The Hamilton Ave Journal 06.25.09: Volume 2 – Issue 92

Posted by JP Prag on 06.25.2009

How much did Donald Trump buying RAW actually cost the WWE and USA? When was the last time RAW scored ratings this high? Is TNA planning to launch a new television show? Is John Cena’s “Attitude Adjustment” package a must buy? Which SoBe is suing the WWE? All this and more is answered in this week’s edition of the Hamilton Ave Journal!

THE HAMILTON AVE JOURNAL
By JP Prag

Volume 2 – Issue 92

ABOUT THE JOURNAL

The Hamilton Ave Journal is the only wrestling news report focused solely on the business of wrestling. Here in the Journal we not only look at the stories that are important to the investor and business-minded person, but also delve deeper into stories that most fans of wrestling would overlook. That is because the Journal is about getting the heart of the matters that affect the companies and outlooks of the wrestling world.

And where is Hamilton Ave? That is the location of the WWE Production Studio in Stamford, CT, and thus the most powerful place in the wrestling world. Besides, The East Main Street Journal just does not have the right ring to it.

Who am I? I am JP Prag: consultant, entrepreneur, businessman, journalist, and wrestling fan.

Now, ring the bell because the market is open.






The Journal's front page area known as What's News isn't just about telling you what has happened. The stories in this section are about what will have an effect on the wrestling industry, individual federations, and the wallets of the fans.

LEAD STORY: How much did Trump RAW cost?

Garnering much media attention, the WWE pulled a stunt claiming that Donald Trump had purchased the WWE RAW franchise on the USA Network. As part of that storyline, Mr. Trump was going to air RAW commercial free on Monday. On top of all that, during the show itself Mr. Trump announced that everyone in the arena would be getting a full refund for their purchased tickets.

Even though this was all part of a storyline, there was an actual cost for the WWE around all of this. First off, the USA Network pays the WWE approximately $550,000 per episode of RAW for rights fees. Conversely, USA Network then sells advertising spots to make up the cost and turn a profit. In a typical hour of RAW, there are 18 minutes of commercials, or 36 30-second spots. That means that USA needs to sell each commercial for an average of $7,700 in order to just break even. But if USA sells a spot at just $15,000 on average (far below the prime-time average of $25,000), they stand to make $530,000 in profit after the rights fees to the WWE (not including the costs of actually selling the time nor running their network).

So why would USA agree to loose the potential of half a million in net revenue? Well, they didn't. RAW was filled with product placement, most notably the KFC buckets that moved between the announcers desk all through the night. While the product placement helped offset the costs of the rights fees, it by no means covered the full cost. Still, why would USA want this?

The answer is average ratings. That night, RAW scored a 4.5 rating, well above average and 25% over the prior week. This was actually the highest rating since February 6, 2006 and the first over 4.0 rating since February 22, 2009. So how do ratings on a commercial free program help USA? Well, ratings are actually a lagging indicator. Advertisers do not pay something additional if the ratings reach higher levels, but actually bid out on the spots months in advanced based on the average rating. This one episode brought the rolling 4-week average up to a 3.8. On May 24, 2009, that average was a 3.4. If advertisers look at June's average numbers, they will bid higher and the USA network will make their money back.

For instance, if June's rate's were based on April's rating of a 3.7 (assuming a two month lagging indicator), July's rates are based off of May's 3.4.. Now, June's 3.8 rating will be used for August's number, meaning that August will have higher paid advertising number then July. In the end, this has actually boosted the advertising dollars for the August period, even if ratings are down in August (which they tend to. August 2008 had an average rating of 3.2).

Outside of the ratings, the refund of the venue tickets racked up an estimated $235,000. Last quarter, the WWE did $18 million in live event ticket sales and fees alone, so $235,000 would amount to about 1.31%. But this quarter also includes WrestleMania, which took in an estimated $6 million in ticket sales, dropping the percentage to less than 0.98%. In other words, it is a relatively small amount in the overall WWE structure. This is not something they could do every week, but as a one-time event it cost the company far less than other promotions and will most likely be written off as a marketing expense.

Next up was the stock price, which closed at $12.21 on Wednesday evening, down from Monday June 15th $13.59. Does the decreased stock price affect the WWE? In reality, not much at all. The stock price is a reflection of the average price someone is willing to pay for a share. Multiple that number times the number of shares outstanding and that is the shareholder valuation of the company. On paper, some people (including WWE Chairman Vince McMahon) lost some value, overall the company did not lose any money. The stock price has nothing to do with day-to-day operations except as incentive plans, so the WWE did not take a hit there.

