The resignation of Vince McMahon, announced on July 22, I believe will be a great relief for WWE’s business, which may eventually lead to improved financial results for consumer-driven categories in particular.
Most importantly, the former chief executive who allegedly engaged in a series of inappropriate relationships and acts of sexual misconduct has, at least ostensibly, been removed from power. Vince’s payments for related NDAs, and the fact those payments weren’t initially recorded as company expenses, have reportedly caused investigations from federal agencies.
In the immediate term, the stock price improved with the notion WWE is more likely to be sold with Vince no longer running the company—although still with controlling ownership, he’d have to approve of any sale. However, I don’t believe a sale is currently being negotiated and don’t expect such a deal to be made soon.
More long-term, for the first time since I started covering WWE business in 2015, I’m optimistic about the company’s ability to rebuild fan interest and consumer sales that Vince’s creative execution for years eroded.
WWE creative under Vince McMahon
In consecutive years between 2016 and 2020, consumer interest in WWE demonstrably declined [see Fig. 1]. During those years, and arguably for years prior, fan engagement was limited by Vince McMahon’s performance as head of creative. The product was held back as he indulged in obsolete or merely eccentric preferences in professional wrestling, and as he micromanaged all that surrounded his creative process.
He tried fruitlessly for much of his career to rebrand away from the words “pro wrestling”. He recognized, albeit correctly, that pro wrestling carried a stigma that limited CPMs and other sales values. He struggled to redress the facade and rename the signposts with euphemisms like “sports entertainment” and the initials “WWE”. But the economic problems with pro wrestling’s perception can’t be resolved with words alone.
As much as he avoided saying the word “wrestling” and restyled his product’s packaging, he never genuinely changed the sophomoric WWE product itself. He failed for a generation to present broadly relatable heroes. His babyfaces were unintentionally booed; his heels, unintentionally cheered; as perhaps his confused sense of morality couldn’t decipher a more widely-appealing presentation of good and evil.
He misevaluated talent. Despite championing adages like, “Treat every day like it’s your first day on the job,” he didn’t evolve his talent philosophy much beyond a formerly more relevant concept of favoring the tall or the freakishly muscular. He underappreciated smaller wrestlers and women. He tried to catch up with female stars only after Ronda Rousey’s rise to stardom in the UFC.
Prone to change his mind or just not remember what he’d booked in prior weeks, he crafted a more meaningless universe in which WWE seldom planned and executed long-term storylines. More often instead, the same matchups were repeated time and again.
Perhaps to disarm critics who lived predominantly in his mind and maybe to cope with his embarrassment at being a pro wrestling promoter, he frequently undermined the emotional investment his audience might’ve developed in his stories by adjoining their presentations with supposedly comedic aspects that primarily he found amusing.
Yet, Vince’s highly-orchestrated creative nonsense—concocted weekly by one or two dozen writers hopeful for his approval—was unrecognizable as a problem to the financial community that closely studied the company’s filings but not its product. Equity analysts mainly understood WWE benefited tremendously from the growth of live sports rights fees. And indeed, record financial results only seemed to validate his creative habits. Overall revenues grew even as WWE’s TV ratings suffered losses in some years worse than wider trends; even as ticket sales and consumer product sales consistently fell; and even as his streaming service’s subscriber numbers flattened, years before Netflix plateaued [Fig. 1]. The external tailwind of increasing live rights fees overwhelmed and obfuscated the internal headwind that was Vince himself.
Secured by the cover of guaranteed payments from partners like TV networks and the Saudi government, Vince’s final years booking WWE were spent at war with his audience. Therein, incidentally, was the most captivating drama on the company’s television programs in that era.
By 2015, a segment of fans who hadn’t embraced but for the trailing ten years tolerated John Cena, saw that a new star, Roman Reigns, was handpicked to be the next leading man. Those fans recognized that Reigns was selected, like Cena, without their approval nor any regard for their sentiment.
So Reigns was booed when he was meant to be cheered. Vince refused to turn Reigns heel (until two summers ago without a live crowd present). Vince tried various strategies to try to trick the crowd into unanimously cheering his new star, which never quite worked as the dissenting audience was always aware of what Vince was trying to do. Numerous other wrestlers could’ve been better developed and would have benefited the company more if not for the opportunity cost squandered in an irresolvable nightly showdown between Vince and his live audience throughout the late 2010s.
In 2022, Reigns is finally a heel and more over than ever. Unintended reactions from the live audience are heard less often now, I believe, from some combination of being drowned out by the advent of fake crowd noise and somewhat by dissenters no longer bothering to attend live events.
Roman Reigns is now WWE’s top star—and a genuine one, a notion consistently supported by results of our talent analytics series, “Who’s A Draw?”. But developing Reigns in the inefficient way Vince insisted on, as well as regularly indulging in McMahon’s other bygone preferences, was expensive.
The cost entailed the birth of All Elite Wrestling, WWE’s strongest competitor since World Championship Wrestling went out of business in 2001. Among the conditions that ripened the AEW business opportunity included a ready population of alienated wrestling fans who wanted an alternative to WWE; and, secondly, a supply of talented wrestlers were reticent to sign with the industry leader—and many already there were eager to leave—for fear their athletic primes would be squandered when Vince predictably saw little value in them.
WWE creative under Paul Levesque
WWE’s creative leadership has been taken over by Vince’s son-in-law, “Triple H” Paul Levesque, which is probably the best option among those available.
Levesque’s vision differs significantly from that of his father-in-law. His leadership of the company’s developmental NXT brand gives him a track record that offers hope.
