The Hamilton Ave Journal 12.08.07: Volume 1 Issue 11
Posted by JP Prag on 12.08.2007
RAW gets extended until 2010, WWE programming looses to the NFL and TNA, a major lawsuit ends after three years, and $3 bags become the top selling products in wrestling.
THE HAMILTON AVE JOURNAL
By JP Prag
Volume 1 Issue 11
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.
WHAT'S NEWS
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: WWE Extends Relationship with USA and NBC/Universal
Coming on the heels of WWE RAW's 15th anniversary show, the WWE and USA (NBC/Universal, a division of GE) announced a new multi-year deal that will keep RAW on USA until 2010. Also with the deal:
AM RAW will continue to 2010
WWE will return to Telemundo and mun2 with the Spanish dub of RAW
WWE will supply two late night specials for NBC
Just a few weeks ago, ECW on SciFi was renewed for another year, and SmackDown! is locked in on the CW for another year and half. The WWE is in a very secure position with their programming and can now concentrate on growing the audience, especially trying to skew it younger. See the "Major Ratings Shifts" article below for more details on that.
As expected, the locker room reacted favorably to the news and feels more comfortable with their jobs and the WWE in general.
At the same time, the WWE is making overtures to its broadcast partners to offer additional programming should the WGA strike continue. At this time it is unknown what, if any, proposals are being considered. The WWE has a vast library it could leverage, but also has live events that could be taped or magazine shows made. Should the WWE add more programming, they will need to add a significant amount of people to the production staff. Right now, the staff is already stretched thin with six hours of original programming a week, plus work on WWE 24/7, PPVs, and WWE Films. Giving these limitations, there is a large gap in resources compared to what the WWE wants to provide.
In their favor, though, is that many producers and technical resources are also out of work during the writers' strike. Because of this, they may be able to pick up many quality personnel in short order. Contacts at NBC/Universal should be able to help facilitate those hires.
Major Ratings Shifts
This week has seen an interesting shift in the directions of televisions in general, and on wrestling in particular. Monday Night Football on ESPN scored the highest rating for an NFL game in cable history with a 13.0 rating. This directly impacted RAW which shed 8.6% of its audience to a 3.2 rating.
Meanwhile, ECW was pre-empted this week in favor of Part III of the SciFi mini-series "Tin Man". This was apparently a strong decision because the episode scored a 3.2 rating, setting a SciFi record. ECW then moved to Thursday night where it set a new 52-week low and tied its lowest all-time record with a 0.6 rating. That 0.6 ratings came on October 6, 2000, the very last episode of ECW on TNN. That means that this is the lowest rated episode of ECW on SciFi ever.
On the same night, TNA iMPACT scored a 1.1 rating, maintaining their rating from the week prior. This was especially impressive as they went head-to-head with ECW in the second hour. Coupled with the 1.1 rating on Thanksgiving, TNA has proven they have a "core" audience that is just TNA (or at least preferences TNA over ECW. It remained to be seen what would happen if TNA went head-to-head with RAW again). This is a very strong sign for TNA as they try to expand their audience over the next year.
This is especially true after TNA cancelled two house shows in Mexico scheduled for next weekend. The shows have been replaced by house shows in Oklahoma and Ohio in January, but that makes two international tours cancelled in the past month. TNA needs to slow down and focus on what it will take to grow an audience instead of just trying to find shots in the arm. Now is the time to carefully grow the business. Too often a business can grow at exponential rates and become considerably unprofitable due to lack of controls. On the other hand, a business can overstep its reach and invest too many resources into one thing that does not pay off. Potential does not necessarily equate to success.
Meanwhile, it is no secret that WWE RAW is usually a juggernaut for ratings; the show has remained in the Top Ten shows on cable consistently for years. The chart below provided by MediaLife shows just last week's ratings:
As can be seen, despite strong competition RAW remained in fifth and sixth place. But when these ratings are broken down by demographic, a different story is told. First is the highly lucrative 18-34 demo:
On this list, RAW is nowhere to be found. Why is this an issue? Because advertisers pay a premium for this demographic because they are the largest spenders in American society. If advertisers pay more, then USA would be more willing to pay more for WWE programming. Since the viewers are not showing up as high in this demographic, that means that RAW's viewers must be older. The following chart shows the 18-49 demo:
Sure enough, WWE programming breaks into the top ten, but it is still not in the overall list, which means that the audience skews even older. When we look just at the 25-54 demo, this is the result:
RAW takes a dominant position. This is interesting to not because not only does it control ad revenue, but also bears an important question on the WWE's future. As the years go on, is the WWE replenishing its audience or is the audience just mostly growing older? Aging audiences are less likely to attend live events and buy merchandise, so this could have a direct impact on the bottom line.
It is an interesting situation and deserves further analysis by the WWE internally. Although there is a "core" audience, that audience is simply aging with the company. The WWE will need to re-examine its programming and strategy if they hope to capture and grow a younger audience.
