Westchester County Weekly – August 2, 2001
By Chris Kanaracus
Vince McMahon, Connecticut’s most colorful billionaire, and promoter/owner of the phenomenally successful World Wrestling Federation Entertainment Inc., generally comes across as larger than life. Not tonight, though, on the July 12 broadcast of UPN’s “WWF Smackdown!”
McMahon, clad in his customary aging-playboy attire (open shirt collar, no tie, suit jacket), stood in the ring, alone. The camera zoomed in for a close-up; McMahon looked tired, exhausted even. The fine wrinkles around his eyes deepened into harsh creases and his cheeks appeared blotchy.
The sight was alarming. At 55, McMahon retains an uncanny youthfulness, partially from a lifetime of obsessive bodybuilding, and from a bottomless well of raw, hokum-meets-ham stage presence. Not tonight. McMahon, after finishing an impassioned in-ring speech directed at wrestler Stone Cold Steve Austin (who, in the show’s storyline, had just snubbed McMahon), let his cartoonish, foam-ball topped microphone topple out of his hand and clatter to the ring apron. The camera moved in for another close-up: McMahon looked like he had one foot in the grave.
But that was just a television show, a fictional skit. Surely everything is fine in terms of the real-life WWF. And surely McMahon, the 1,000-pound gorilla of American CEOs, has matters firmly in fist. Right?
That’s hard to say. McMahon’s WWFE (renamed from WWF after a 1999 initial public stock offering) definitely enjoys a reputation as a company on the rise, a newly legitimate enterprise with massive growth potential and a rock-solid future.
Certainly, the numbers back up that thesis. As the WWF grew from a small, family-run business into a multi-national, multi-brand behemoth, earnings increased accordingly. Recently, growth has been stratospheric. In 1999, the company reported revenues of $251 million. Last year, that number shot to $379 million.
For the fourth quarter ending April 30, revenues from continuing operations were $131.1 million, up 13 percent compared to the same period last year. Pretax earnings were $26.1 million, compared to $20.5 million for last year’s fourth quarter.
Most of the dough comes from lucrative pay-per-view events. April 2000’s “WrestleMania” broadcast scored more than 825,000 buys at $50 a pop, a $41.2 million gross. For the fiscal year 2000, the company raked in a cool $150 million via pay-per-view. Its market valuation hovers near $1 billion.
Then there’s the company’s virtual monopoly on the wrestling industry; besides scores of tiny, barely profitable “indy” promotions around the country that mostly act as farm leagues, WWFE is the only game in town. It wasn’t always this way, of course. Earlier this year, McMahon purchased Atlanta-based World Championship Wrestling from media conglomerate AOL/Time-Warner. It was a sweet victory for McMahon, as the rivalry between the two companies had become personal. Over the years, McMahon had verbally sparred in the media with Ted Turner, who owned WCW before the AOL/Time-Warner merger.
Another, though much less dangerous rival, scrappy Philadelphia-based Extreme Championship Wrestling, also recently folded. WWFE has absorbed both companies’ wrestlers and brand names into current storylines. At this writing, the first volleys in the ultimate wrestling war–WWF vs. everyone else–are being fired on WWF programs. Many say that if done correctly, the storyline could prove the most lucrative yet–more on that later.
But evidence indicates that as impressive as McMahon’s empire seems, it’s not as impervious as you might think. And there’s some question as to whether mainstream investors and observers have a clue about what, or whom, truly drives this sleek entertainment mini-empire.
Where’s the truth? It’s somewhere in a murky stew of traditional business philosophy and secretive, sometimes frantic back-room machinations. As it turns out, predicting the future of the pro wrestling business is about as tricky a game a speculator can play.
It’s important to note that the wrestling business, like many others, tends to be cyclical. After an initial boom in the mid-1980s, business for both the WWF and its former competitor, World Championship Wrestling, slowed to near-bankruptcy conditions.
A far less drastic dip in business is occurring at present. In early spring, the WWF quietly canceled a “house show,” or non-televised event, in Ohio due to slow ticket sales. While the cancellation went unnoticed in mainstream circles, it provoked marked discussion on many Internet wrestling sites. House show business has dipped substantially at many other locations. The WWF’s July 16 show at the New Haven Coliseum drew a crowd of 5,008 paying customers, in a building that seats 10,000. One year ago sellout crowds were common. Even live tapings of programs like TNN’s “Raw Is War” and UPN’s “WWF Smackdown,” which in the past few years have sold out in minutes (once, the company sold out back-to-back shows in Texas in less than 90 minutes), are running at 75 percent capacity in some locations.
