The WWE stock situation

The corporate world, especially at a global level might be more of a shark tank than the professional wrestling business. Within just the past two weeks, Vince McMahon fired the WWE's co-presidents, George Barrios and Michelle Wilson after the two had worked for the company in that role for over a decade. The move was made ahead of the organization's fourth quarter conference call last week, and saw the stock price drop over 20% to roughly $49, as the market appeared as surprised as anyone with the sudden departure of two of the top executives of the publicly traded company. As a comparison, the stock price reached  $100 just over a year ago with the announcement of Smackdown's move to Fox. Much like Eric Bischoff in October of last year, Barrios and Wilson are more or less taking the fall for sluggish numbers nearly across the board for WWE. Network subscribers dropped nearly 10% to put the streaming service at an estimated 1.4 million subscriptions, while attendance and television ratings have dropped.

However, don't feel too bad for Barrios or Wilson, as aside from their high-paying corporate jobs under the WWE umbrella for the past ten years, they will reportedly receive seven-figure severance packages when they leave the company.

In truth, much of these happenings have nothing to do with the on-screen product and more to do with the decision-making process behind it. Keep in mind, investors don't care about who gets a push, how the young stars are built for the future, or what deals are signed to turn a profit. In fact, the investors don't necessarily have to be fans of sports entertainment or anything else they decide to buy stock for. The only thing that matters to the investors is a return on the investment to buy stock in the company. As much as going public increased the value of the WWE empire, it added another major hurdle to the corporate structure, which was being held accountable to the investors with a very direct financial consequence along with it. The sudden departure of key executives suggest some instability within the company, which is exactly why the stock price dropped because steady consistency lets shareholders know that they made a safe investment.

One of the key questions that hasn't really been answered yet is, can the WWE truly cater to its audience and its stockholders at the same time?

Let's be honest here, the WWE fan base is ultimately what spends money on the product and watches the programming to give the shows ratings, which translates into TV rights fees and ad revenue. That entire process is what ultimately fuels the company and makes the stockholders money. A loyal fan base is the foundation of the success that is built, while the shareholders collect based off of that success at the top. The vast majority of the casual fans aren't trading stocks on wall street, but the perceived value of the WWE stock is what brings in those investors and more importantly sponsors as well.

So, obviously there's a reason that WWE brass serves its investors with a stream of revenue sources, even with the controversial mega paydays associated with the Saudi government's propaganda campaign. Still, when does the intention to serve the stock price sour the actual viewing audience? The numbers for television and live attendance suggest that a notable portion of the audience is already soured on the WWE agenda. Keep in mind, wall street doesn't generously invest on what could be in the future, but rather the money that can be earned now. Some corporate suit doesn't care what independent wrestler might be the next John Cena to draw the company millions of dollars in ten years. The $40 million from the Saudi government this year is the objective, even if the decision to run shows there draw criticism from actual WWE fans.

One of the headlines from the conference call was Vince McMahon's announcement that the company has discussed potentially selling the rights to pay-per-views to another streaming service, which would essentially guarantee the company a specific amount of money every month for the event instead of the amount earned being based on how many network subscribers there were for a specific month. The upside is a guaranteed revenue stream, while the downside would be that it would basically admit a critical flaw with the concept of the network.

I've written about it many times, but it should be mentioned again here. When the network put thousands of hours of content online and included the live pay-per-views each month, it unintentionally lowered the value and the level of quality of those events. In some ways, when the writing team knows that a pay-per-view is sold for $10 a month, there's not much pressure to deliver a show that will sell subscriptions. In fact, there are very few individual events, possibly Royal Rumble and Wrestlemania, that stand out as the specific reason that someone would decide to subscribe to the network. If anything, if a fan subscribes to the streaming service, it's based on the concept of the extensive library that's available with the current pay-per-views. Along with that, when access to the current pay-per-view is sold for $10 a month, it would be difficult to increase the price after that because subscribers associate the value of the PPVs with the $10 price of the network.

Another important aspect is the WWE almost gave away too much content on the network because there's only so much wrestling even the most die hard fans are going to watch within a specific time frame. When you consider that there are seven hours of live programming on TV every week, does the general fan really want to watch more wrestling? Furthermore, while the achieves are a major selling point for a subscription, how many hours of classic content does the  average fan have time to watch? For example, if someone wanted to re-watch the Monday Night War era, without the commercials, there would be an hour and a half of footage to watch for each Raw and Nitro show. The three hours of classic footage a week translates to 156 hours of content if a fan watched to watch Raw and Nitro for a specific year. Who has the time to do that within the span of a month? If re-watching the classic era in chronological order is going to be a process that takes months, there will undoubtedly be content available to subscribers that they simply won't have time to watch. The bottom line is, there's a certain point where it doesn't matter how much content is on the network because viewers will realistically only watch a certain amount of hours so the random episodes of WCW Saturday Night from 1994 don't really translate to an extra selling point for the network.

If the WWE actually does sell its PPV rights to another service, it would theoretically take a major selling point away from its own network. If the network consisted of just the archives and some of the documentary content, it would retain a portion of its subscribers, but such a decision would more or less send the message that the guaranteed money from another group is more important than establishing the network at any other level than it is now. Despite WWE's TV deals and market share of the sports entertainment genre, I don't know if selling the PPV rights would automatically translate to success for another streaming service. Reportedly, NBC Universal, Amazon, and DAZN are possible choices for the PPV rights, but again, there are only so many hours of content fans are going to watch, the same way there are only a select few streaming services people will subscribe to for content. Would WWE network subscribes really be willing to pay for another streaming service to watch current pay-per-views?

If I had to guess, I would say that Amazon might be the only entity that might have a chance to garner an increase in their subscriptions with the addition of WWE PPVs because they can offer it as a bundle with Prime video and its free two-day shipping service. Still, all of this seems like a way to provide a short-term solution with another surge of guaranteed money that can boost the stock price, but doesn't do anything to address the basis of the problem, why have fans stopped watching the product?

While the answer to that is complex and doesn't have just one fix, the bottom line is, the WWE product doesn't retain viewers the way that it did previously. It's possible that the ideology that caters to the shareholders instead of the fans is the reason the ratings have declined. At some point, WWE management will be forced to recognize what their audience is or isn't watching and adjust accordingly or the numbers will continue to decline. Ironically, it's the attempt to cater to the stockholders that has declined the audience and in the process caused dissension among those same stockholders. Again, the investors don't care how WWE brass makes the profit so perhaps management should focus on a way to generate more viewers instead of the corporate agenda.