STRENGTHS (INTERNAL — HELPFUL)
- Wide margin leader in name ID among pro wrestling brands: WWE has well-established global appeal and distribution. If you know any pro wrestling brand, you likely know WWE. Its programming is on TV in many countries around the world, more widely than any wrestling brand. Pre-Covid, it’s the only company that does such broad international tours. This factor is a benefit to establishing and maintaining business partnerships, adopting fans, and succeeding in talent recruitment. This factor poses a challenge to any wrestling competitor.
- Strong legacy intellectual property: WWE owns its character likenesses, owns its historical video library and the video libraries of nearly all pre-2000 United States wrestling of note. Most of the 20th century U.S. video history that they don’t own has unclear ownership or is so obscure as to have minimal value.
- Secure financial outlook: Large guaranteed revenue sources from long-term agreements for broadcast rights and from twice-annual events for the Kingdom of Saudi Arabia makes the majority of the company’s revenue stable and predictable.
- Established direct-to-consumer streaming video service: WWE Network is itself not just a revenue source but a valuable asset and a direct line to sell consumers its vast library of new and old content, to compete for time, and to build loyalty. It may also provide consumer data that allows the company to better market to its audience.
- Early social media “land grab”: A directive from the CEO in the late 2000s to “get more than our fair share” of social media space resulted in WWE investing early in an area that’s increasingly relevant, especially with younger audiences. It’s still unclear how time spent on social media can be better monetized, but when or if there’s a way, the company should be well-prepared to take advantage.
- Promotion of personalities in non-wrestling media: The company produces three active reality TV series distributed via NBCUniversal (Total Divas, Total Bellas, Miz & Mrs.) and produces films through its WWE Studios division. The reality series star WWE talent; films often do as well. Total Divas likely drove many female viewers to WWE flagship programming.
WEAKNESSES (INTERNAL — HARMFUL)
- Demonstrably challenged at developing new, youthful star power: The economic history of WWE and the rest of the wrestling industry largely hinges on the popularity of its biggest stars. The company has struggled to create a star who’s had a positive long-term effect on consumer revenues since the elevation of John Cena in about 2005. I wrote more about this here: WWE Hasn’t Created Strong New IP In Over 15 Years.
- Head of creative is the controlling shareholder, chairman, and CEO: Due to class B shares granting him 10x voting power over all shareholders who aren’t McMahon family members, Vince McMahon can sell his ownership down to a small minority of all shares and still control the majority of the voting power. Vince seems determined to control the creative direction of WWE’s most valuable content for the rest of his life. Under that direction the company’s core content has disenfranchised some fans and some talent for years. This has exacerbated in the last few years as alternative wrestling brands have gained in global appeal. TV viewership, merchandise sales, ticket sales, and streaming subscriptions have declined in recent years, likely as a downstream effect of the aforementioned weaknesses.
- Over-saturation of WWE content: While generating an increasing number of weekly first-run hours of in-ring content in pursuit of more media revenue, WWE is over-saturating an increasingly competitive market for wrestling time and entertainment time in general. While taking advantage of the growing value distributors are willing to pay for live content, there may be a balance that needs to be struck in order to protect the long-term health of the brand, as consumers struggle to keep up with WWE’s sprawling content offerings, including a weekly three-hour Raw program which has trouble retaining its audience in the third hour.
OPPORTUNITIES (EXTERNAL — HELPFUL)
- Further peak event monetization: “Pay-per-view” events, where matches built up on Raw and Smackdown culminate, are primarily self-distributed on WWE’s direct-to-consumer video service, the WWE Network. At the company’s current level of popularity, those events may be better monetized by being sold for guaranteed revenue to a major streaming platform (e.g., Peacock, ESPN+, Amazon Prime). In that case, the WWE Network can still likely be a profit generator with a lower subscriber base by continuing to offer access to the company’s enormous video library and other valuable new in-ring content, like the NXT brand’s peak “Takeover” events. Selling the main roster “PPV” events will likely be one of the early important tasks for new WWE President and Chief Revenue Officer, Nick Khan. WWE tried to make a sale in early 2020 but negotiations have stalled since Covid.
