WWE Network finally happening

[Guest Nell Santucci]

Dave is right to say that they're going into unchartered waters, but for WWE to tell their stockholders that they could get 4 million subscribers over time is lolz.

[jdw]

What does dividends have to do with a network? Either a given plan for the network would be profitable or it wouldn't. Is lack of funding the hang-up?

The channel quite possibly wouldn't have been profitable at the start due to start up costs and finding revenue streams, depending upon what path they chose to go with. Profits sucked out of the company into the McMahon's pockets via dividends could have covered those losses.

 

Let alone the money pissed down the drain on WWE Movies.

 

$540M covers a lot of losses.

[Guest Nell Santucci]

What does dividends have to do with a network? Either a given plan for the network would be profitable or it wouldn't. Is lack of funding the hang-up?

The channel quite possibly wouldn't have been profitable at the start due to start up costs and finding revenue streams, depending upon what path they chose to go with. Profits sucked out of the company into the McMahon's pockets via dividends could have covered those losses.

 

Let alone the money pissed down the drain on WWE Movies.

 

$540M covers a lot of losses.

 

What's bad is that WWE's cash reserve is under $200 million after Linda McMahon went insane and blew money on her failed senate bid.

 

They're still making a profit and have plenty of cash, but if a crisis happens in the next ten years, especially after Cena years, it'd be wise to be sitting on plenty of cash to pay the bills. Already, the Rock is done (I think), Undertaker won't be around much longer, Brock Lesnar isn't paying the bills, John Cena could wind up with a nasty injury like he already did in Europe, CM Punk's body is breaking down, no one cares about HHH, and there is not a single guy on the roster they can push now, besides the Shield, who hasn't done many jobs on TV or PPV. (But wait, no one cares about wins and losses.)

 

Me personally, I think the Network is worth shooting for, but if they can't come close to meeting their projection with a million subscribers just to break even, they need to pull the plug quickly. The truth is that, from what I'm reading, that company is scarily insular.

[Robert S]

The money for Linda's senate runs came out of the personal pockets of the McMahons not from the WWE's cash reserve, right?

[Guest Nell Santucci]

The money for Linda's senate runs came out of the personal pockets of the McMahons not from the WWE's cash reserve, right?

Good question. I don't know. But what I do know is Dave saying a number of times that they spent, in total, $100 million of the $300 million. AFAIK, WWE's cash reserve is now somewhere in the $150 million, unless I got confused, and it was $300 million before.

[Ditch]

No, WWE did not fund Linda's campaigns directly. Though there is a question of whether they would have taken out so much money without the plan to tilt at the electoral windmill.

[jdw]

The money for Linda's senate runs came out of the personal pockets of the McMahons not from the WWE's cash reserve, right?

WWE's Profit / Cash has been paid out in dividends totaling $540M over the past 10 years.

 

Dividends are paid to shareholders.

 

The Vince & Linda are the largest shareholders.

 

In a very true sense, the WWE funded Linda's insane runs for the Senate because Vince & Linda have been extracting money from the WWE via dividends. A boatload of money.

 

John

[jdw]

Just to make it clear, here are the approximate numbers for the quarter that just closed.

 

FY2013 1st Qtr (Jan 1 - Mar 31 2013)

 

29,252,010 Class A Shares Issued & Outstanding

45,500,830 Class B Shares Issued & Outstanding

 

Dividend = $0.12 per share = $8,970,340.80

 

This ties in fairly close with the "$8,977" listed in the 10-Q, which is in thousands and would mean a rounded "$8,977,000".

 

Vince & Linda

39,272,641 Class B Shares * $0.12 = $4,712,716.92

566,670 Class B Shares * $0.12 = $68,000.40

100 Class A Shares * $0.12 = $12.00

Total: $4,780,729.32

 

The last two are in "Linda's Name", but we all know that what is Vince's is her's anyway so I would treat all of these as Vince & Linda's shares.

 

So 53.3% of the dividend is going to Vince & Linda.

 

Steph has 3,764,071 shares (most in two trusts of Class B and one small batch of Class A) while Shane has 1,541,204 (most in one trust of Class B and one small batch of Class A). Side bar: I'd have to go back and track what happened to Shane's shares, as his 2008 trust is slightly smaller than Steph's and his 2004 equiv of her's doesn't exist... though last decade when I looked at this they looked pretty close to equal. My guess is that Shane must of unloaded some of his Family Business Shares. Anyway...