This brought up an interesting point that Fox News reported about the FCC possibly investigating the WWE, NBC-Universal, and Donald Trump for stock manipulation. Of course, the intent of the press release was not to manipulate the stock price, so the SEC would have a difficult investigation when there are much more important matters to attend to. Just to be safe, WWE and USA both sent out additional press releases clarifying that the Trump purchase was just a storyline:

"USA Network and WWE issued a press release on June 16 that referred to Monday Night RAW's storyline of a 'sale' of WWE's RAW to Donald Trump. We intended the release to be promotional for that ongoing story arc on the series. There is no such actual 'sale'. We apologize for any confusion."

Overall, this was far from the most expensive publicity stunt that the WWE has attempted. And where one night of success may pay off in the end, the WWE is looking to continue. From their own press release on June 23, 2009:

Although Trump is no longer the "owner" of Monday Night Raw, this may not be the end of the feud between these two world class promoters.


Newsbites

Some items of note in the rest of the wrestling business world:

In the often rumored by never seen, TNA is taping full episodes of "Spin Cycle" to pitch to a network. Three pilot episodes have been shot, though few details are available on the show content and how it differs from the current internet show. TNA has been trying to add an extra hour of programming for some time. At one point, this was rumored to be a Knockouts-only show, but that never came to fruition. Meanwhile, TNA has launched Epics in the UK thus far and has been trying to expand distribution of that inexpensive to produce show.

As covered last week, DSW and Joe Hamilton have brought suit against the WWE for breach of contract relating to DSW being dropped as a development territory. The WWE law team has already responded asking the case be moved from federal court to state court. It is unknown what state the WWE asked for (Georgia or Connecticut), but most likely are looking for favorable terms at the state level. Given that this case involves interstate commerce, the WWE may have a tough time with this argument.

Not mentioned last week in the journal, Mr. Hamilton's son referee Nick Patrick worked for the WWE until August 8, 2008, when he was released after chronic back injuries. Also, in April 2009 Joe Hamilton was released from his contract with Rampage Pro Wrestling due to financial cutback (he was acting as television show director). These two items may be part of the underlying reasons why the lawsuit is being launched now instead of in 2007.




In the Marketplace we look at the trends in television ratings. This section is less for critical analysis by the Journal but more for the reader to see what is really going on and to draw their own conclusions.

As with stocks, here in the Journal we track the progress of television ratings. If ratings are the barometer by which we judge the product, then over the course of 52 weeks we should be able to see patterns, trends, and anomalies.

For the week ending Wednesday June 24, 2009, here are the current standings of our shows:





RAW
Close (This Week's Rating): 4.5
Open (Last Week's Rating): 3.6
Percentage Change: ▲ 25.0%
52-Week High: 4.5
52-Week Low: 2.6
All Time High: 8.1
All Time Low: 1.8

SmackDown*
Close (This Week's Rating): 1.7
Open (Last Week's Rating): 1.8
Percentage Change: ▼ 5.6%
52-Week High: 2.5
52-Week Low: 1.6
All Time High: 5.8
All Time Low: 1.0

* SmackDown! ratings may include fast overnight if final ratings are not posted. Also, SmackDown! ratings are for the prior week as overnights are not available before this article goes to print.

ECW
Close (This Week's Rating): 1.1
Open (Last Week's Rating): 1.1
Percentage Change: UNCH
52-Week High: 1.5
52-Week Low: 0.9
All Time High: 2.3
All Time Low: 0.6

TNA iMPACT**
Close (This Week's Rating): 1.2
Open (Last Week's Rating): 1.1
Percentage Change: ▲ 9.1%
52-Week High: 1.3
52-Week Low: 0.9
All Time High: 1.3
All Time Low: 0.6

** TNA iMPACT's are for the prior week as ratings may not be available at the time of the Journal's posting

SuperStars***
Close (This Week's Rating): 0.9
Open (Last Week's Rating): 0.9
Percentage Change: UNCH
52-Week High: 1.0
52-Week Low: 0.8
All Time High: 1.0
All Time Low: 0.8

*** SuperStars ratings may include fast overnight if final ratings are not posted. Also, SuperStars ratings are for the prior week as overnights are not available before this article goes to print.

Analysis:

Did Donald Trump "buying" RAW affect the ratings of the other WWE shows? The answer is a resounding "no". From the time of the announcement, SuperStars remained unchanged at a 0.9 and SmackDown dropped 5.6% to a 1.7. With the fallout from RAW (posting a 25% gain covered in depth in "What's News" above), ECW remained unchanged at a 1.1. If this is any indication, RAW can expect a drop to normal ratings next week.




We all know that wrestling is a business, but we don't often pay attention to what sells and makes money. Money and Investing looks into the top selling items in the world of wrestling and any interesting figures that may have come out this week.

