One week ago, Vincent Kennedy McMahon lost his billionaire status in a single day. For a man with as gigantic an ego as McMahon, the loss was pretty brutal. One third of his net worth vanished to the vagaries of Wall Street.
Some people blamed the meager increase of WWE’s television deal with NBC Universal, others blamed anemic (by Wall Street’s standards) subscription numbers for the WWE Network. There probably wasn’t one particular reason, as the stock market is a place prone to unreasonable standards and herd mentality, where if one person starts selling a stock, the rest of the market follows without questioning why.
This whole debacle really illustrates two mistakes, one past, one more current, on the part of WWE.
The first mistake was made back in the heyday of the Attitude Era, when the McMahons decided to cash in on wrestling’s pop-culture status and take the (then) WWF public. The stock’s IPO wasn’t phenomenal, and the price languished in single digits to low double digits for years. It produced a steady but very mediocre consistent revenue stream for the WWF/E in its first decade on the NYSE, but its effect on how WWE conducts business has contributed to things like the “PG Era,” most likely.
The greater long-term effect, though, is one that affects many corporations. Quite frankly, Wall Street has not taken the long view for many years now. It is a quick-buck market, designed for fast sellers and buyers, people who won’t hesitate to cash out of a stock at the first sign of weakness. In that environment, it has led to things like belief in miracle CEO’s, skyrocketing bonuses, and companies running business not for the customer, but for its executives.
Where does my statement on Wall Street nonsense fit in to WWE’s business situation? Well, Vince McMahon’s risk-taking nature has been significantly reduced for a long time now. The WWE Network was the first big venture for McMahon in ages, and it was remarkably cautious in its nature. Even now, months later after rollout, when its stability and value have been proven to anyone who subscribes (like myself), it is STILL not available even in major international markets like Canada (our border neighbor!) and the United Kingdom. Those two nations are huge hotbeds for wrestling fans, and would’ve done wonders for boosting the subscription numbers for the WWE Network.
However, caution about network infrastructure and performance kept WWE from doing so, and thereby helped lead to low subscription numbers, which was one of the triggers for Wall Street bailing on WWE stock. It almost certainly doesn’t help that Wall Street, and a fair segment of “mainstream” America looks down on professional wrestling anyways, so when this big, risky venture failed to deliver on expectations by hitting 667,000 instead of one million subscribers, Wall Street decided to start bailing.
Why is this shortsighted? First of all, as Awful Announcing’s Joe Lucia pointed out this week, Netflix took SIX YEARS to become profitable. Facebook is only now becoming profitable as well, after its spectacular IPO bellyflop. But social media and streaming services are fast becoming the preferred way for viewers to get content. Netflix, Hulu Plus, and Youtube generate the majority of Internet traffic these days, and it’s because not only can we watch current programming, but the library of old television shows is a major draw for subscribers.
While I certainly enjoy getting discounted pay-per-views, the fact is that I, like so many, subscribed for the massive archive that WWE owns. Getting to watch so many classic matches and cards from my youth, along with things I never got to see before, really made it worthwhile. Plus, I now get to watch NXT each week, and that has fast become one of my favorite programs, because the quality of matches and watching character development is just AWESOME.
WWE really would’ve been far better off holding out and getting venture capital invested into their brand, which is a proven brand, as opposed to joining the NYSE and having to placate coke-fueled investment bankers who can’t see past a quarterly earnings report or a piece of bad news. Working privately to find new revenue streams would have meant that the Network could’ve launched unencumbered by the demands of Wall Street and been allowed to properly incubate and develop into a substantial, solid revenue stream for WWE. Because while stock does bring money in, that money is subject to quick change, while a subscriber base is in it for the long haul.
Maybe a disaster of this magnitude might convince Vince to buy back the stock and bring some venture capital people on board. It would certainly be what’s “best for business.”
What do you think? Comment below with your thoughts, opinions, feedback and anything else that was raised.