 

3,764,071 shares for Steph * $0.12 per share = $451,688.52

1,541,204 share for Shane * $0.12 per share = $184,944.48

 

Total McMahon dividend payout = $5,417,362.32 (60.4%)

 

That's just one quarter. The dividend payout now looks to be aimed at $35.9M for the year, which is the same as last year... down from the $81M-$83M per year that was being shelled out in 2008-10, which at 60% a pop going to the McMahons would have been a total of $148M in those three years out of the $247M paid out in dividends.

 

The McMahons could have kept the money in the company by simply paying out Class A dividends... in other words, just on the shares that are publically traded (the Class B owned by the McMahons aren't).

 

As far as Cash, the company is currently sitting on:

 

$46.28M Cash and cash equivalents

$85.98M Short-term investments, net

 

That's down $20M from the start of the quarter (specifically in Cash). I haven't really tracked their cash flow and balance sheets over the years, being much more interested in the Income Statements (specifically Revenue side)... so I don't have a handy sheet with the cash data over the years... and really don't want to sift through close to 20 years of filings on the SEC's website to find it. But... I wouldn't worry too much about that. $130M in cash and short term investments (especially the way the market is going) isn't a problem for a company with a shade under $500M in annual revenue and pretty reasonable credit facilities available to it.

 

John

[jdw]

What's bad is that WWE's cash reserve is under $200 million after Linda McMahon went insane and blew money on her failed senate bid.

 

They're still making a profit and have plenty of cash, but if a crisis happens in the next ten years, especially after Cena years, it'd be wise to be sitting on plenty of cash to pay the bills. Already, the Rock is done (I think), Undertaker won't be around much longer, Brock Lesnar isn't paying the bills, John Cena could wind up with a nasty injury like he already did in Europe, CM Punk's body is breaking down, no one cares about HHH, and there is not a single guy on the roster they can push now, besides the Shield, who hasn't done many jobs on TV or PPV. (But wait, no one cares about wins and losses.)

Okay... so no point in being lazy, and might as well add a couple more columns to the sheet...

 

They went under $200M in Cash, Cash Equiv & STI back in 2008. They popped briefly above it in 2009, but have been under ever since. They've been in the $150M - $165M range the past three years. Once suspects the current quarter dip is more cyclical than anything else, and when Mania Money flows in that the next quarter will be back up in that range.

 

One gets the sense that at the tail end of the period where they had $250M+ in cash, cash equiv & STI (2001-2007) that they determined they were carrying too much and moved to draw it down. That ties in with the increase in dividend amounts being paid out in 2007-2010, before being eased back down the last two years.

 

There is one thing we can say about Vince that he's better at than any other wrestling promoter in the modern era: when hit with business slow downs, he reacts fast to cutting costs / expenses. He's done this time and again over the years. So the WWE would have to go in a massive tailspin before his moves to cut costs wouldn't be enough.

 

Now that may change if Vince drops dead and Trip & Steph run the show. On the other hand... one gets the sense that Trip is a little more cut throat than most would be. Especially with no true rival for talent to go to.

 

John

[jdw]

The money for Linda's senate runs came out of the personal pockets of the McMahons not from the WWE's cash reserve, right?

Good question. I don't know. But what I do know is Dave saying a number of times that they spent, in total, $100 million of the $300 million. AFAIK, WWE's cash reserve is now somewhere in the $150 million, unless I got confused, and it was $300 million before.

 

My guess is that Dave means they've spent $100M of the $300M they've gotten from dividends. $300M would be pretty close to accurate.

 

On the other hand, I'd have to go back to look at the IPO to see how much went into their pockets. We'd also have to ponder how much Vince & Linda might have made off their investments over the years. $50M + $50M might have just been the poker equiv of Bankroll: money they had set aside to play with.

 

John

[rovert]

It is finally happening AGAIN:

 

We have heard from few sources that the current plan for the WWE Network is to debut in the first quarter of next year. One source told me that the date right now is February 24, which would be the day after The Elimination Chamber and would have it in place leading up to WrestleMania. I have not been able to second source that date but can tell you that I have been told that people are working under the assumption that it will start in the first quarter of 2014.

