It’s good to see Vince McMahon understand that for his World Wrestling Entertainment empire to take a step forward, he needs to take a step back.
After offering excuses for WWE’s poor creative product on previous earnings calls, the WWE CEO wisely acknowledged Thursday that two new hires he made earlier this month freed him up “to look at longer range story arcs and work on character development, versus being in the weeds.”
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Although the future looks brighter, the present is still a little dim. With another lackluster quarterly earnings report on the books, WWE attempted to mask its poor performance during its Q2 earnings call by focusing on the new overseers, Paul Heyman and Eric Bischoff, of his primetime series on USA and eventually Fox.
The decision to create two new executive positions is just what McMahon needs to position himself to take a more strategic view of the WWE product, allowing the wrestling company to refresh their output, or as McMahon put it, “relaunch in terms of our content.”
McMahon is making a smart move here, by allowing others to focus on the day-to-day while he turns his attention to what matters most: captivating storytelling in the long term. He has long been feted for his ability to develop characters which tap into the national id, from Hulk Hogan in the 1980s, Stone Cold Steve Austin in the 1990s and John Cena in the 2000s.
But despite their best attempts, WWE has arguably not yet found their audience lightning rod in the 2010s. Now McMahon is going to be able to put more effort into creating that next big character.
The market appears to be buoyed by that news, and the announcement that WWE will be releasing a tiered subscription system for their WWE Network SVOD product. The stock is currently up 10% from closing the day before the call.
But the stock increase ignores the fact that current revenue continues to trail 2018’s levels, and key market engagement metrics also all continuing to be down on a yearly comparison.
WWE’s revenue ($268.9 million) and operating income ($17.1 million) were down from Q2 2018, by 5% and 19% respectively, along with a decline in ratings, WWE Network subscriptions and merchandise spend. One bright spot was that net income had slightly increased from last year’s level by 4% to $10.4 million.
The company put the best possible face on the numbers by noting the declines were shrinking, pointing out that lower ratings at the end of the quarter were not as steep as the ones that began it. So far, it seems to have worked.
In another creative refresh, McMahon stated on the call that WWE would be increasing the edginess of the storylines, but staying within the parameters of a PG rating. This is a smart move to attempt to lure back lapsed fans who may be bored with the current product’s tame/non-existent stories, and lured to new wrestling company AEW, which carries a TV-14 rating.
On that note, the WWE head also decried AEW’s recent focus on what he dubbed “blood and guts” and stated that the WWE “is just not going back to that gory crap that we graduated from.”
TNT, home of AEW’s new show, announced this week it would be airing on Wednesdays starting October 2nd, directly against WWE’s own NXT show on their SVOD service, and two days before “SmackDown” moves to Fox.
In an interesting twist prior to the earnings call, seven top WWE Executives, including Vince McMahon, daughter Stephanie Levesque, son-in-law Paul Levesque and both Co-Presidents, sold $23 million worth of stock on Monday. The shares were priced at $70.23 that day, 9% lower than the current price of $76.52, meaning they collectively missed out on additional $2.4 million by not waiting to sell until a day after the call.
During the call, WWE co-president George Barrios re-iterated the WWE’s stance that absences to key performers was the key behind 2019’s diminishing ratings for shows “Raw” and “SmackDown.” WWE went on to say in the call that, with the return of the superstars, ratings improved in May and June, which were not as far behind 2018 levels as April was.
In another ratings spin, Barrios mentioned this week’s episode of “Raw,” a special packed with former stars dubbed Raw Reunion, had an audience 15% greater than the “Raw” airing a year before. This is not the fairest comparison, given last year’s July 23rd episode was just a regular episode, not a special. The fairest comparison would be against the last “Raw” reunion special, Raw 25, airing on January 22, 2018.
Raw Reunion drew an audience size 1.4 million people lower than Raw 25. This suggests that WWE has lost a large number of casual viewers over the last year or so, especially when taken with the context that the “Raw” episode after Wrestlemania also drew 1 million fewer viewers than 2018.
Furthering the idea of a decline among casual fans, WWE acknowledged during the call that its live event attendance, fan spend and WWE Network paid subscriptions were all below 2018 levels. These are organic measures of interest. With fewer and fewer dedicated fans watching, going to events and buying swag, it suggests the issue with the ratings has been long in the making and glossed over until now.
Paid Network subscriptions in effect for Wrestlemania, the company’s largest annual showcase, were 2% lower than in 2018 (2018’s edition saw a 9% surge versus the 2017 iteration).
It could be argued that part of the reason why McMahon is stepping away from the day-to-day of running two WWE shows is the upcoming relaunch of the XFL. Regardless of juggling two companies, having McMahon’s WWE creative focus on the strategic development of the content may well see things pick up for WWE.
Although it is worrying to see the recent decline in casual fans, it’s long been said that wrestling is a cyclical business. If WWE can focus more upon creating engaging storylines that captivate audiences, and less on excuses, McMahon may soon find himself witnessing yet another surge in popularity.