Then there’s the biggest sore on the WWF’s keister this year: the unmitigated failure of the Xtreme Football League, a McMahon/NBC co-production. The games, which featured looser rules than the NFL, campily sexy cheerleaders and inventive television production, drew well at stadiums but bombed in the ratings.
The WWF’s share of the XFL write-off was $36.2 million. While all observers agree the company is more than strong enough to shoulder that debt, the XFL’s folding resonated on Wall Street, pummeling WWFE’s stock price. Before the start of the first XFL season, the stock’s average price was $21 a share. Now it hovers around $13 a share.
More importantly, the XFL’s death chipped away at McMahon’s carefully crafted image as a risk-taking but generally infallible marketing genius. It’s an image he covets, especially in terms of Wall Street.
WWFE investor relations director Tom Gibbons, while admitting the XFL’s failure hurt, expressed confidence in the company’s future. “We looked at [the XFL] as an extension of our traditional sports entertainment product. It fit our strategy. [But] we rushed [the launch],” said Gibbons, who also posited that the Saturday-night time slot for games didn’t help either.
As investor relations directors are wont to do, Gibbons was more eager to talk about the WWF’s new business ventures, post-XFL. There is indeed a lot in store. The company recently created its own recording label, and is producing a reality-themed MTV show, Tough Enough, which follows a group of attractive, twenty-something wrestling trainees, a la The Real World.
Gibbons expressed high hopes for those ventures, as well as WWF superstar The Rock’s fledgling movie career. Indeed, you have to give the McMahon family credit: they’ve transformed pro wrestling, that pariah of American popular culture, into something hip and profitable–like Don Corleone’s import-export business, they’ve “gone legit.”
In general, Wall Street views WWFE favorably. Late last year, Business Week rated WWFE as one of the country’s 100 best small companies.
Laura Martin, an analyst with New York-based investment firm Credit Suisse First Boston, said her company currently has a “buy” rating on WWFE, and thinks things look solid for the near future. “I like the stock. As far as the content companies go, [WWFE is] doing well. The exit from the XFL allows them to free up some of the cash flow from their wrestling business [for other things]. It’s going to benefit stockholders.”
A survey of other investment firms reveals similar thumbs-up–albeit not rabidly so–assessments of WWFE.
But as Martin mentions, despite all the potentially lucrative ancillary ventures WWFE has lined up, its core product remains straight-up, warts-and-all pro wrestling. Despite the newly legitimate public face of pro wrestling, it hasn’t lost sight of its roots as a “closed” business, owned and staffed, much like carnivals or the circus, by a select, closely knit group. As such, some of the most intriguing information on what WWFE’s future might hold can’t be found in the pages of the Wall Street Journal.
California resident Dave Meltzer has been publishing the weekly Wrestling Observer Newsletter since 1982. The 16- to 20-page paper is regarded by pro wrestling fans, promoters and wrestlers themselves as an indispensable bible of news, gossip and analysis of the pro wrestling business.
Only in sheets like the Observer will you learn that tough-guy WWF wrestler Tazz has trouble getting out of character after his matches. Also here is it revealed that ex-Olympic gold medalist-turned-pro Kurt Angle legitimately bruised his tailbone during a particularly grueling match, or that Mexican high-flyer Eddie Guerrero has entered a drug rehab center for an addiction to painkillers.
It’s news you’ll get nowhere else. Certainly no other media outlets cover the wrestling business as intensely as Meltzer and his primary competitor, 30-something Minnesotan Wade Keller, who publishes the glossier, but somewhat less informative Pro Wrestling Torch. Both the Torch and the Observer have accompanying websites, which are updated around the clock. The sites, though, feature mostly news tidbits. The good stuff–exclusive interviews, the most salacious gossip, deeper analysis–costs money; about $80 for a one-year subscription. For both Meltzer and Keller, the newsletters are their only job. Keller even has an assistant editor on staff, Jason Powell.
In a business as historically “inside” as pro wrestling, how can investors or stock market observers really understand how to predict the company’s fortunes? Meltzer says it’s hard, if not impossible. “The stock market people don’t have a clue,” says Meltzer.
That said, Meltzer himself hedges. “I don’t know that anyone does. This is a business where you can’t predict what’s going to happen in a week.”
Even so, Keller and Meltzer tend to be the primary sources of unfiltered information concerning inside dealings of the WWF and the wrestling business on the whole. While in the past, the “dirt sheets,” as they’re called, dealt mostly with gossip, match results and critiques, and storylines, pro wrestling’s emergence as an economic player has forced sheet writers to place stronger focus on financial matters.
In the past, wrestling companies would publicly disown the sheets, claiming they violated the once sacrosanct tradition called “kayfabe.” The term, which wrestling lore lists as coming from the carnival business, refers to the veil of secrecy the wrestling business placed over its activities, especially an insistence that such an obviously staged product was as real as rain. So ironclad was the tradition, it could be compared to “omerta,” the Mafia code of silence.
