The Hamilton Ave Journal 11.15.08: Volume 1 – Issue 60

Posted by JP Prag on 11.15.2008

The WWE loses one of its biggest names, the Journal checks in with the wrestling scene in Mexico, WrestleMania tickets go on sale, TNA iMPACT gets a price cut, NWA crosses paths with WSX, ratings hit a minor rebound from a down week, and ShopTNA.com has a lot of explaining to do around their merchandise selection.

THE HAMILTON AVE JOURNAL
By JP Prag

Volume 1 – Issue 60

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: Major figure leaves WWE

As mentioned last week in the Journal, a pivotal figure in the WWE corporate hierarchy has decided to leave the company. According to a press release from the company:

Effective December 31, 2008, World Wrestling Entertainment will accept Mike Sileck's resignation as COO and member of the Board of Directors. Donna Goldsmith, Executive Vice President of Consumer Products, has been named as his successor.



Mr. Sileck's departure is a major blow to the WWE organization. While the Journal highlighted that many people in the WWE's top positions may not be as productive as could be and are costing the WWE a large sum of money, Mr. Sileck is responsible for much of the WWE greatest financial achievements. His resignation notice came out just before the Q3 results were released, making it seem like he may be taking issue with the financial direction of the company. Whether that is true or not, Mr. Sileck's prior impact on the company cannot go unwarranted.

In 2005, Mr. Sileck joined WWE as their CFO having been Senior Vice President and CFO of Monster Worldwide. When asked why he chose to leave Monster for the WWE, Mr. Sileck told Stephen Taub of CFO.com:

I had been there for three years. The company had five divisions when I started and was down to one and a half, and on the way to one and I was looking for a new challenge. I had known about WWE a long time. After spending time with [WWE founders] Linda and Vince [McMahon], I felt it was a good business opportunity.

While acting as the CFO, Mr. Sileck made many vital changes to the company including moving the fiscal year to be in line with the calendar year, expanding the WWE's reporting from two business segments to four, and make finance a part of everyone's daily job. Says Mr. Sileck in the aforementioned interview:

I thought I could bring more of a financial orientation to the company. Not necessarily from an accounting standpoint. They have great controls, [and] a great senior VP of finance. They were in great shape. But, I felt finance could be more integrated into the organization.
…
We put financial people, who were in a centralized role, into the businesses, so they are now working for the operators of the different businesses. This helps to get a financial orientation into the corporate culture. For example, in our Live Events business, we now do a very rigorous analysis before we commit to new markets to tour in. This more rigorous analysis is made possible by having financial people in operating roles.

In other words, Mr. Sileck introduced managerial accounting into operating decisions and gave the WWE the tools it needed to become a fast growing financial behemoth that understands how to make money and not just go by their gut.

But in recent years, especially since Mr. Sileck became COO in February 2007, one would have to say that many of those financial controls have left the organization. Decisions are being made quickly and rashly, not as thoroughly or with as much financial rigor as in the past. Current CEO George Barrios joined the company in March 2008 from New York Times company, so he may still be re-establishing controls that were lost in the time between himself and Mr. Sileck when long-time WWE employee Frank Serpe was in the position until his retirement.

Either way, Mr. Sileck has been an important asset for the company and losing him now when finances are on the downturn will again hurt the WWE. This would be a perfect time for his experience and know-how, but now the WWE will face the challenges of the recession alone.


What's happening in Mexico?

Over the past couple of months, the Journal has been extensively following the moves and shake-ups in the Mexican wrestling scene. The WWE scored a new TV deal for all of their programs (save ECW) while TNA filled in the slots the WWE left. Meanwhile, CMLL began bowing under the pressure of their own issues and international competition while AAA began expanding into the United States.

Two week ago, the WWE actually sent out a press release touting the ratings success in Mexico. Despite this, some people in Mexico began to question the success of the WWE. Last week in the commentary section, USAUSA1 sent this in:

I just heard WWE is done on Galavision in Mexico. That only lasted 6 weeks, LOL. AAA wins the war. Really, WWE should of known better messing with Televisa.

Taking this cue, the Journal began to research and track down exactly what was happening. On the WWE's own website they list RAW being shown Sundays at 5:30pm on Galavision and Live at 8:00pm Mondays on TVC Deportes. Yet, on Galavision's website under Lucha Libre they list only AAA.

Going over to Televisa Deportes, they sent out a press release on November 7, 2008 stating (roughly translated):

Thanks to the success of the WWE RAW on broadcast television, starting November 10 Televisa Deportes will broadcast every Monday the thrill of wrestling.