PWInsider

[Migs]

It is finally happening AGAIN:

 

We have heard from few sources that the current plan for the WWE Network is to debut in the first quarter of next year. One source told me that the date right now is February 24, which would be the day after The Elimination Chamber and would have it in place leading up to WrestleMania. I have not been able to second source that date but can tell you that I have been told that people are working under the assumption that it will start in the first quarter of 2014.

PWInsider

 

Wondering if the success of Total Divas has given them leverage to suggest to cable companies that they can promote programs like Legends House successfully. If their non-wrestling programming can draw viewers, the network might have real value.

[Slasher]

It is finally happening AGAIN:

 

We have heard from few sources that the current plan for the WWE Network is to debut in the first quarter of next year. One source told me that the date right now is February 24, which would be the day after The Elimination Chamber and would have it in place leading up to WrestleMania. I have not been able to second source that date but can tell you that I have been told that people are working under the assumption that it will start in the first quarter of 2014.

PWInsider

 

Wondering if the success of Total Divas has given them leverage to suggest to cable companies that they can promote programs like Legends House successfully. If their non-wrestling programming can draw viewers, the network might have real value.

 

I would hope that the cable companies are not as easily misled as you think they are. Total Divas is on a popular woman-centric network. It's no more successful than anything else that is on the channel, and in the larger scope, it's not that successful to begin with. That does not equate to some mythical boon of having a WWE network available to the cable companies. In fact, I hope it never gets off the ground because I see another spectacularly failed venture that would eat up a good chunk of their resources, and they do not need it. In fact, if anything, the future (for now) is in a streaming service that is available online.

[flyonthewall2983]

Said it before, but they could make a hell of a lot of money off a Netflix-type service using their back catalog of wrestling. Either that or enter a more lucrative deal with Netflix and give them more stuff to put on.

[Slasher]

Said it before, but they could make a hell of a lot of money off a Netflix-type service using their back catalog of wrestling. Either that or enter a more lucrative deal with Netflix and give them more stuff to put on.

Yep. They should have their own Netflix service.

[Migs]

It is finally happening AGAIN:

 

We have heard from few sources that the current plan for the WWE Network is to debut in the first quarter of next year. One source told me that the date right now is February 24, which would be the day after The Elimination Chamber and would have it in place leading up to WrestleMania. I have not been able to second source that date but can tell you that I have been told that people are working under the assumption that it will start in the first quarter of 2014.

PWInsider

 

Wondering if the success of Total Divas has given them leverage to suggest to cable companies that they can promote programs like Legends House successfully. If their non-wrestling programming can draw viewers, the network might have real value.

 

I would hope that the cable companies are not as easily misled as you think they are. Total Divas is on a popular woman-centric network. It's no more successful than anything else that is on the channel, and in the larger scope, it's not that successful to begin with. That does not equate to some mythical boon of having a WWE network available to the cable companies. In fact, I hope it never gets off the ground because I see another spectacularly failed venture that would eat up a good chunk of their resources, and they do not need it. In fact, if anything, the future (for now) is in a streaming service that is available online.

 

Not suggesting that they'd be misled. Nor do I think WWE could credibly suggest a boon. Just suggesting that it proves there is some market for this type of show that isn't tiny. But yes, the placement on E! is obviously different than it would be on the WWE Network,

 

Said it before, but they could make a hell of a lot of money off a Netflix-type service using their back catalog of wrestling. Either that or enter a more lucrative deal with Netflix and give them more stuff to put on.

You have to wonder, in the streaming era, why they don't simply sell an online version of 24/7? I would gladly pay whatever the current 24/7 fee is ($10 a month?) for access to the content. And obviously, they're capable of doing something more expansive as well.

[jdw]

Not suggesting that they'd be misled. Nor do I think WWE could credibly suggest a boon. Just suggesting that it proves there is some market for this type of show that isn't tiny. But yes, the placement on E! is obviously different than it would be on the WWE Network,

It's 1M fans for 1 hour of programing a week. They're doing a 15 episode "season", and perhaps can figure out how to do two "seasons" a year... which is 30 hours of programing in an entire year.

 

The WWE Network will being doing 30 hour of programing in primetime content every 10 days.

 

Total Divas is a blip on that ass. Worse, it's likely something that has a short shelf life in interest as far as drawing "big" ratings. It already finished down 33% over the last three episodes. It's not really a concept that's going to pull in big numbers for 6 years.