- Growing value of live sports content: WWE has seven hours of weekly live content on major cable and network programming. Five of those hours (Raw and Smackdown) are already highly monetized. The other two hours belong to WWE’s newer third brand, NXT, which are far less monetized and stand to gain in value in future negotiations. Pertaining to all seven hours, there’s no strong sign that the value of live sports-like content will diminish in the coming years.
- Gaming investments: If gaming space is the next frontier in new media, WWE may benefit from investing. The company has more cash than usual on its balance sheet. There are obvious synergies possible. WWE has a long history of selling its IP licenses in console gaming and more recently for mobile games. WWE’s overall consumer base is probably disproportionately interested in gaming.
- Public perception: Wrestling brands historically have had trouble with public perception for a variety of reasons. The company has made some headway in this area in recent years, with campaigns like “The Hero In All Of Us”, rating most of its programming TV-PG, and other forms of community outreach and philanthropy. There’s additional opportunity still to attract younger and more affluent audiences. Under a more disciplined creative leadership, the company could develop stars that attract younger audiences and could prove to more affluent audiences that WWE is more than a brand of simulated violence and sophomoric humor; rather, that it can, without alienating its captive fans, tell exciting stories through sports-like drama in a more sophisticated manner compared to what WWE normally delivers.
THREATS (EXTERNAL — HARMFUL)
- Emerging competing wrestling brands: All Elite Wrestling is the company’s strongest direct competitor since World Championship Wrestling closed in 2001. AEW is less than two years old but already has strong distribution (TNT domestically and other WarnerMedia networks internationally), worthy leadership, and superior consumer credibility among its smaller audience. The potential alignment in the timing of WWE and AEW TV contract negotiations may result in unfavorable comparisons. WWE also competes for talent and, to a lesser extent, market share with other companies like New Japan Pro-Wrestling, Impact Wrestling, and Ring of Honor. Competition from other wrestling companies has immediately resulted in an increase in the cost of talent and in the quantity of talent WWE keeps under contract.
- Covid-19: The ongoing pandemic continues to threaten WWE’s media content and the businesses of its partners. Covid has created uncertainty for the live event business and wiped out an always lucrative Wrestlemania week. The company’s media content is compromised by preventing live audiences from being in attendance, which negatively affects the quality of the content. Covid may also impact consumers broadly, although WWE’s direct-to-consumer businesses like the WWE Network and online merchandise sales have held up so far.
- Media partners might pay less for WWE content to pursue more in demand properties: In order to compete with other networks to acquire and retain larger sports brands (like NFL, NBA, MLB), partners might decline to make large offers for WWE’s broadcast rights, especially if WWE’s viewership continues to under-perform.
- Fragmenting media economy: An increasing number of entertainment options threatens to compete with WWE for consumer watch time, potentially devaluing media rights value and other parts of business.
- Employee/contractor and other possible legal challenges: While none of the ongoing litigation WWE is involved in appears to pose a great threat, the company’s greatest legal liability is probably in its continued classification of wrestlers as independent contractors while exuding great control over their work. There’s no active lawsuit of this nature. Statutes of limitations and performers’ desire to stay on good terms with the company even after termination are a deterrent. However we’re entering an era where WWE’s virtually monopolistic grip on the wrestling industry is releasing, and there are more alternate ways to make a great living as a wrestler. Furthermore, WWE’s stated plans to expand training centers and developmental brands into territories throughout the world (EVP Paul Levesque’s “Global Localization” strategy) would likely require a growing number of contracted wrestlers, thus increasing the population of potential plaintiffs. WWE could reduce this risk either by reducing the degree of control it holds over talent or by converting wrestlers (there are currently around 300 of them) from contractors to employees. The latter would be quite expensive, and would significantly impact short-term shareholder value, but would be within their projected future profit margins.
What do you think? Did I leave something out? Tweet me @BrandonThurston or email brandon@wrestlenomics.com.
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