No more. While mentioning the Internet as a catalyst for change might induce yawns at this point, the adage has never been truer than for wrestling. Literally thousands of sites exist, some more regularly updated than others. The most ambitious ones are almost laughably detailed in their coverage: minute-by-minute text updates during pay-per-views, obsessive post-show analysis, interviews with anybody remotely tied to the business, from roadies to managers to valets.
Wrestling companies and wrestlers themselves have taken notice, and are taking the Internet crowd’s attentions seriously. WWFE executive Jim Ross, who is also an on-air commentator, holds regular conference calls with the media. Not The New York Times, Entertainment Weekly or Sports Illustrated, though. Instead, Ross dishes inside dirt to people like Meltzer and Keller.
WWFE officials aren’t ready to completely embrace newsletters, though. “You’ll never see anyone’s name used in those things,” said WWFE spokesperson Jayson Bernstein.
“For every time they’re right, 10 times they’re wrong. Certainly there are some of our employees here that are going to speak with [newsletters], people that may have had a longstanding relationship with [writers]. You can’t stop that.”
WWFE officials pay more attention to the waves of e-mail that pour in after each broadcast or special event, says Bernstein, than anything in the sheets.
There’s always been a certain quid pro quo to the relationship between sheet writers, wrestlers and wrestling companies. The sheets get the scoops and, consequently, the money of thousands of eager subscribers. Individual grapplers can air grudges, pass along gossip, and even plant damaging stories about rivals. Promotion bosses get to disseminate information in a way no mainstream outlet can; in fact, WWF executive and on-air talent Jim Ross recently announced plans to make his occasional conference calls with sheet writers a regular, monthly event.
It would be a mistake, however, to overstate the wrestling business’s new candor. Nearly all sources are anonymous. I.D.’s like “top WWF official,” “one big-name star” abound, evoking comparisons to most Washington coverage these days. Yet as tabloids and gossip columnists well know, a veneer of exclusivity and secrecy can be a selling point in itself. Despite the lack of attribution, what gets printed is often received as the gospel. Meltzer, in particular, is revered as an all-knowing guru.
But you’ll rarely see Meltzer or Keller quoted in the mainstream media for anything more than comment on wrestling’s creative content. As the following shows, the financial press is missing out on a lot of potentially important scoops.
The story behind WWFE’s biggest current storyline–indeed, perhaps the biggest storyline ever in wrestling–is a perfect example of how business at the company is anything but “as usual.”
Just before the demise of the XFL in May, the WWFE publicity machine trumpeted its latest, greatest move: after decades of battle, they had defeated and bought out their competition, Atlanta-based World Championship Wrestling.
WCW, which under various names and structures has been around for more than 50 years, reached its financial peak in 1997 and 1998, even trouncing the mighty WWF in cable ratings and at the box office. The company’s growth, spurred by inventive storylines and the signing of famous, ex-WWF grapplers, was explosive: WCW, a struggling, $30 million company in 1995, grossed $250 million in 1997.
But the success was short-lived. After a prolonged creative malaise that led to a $60 million loss last year, owners AOL/Time-Warner pulled the plug. WWFE pounced, purchasing WCW’s brand name, video archives and a number of low-level contracted wrestlers for about $30 million.
At the end, WCW was in a sorry state. Live events, even for television, drew scarce crowds. Television ratings fell to less than half their peak. In essence, while WWFE may have won the war, their spoils were tainted.
Meltzer says that although the WCW brand name carries a stigma, it’s not an insurmountable one. “Wrestling fans are incredibly forgiving when it comes to the product. Give them six weeks of good television and they’ll forget all about the bad stuff.”
And it’s via that philosophy that many wrestling fans looked forward to the ultimate, “dream” wrestling storyline: WWF vs. WCW.
Things started off well enough about seven weeks ago, with WCW’s champion, the athletic Booker T, attacking top WWF stars at the climax of “Raw Is War.” But while T’s timing was great, the reaction he got from the crowd was tepid at best. Part of the problem was that the WWF itself had spent the past several years regularly bashing WCW on its programs; now it had to make WCW seem cool.
The following two weeks of television were no better, either in execution or crowd response. Most of the WWF’s WCW signees were lesser-known, inexperienced stars; if headliner Booker T couldn’t spark a reaction, how could a bunch of scrubs? And while you could give the newcomers instant credibility by allowing them to defeat prominent WWF wrestlers, it could also end up tanking the home team.
Things weren’t looking good; although television ratings weren’t appreciably affected by the fizzling feud, the promotion’s long-term track looked shaky. The angle had to be reworked immediately.
