The WWE sale

Professional wrestling is very ironic.

After months of speculation, it was announced earlier this week that Endeavor, the massive conglomerate of media properties and the parent company of the Ultimate Fighting Championship, bought the controlling-interest in World Wrestling Entertainment, merging it with the UFC to form a newly-created organization that will be publicly-traded after all the formalities are completed. Just a few months ago, Endeavor CEO, Ari Emanuel mentioned during a conference call that the WWE was an accomplished organization, but that his group wouldn't be interested in the acquisition of more debt. Considering that 51% of the WWE was purchased, it's possible that the terms of the deal allowed for the ownership of stock rather than a direct cash payment, which could've been the aspect that made the deal possible. Initial speculation valued the WWE brand at around $6 billion, and when news that Vince increased his asking price to $9 billion, as I wrote at the time, I thought it might've been a way to realistically eliminate the few logical buyers that might be in the market for the sports entertainment company. When Emanuel seemingly took Endeavor outside of the sale conversation, Comcast was probably the only other logical buyer, mostly because the NBC corporation already pays such hefty rights fees for the Raw brand on USA and the WWE Network on Peacock.

Say what you want about Vince, and he deserves a lot of the criticism, but as outlandish as his price tag sounded, the news of the merger brought WWE to a value of $9.3 billion so when that's combined with the UFC's market value of $12 billion, the sports powerhouse merger will be worth over $21 billion.

Still, it's difficult to believe that for the first time in its existence, there technically won't be McMahon ownership of the WWE company, an organization that spans as far back as the events promoted by Vince Sr. under Capital Sports, and before that Jesse McMahon's boxing cards that started the family's promotional ventures. That being said, it's not going to be all that different in terms of the structure or presentation of the current WWE product. The scandal that sent Vince into a brief "retirement" is more or less moot at this point. As sleazy as it was, Vince paid off his accusers and reimbursed WWE for the costs of those payoffs, as well as the investigation that was launched last year after the accusations surfaced. With that many accusations, clearly there was some level of misconduct, and the payoffs don't clear him of the sleazy behavior, but the point being, this merger will put Vince back into the same position he was in before the "retirement." It's not ethical, but money taking priority over ethics isn't anything new in pro wrestling or any other major business.

In many ways, Vince gave up just enough ownership to get paid because despite the sale of the majority interest, he will still own the most stock on the WWE side of the new venture. Plus, and this was probably a determining factor in the deal, Vince will run WWE the same way he did before the misconduct scandal. McMahon maneuvered a way to get back into power and get paid in the process. It remains to be seen if the WWE Board of Directors, the same group that originally dismissed Vince's request to return to the company late last year, will existent when the merger is complete.

As far as the impact on the WWE landscape that this merger will have, the on-screen difference will be minimal, if there are any changes at all. Keep in mind, Endeavor owns several different media properties in an effort to diversify and maximize the revenue streams. Despite some of the common ground of WWE and UFC, this isn't a crossover. Quite frankly,  Ari Emanuel is too smart to tamper with a formula that works so it will more or less be business as usual for the WWE. Similar to the way that McMahon packaged and marketed pro wrestling as sports entertainment, Endeavor continued to present the UFC as a part of the traditional sports line-up as a way to make it a part of the fabric of the sports world, specifically with the ESPN deal that gave the network incentives to promote the MMA brand as much as possible on its channels. Basically, the WWE and UFC will continue to run as their own entities. Vince will probably outlive us all, but this deal cements the fact that he will run WWE until he does the job to the grim reaper. Despite some of the rightful criticism from long time fans, from purely a corporate perspective, WWE will remain secure and profitable. If or when the management changes hands to someone outside of the McMahon family, it won't be any time during the current era.

So, what impact does the merger have on the WWE?

The dynamics of the television industry, specifically the demand for live programming to avoid DVR viewing and thus maximize ad revenue that allowed WWE to land such mega TV contracts, have shifted. Granted, live programming is still considered a premium commodity, but ad rates aren't quite as good as networks would've hoped with the increasing amount of streaming content available to consumers. Furthermore, and this is possibly the biggest reasons for the change in the TV climate for WWE, those big money deals were inked before the pandemic, and as we know, the product hit a slump without a live audience for the bulk of the pandemic era. Despite the guaranteed money that the TV deals provide, the ratings just haven't been where they have to be for it to make economic sense for the networks. While it's a major win for the WWE because they get paid regardless of the ratings, Fox has reportedly lost money on the Smackdown deal.