The events will be televised at 10:30pm on Channel 4, Canal de la Ciudad.

Again on November 11, 2008 Televisa Deportes sent out a press release trying to clear up the confusion. As it was, RAW was being transmitted a week behind schedule, so Televisa used an opportunity to fast forward the weeks and get everyone up to date. The ratings have actually been so good that Televisa does not want to be a week behind but actually in line with the United States. These shifts in schedule appeared to confuse many people, but were not an indication of the WWE being done with Galavision. Says Jorge Pietrasanta of Televisa:

People have been asking to move [RAW] to the same day [it is show in the US], something that was sought from the beginning…

He continued:

We started on Sunday with some strategic moves that work for the company. First it was at 3:00 pm right after Triple A and the ratings remained at a good level…"

When asked specifically if the time change would lose viewers, especially children, Sr. Pietrasanta said:

The change is for those fans may look ahead a little bit; it's a bit difficult being on Monday night, but when thinking about family and children viewers the show is repeated on Sundays at 5:00pm by Channel 9, "

So all and all, RAW is alive and well in Mexico; it has just moved a number of timeslots to makes sense and keep up with the US.


Newsbites

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

Plenty of other news outlets are picking up on the WWE financial issues that the Journal reported on last week, including Variety. An interesting report to read on the WWE cash flow situation by Steven Mallas is available on BloggingStocks.com.

After two delays, tickets for WrestleMania 25 in Houston, TX went on sale this Saturday. Despite the hype, the WWE did not sell out and as of Monday had sold 40,000 tickets. Now that number is no small feat in just a day or two, so there is nothing to be taken away there. Besides, the WWE has already made the event profitable based on ticket sales alone. According to a press release from the WWE:

With ticket sales already exceeding $4.8 million, fans from 24 countries, including all 50 states and 7 Canadian provinces, are expected to attend the event, making the 25th anniversary of WrestleMania an event only a state the size of Texas could handle.

The venue can hold around 70,000 people, but there is still plenty of time to make additional ticket sales. This reporter will be on hand for the event in either case.

In what is not being viewed as a good sign, the TNA iMPACT Video Game has already dropped in price just a few months after its release. A drop in price usually comes 6 months after a title is out, so this is indicating lower than expected sales. Despite this, TNA has started to release downloadable characters for the XBox360 version of the game. Petey Williams and Curry Man are available for 100 Microsoft Points (roughly $1.25) while Mike Tenay is free.

Meanwhile, Midway has been putting much their marketing budget into Mortal Kombat vs. DC, but development does still continue for TNA iMPACT 2. Hopefully this one will take less time to develop so the project can see completion and fix the errors and issues that gamers noted in the first one.

The NWA has begun work on a new show that will air on the Coulors channel on Dish Network. Involved in the project are Adam Pearce, David Marquez, and Big Vision Entertainment's Kevin Klinerock who worked on WSX. While the show is only planned for the one network for now, the NWA is looking into syndicating the show internationally and in the United States. Considering most countries in the world already have 3 WWE shows and 1-2 TNA shows, it does not seem like there is a lot of room on the spectrum for another wrestling broadcast.


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.

For the week ending Thursday November 13, 2008, here are the current standings of our shows:





RAW
Close (This Week's Rating): 3.1
Open (Last Week's Rating): 3.0
Percentage Change: ▲ 3.3%
52-Week High: 4.1
52-Week Low: 2.5
All Time High: 8.1
All Time Low: 1.8

SmackDown*
Close (This Week's Rating): 2.1
Open (Last Week's Rating): 1.7
Percentage Change: ▲ 23.5%
52-Week High: 2.9
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): 1.2
Open (Last Week's Rating): 1.0
Percentage Change: ▲ 26.3%
52-Week High: 1.5
52-Week Low: 0.6
All Time High: 2.3
All Time Low: 0.6

TNA iMPACT**
Close (This Week's Rating): 1.1
Open (Last Week's Rating): 1.2
Percentage Change: ▼ 8.3%
52-Week High: 1.2
52-Week Low: 0.9
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:

After a week far down the ladder, SmackDown rebounded nearly 24% to tie their MyNetworkTV record rating with a 2.1. This week, though, they actually surpassed their total audience so it looks like people are starting to find them again. ECW also partially recovered from Election Day, going up to a 1.2 but below the recent 1.3 average. RAW has also hit its recent ceiling of a 3.1. The last time RAW got a rating above a 3.1 was on August 18, 2008.