Long Lawsuit Finally Ends
After years in court, the following press release was sent out earlier this week:
The Federal court has issued an order stating that it will dismiss the lawsuit against JAKKS Pacific, Inc. (NASDAQ:JAKK), its officers and other defendants in the federal lawsuit initiated by World Wrestling Entertainment, Inc. (WWE). The judge in the action captioned World Wrestling Entertainment, Inc. v. JAKKS Pacific, Inc., et al., 1:04-CV-08223-KMK in the U.S. District Court for the Southern District of New York, stated in his order that the Court "has determined that it will grant Defendants' motions to dismiss Plaintiff's Amended Complaint", and that a "comprehensive opinion""will be issued in short order" in which "the reasons for this decision are explained in detail." The state court litigation among the parties remains pending.
The suit was first filed on October 19, 2004 due to what the WWE alleged were racketeering and bribery violation. This stemmed from a lawsuit filed against the WWE by another company that basically alleged that the JAKKS was strong-arming them in the WWE's name. The WWE turned around and sued JAKKS for their loss, though the two continued to work together and produce action figures for the past three years.
Since being filed, this case has been a constant topic of discussion during investor calls and SEC reports. During that time, the results of the lawsuit have seemingly been booked as unearned revenue. Now that the case is dismissed, the WWE will have to answer to investor's for their confidence and take a significant write-off. The impact on the bottom line for the forth quarter of this year or the first quarter of next year will be significant.
As of this writing, the news has gone relatively unnoticed by investors as there has been no discernable change to the WWE's stock price. Once this story makes its way through the investor community, though, there may be additional repercussions.
MARKETPLACE
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. Please note that gaps in the chart below are due to data not being released/available.
For the week ending Thursday December 7, 2007, here are the current standings of our shows:
RAW
Close (This Week's Rating): 3.2
Open (Last Week's Rating): 3.5
Percentage Change: ▼ 8.6%
52-Week High: 4.3
52-Week Low: 2.5
All Time High: 8.1
All Time Low: 1.8
SmackDown!*
Close (This Week's Rating): 2.6
Open (Last Week's Rating): 2.8
Percentage Change: ▼ 7.1%
52-Week High: 3.3
52-Week Low: 2.2
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): 0.6
Open (Last Week's Rating): 1.4
Percentage Change: ▼ 57.1%
52-Week High: 2.3
52-Week Low: 0.6
All Time High**: 2.3
All Time Low**: 0.6
** ECW's All Time figures include ECW on TNN
TNA iMPACT***
Close (This Week's Rating): 1.1
Open (Last Week's Rating): 1.0
Percentage Change: ▲ 10.0%
52-Week High: 1.2
52-Week Low: 0.6
All Time High: 1.2
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
Analysis:
Ratings have been covered heavily in What's News this week. Just note here that iMPACT is one week behind, so next week another 1.1 will show an unchanged rating. Also, all of the WWE programming saw a ratings drop in the past week while TNA maintained relatively the same audience. This is further proof that the core audience for TNA is a solider base than first assumed. Now that iMPACT has defeated Thanksgiving and ECW, it is time to go after other audiences not being serviced by any major national company at this moment.
MONEY AND INVESTING
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. WWE Black Gift Bag
2. Shawn Michael Heartbreak and Triumph DVD Retro T-shirt Package
3. John Cena My Life DVD
4. Triple H The Conqueror T-shirt
5. WWE Superstar 2007 Ornament
6. 2008 WWE Day Dream Calendar
7. Triple H Grey Skull T-shirt
8. Stone Cold Steve Austin Jakks Exclusive Action Figure
9. Chris Jericho Save_Us.222 T-shirt
10. WWE Holiday Gift Wrap
As far as items on this list, only the WWE Action Trading Cards left (going from #1 to not even on the list) and WWE Holiday Gift Wrap jumping up. Judging by the items and relative cost of them (the Black Gift Bag costs $3), it must have been a low volume week on WWE.com. Considering the two Triple H shirts jumped so high after falling week after week means more likely the other products dropped in volume at a faster rate that the Triple H T-shirt. Interesting to note that Triple H is outselling Chris Jericho at this point, which may play more into Triple H's behavior noted in the HR article above.
TNA requires a little bit more research. Their website does not release Top Ten lists, so the Journal does a general search for a space on "featured products" and sorts by most popular. They came up in order as:
1. TNA Meltdown Vol. 2 CD
2. The History of TNA: Year 1 DVD
3. Instant Classic: The Best of Christian Cage DVD
4. TNA Fleece Jacket
5. NEW TNA Hoodie
6. 2008 Wall Calendar
7. Long Sleeve TNA Logo T-shirt (Charcoal)
8. Long Sleeve TNA Logo T-shirt (Navy)
9. TNA Christmas Ornament
10. TNA Playing Cards
TNA also so very little movement this week, but did diversify a successful product line: the long sleeve T-shirts now appear in Charcoal and Navy. With that, TNA has almost doubled the sales of long sleeve t-shirts, a high revenue and margin item. As noted in the Journal last week, TNA has done an excellent job of capturing a market the WWE has not: winter clothing.
PERSONAL JOURNAL
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
9 (Dec)
10
RAW Bridgeport, CT
TNA iMPACT Orlando, FL
11
SmackDown!/ECW Boston, MA
TNA iMPACT Orlando, FL
12
13
14
TNA Live Monterrey, Mexico
15
TNA Live Mexico City, Mexico
16
WWE Armageddon Pittsburgh, PA
17
RAW Buffalo, NY
18
SmackDown!/ECW Rochester, NY
19
20
21
22
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.
EDITORIALS
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.
No critical pieces were written this week, so worth your read instead is:
