WWE’s Classic Case of Overbranding

In the quest for more valuable business partnerships, it’s easy to lose sight of consumers — in this case wrestling fans — who are the foundation of a business. That’s especially so when it’s fans you’ve always had and the approval of prestigious businesses that long eluded you. And it’s more especially so when the growing majority of your total revenue comes not out of the wallets of average people but from contractual payments that are the result of those finally-captured corporate relationships.

WWE has done a lot to improve its image and monetization with other businesses in recent years. WWE for the last 20 years or so (yes, arguably earlier) has frantically tried to escape the fact that it’s a professional wrestling company. Being a mere professional wrestling company, the belief seems to be, kept them out of a lot of valuable business partnerships, left them with weaker access to valuable advertisers and sponsors. 

You don’t often hear the word “wrestling” in WWE programming, even though the word is in the name of the company. You more often hear the initials of the trade name and you more often hear WWE’s athletes — don’t call them “wrestlers” — called competitors, performers, or superstars. These competitors are engaged in “sports entertainment”, seldom “wrestling”. WWE doesn’t have wrestling fans, they have the WWE Universe. The corporate website tells you the business is an integrated media organization. The word “wrestling” does not appear.

Here Stephanie McMahon explains the etymology:

Vince McMahon is constantly reimagining WWE. It’s how he was able to take a regional business in the 1970s and turn it into a global media powerhouse known from every street corner in the United States to favelas in Brazil to high rises in Shanghai and everywhere in between through digital and social media. He started with the brand. Before anything else, Vince wanted to upgrade the image of what was known as professional wrestling. He was able to stand in the back of a smoke-filled armory, watching hundreds of people shout at the performers in the ring and re-imagine the future. … But advertisers [in the 1980s] either had an adverse reaction to the words “professional wrestling” or they simply didn’t understand what it was. So how could we create a term or a label that potential partners could understand? How could we describe that the WWE was based on larger-than-life characters enthralled in a relatable storylines? That is when we coined the term, “sports entertainment”.

WWE chief brand officer, Stephanie McMahon (April 2018, WWE Business Partner Summit 2018)

WWE has succeeded in presenting its product to potential business partners as something more digestible than the stereotype of professional wrestling that many may have in mind. You can go to community.wwe.com and see the company’s philanthropy and community outreach programs. In 2015, WWE and NBCUniversal together produced “The Hero in All of Us” campaign ahead of network upfronts that year, a campaign directed not at fans but at advertisers and business partners, intended to improve the image of the company, to show them that WWE wasn’t a caricature of phony violence, but that it’s something magical that provides memorable experiences and attracts people from all different age groups and backgrounds. It “puts smiles on people’s faces”.

While WWE has improved its brand perception among business partners, it hasn’t taken care of its brand perception among fans. Acceptance among business partners may have soared, but the company’s relationship with many would-be fans is increasingly contentious or apathetic.

For a long time in wrestling punditry, maybe inside the industry as well, a common distinction used to talk about the fan base is to separate hardcore fans and casual fans. But I think that hardcore-and-casual distinction is no longer as relevant as a different distinction, which is WWE fans and other wrestling fans. That is, fans who are primarily WWE fans and wrestling fans who are not necessarily primarily WWE fans.

There’s a core of WWE fans we might call (to adopt the company’s branded phrase) “WWE Universe fans”, for whom WWE is the be-all end-all of wrestling. And those fans are a large portion of the people who are watching WWE on television. This is the large portion of people who are consuming WWE media, merchandise, and (eventually again someday) live events. Those fans aren’t really engaging with or may not be highly aware of other brands of wrestling. 

And then there’s the other core of fans, who are passionate about wrestling in a more general way, who are less satisfied in and excited about the WWE product. And that group of fans engage more with other non-WWE wrestling brands. The former “WWE Universe” group may well be larger, but the latter group has grown among the total denominator of wrestling fans.

Over time that’s evident from the emergence of other wrestling brands in the U.S. in the last five years or so: whether that’s the increase in business at least for a time for Ring of Honor, for New Japan Pro Wrestling in the US, and finally for the launch of All Elite Wrestling in 2019. In fairness, WWE has made an effort at trying to capture the different tastes of that latter group through its NXT brand.

Nonetheless, WWE has a young adult viewer problem. Viewers aged 18 to 34 fled from Raw and NXT at the beginning of the pandemic and have yet to return.

Source: Nielsen, Showbuzzdaily. WWE NXT data for January 2021 unavailable.

The net promoter score study that I did from late December 2020 to early January 2021 (with an effort to collect random samples through advertising, rather than collecting samples through organic social media sharing), showed young adult fans between 18 and 49 were somewhat less likely to recommend Raw, Smackdown, or NXT, compared to people who responded to the survey who were either over the age of 50 or under the age of 18. AEW Dynamite, however, showed an inverse of that pattern among people aged 18 to 49, who were more likely than their younger or older fellow wrestling fans to recommend Dynamite to a friend. There’s a similar pattern with other non-WWE wrestling brands, Impact Wrestling, Ring of Honor, and New Japan Pro Wrestling.

Source: Wrestlenomics survey (n=502)

That said, WWE’s net promoter score remains positive. AEW’s score is higher, but there’s clearly still a large population of fans who approve of WWE and are not about to tune out and disengage.