 

I don't think the Divas have much to do with the WWE getting carriage deals.

 

 

 

Said it before, but they could make a hell of a lot of money off a Netflix-type service using their back catalog of wrestling. Either that or enter a more lucrative deal with Netflix and give them more stuff to put on.

You have to wonder, in the streaming era, why they don't simply sell an online version of 24/7? I would gladly pay whatever the current 24/7 fee is ($10 a month?) for access to the content. And obviously, they're capable of doing something more expansive as well.

Other than Netflix, who really is making $100M a year from streaming stuff? Or $50M?

 

Setting aside the sports leagues, where they've done deals for digital rights but it's not clear yet that the people paying big money for those rights really have made a ton of money off them. We can talk about ESPN3, but it doesn't operate in a vacuum: we get it through ESPN's deal with the carriers, not as a stand alone entity.

 

As far as online content on their own, the WWE has tried to experiment with subscriptions on their website. While the content has been pretty limited, there hasn't been a major move of people to subscribe to incent the WWE to go in that route.

 

What you really want is Channel + Digital Delivery, where the digital delivery is provided for free to the folks whose carrier has the WWE Channel. Then over time you can track how many people are watching on the mobile devices / computers.

 

But getting people to pay for it? Even the porn business is taking a hit because of all the free stuff out there... and porn use to be the one thing people would pay for online.

 

John

[cm funk]

Total Divas.....I tried to watch it.....after about 3-4 episodes I tapped out. Everyone on the show came off as so unlikable, save for Uso, Bryan, and I guess Cena and Jo-Jo. Natalya was supposed to be the veteran babyface diva and I ended up really disliking her. Tyson Kidd looked like a douche. The Bella that dates Cena seemed manipulative and broken. Jo-Jo just came off as way over her head. Eva Marie was just awful in every way, like she was hired just to be on this show. I really did not enjoy watching that show, most of it was cringeworthy. However, I'm not a "reality" tv watcher, so I guess I can see the appeal to people who watch that crap

 

The network plan has been a disaster since day 1. I totally agree they should figure out a way to do a Netflix/Hulu + type deal, but I understand the appeal of having their own premium cable channel. If they can get that, and get it solid, it only solidifies their brand name. A WWE network that was tiered with premium sports channels would be huge for them. They're a public company. They, in their minds, compete with the NFL and UFC. I get why they're striving for that goal. And they might get there. But so far it's been a struggle, and they're spending a ton of money trying to make it work

[jdw]

There's money to be made in cable channels.

 

Lifestyle Media is Scripps' unit that manages HGTV, Food Network, Travel Channel, DIY Network, Cooking Channel and GAC.

 

$1,554,422,000 Advertising Revenue

$667,741,000 Network affiliate fees revenue (i.e. carriage fees)

 

A WWE network isn't the equiv of those six channels, two of them who are a bit of powerhouses. On the other hand, HGTV and Food are "successful" networks pulling in an average of about 1M viewers in their primetime hours.

 

[Yeah... I get what I said about the Divas above doing 1M viewers not really mattering: it doesn't, since the true hit Food programs do well over that (such as Paula Dean in her prime). If the Divas were the hit for the WWF, there's a problem if the other 20 hours of primetime a week pull in a 200K average. That was my earlier point - Divas isn't really that mosterous of a hit to anchor a network.]

 

The WWE is always going to have some advertising issues just because it's pro wrestling. It's also a new channel, so it's not going to pull in a good carriage fee... and it will struggle to get onto basic, where the real money is made.

 

But...

 

Get into 80M homes on Basic at $0.07 per month * 12 months a year = $67.2M in revenue. That's not chump change: the WWE's domestic rights fees last year were $88.9M. Advertising on top of that is gravy, and they likely could joint venture with some existing cable player to administratively handle the advertising for X years for a cut. The WWE can run "low cost" because they have so much existing content in the vault. Obviously you'd look for create "new" programing for the network, but that's not as complicated as one thinks: they were doing cheap ass versions of it for 24/7 like the Round Table, and have done cheap ass recap shows like All Star and Primetime in the past. In addition to things they're already doing relatively cheap things that have little domestic revenue return like NXT, Main Event, Superstars and Divas. I've thrown out in the past, probably even in this thread, that they could do a cheap, live house show on Saturday Night.

 

The start up costs that aren't cheap: getting a channel, staffing. Times are lean until the revenue starts coming in, and firms up.

