The Hamilton Ave Journal 02.05.09: Volume 2 – Issue 72

Posted by JP Prag on 02.05.2009

The WWE puts over their ratings and community outreach success, but quietly clothes a number of offices. In other news, Randy Orton almost punts John Cena and Jeff Hardy out of the Top Ten, editorials delves further into the losses in the video game industry, and the Journal analyzes just why the WWE has so many PPVs in a year!

THE HAMILTON AVE JOURNAL
By JP Prag

Volume 2 – Issue 72

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: WWE pumps ratings and community service, but closes offices

In these less than desirable economic times, the WWE media department has been working on overdrive to try to make the company look better. While all of this economic turmoil has been going on, the WWE has also been trying to shift their image from the edgy and teen focused organization to family friendly (and especially kid friendly) entertainment.

Over the past few weeks, Linda McMahon has been working on her bid to join the Connecticut Board of Education and has the governor of the state at her backing. But the WWE did not want to stop there showing their dedication to youths. On the WWE Fan Nation YouTube page, the company released a video of CEO Linda McMahon taking several children and young adults to an opera event.



At the same time, press releases were sent out concerning the WWE Reader's Challenge, the success of "SmackDown Your Vote", and the various other WWE programs. This culminated in the "WWE Community Champion". From the press release:

WWE is proud to announce WWE Community Champions, a program that celebrates youth who display outstanding community spirit. Selected youths will be featured in exclusive WWE videos to appear on WWE.com and WWEKids.com.

The website for the program is already available (http://www.wwe.com/inside/overtheropes/communitychampions/) with the first few Community Champions listed. Obviously, this is all part of the WWE Kidz Initiative and is being done to make the WWE a seemingly more family friendly form of entertainment.

Still, it is not only children and families the WWE is reaching out to, but also potential sponsors. The WWE sent out another press release touting their television programs and their ratings among the male audience. From the press release there:

Friday Night SmackDown® on MyNetworkTV (8:00 PM ET/PT) is the number one program Friday nights on broadcast television among males under the age 50, especially the key M12-17 and M18-34 demos

Monday Night RAW® on the USA Network (9:00 PM ET) is the number one entertainment program on primetime cable among male viewers (M2+), including M18-34, M18-49 and M25-54

ECW® (9:00 PM ET, Tuesdays) is the number one program on Sci Fi among male viewers (M2+) including M12-17, M18-34, M18-49 and M25-54

For advertisers looking to reach the male demographic, WWE's male dominance is the reason why it is considered the best value in entertainment.

Despite an extreme specialization of the numbers, these are true figures and key demographics for advertisers. The WWE is doing their best to continue to have sponsors in a fractured and light market. Others are already taking these numbers at face value, though, including The Miami Herald that printed this part of the press release in their sports section.

Despite these positive releases, the WWE quietly made some rather large decisions to cut costs. Over the past two months, 10% of the workforce has been laid off or released, SmackDown has combined into bi-weekly tapings, the referee force has been combined together, the WWE ended a capital program, and plenty more.

This week, the WWE actually closed international offices in Australia and Canada, both large and important markets for the WWE. In Canada, the WWE ad sales staff will keep their job because the WWE does not have the same programming fees as in the United States and most of the rest of the world but actually sells advertising sales themselves.

The offices are still being listed on the WWE Corporate page and no reasons have been given as to why these offices would be closed. WWE Canada makes some sense as WWE has offices in Connecticut, New York, and LA and Canada is quite accessible from any of them. That said, Australia is not the easiest place to get to from the United States, but the Japan or China office may be taking over the functions there.

The savings amount from these closures is also unknown, but it will most likely go only a small way towards the $20 million cost savings goal.


Newsbites

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

Tapings for the new "WWE Superstars" show (that will air on WGN) are expected to begin after WrestleMania. At this time, they show is planned to tape before RAW. It is unknown if the WWE will tape Superstars and ECW before RAW and continue the SmackDown double tapings or if ECW will return with SmackDown and tape every week. Right now there are very few live events schedule that far out, though SmackDown and ECW are (for now) taping together at a couple of events in May.

Though sales for SmackDown vs. RAW 2009 may be down for the year (see the Editorials section below), the game has been nominated for "Best Fighting Game" at the Annual Interactive Achievement Awards.

Awards aside, the slower sales of the title along with other issues led to THQ (makers of SmackDown vs. RAW) net loss of $191.8 million for Q4 2008 alone.

Video game may not be selling as well, but the WWE found a rare niche in the CD market. WWE the Music Vol. 9 jumped to number 11 on the Billboard list, selling 26,000 copies for the week.

Despite trimming back talent and the size of their development program, the WWE has been expanding their working relationship with OVW. The WWE severed ties with OVW as a development territory last year, but the organization has remained solvent even without the WWE's support. Meanwhile, the WWE's sole development territory FCW has had significant logistics issues with everything from getting a TV deal in place to having bathrooms installed.

The WWE will be releasing Q4 2008 and year-end results on February 24, 2009. As expected, the Journal will have complete coverage starting on February 26, 2009.