The company will be set to negotiate new TV contracts relatively soon with the current deals set to expire in late-2024 and based on the WWE numbers, at least prior to the Endeavor purchase, the sports entertainment group would have to take a pay cut for the broadcast rights fees. Since the TV money is not only the biggest revenue stream for WWE, but also the reason they touted record-setting profits in recent years, a decrease in TV cash could be a major dent in the company's value. In some ways, there's a domino effect with the television contracts because a decrease in that money would decrease the stock price.

Obviously, Vince knew that, and this merger more or less eliminates any major threat to the stock price or the value to the company because if the WWE money takes a dip at any point, the UFC is under the same banner and can cover the difference. Keep in mind, this is a WWE/UFC corporate merger, the other Endeavor proprieties are still their own entities. Endeavor has enough entertainment muscle, especially with the combination of WWE and UFC programming, to still secure solid rights fees for the WWE shows. It goes without saying, this isn't a crossover and that would completely flop anyway so you won't see Conor McGregor jump into the ring, but it theoretically opens the door for WWE to be a part of any of the Endeavor avenues in terms of distribution. Maybe Smackdown ends up on ESPN? Maybe the WWE Network will eventually be moved to ESPN+ since the UFC already has a deal with that streaming service? More than anything, there's such a major promotional push tied to all of this because you will undoubtedly see commercials for WWE pay-per-views on UFC broadcasts and then ads for upcoming UFC events on WWE programming. As much as Endeavor worked to make UFC as much a part of the traditional sports conversation as possible, the WWE can be brought along in a similar fashion, even if it doesn't generate the same numbers. This opens the door to more contemporary exposure for the WWE, which allows more growth of the brand. And, it's not a one-way street either, as Endeavor tremendously diversifies its sports properties with this purchase. For example, MMA is usually the 18-34 year old demographic, and as talented as the athletes are, there are some people that just don't want to watch some of the more brutal aspects of the sport. The merger more or less covers every demographic because the WWE product still skews toward a younger and older fan base as opposed to the typical UFC demographic. The international reach is another huge benefit for both brands. Under Endeavor, the Ultimate Fighting Championship made more of an international footprint, but there are some markets that aren't as receptive to the more violent aspects of the genre. For example, India isn't a big market for the UFC, but has a massive following for pro wrestling so the WWE will be a platform that Endeavor can use to generate revenue from the Indian market. On the flip side, pro wrestling hasn't been a major draw in China yet, but the UFC has made some progress there with stellar stars like Zhang Weili. It's a win-win for Endeavor because it's a revenue stream regardless of what brand generates it.

However, the most ironic part of all of this is that the surge in popularity in the early-2000s that ultimately led to Endeavors purchase of UFC  in 2016 is that the MMA group more or less used a pro wrestling philosophy to finally promote its stars to a main stream audience. At a time when WWE won the wrestling war of the 90s and was more focused on trying to become strictly an entertainment commodity with B-movies from WWE studios, Zuffa gave its fighters a chance to introduce themselves to the audience. Granted, it wasn't scripted, but the success of the Ultimate Fighter reality show was based on the fact that the fighters were allowed to introduce their "character" as a person to television viewers. They weren't just random names with gloves and shorts in the cage. The fans got to know their background and who they were as people outside of the octagon. Chuck Liddell was the cool KO artist, Randy Couture was the honorable aging legend, Tito Ortiz was the arrogant villain, and Forrest Griffin was the gritty Rocky character that had enough heart to win the finals. It was textbook pro wrestling promotion, even if it was based on their real-life personas. When Art Davie was looking to sale the MMA product because he couldn't get clearance on pay-per-view and the sport was still banned in many states in 2001, Shane McMahon actually suggested that the WWE buy it. Fast forward a few decades and the argument could be made that the UFC did pro wrestling better than the WWE in the modern era and that was what set the stage for the WWE sale.