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 Heritage IV Trading Cards ($2)
2. Eddie Guerrero Viva La Raza! DVD/Armband/T-Shirt Package ($57.95, on sale $26.99)
3. WWE Black Gift Bag ($3)
4. WWE SmackDown vs. Raw 2009 (PS2) ($39.99, on sale $34.99)
5. Hardys WWE Shop and Jakks Pacific Exclusive Action Figure ($34.99, on sale $24.99)
6. WrestleMania 25 Collage T-Shirt ($20, on sale $9.98)
7. Hardys Purple Logo Pendant ($10)
8. WWE Ultimate Rivals Trading Cards ($2)
9. Stone Cold Steve Austin Destroyed That T-Shirt ($25, on sale $20, on double sale $9.98)
10. WWE Red Gift Bag ($3)

A week after releasing numbers that showed some major hits to their margins, the WWE showed that the pattern is thoroughly continuing in the fourth quarter. There are actually four items in the Top Ten under $5, hardly a stellar number to be showing off. Of the remaining items, all are discounted save the $10 Hardy Pendant. While some of the discounts are off of packages, the numbers are not impressive. Also of interest is that with the new SmackDown vs. Raw 2009 game out, only the PS2 version made the list. Why the PS2 and not the PS3 remains the bigger mystery as it looks like there may be plenty of people who never upgraded.

TNA releases a weekly Top Seven list on ShopTNA.com. According to the site the top selling items were:

1. Jeff Jarrett Autographed Laser Engraved Guitar ($299, on sale $199)
2. Autographed Sting Baseball Bat ($149)
3. TNA iMPACT Video Game ($39.99 to $59.99)
4. Knocked Out DVD ($14.99)
5. TNA Global iMPACT DVD ($19.99)
6. Post Yard Sale DVD Special ($29.99)
7. Post Yard Sale T-Shirt Special ($39.99)

What is even worse than TNA not updating their list is that they are not watching their website at all. This item is listed as a featured item with two stars and has the following reviews:



On one hand, it is refreshing that TNA does not filter their responses at all. On the other hand, this is their marketing venue and they are putting on some harsh self deprecating material.

As mentioned above, though, TNA is not paying attention to their site at all. This item is shown on the front page and has been listed there for quite some time:



Now why would TNA continue to advertise someone who is no longer with them when they have plenty of other people that could take the space? On top of that, when the WWE releases someone their merchandise immediately gets discounted. Somehow this one is still at full price! These little types of disorganizations add up greatly to TNA's underlying issues. They need to get their house in order instead of trying to grow huge quickly. This is just one of many small examples of how TNA is not being run and instead just being driven.


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
16 (Nov) SmackDown Live (Dortmund, Germany) TNA Live (Huntsville, AL)	17 RAW / ECW (Atlanta, GA) TNA Live (Nashville, TN)	18	19	20	21 ROH Live (Dayton, OH)	22 ROH Rising Above PPV Taping (Chicago Ridge, IL)
23 WWE Survivor Series (Boston, MA)	24 RAW / ECW (Providence, RI) TNA iMPACT (Orlando, FL)	25 SmackDown (Albany, NY) TNA iMPACT (Orlando, FL)	26	27	28	29 RAW Live (Elmira, NY) SmackDown / ECW Live (State College, PA)

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.

From the commentary section last week, Guest#5027 of course wanted to talk about the WWE's financial results (as all no-named guests do):

If they are going to cut costs, aren't they recognizing the problem?

And cutting costs while the company is still very profitable is "too little, too late"? Isn't that when they should be doing it? Or is this something that has already done bad damage?

And lastly, should the revenue increase for January 1 to September 30, 2008 compared to January 1 to September 30, 2007 ($401 million in 2008 to $353 million in 2007) be considering disappointing or not given all factors involved?

Last_Rider covered many of the points:

To guest 5027, cutting costs doesn't mean you're acknowledging the issue.

Take, for example, the current American economy. People have been voting and discussing a proposed "bail-out" plan to relieve the financial problems. The bank issues are symptomatic, not causal. If Americans lived within their means and not up to their eyeballs in debt banks wouldn't be in the position they're in, neither would the market, and so on.

Similarly, the WWE removing low end talent and pencil pushers while multiple rather useless "high end" executives drain the finances without contributing anything of value.

Also, lest I be lambasted for denouncing Americans in general, I am a very proud American, I simply acknowledge that the basis for our financial system as it is will collapse eventually.