In short order it was, and to exhilarating effect, when WWF writer and on-air talent Paul Heyman tossed off his headphones and climbed into the ring during the main event of the July 9 “Raw Is War.”
Heyman is an industry veteran, having come to the WWF after his own promotion, the Philadelphia-based Extreme Championship Wrestling, folded earlier this year. Heyman is more a creative mind than a financial one. Many of the ideas and themes currently used by the WWF are vintage ECW, from the T&A to the accelerated violence, and its fans were some of the most dedicated and vocal the business has ever seen.
As Heyman made his way into the ring, a series of wrestlers walked down the ramp. Some were active WWF employees. Others worked under WCW’s banner. All, however, were former ECW stars. Surrounded by his 12 old friends, Heyman grabbed the microphone and delivered an impassioned speech declaring the reformation of ECW. The alchemy worked: the crowd went ballistic.
Several days later, on “Smackdown,” Heyman revealed a further, even more ingenious twist: Vince McMahon’s own daughter, Stephanie, was behind the purchase and revival of ECW. In the following weeks, the duo joined forces with Vince’s son Shane, who in storylines had already masterminded the WCW “invasion.” Most recently, none other than “Stone Cold” Steve Austin jumped ship to the WCW/ECW camp, which is now dubbed “The Alliance.” With big WWF stars like Triple H and the Rock set to come back from long-term absences, it seems like the World Series of pro wrestling that fans have longed for could finally become reality.
While not a masterstroke, it seems the creative dilemma facing the WWF evaporated overnight. But who was responsible? Why wasn’t this approach taken from the start?
There’s no official account: WWFE spokesperson Bernstein declined any comment on matters concerning the company’s internal creative processes. But a possible answer can be found in a fascinating “Keller’s Take” column posted on July 11 (two days after Heyman’s showstopping speech) to the Torch website, titled “How You, the Average Wrestling Fan, Can Change the Course of Wrestling History.”
Formatted as a mock advice column, the piece explained how to gain influence within a wrestling company by toying with a promoter’s overreliance on the whims of Internet-savvy fans. “First, come up with something that’s being done poorly and imagine how it could be improved,” wrote Keller. “Sit back and watch as the idea is being done poorly. Do not say anything to anyone! It’s important, for your idea to eventually be accepted, that the idea it is replacing fail miserably first.
“Then, when the timing is right, start sending dozens and dozens, if not hundreds, of e-mails to various wrestling websites that run reader feedback,” continued Keller. “Tell them, under dozens of made-up names, how something isn’t being done right and is doomed to fail. . .This will strike fear into the promoters and wrestlers who thought that things were going just fine. . .They’ll be insecure and looking for a savior.
“Then, a few days, or at most a couple of weeks after that first letter campaign, bombard these same websites with letters suggesting your idea. Write letters under dozens of made up names under various e-mail services.
“Then, try to get as many Internet sites as possible who do polls to ask a ‘yes or no’ question regarding your idea that you’ve popularized beyond reality. . . At this point, the gullible, overworked wrestling promoters, and especially his ‘yes-men’ who long ago figured out how to manipulate him, will see the ‘groundswell of support’ for your idea and push for it.
“The only problem with this overall plan is that when the idea works, you can’t take credit for it. . . Instead, try to make it seem like it was an idea of the boss. . . Nothing pleases a boss more than public credit for something, even if he didn’t come up with the idea.”
While Keller didn’t name any names in his article, its timing and tone points in one direction: Heyman. Perhaps it was all just an elaborate conspiracy theory. If true, though, it’s a tantalizing concept: that someone as publicly powerful as Vince McMahon, could be manipulated so easily by a subordinate, that the creative path of such a massive company can be altered by one individual’s careful gamesmanship.
Of course, those types of slick moves are what McMahon, and pro wrestling itself, is based upon.
The invasion angle could still prove to be a flop, but WWFE can afford to make a few mistakes right now: with the WWF, ECW and WCW now folded into an all-encompassing entity, WWFE is the only game in town. Besides, the company has proven its resilience again and again.
Also, there doesn’t seem to be much interest in a new, start-up promotion. Faded wrestling great Hulk Hogan (Terry Bollea), 47, has hinted at an impending deal with Universal Studios for more than a year, but with no tangible developments. While Hogan is not the star he used to be, he remains a household name, making his struggle curious at the least.
Then again, as Meltzer posits: “You’d need such a massive cash outlay in order to legitimately compete with the current WWFE product on a competitive level. I don’t see that happening right now.”
WWFE spokesperson Bernstein says his company is ready, and even waiting for someone to take on. “If I believed all the rumors I hear, we’ll have half a dozen new promotions anytime now. There are plenty of companies who could back a new organization. We welcome competition.”