The economics of WWE

Professional wrestling, much like other forms of live entertainment, had its share of triumphs, tragedies, scandals, and controversies throughout the history of the genre. Heroes, con artists, murderers, and a myriad of shady characters have played a role in a sport with a very complex narrative. Ricky Steamboat is a real-life baby face, Kevin Nash really is one of the coolest dudes in wrestling, and Hulk Hogan eventually proved that his public persona was a marketing scam. John Cena is a real-life super hero to millions, and The Ultimate Warrior wasn't.

At this point, nothing should be surprising when it comes to the business that originated from the carnival circuit, but I have to say, I was shocked at the rumor mill news a few months ago that the WWE, the biggest and most influential pro wrestling organization in the history of the sport, might be sold to the Saudi Arabian government. On the surface, this seems impossible, how could the WWE,be sold to a foreign government that is often criticized for its human rights violations and compared to a dictatorship?

The erroneous tweets that caused an uproar in recent months brought the topic into the conversation, as it continues to look very possible that the WWE will be sold. With the company being public, there are several hurdles that must be cleared before it can be sold so it's quite literally not a process that can happen overnight, even if Vince would prefer that type of swerve for Wall Street.

The possibility of a sale was back in the headlines recently when it was reported that sports entertainment kingpin, Vince McMahon, who strong-armed his way back onto the board of directors after accusations of misconduct sent him into a brief retirement, looks to ask for $9 billion for his organization. This is a drastic increase from the six billion that some analysts speculated the promotion could be sold for when the potential sale was originally discussed.

So, what's the point of all of this and is it possible that the organization will actually be sold?

As I wrote at the time of the initial reports that the WWE hired the JP Morgan firm to help with sale negotiations, it's very possible that all of the talk of a sale was a smoke screen for Vince to get himself back in the organization after he was ousted for the accusations of misconduct. However, considering that since he's still the majority shareholder, he had the power to return the entire time anyway so what does he accomplish if the sale talk is a bluff?

As we know, Vince told the board in writing late last year that he wouldn't approve of a new television deal or any sale of the company if he wasn't directly involved. The reason that the WWE continues to tout record-setting profits is because of its TV deals, as well as the Peacock deal so without the ability to negotiate for a new television contract, it would theoretically put the corporation in a scenario where it wouldn't have a platform to air its programming in the United States.

There's definitely a possibility that Vince increased his asking price to realistically eliminate any buyers. There are only logically a few corporate entities that have the capital and the funding to make such a purchase. With the company originally discussed at the six billion price point, the jump to $9 billion limits the list of buyers even more. Comcast was and still is the buyer that I think will end up with the company if it's actually sold. Raw is too valuable to the USA Network and they are already paying massive rights fees for the broadcast rights for the Monday night show and the WWE Network on Peacock. If Comcast, through the NBC umbrella makes the buy, they don't have to invest just to get the show on their channel, but can attempt to fully monetize it through the different networks and streaming platforms of the corporation. However, that's just my two cents, as more recent reports suggested that Comcast wouldn't look to invest billions to own the WWE, and this was before the price hike.

I wrote previously that Disney, with it's expansive collection of media properties, including ABC, ESPN, and other avenues could theoretically be a player in the sale, but with the recent shake-up of Disney management, which saw Bob Chapek get the boot after just two years as CEO, the company has much bigger problems than adding pro wrestling to it's line-up. In fact, Chapek was initially set to be the successor to the CEO position, but after two years of dismissal numbers, including massive flops that lost money for the Disney streaming service, former CEO, Bob Iger was asked to return as the CEO. The 72-year-old Iger worked as the top executive for Disney for 15 years before he retired, and only agreed to return for two years to help set up the next successor for the job. So, again, Disney has much bigger problems to tackle than an investment in pro wrestling.

If Comcast and Disney aren't buyers, that leaves Fox or Endeavor, the parent company of the UFC. This is where the dynamics of the media industry play such a key role in the possible sale of WWE. As we've seen more recently, the streaming bubble is finally deflating and thus media corporations aren't as willing to invest as much money at the moment, especially when there are streaming platforms that have lost money. When the production of a series has a certain cost, it depends on a specific amount of subscribers to remain customers of a service for a specific amount of time to cover those costs. If a specific series doesn't generate new subscribers or maintain them, the platform still has to provide new content to its current customers to maintain its subscriber base.

How many corporations are realistically going to invest $9 billion to buy the WWE in the current market?

During an earning call for stockholders, Endeavor CEO,. Ari Emmanuel praised the WWE's success, but mentioned that the corporation wouldn't look to make a purchase. Again, Fox would technically be a possible buy because of its hefty investment into the rights of Smackdown, but some analysts have reported that the network might actually lose money on the blue brand this year. This is where the question of if Vince really looks to sale could determine the next move for WWE. Since networks were willing to pay more for content a few years ago with the increased competition for viewers that went along with so many streaming options, the WWE landed the massive TV deals. As mentioned, the streaming bubble is deflating and when there are less streaming options, there will naturally be less competition for viewers so networks won't have to pay nearly as much for content with an established fan base that they did before. If Vince knows that the company would have to take a major pay cut for its next TV contract, he might look to sell the company before the climate of the TV industry decreases the value of WWE programming.

If he can cash out for a few billion dollars, that's a smart business move. But, I honestly doubt that he pushed his way back onto the board just to sale the company. As the majority shareholder, he would be set for a major payoff when they company is sold, regardless if he's on the board of directors or not. We know that Vince dedicated his entire life to his company and the stories of his ridiculous work schedule as the owner are well-documented in many interviews in recent years. Vince is probably going to die in the chair as CEO before he's going to play golf in Stamford. If McMahon was ever going to retire to life outside of the wrestling business, he would've done in when he left the organization last July.

The $9 billion price tag might be the "I don't want to sell it" price, but a number that Vince couldn't turn down because its significantly more than the company is valued at right now. If I had to guess, and this is a complete guess, considering the Freud would end up on the couch if he tried to figure out Vince McMahon, I think the $9 billion price is more or less a way for McMahon to maintain control of the company. Ironically, the Saudi government would probably be the only realistic buyer at that price because of the obscene amount of money the government has from the oil industry. As erroneous as the initial tweet was a few months ago that the Saudis bought WWE, it might end up being the only way someone other than Vince owns the company. Keep in mind, not only would a corporation have to invest billions to make the purchase, but there would have to be some realistic expectation of how there would be a return on the investment to make an eventual profit from the purchase. A five-year deal for the rights to Smackdown brought the company $1 billion, even when you add Raw and the WWE Network into the equation, it might take a corporation at least two decades to generate $9 billion in profits from WWE.