True, NXT was put against AEW’s flagship show, Dynamite, head-to-head in a ratings competition on Wednesday nights, from October 2019 to April 2021. NXT decisively lost the viewership contest and retreated to Tuesdays. And, unlike AEW’s upgraded relationship with WarnerMedia, NXT’s ratings apparently weren’t strong enough to become a more lucrative media rights brand for NBCUniversal.
But before Vince sent NXT to be the bulwark against AEW, Levesque’s brand grew into an exciting alternative to WWE’s main roster product. Its weekly show was among the most-watched programs on the WWE Network. Beginning in August 2015, its peak events, branded “Takeover”, sold-out major arenas on neighboring days when the main roster ran the same market for pay-per-view events. NXT was essentially a minor league that greatly outperformed expectations, in part because it delivered a show that invested fans in ways the major league version didn’t. Levesque’s NXT valued talent Vince would’ve never gotten behind — and who he, indeed, often did not promote when they were called up to the main roster, despite whatever promise they showed in NXT.
With Levesque now managing the major league team in Vince’s place, I expect change to be gradual. Certainly, Vince’s cult of personality and the hagiography that’s a part of it is still being honored. Stephanie McMahon, Vince’s daughter and Levesque’s wife, is the new co-CEO. Stephanie herself led a “Thank you, Vince” chant in Boston the day her father resigned in disgrace. There certainly won’t be anything resembling an overt public repudiation of Vince or his philosophies coming from anyone at WWE.
But only a few weeks removed from Vince’s exit, changes are already apparent. Talent Vince had no interest in using, including Dakota Kai, IYO SKY (Io Shirai), and Karrion Kross, have been brought onto Raw or Smackdown. The Orwellian language has been eased. Commentary, which Vince was infamous for aggressively producing, seems more relaxed in his absence. Wrestlers like Tommaso Ciampa, Ricochet, and Shayna Baszler, who were likely favored more by Levesque than by Vince, got wins on television they almost certainly wouldn’t have gotten if Vince was still in charge.
Yet, on the other hand, Kevin Dunn, who I believe is a political opponent of Levesque and Stephanie McMahon and a strong ally of Vince, is still in his role as Executive Producer. Chaotic camera work associated with his reputation remains.
Moreover, Raw last week Monday had two “no-contest” finishes, a hallmark of Vince’s indecisive booking. And on Friday, Liv Morgan, a babyface champion, was unintentionally booed.
Despite mixed early results, I expect change will continue, slowly over months and possibly years until a more normalized version of Levesque’s on-air product is fully formed. I expect most of the changes will be positive. And while Levesque is sure to take missteps of his own, it would be a feat if he managed to create television that harmed fan interest and talent morale to the degree of his predecessor.
AEW consequences
There are consequences for AEW and others in wrestling, too, in the scenario fans are more broadly served by WWE and talent are more likely to be creatively satisfied there.
WWE’s strongest competitor may have more trouble attracting and retaining talent. Many of AEW’s current stars have positive prior working relationships with Paul Levesque and may have chosen to leave WWE because they believed their careers would be better developed in AEW as opposed to working on the main roster under Vince McMahon.
AEW CEO Tony Khan answers that he has wrestlers under long-term contracts, implying some agreements last as long as five years. But he certainly doesn’t have all talent under deals that lengthy. And in the long-term, eventually, all contracts come to an end. AEW may also have challenges attracting unsigned talent if, as Levesque did when he controlled NXT, WWE pursues wrestlers with experience elsewhere in the wrestling world.
WWE in my view is well ahead of AEW with women’s wrestling. After three years AEW’s women’s wrestling scene has improved, but women still feel like secondary characters more than they do in WWE. In light of that, attracting and retaining the best female talent may be especially difficult for AEW. If women’s wrestling becomes increasingly important to wrestling fans, which is the trend the business has moved in over recent years, it will mean an additional advantage for WWE and a disadvantage for AEW.
As argued earlier, a significant part of the value proposition for AEW’s launch benefited from the dissatisfaction of many wrestling fans. If WWE consistently delivers a product that better serves fan segments that were alienated and that appeals to a wider market while doing so, WWE will be stronger positioned, and AEW’s differentiating quality may be diminished, lowering the growth potential for the privately-held startup.
AEW, however, which is funded by the Khan family, who own the Jacksonville Jaguars, has established a relatively strong three-year track record. Flagship program Dynamite is consistently a top performer on cable on Wednesday nights. Even in the case that WWE becomes significantly stronger long-term in the ways mentioned above, I believe the AEW brand is well-established enough to carry on as a healthy #2 wrestling company that attracts lucrative media rights values and ardent consumer interest.
Wrestling overlaps a space between live sports (which tends toward having one extremely dominant league) and scripted entertainment (which has a multitude of unique brands of content). So I continue to believe there’s room in the current media economy for two wrestling companies that have healthy businesses while competing with one another.
WWE financial estimate
On July 25, WWE released preliminary financial results for the second quarter of 2022, which the following estimate is in part based on.
Wrestlenomics’ Q2 2022 estimated results (values in millions, except earnings per share):
Revenue: $327.8
Adjusted OIBDA: $91.9
Net income: $49.0
Earnings per share (diluted): $0.55
Wrestlenomics’ full year 2022 estimated results (values in millions, except earnings per share):
Revenue: $1,289.1
Adjusted OIBDA: $394.2
Net income: $228.4
Earnings per share (diluted): $2.57
Disclosure/disclaimer: I have no current positions in WWE stock (NYSE: WWE), nor do I have any plans in the next 72 hours to initiate any such positions. This article expresses my opinions, only. This article is not investment advice nor should it be construed as investment research.
Brandon Thurston
brandon@wrestlenomics.com
Financial model (⬅️Google Drive link to PDF)
📎 PDF version is attached at the end of the Patreon post
[Fig. 1]