And WWE has enormous name ID, too. Google web searches for WWE on a worldwide basis is eight times greater than that of AEW, and is about six times greater in the U.S. Other non-WWE wrestling brands are microscopic by comparison. 

WWE maintains tremendous name recognition, has strong corporate leadership and media strategy. The company has new key executives who are well-equipped to maximize revenues in the future. But WWE would have a greater revenue potential if it had a strong core product to sell, which it does not, and which the company shows no sign of being able to reckon with.

We don’t believe that we’ve lost eyeballs. We believe eyeballs tend to shift from linear to digital platforms. So if you look at even our Facebook numbers, which are significantly up the last six months or so, including the revenue against those numbers, we think the eyeballs are there. Like I said, we’re always looking to grow ratings. So now that we’re coming out of a competitive presidential race that a lot of people were focused on. We’re still all in the midst of a virus that a lot of people are focused on. We believe with the continued great in-ring product that the eyeballs are continuing to grow and will result in more linear eyeballs as some of the other stuff that I just mentioned passes. So we feel good about our position, and we think our network partners do as well.

WWE president and chief revenue officer, Nick Khan (2/4/2021, WWE Q4 2020 earnings call)

Annual declines in consumption began about five years ago, unraveling in a variety of areas, including ticket sales and merchandise sales (those obviously not comparable in 2020 because of the pandemic). While streaming subscriptions grow throughout the media industry, WWE Network subscribers are still below the level of 2018 despite growing in 2020. And Google web search has fallen precipitously since 2016.

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Stephanie McMahon mentioned in the earnings call on Thursday that Vince McMahon taught her that you should always be ahead of the curve, and that’s why WWE is pivoting from its direct-to-consumer streaming service to selling its streaming rights to NBCUniversal. The need to sell those streaming rights might not be the more profitable choice if WWE had a stronger core product which attracted more customers, and that might have brought in subscribers closer to the three or four million that were originally projected. Nonetheless, even if WWE could never reach those lofty goals, the WWE Network would be even more valuable to sell to a licensee if WWE was more popular and if the content was consumed more avidly across a greater number of fans — a notion the company, at least publicly, all but says isn’t possible.

In many ways, WWE has been ahead of the curve in terms of its media strategy. Throughout the decades WWE moved from closed-circuit to pay-per-view, from syndicated television to cable, from pay-per-view to streaming. But its content is anything but ahead of the curve. Trends among younger aged adults in particular should be a warning.

WWE is a classic case of overbranding. Ubiquitous logos, chosen nicknames, and stilted corporate euphemisms may attract partners in the short-term but they overwhelm and repulse the audience in the long-term. Executives have succeeded in their mission to transform the company’s image with businesses, but the pedal-to-the-meddle branding, which permeates virtually every frame of the core content, is one among a myriad of contributing factors disabling authentic star development and, thereby, popularity with consumers.

Creative has chronic difficulty developing stars to their potential and relies increasingly on the return of aging stars from a more popular era, many of whom don’t work a full year-round schedule. Poor creative execution will continue indefinitely under the creative leadership of Vince McMahon, and as long as it does, expect WWE to continue to shed viewers and consumers over time, especially younger people. Not that WWE’s business is going to be drastically negatively impacted next week, next month, or next year, but the virtual monopoly WWE once had on the wrestling industry will continue to erode.

Maybe that’s good for fans, those who are left anyway. In the big financial picture for WWE, it’s not as if in the coming years there’s going to be any economic signal that will intensely pressure WWE to take a serious look at the quality of its content. If anything, in the years to come, even more of WWE’s revenue will come from business partners rather than from wrestling fans. Peacock picking up U.S. rights to WWE Network content deepens this dynamic.

In 2020, an exceptional year because of the pandemic but not much different than in future years, WWE made just over half of its revenue from TV rights fees. Those payments are not dependent on the particular performance of viewership. Just ten years ago the company made as much as 78% of its revenue directly from consumers, in the form of pay-per-view buys (or even Network subscriptions later on), ticket sales, and various kinds of merchandise sales. But increasingly over time and increasingly in the future, WWE will get a greater majority of its revenue from business partners, whether that’s from television broadcasters, advertisers and sponsors, WWE Network licensing fees (the upcoming Peacock deal), or from the Kingdom of Saudi Arabia.

Source: SEC filings, Wrestlenomics definitions of “DTC” and “B2B”

In 2020, 70% of WWE’s revenue came from business partners. Only 30% was generated directly from wrestling fans. In the next few years to come, I estimated that WWE will make as much as 80% of its revenue from business partners as guaranteed and often escalating fees with media partners like NBCUniversal, Fox, Sony, BT Sport, and the KSA continue to contribute to a growing majority of the company’s business — further insulating, perhaps, the chief decision maker from the sentiments of wrestling fans who ultimately are the foundation of the pro wrestling business.

I don’t see much changing in the years to come, but on a long enough timeline, the company maintaining the current quality of creative probably isn’t tenable if alternative wrestling brands grow in popularity.

How long can WWE rely on its legacy intellectual property of stars from the past and float on lucrative business relationships without creating fresh, younger stars who can attract younger viewers? How long is it sustainable for? Probably a long time. We may find out. Not any time soon, but in the decade to come.