 

But long term, it gives the WWE a place to land SmackDown and/or Raw if the bottom falls out of what the USA Networks want to pay them. That's why you get a network: if the other cable channels try to squeeze the WWE on rights fees despite the WWE bringing 3-4M viewers to the table.

 

Not saying that it will be a cash cow. But for long term security, it really is something that long ago should have done and move towards now. I can't get across strongly enough how stupid those $532M in dividends have been, especially the $316M in 2007-2010, when that money could have been used to establish a WWE Network by now.

[mookeighana]

I put all of my thoughts about WWE Network into one place: http://indeedwrestling.blogspot.com/

 

I think it can succeed. I look at WWE history of risks, current WWE financial situation, modeling the rollout, overview of the current television landscape and so forth.

[Ditch]

Nicely done, Chris!

[Bix]

Meanwhile, the NY Post cited an article I wrote a few days ago that mentioned the contradiction between Stephanie's speaking engagement Wednesday and Vince on the conference call Thursday: http://nypost.com/2013/11/02/wwes-mcmahons...s-to-investors/

[Sidebottom]

That's great Bix.

[jdw]

I put all of my thoughts about WWE Network into one place: http://indeedwrestling.blogspot.com/

 

I think it can succeed. I look at WWE history of risks, current WWE financial situation, modeling the rollout, overview of the current television landscape and so forth.

You probably should look at the second revenue model as well:

 

1. Subscriber base

2. Household carriage fee (i.e. Basic)

 

These guys:

 

Golf Channel, MLB TV, NHL Network, Outdoor Channel, Sportsman Channel, The Ski Channel, World Fishing Network, and NBA TV

Have fought to be on basic. The ones that aren't are basically test pattern networks rather than ones that generate serious money.

 

Speed was pulling in $0.23 per household, and on basic (which is why FS1 was launched using the dead husk of Speed). Obviously the WWE isn't going to pull in that. But:

 

$0.07 per household x 12 months x 60,000,000 Basic Households = $50,400,000 carriage fee revenue

 

Which is that $50M "cost", and also doesn't canibalize the non-Mania PPV (i.e. saving the company an estimated $35M in revenue). Nor factor in any advertising revenue which would be gravy off using the carriage fee to cover year-to-year costs.

 

Obviously it isn't a great time to get on TV, nor on basic. Though many of the channels having issues are the ones that are dreaming of ESPN-like carriage fees on Basic: the NFL Network, Fox Sports 1, etc. Accepting a cheap $0.07 simply to get in the door without pissing off the carriers who are looking to dump channels isn't a bad approach.

 

That of course doesn't factor in a potential major element of start up: buying a husk of a channel that's on Basic that gets you in the door. If you go that route.

 

I still think Basic and getting on at a "low" carriage fee simply to get on is still the route to go. Grow the channel, then look for a bump up the next round. Grow it some more, point out your viewership and some other jobber channel that has a higher fee, and look to bump it up again. Look to expand from 60M households to 90:

 

$0.15 per household x 12 months x 90,000,000 Basic Households = $162,000,000 carriage revenue

 

Again before getting to advertising. If you can get to that $0.15/90M in 10 years, that's rather huge.

 

In turn, you have a channel to move SmackDown to if you see the TV Rights not acceptable, especially if SD added to the WWE Network in 5 years will help you move up that carriage fee.

 

My thought on Pay Channels is best summed up with:

 

Even the NFL with the ability to air 13-14 Games on the Network in Primetime (not to mention cook the books to make all 13-14 attractive ratings draws if they felt like it), chose *not* to go the Pay Channel route but instead the Basic route hoping to start from $0.75 a household and over time move that upward.

 

Why?

 

$0.75 per household x 12 months x 90,000,000 Basic Households = $810,000,000 carriage revenue

 

Which isn't too far off of most of their TV packages:

 

ESPN: $1.9B

Fox: $1.1B

CBS: $1B

NBC: $950M

 

Now the NFL isn't getting $0.75 yet, and had years of fights. But that's where they want to be... and then look to push that up to $1 then $1.50, etc.

 

To me that's where the WWE has long made its mistake: failing to get on cheap to get in the door, and also to put the "start up" cost well into their rear view mirror.

 

John

[Bix]

They tried to get the network clearances as an enhanced basic channel. Nobody bit. At all.