What are the top ten selling items for the WWE? From WWEShopZone.com:

1. John Cena Attitude Adjustment T-Shirt ($25)
2. John Cena Attitude Adjustment Baseball Cap ($20)
3. Triple H Eversoris T-Shirt ($280
4. John Cena Attitude Adjustment YOUTH T-Shirt ($22)
5. WWE Ultimate Rivals Trading Cards ($2)
6. Jeff Hardy 2 Armband Package ($40, on sale $14.99)
7. John Cena Attitude Adjustment Sweatband Set ($12)
8. John Cena HLR Academy T-Shirt ($25)
9. Jeff Hardy PPV #20 Action Figure ($39.99, on sale $22.99)
10. WWE White Gift Bag ($3)

For anyone who doubts the selling power of John Cena and wonders why he has his spot in the WWE, they need look no further than this week's Top Ten list. John Cena does not just introduce single items, but whole sets of items that people pick up immediately. T-shirts, hats, sweatbands—all of these quickly raised to the top. Also at the same his older t-shirt got a boost from the sale, leading to John Cena dominating the list this week with 50% of the items.


TNA sometimes releases a list of top selling items on ShopTNA.com. According to the site the top selling items were:

1. Beer Money T-Shirt ($19.99)
2. World X Cup 2008 DVD Set ($14.99)
3. Jeff Jarrett - King Of The Mountain DVD Set ($29.99)
4. The Midnight Express 25th Anniversary Scrapbook by Jim Cornette ($29.99)
5. Nevermore: The Best of Raven DVD ($7)
6. Second 2 None - World's Toughest Tag Teams DVD Set Signed by Team 3D ($19.99)
7. Kurt Angle - Champion DVD ($19.99, on sale $7)
8. TNA Guitar Picks ($4.99, on sale $3.99)
9. Knockouts Blaster Pack ($19.99)

TNA's list this week shows the power of exposure on television leading to sales. Raven's DVD came out in 2005 and has not been on anyone's radar for quite some time. Yet because he has been visible on television, tying that with a $7 price tag led to a spike in sales beyond most on the current roster. On the other end of the spectrum is the Knockouts Blaster Pack. Trading cards truly have turned into a major item for TNA, and this quick $20 item demonstrates that the investment has been worth it.




Wrestling isn't just about watching and reading. The best way to be a wrestling fan is to experience it live. Where is wrestling coming to in the next 2 weeks? The Personal Journal answers that question.

Sunday	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday
28 (Jun) WWE The Bash (Sacramento, CA)	29 RAW / SuperStars (San Jose, CA)	30 SmackDown / ECW (Fresno, CA)	1 (Jul) SmackDown / ECW Live (Bakersfield, CA)	2 SmackDown / ECW Live (Palm Springs, CA)	3 RAW Live (Auckland, New Zealand) SmackDown / ECW Live (San Diego, CA)	4 RAW Live (Sydney, New South Wales, Australia)
5 RAW Live (Brisbane, Queensland, Australia) SmackDown / ECW Live (Honolulu, HI)	6 RAW Live (Adelaide, South Australia, Australia)	7 RAW Live (Melbourne, Victoria, Australia) SmackDown / ECW Live (Tokyo, Japan)	8 RAW Live (Perth, Western Australia, Australia) SmackDown / ECW Live (Tokyo, Japan)	9 TNA Live (Jamestown, NY)	10 SmackDown / ECW Live (Manila, Philippines) TNA Live (Hamilton, ON, Canada)	11 TNA Live (Hamburg, NY)

Do you know a wrestling event coming up? Send one in to The Hamilton Ave Journal and we'll be sure to add it to the list.




The Editorials section is designed for you, the readers, to respond to the views presented in the Journal, send an important news item, or talk about another overlooked business related item in wrestling. Just beware: the Journal reserves the right to respond back.

From the commentary section last week, there was some confusion over who is suing who. Sammy says:

SoBe is owned by Pepsi. I think they'll have no trouble sticking it out with WWE in the long haul over this lawsuit.

Unfortunately, Sammy, you are confusing two very different companies.

South Beach (SoBe) Beverage Company is an organization that was founded in 1996 in Norwalk, CT and was acquired by PepsiCo in October 2000.

SoBe Entertainment is record label that was founded in 2003 in Miami Beach, FL by a totally different set of people.

PepsiCo and South Beach Beverage Company have nothing to do with SoBe Entertainment (though they have sponsored some SoBe Entertainment events). South Beach Beverage Company was named after the beach in Miami, but that is where the similarities end. The term "SoBe" is actually public domain as a name that is used by many other companies. For instance…

"Sobe World" in an online role playing game that was trademarked in 2007 by an individual developer

"My Sobe Honey" is a brand of honey trademarked by an individual in 2001 (abandoned in 2003, so you can have that one if you want)

"Sobe Sushi" is a restaurant service owned by Loews Hotel that was trademarked in 2007

"I Love Sobe" is an advertising slogan owned by New Age Properties since 2007

Basically, South Beach Beverage Company has a trademark of using "SoBe" as a beverage and as a logo on beverage products, but so long as your product is not one of those you could create a product called "Sobe".

