The Ringside Sermon: Is the WWE Going out of Business?

The WWE Firing Spree:

“The WWE is going out of Business!”

Idiots rejoice, your time has come! Raise your voice in uniformed song, don your signboard and stain yourself with liquor, for your chance to scream nonsense from your local street corner is upon you! Hark!

C’mon people, think, and I mean really think.

This column is going to involve a lot of guesswork, but I’m going to try, (just try) for a moment to explain the financial situation in the WWE. This column may be a little dry, because it’s going to end up as “math heavy” but I think it would be really good to have some actual numbers that give you a vague idea what kind of situation we’re working with here, alright?

First thing first, the WWE’s Fiscal Year begins and ends with Wrestlemania, but for the sake of simplicity, we’re going to look at 2004 to date, as that should give us enough time to know the current state of the company.

First, let’s look at expenses. The first we’re going to look at is the annual salary of the staff.

There are currently eighty four “television” personalities with the WWE, eighty five if you count Vince McMahon. Superstars are not actually as expensive as people think, because for every Big Show, there’s a Scotty 2 Hotty to consider, so while some guys clear a few million a year, most don’t. For the sake of averages, and considering that this talent pool includes the announcers, we’ll say 600,000 dollars per super-star per year. This is just the “downside guarantee”, and doesn’t take into consideration the percent of any “gate” that they take in. These things are determined by your place on the card, the relative size of the arena you’re renting, the cost of the tickets, and the individual clauses in your contract, and there’s too little information to come up with any kind of educated guess here. But, it’s not as relevant as we might think, only because the Gate Percentage is always kind of negotiable, and dependant on profit…

So, the rough amount of money the WWE has to pay to superstars is 50,400,000.00 American Dollars.

And whoo, that seems like a lot of money.

But we’re not done yet.

We also have to take into account that the WWE has to “rent” every arena it puts a show on in.

We also have to consider the other staff in the company, and add it to the column of “expenses” being tabulated (fun word) at the bottom of the page. There’s the Titan tower staff, TV Production, Accounting, Legal, Marketing, (both at home and abroad), Road Agents, Talent Scouts, Trainers, Referees, Clerks and Secretaries, Ring Crew, Electricians, and ect… Let’s say that the WWE, and this is a pretty generous guess, pays about ten million in “other staff” fees.

We also have to consider Arena Rentals. I tried to look into this, but the places I checked charge a percentage, with a minimum of 5,000 dollars. The WWE is a franchise, however, and because of the amount of business they provide to various arenas, are likely to have a special rate negotiated for them, or a flat fee in most of the arenas they visit. Since they have their own staff and catering departments, they don’t need a lot of arena staff on hand. Let’s say thirty thousand dollars per arena. Again, that’s a generous guess, but because I don’t have actual numbers, I’m “inflating” my expenses column a bit, so they’ll be higher than they actually are, or cover for any expenses that I somehow overlooked without effecting the overall bottom line or my point.

It’s fuzzy math.

Next on our list of expenses worth considering: Travel Expenses. Wrestlers pay for their own rental cars, and can drive from house show to house show. But the WWE pays for plane tickets to and from home to Raw or Smackdown. It’s hard to say exactly how many wrestlers attend how many shows, so let’s go ahead and say there are thirty guys at every show. Again, it’s a bit of a generous estimate, but that’s the safe way to do this guesswork math. So, two shows a week, thirty guys at every show, two plane tickets per guy. Sixty guys a week means sixty plane tickets, but let’s not forget the staff that has to fly to every show. So let’s say a hundred and twenty, just for the sake of argument. So that’s one hundred and twenty return trips per week, even though not all of them will be return trips. So, that’s one hundred and twenty plane tickets a week, and we multiply that by fifty six to get the rough number of plane tickets per year, not counting trips to Iraq and stuff, because that’s just too much to care about. We’re going to say six hundred dollars per ticket, and again, that’s deliberately high. That works out to four million, thirty two thousand dollars.

Another thing to consider is the equipment the company uses. Trucks, rings, lights, sound gear, camera equipment, and everything else it takes to get this show on the road. Most of the equipment is paid for, so all we have to consider is the maintenance and replacement cost. It’s tough to guess, so let’s two million a year, arbitrarily.

Then there’s advertising. The WWE actually runs a fair number of ads, so they obviously have an advertising budget. Running ads during their own shows doesn’t actually cost them anything, however, so that doesn’t cost quite as much, though they still have to produce the ads. Let’s say an annual budget of a million dollars for ads, and that’s probably pretty high.

Now, this year we have to consider promotional pay offs. Tough Enough and the Diva search are big ones, so they have to be considered. That’s one million, two hundred and fifty thousand.

That’s all I can think about on the expense side, I’m sure there’s more, but my “budget” is heavily padded to include those things, even though they aren’t listed. Every area of cost is actually more expensive than it should be, as best I can estimate, just so you can get an accurate picture of the real bottom line.

Now, we can look at revenue.

First off, The WWE gets paid for every show they air on Spike or UPN, something to the tune of three hundred thousand dollars an episode. I actually have the actual figure in a book upstairs, but I don’t want to hunt for that one page, so you’ll just have to deal with my memories best guess.

That’s two shows a week, no off season. Six hundred thousand times fifty-six, to make the math simple…

The WWE also gets a pretty big slice of the advertising during it’s programs, but I don’t know what that is, so I’m going to have to explain my guess. In Television, the demographic, or audience worth the most to advertisers is males aged fourteen to thirty five. Consequently, programs that cater to men in that age range can charge a good fee for advertising, as related to their ratings. The ratings determine the number of people these ads reach, obviously. The WWE is still one of the highest rated programs on cable, and as such demands a fairly hefty price tag for its ads. We’re going to say, and this is a conservative guess, I think, that the WWE gets another hundred thousand dollars a week from advertising, and I think the actual number would be about four times that, but I don’t really know for sure. This translates into another five point six million dollars per annum.

