WASHINGTON January 17, 2014 — The Washington DC area was treated to a trio of World Wrestling Entertainment’s (WWE’s) popular “Smackdown” events at both the Verizon Center and George Mason University’s Patriot Center during the recent end-of-year holiday season. Whether you regard these colorful, action-filled events as sports or entertainment, they tend to draw large and enthusiastic family crowds.
At the most recent wrestling event at the Patriot Center last week, WWE fans reveled in their hero C.M. Punk’s astounding and hard-fought victory over the three—count ‘em—villainous members of The Shield, in a lopsided battle that featured a single wrestler (Mr. Punk) vs. a three-man tag team match.
More interesting to investors than Mr. Punk’s win, however, may be WWE’s most recent revenue-generating move, which is bound to be at least as challenging as coming up with a win against a much bigger opponent in a no-holds barred Texas-style steel cage match. Without much media fanfare, WWE (stock symbol also WWE) announced at last week’s annual Las Vegas Consumer Electronics Show (CES) that on February 24, the company would launch their newest and perhaps most daring media venture: their very own 24/7 streaming network featuring—no surprise—events and entertainment primarily geared toward pro wrestling fans.
According to a WWE release, their new online network will be available on a variety of platforms including desktop and laptop computers via the company’s website, WWE.com; handheld devices via a WWE App; various set-top boxes; and the latest video gaming consoles.
Website wrestlingzone.com quotes WWE’s CEO Vince McMahon as claiming “WWE Network will provide transformative growth for our company and unprecedented value for our fans.” If that’s indeed the case, it won’t come a moment too soon for long-suffering WWE investors.
For years, this unusual stock performed much like a utility or a real estate investment trust (REIT), in that it returned a surprisingly large dividend, often in the neighborhood of eight percent, while offering little in the way of growth.
In recent years, while still profitable, WWE began to fall out of favor with investors with lessening revenue and reduced cash flow forcing its once reliable dividend lower and lower to its current level of 2.5 percent. Clearly the company had to do something to increase the pot.
The company’s best wrestling moves to date, in addition to its still-lucrative pay-per-view TV events, have been the regularly scheduled “WWE Raw” and “WWE Smackdown” series of wrestling matches and video hype aired on regularly scheduled weekly broadcasts on the USA and SyFy networks. This, along with the sales of products and other merchandise has kept WWE in the black if not always in high-growth mode.
The addition of its own pay network—which, in a way, follows the path laid out earlier by Netflix—could enable WWE for the first time to capture 100 percent of its own revenue stream, something it must share now with its cable network partners.
Thus far, there has been no comment from either USA or SyFy on WWE’s apparent flanking move. It’s likely that all three—USA, SyFy and WWE—will wait and see what transpires. That said, WWE’s new outlet would likely become an issue during that company’s next round of programming negotiations with both networks.
In the end, it remains to be seen whether WWE’s fan base is robust enough and enthusiastic enough to shell out an additional $9.99 for yet another channel when the price of video entertainment—whether via cable TV, Netflix, WWE, or additional broadband or pay-per-view channels—continues to accelerate along the same lines as college tuition boosts.
But if WWE’s bold, wrestling fan-centric streaming service proves a successful revenue booster, it could not only goose the price of its shares and get its dividends back in the up-trend. It could also mark another positive step in the gradual free-for-all for viewers. Pressure continues to mount for unbundling all manner of entertainment programming and finally breaking the lucrative monopoly long held by cable companies and entertainment conglomerates.
All entertainment costs too much these days, and remains that way due to longstanding sweetheart deals among cable providers, entertainment networks and conglomerates, and the politicians who allow all of the above to retain lucrative and consumer-hostile monopolies devoid of much competition.
Netflix first drove a wedge into this game with its streaming service. Should WWE succeed with its own brand, it could mark the beginning of a trend in which consumers gain more control over where their entertainment dollars are spent and, indeed, how many dollars they spend on entertainment in total.
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