Moving away from lawsuits to the international scene, BringTheNoise wants to know:

Any thoughts on what the death of Misawa will mean to NOAH as a business? I believe he was the President of the company.

Misawa was actually the founder of NOAH in May 2000 as well as the Global Professional Wrestling Alliance in 2006. He is also the biggest investment holder and the company controls will most likely fall to his nearest relative, just as AJPW did when Giant Baba died. In a bit of irony, history could repeat itself if a major star is unhappy with Misawa's family's choice of direction for the company. There are most likely a number of smaller investors as well, but they will not have as much say.

Meanwhile, the promotion already has shows booked out through the end of July. After that, either someone in the current office will step up to run things or the promotion will simply fall apart. If this were TNA and Jeff Jarrett suddenly died, the promotion would go on just fine because there is enough structure and other backers around the organization. Being this a promotion more similar to ROH, the loss of a key player could either deplete the organization completely after this run or could lead to a new leader stepping up (a la Paul Heyman in Eastern Championship Wrestling).

Back to the main topics on hand, the WWE has been exploring more ways to make PPV revenue. One was the possibility of movie theater showings. AngryTas fills us in:

RE: "testing" of cinema showings on PPV.

Back in 2003, something happened to Australia's PPV rights and they were no longer available. Village Cinemas picked up the slack and showed WWE PPVs for a short time. The first of these was Backlash 2003, where The Rock took on Goldberg.

Obviously I can't provide any hard figures, but the cinema I was in was definitely full.

This reporter was at the event live, so there was no need to go to a movie theater for the experience. But in the Boston area, movie theaters often show big Red Sox games at their cinemas, which leads to dollars that normally would not exist. The WWE may be on to something. Canadian Dude shared his experience:

Watching wrestling in a movie theater is awesome. I didn't know Americans didn't have that option.

Theaters SUCK! provides the opposing view (do you wonder what he might say?):

Yeah. Unfortunately we either have to…

a) Watch it the comfort of our own home without sitting in shitty theater seats and being able to talk to our friends about what is going on

or

b) We have to go to a local Bar and watch and drink beer and eat chicken wings.

I can't see why people would think that watching a PPV in a theater is so awesome?!?!?

I watched several PPV on closed circuit back in the day and they sucked!

I'll stick with having a PPV party once a month and having my friends bring beer and food over and have a great time without watching it in a dark theater with 50 other marks, bad seating, and no booze.

You can have your closed-circuit Canada!

Several things to note: first, many theaters nowadays have premium seating, serve alcohol, and have full service food. Not to mention some theaters have excellent stadium style seating in very comfortable chairs. Next, who says that the theater will go dark and you can't talk? The WWE can arrange to keep the lights on low and if people do not care if other talk, then they will. On top of that, movie theaters are only one option. Some warehouse style bars have large screen projectors that they can set up all around and charge a cover fee. There are many different possible paths the WWE could go.

Also, you never elaborated on why you thought closed circuit was so bad back in the 1980's. What exactly did you find so distasteful about the experience. More importantly, what were the attendance figures like? Even if you did not enjoy it, just showing that people were there proves that there was a market and made money for the WWE, which is what this is all about.

Sticking with the PPV discussion, MacDollarz wants to discuss Dragon Gate's foray in to the PPV market:

How can companies do PPV (even taped) if they don't have a TV show in place?

Even TNA had xPolsion!.

I think ROH is smart for staying away from PPVs for a moment then going back in. They don't have Panda Energy owning 75% of their stock.

Building a casual fan following on TV, selling some DVDs, and merchandise and then building a war-chest to come back on LIVE PAY-PER-VIEW! is the best way.

Dragon Gate USA probably has an even worse chance of selling PPV's as they will be seen as foreign no matter what they do.

One correction to your thought: When TNA started they had nothing. They were a weekly PPV company that taped every other week. It would take over a year to get xPlosion in place in a smattering of markets.

Other than that, ROH leaving PPV makes a lot of sense for the company. It cost a lot of money for them to produce PPVs and takes over 6 months to recoup costs (9 months given their taping schedule). Given that Dragon Gate is doing expansion in Japan, the USA, and the UK simultaneously, it would not be unreasonable to assume there are a number of deep pocket investors behind them at the moment. They probably do not have the funding of Panada Energy, but enough to sustain the company for at least a couple of years.


Plenty more was written, so be sure to take a look. And of course, a week would not be complete without a good dose of JP Prag's own HIDDEN HIGHLIGHTS!!

If you enjoy the Journal, why not bookmark 411mania.com and make it your home page? You can do that by clicking here.




This concludes Issue #92 (Volume 2) of THE HAMILTON AVE JOURNAL. Join us next week as we get ready to ring the bell again.

Till then!