic bottom lines, they are making up for in international revenue. For example, the WWE’s net revenue for the Asia Pacific region was $32 million in 2008 alone. Critics may scoff at a lumbering clunk like The Great Khali, but India represents WWE’s second largest TV distribution agreement outside the United States.
Joshua A. Shuart, Ph.D. & Peter A. Maresco, Ph.D. concluded in a professional journal article from several years ago titled World Wrestling Entertainment: Achieving Continued Growth and Market Penetration through International Expansion that "World Wrestling Entertainment is indeed a unique business entity that has, thus far, been incredibly successfully as it has expanded its fan-base into international waters. In fact, the data shows that while domestic earnings have continued to diminish, they have steadily climbed each of the last five years internationally. More success is yet to come as even more countries become partners with the wrestling corporation, and as new revenue streams continue to develop."
Other factors have also influenced the WWE's economic climate, most notably the cost of PPV and the expansion of corporate sponsorships with the shift to PG television. Prices per PPV increased by $10 for the typical PPV over the past six years. Additionally, the WWE introduced HD to their PPVs at the 2008 Royal Rumble, with its inherent cost increase of $10. In the last five years, the extra cost of HD increased again by $10. With Wrestlemania's continued growth into the global mainstream phenomenon that it was originally intended to be, its cost has also skyrocketed in recent years, with a $15 increase in HD price. There may be less of a demand to view WWE on PPV, but the drop is offset by the PPV cost. They still have a loyal audience willing to spend more money. As for the PG era, it has been critically denounced, but it produced triple the number of corporate sponsors. Raunchier TV shows cannot attract the kind of sponsors that can their family-friendly counterparts.
Conclusion: WWE Business is doing just fine. So, we can put that debate to rest. International expansion has allowed them to maintain their substantial business stature in the global market, despite their product being comparatively in recession to the Attitude Era.
Credit Wall Street Journal, Brian Gerweck, Market Watch, and Business Sports Journal as sources for this article.
Asking for Reader Feedback on a Few Things
As columnists that are in it for the long haul, we often have to adapt our writing schedules to meet the other demands of our lives. Wrestling is a frequent topic in my mental downtime, but not always does my non-columnist life allow me the opportunities necessary to fully translate my thoughts into words. That is one of the reasons why I like the LOP Radio avenue - it gives me 60-minutes to let the words flow. For those that do not listen, you ought to check it out. If you enjoy my analytical writing, you will enjoy my analytical radio show. I do it twice a month on Wednesdays at 6PM and I am not yet that adept at promoting it. I would like to expand that audience, to be honest. Please give it a listen and let me know what you think. I am going to be changing the format starting with the next show on the October 30th. It will feature a guest on every episode to discuss the hottest topics.
I would also like to experiment with new column types. If you have followed my work for any length, you may have noted that I dabble in just a little bit of everything. I wrote a creative short story series. I love the occasional epic list. I have always been partial to reviews and breaking down matches/PPVs/shows. Most frequently, as of late, I have fancied the standard, conversationalist piece. I'm always looking for new ways to challenge myself and stay motivated. Undoubtedly, my book ("The Wrestlemania Era: The Book of Sports Entertainment" due out in January) was the most challenging writing that I've ever done. I've been thinking about a Q&A style column and wanted to gauge reader interest in an "Ask The Doc" series. I may not be a former pro-wrestler, but I've seen everything that there is to see in mainstream pro wrestling during the Wrestlemania Era. I really enjoy reading those types of columns and would like to know if you want me to do that. You ask...I answer. If you have interest, let me know via Facebook, Twitter, Comments, or Email.
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