Next we’ll consider the ticket sales to live events. We’re going to look at the televised shows and house shows separately, but I’ll consider both.

First, Raw and Smackdown, once a week apiece, in fifty thousand seat arenas usually do fairly well. We’ll say twenty five thousand people at each show, but there’s no where to actually get hard statistics for this, so it’s one of my shakier guesses. Oh well. So tickets range from sixty dollars in the front row to ten dollars in the nose bleed seats, so we’re going to go ahead and say fifteen. Why fifteen? Because there’s a hell of a lot more cheap seats than there are expensive ones, and it’s a pretty safe average. Now, that works out to roughly three hundred and seventy five thousand per show, twice a week, fifty six weeks of the year for a grand total of forty two million dollars a year.

Then there’s the house shows. Let’s say the price of an average ticket to a house show is ten dollars (that’s low) and that five thousand people attend every house show (low again) and that each brand runs three house shows a week (they actually average closer to four, but hey, I’m making a point here.)

So, that’s five thousand times ten times six (per week) times fifty six (per year) and that makes the house show revenue about sixteen million eight hundred thousand dollars.

It’s starting to scare me how much money flows around the WWE, and we haven’t even gotten to the PPV buys.

But we are at PPV attendance, and that’s going to be fun. PPV tickets are more expensive than raw and Smackdown, and the attendance is always a bit higher. So, there are twelve PPV’s, but we’re actually counting fourteen this year, with Taboo Tuesday and “The Great American Bash”. So, we’ll up the average cost per seat to twenty dollars, and up the average attendance to forty five thousand. Both are probably a little low, (almost certainly), but we’ll use those numbers anyways.

So, forty five thousand times twenty time fourteen brings the PPV attendance figure to twelve million six hundred thousand dollars.

I actually have all the PPV buy rates right in front of me for this year, and this too is going to take some explaining. A buy of 1.0 means four hundred thousand homes. Some shows, like Wrestlemania, did about 1.6, while most have settle around 0.4. The average works out to roughly 0.6, which is two hundred and forty thousand homes. Again, the figure has to be multiplied by fourteen, as well as by the cost of a PPV. Wrestlemania drives up the average a bit, but we’re going with an even thirty dollars per household. That means it’s thirty by fourteen by two hundred and forty thousand.

Are you ready for this?

That is one hundred and thirty four million, four hundred thousand dollars.

But wait, I neglected something. I neglected the cost of putting a show on PPV, which has to go in our expenses column. Let’s spend a fortune on this one, just for fun. Let’s say it costs one million per PPV, and I can assure you that it probably doesn’t.

Finally, that brings us to the last big money maker for World Wrestling Entertainment, and that’s merchandizing. That’s lunch boxes, video games, foam fingers, T-Shirts, Title Belts, action figures, hats, candy, energy drinks, and the other things that have a face, logo, catch phrase or anything else WWE related on them. The video games we know are a multi million dollar industry, so are the books, T-Shirts do very well, and action figures aren’t bad.

The problem is, there’s no way to get any reasonable numbers here. I mean, I don’t know what percentage of the video game sales go to the WWE, or if they get a flat licensing fee. I don’t know how large a percentage of merchandizing sales go to the wrestlers represented. I don’t know the cost of producing a t-shirt of a foam finger, so I don’t know the investment or return to consider. All in all, this is the hardest number to come up with, and as such, I have to go ridiculously low. I’m going to say ten million in total for all DVDs, Books, Video Games, Action Figures and T-Shirts. That’s way lower than what I think it actually is, but I’m being safe here.

So this is where we’re left.

Income

Network Payday – 16,800,000

Advertising revenue – 5,600,000

Raw and Smackdown Attendance – 42,000,000

House Shows – 16,800,000

PPV Attendance – 12,600,000

PPV Buys – 134,400,000

Merchandizing – 10,000,000

Expenses

Arena Rentals – 30,000

Other Staff -10,000,000

SuperStars -50,400,000

Travel Expenses – 4,032,000

Equipment Costs – 2,000,000

Advertising – 1,000,000

Contests – 1,250,000

PPV Broadcasting – 1,000,000

And now we can do the totals:

Total Expenses: 69,712,000 Per Year

Total Income: 389,400,000 Per Year

That’s a long way to go, just to make a point, what the hell.

These numbers are in no way set in stone, both categories are full of estimations, guess work, and probably at least half a dozen different expenses and incomes included. But, to be honest, I have done my best to increase the expenses and lower the cost, and even if I’m so wrong as for the expenses to be doubled and the income to be halved, and it’s a real possibility, the WWE is still a highly profitable company.

With that said, I’m probably way off. It’s quite possible that the WWE is only making a couple million a year, after expenses, but there’s very little doubt that they are making money, and that their bottom line is very healthy. I’m sure if anyone was willing to work hard enough, they could get all the actual figures from the WWE themselves, but that isn’t my point.

Making assumptions and jumping to conclusions like people have been in regards to the WWE firings is stupid, very, very stupid. Before you come up with any kind of opinion, you have to get as much information as you can, and make it an educated opinion. What I’ve done is show you exactly how much information you need to have before you even start guessing at the WWE bottom line, and the amount of information you have to consider. Things aren’t sliced in black and white, and until we know why the WWE is releasing so many guys, we aren’t in a position to assume or know anything about the status or fate of the company.

Whew. Five pages of math in a wrestling column.

What the hell was I thinking?