That is a good over-arching argument, but let's break down each one of the guests issues separately:

The issue is not that they are recognizing the problem, it is that they did not recognize it soon enough. The Journal, other analysts, and investors have been noting issues with rising costs since the beginning of the year. Yet at the same time, the WWE claimed that everything was fine. Even during this quarter the WWE sent out 3 press releases to say how good they were doing, all the while knowing these numbers were coming. On top of that, they have not really admitted that there is an issue. If you read their numbers and their releases, the WWE does not actually acknowledge that the problem is that their internal controls have allowed costs to rise out of control. Instead they blame everything from the economy to the Olympics to make up excuses. They say they need to cut costs, but they don't say why, and that is the key to self reflection and beneficial change.

The reason that is "too little, too late" is because they already had an extra $20 million in cost year-to-date. The damage has been done. You cannot undo spending money. They could have been proactive and stopped excess spending 9 months ago, but instead they let it boil to this point where they are being reactive and are cutting wrestlers and staff. Again, they are not addressing the issue and are just trying to fix numbers by eliminating people.

The problem isn't the revenue increase; that is something that—overall—they have done amazingly well. Even though with time value of money they were down for the quarter and not as high up year-to-date. This is a key business point that most people miss: revenue is not a true indicator of company health. The real indicator is profit. So while revenue has been rising, net profit has been going down. That means that the WWE has to earn more money to make less in the end. That is a terrible and dangerous situation to be in and related right back to costs being out of control. In a healthy organization, more revenue would lead to more profit. More revenue leading to less profit is not what anyone would want, yet it is what the WWE is constantly trying to cover up.

Sticking with the dollar, Crimefighter stated:

And the author missed completely that WWE INCREASED THE PRICE of the PPVs! Don't you think THAT is a factor?

The Journal would consider it a factor, if it happened this year. The increase on costs of PPVs (outside of WrestleMania) happened last year, not this year. Yes, there is an additional charge for the HD broadcast, but that is not broken out right now. Year-over-year, the prices were the same so the buyrates were the issue. Now, if you are suggesting that the price of PPVs made them less affordable this quarter because people had less disposable income this year than last year, then yes, you would be correct.

Moving away from the WWE, TNA made a hiring decision that Karlos wanted to comment on:

Re: William Goertel -- I'm not sure that I agree with the apparent assumption that a graphic designer is only capable of operating in a single style, or with the suggestion that no new ideas are possible, only retreads or ideas that he had "not been able to implement" previously.

Although the Journal does not necessarily believe that Mr. Goertel is a breath of fresh air to the TNA organization, the Journal did state:

… although there may be ideas that Mr. Goertel has that he has not been able to implement while with the WWE for nearly a decade.

The Journal does agree that the possibility exists, but for now the Journal is concerned that TNA will look more like the WWE. Even if Mr. Goertel has new ideas, he will need to work with what he knows to produce at the beginning and that means using the WWE-style.

Moving on to the favorite topic of merchandise is UcantCLA:

Just curious if you have any info on WWE Vol 9? I know the last CD tanked commercially since it contained some horrible intro music, but I have to think the next CD should contain [better ones].

With a track list including those songs it should at least double the sales of vol.8 and vol.7 (released only on iTunes). Keep up the good work.

While the Journal is not privy to exact sales figures for the CD, CD sales across the board have been down this year for a variety of factors; most notably competing technologies (MP3), no cross-genre super artists, and less dollars available to spend on music. The WWE would be smart to continue to release iTunes and the like only versions of songs. Also, instead of releasing volumes, just putting their entire catalogue of entrance music up would give a continual sales volume. The time of the super hit album is gone, but there is a possibility for one-off tracks selling well. If you want an example of that, look no further than Jillian Hall's Christmas album which reached number 120 on the Billboard 200.

And on to everyone favorite topic (for the last time)—Belfast, N. Ireland courtesy of Sammy::

Epic fail for your "multiple Belfast" argument because it absolutely not true. And really, that's the best you could come up with? You took WWE at face value, WWE has Belfast improperly classified, therefore you are also wrong by relying on their listing. Move on and stop getting so uppity about defending yourself.

The Journal was not defending itself against being wrong. People like Iron Knee were fine in the way they pointed out the issue. The problem was with people like Ignorance who started to make baseless accusations and showing no respect. The Journal has always issued corrections when wrong, but will not tolerate being disrespected for no reason.

On the other hand, the Journal rarely prints praise received as well. There was quite a bit of it last week and this reporter thanks everyone who submitted complements. We at the Journal greatly appreciate the recognition that goes into producing an issue of the Journal, especially one like last week.


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!!


CLOSING BELL

This concludes Issue #60 (Volume 1) of THE HAMILTON AVE JOURNAL. Join us next week as we get ready to ring the bell again.

Till then!