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 February 4, 2009, here are the current standings of our shows:





RAW
Close (This Week's Rating): 3.6
Open (Last Week's Rating): 3.6
Percentage Change: UNCH
52-Week High: 4.0
52-Week Low: 2.6
All Time High: 8.1
All Time Low: 1.8

SmackDown*
Close (This Week's Rating): UNAV
Open (Last Week's Rating): 2.2
Percentage Change: N/A
52-Week High: 2.8
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): UNAV
Open (Last Week's Rating): 1.4
Percentage Change: N/A
52-Week High: 1.5
52-Week Low: 1.0
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: 1.2
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:

For some unknown reason, SmackDown and ECW ratings are delayed this week, though preliminary numbers show SmackDown may have had a strong drop to the 1.9 to 2.0 range. But without solid numbers, there is nothing to comment on there.

What is known is that RAW was able to maintain its relatively higher rating of a 3.6 from last week, showing a surprising uptick at the beginning of this year. RAW was not alone as TNA iMPACT tied its all-time high rating of 1.2. iMPACT has scored a 1.2 four times in the past two months which would put it in line with last years figures. Can TNA keep ratings up or will their cycle start trending them down through the Spring?




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. Randy Orton Gas Mask T-Shirt ($25)
2. Hardys Green Pendant ($10)
3. WWE Black Gift Bag ($3)
4. WWE: The Music Vol 9 CD ($13.47, on sale $9.99)
5. Randy Orton Age of Orton T-Shirt ($25)
6. Jeff Hardy 3 Armband Package ($60, on sale $20)
7. Hardys Purple Logo Pendant ($10)
8. CM Punk Full Zip Hooded Sweatshirt ($40, on sale $24.98)
9. John Cena HLR Academy T-Shirt ($25)
10. John Cena Cenation Sweatband Set ($12, on sale $5.98)

In quite a beneficial surprise, Randy Orton has not only stayed on the list, but this week became a top individual seller with two very high margin items. All of Mr. Orton's TV time has apparently been paying off as even as a heel he is outselling the biggest faces in the company. If this can keep up for long remains suspect, but for now Mr. Orton has been able to diversify the list consistently for weeks, not just the one offs that we have seen many times.

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

1. Main Event Mafia – Black T-shirt ($19.99)
2. Autographed Sting Baseball Bat ($149)
3. Main Event Mafia – Grey T-shirt ($19.99)
4. Frontline T-Shirt ($19.99)
5. Cross The Line Triple Pack ($24.99)
6. TNA Ultimate Matches ($19.99)
7. Mick Foley - Bang Bang T-Shirt ($19.99)

TNA up to their old tricks? Why would the list be updated more than once every two months?




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
8 (Feb) TNA Against All Odds (Orlando, FL) RAW Live (Sacramento, CA) SmackDown Live (Bakersfield, CA)	9 RAW (Oakland, CA) iMPACT (Orlando, FL)	10 SmackDown / ECW (Fresno, CA) iMPACT (Orlando, FL)	11	12	13 RAW Live (Los Angeles, CA)	14
15WWE No Way Out (Seattle, WA)	16 RAW / ECW (Spokane, WA)	17 SmackDown (Portland, OR)	18	19 SmackDown Live (Leon, Mexico)	20 RAW / ECW Live (Huntington, WV) SmackDown Live (Guadalajara, Mexico) TNA Live (Macon, GA)	21 RAW / ECW Live (Bristol, TN)

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, it was learned after the Journal's report that the two new WWE shows would actually be half an hour a piece. Still, considering the shows' premises, that is quite a bit of content as casual_monday_mayhem points out:

If "This Week in WWE" starts at 21:00 CET Monday, and "WWE Vintage Collection" at 21:30 CET Monday, at least the clip show is just 30 minutes, which gives probably 22-24 minutes of actual WWE content. How do they cram FIVE hours (EIGHT on a PPV week) in 22 minutes?

How much of the shows are just filler now?

Outside of new television, merchandise (per usual) remained quite the hot button issue. graves9 thought TNA's list was of particular interest (since they did update it for the first time in two months):

The fact that the M.E.M is outselling the young guys IMO has more to do with the way both groups are booked. The M.E.M are booked as the biggest stars and much smarter and better than the Frontline. They have pretty much taken out what should be the Frontline's top two stars (Joe and A.J).

I am somewhat surprised that the Frontline gear is even selling well enough considering they've been made to look like losers (for the most part). I think if they were booked stronger they'd sell more items and gain creditability, too.

That has to be in the long term plans (assuming there are long term plans), but everything these top players say is proven true here: they are the sellers while everyone else is still in second place. Now TNA management's job should be to reverse this trend and make their home grown talent the true sellers. At some point, even the M.E.M. members will have to retire and TNA cannot depend on them for much longer, especially Sting and Kevin Nash.

Sticking in merchandise, video game sales for SmackDown vs. RAW 2009 were down compared to last year's model. Ryushinku brings some additional perspective to this trend:

I really can't put too much stock in the growth of the video game industry... that's been viewed as always strong and growing in the past, but I think that it's going to be hit pretty hard over the next couple years. The lower sales of SvR 2009 may be an early shot across the bow, and it's far from the only release or company experiencing it at the moment. I think the days of the multi-million dollar videogame may be numbered.

JAMRenaissance adds on to this point:

I think people are reading into this what they want to read into the drop in SvR sales without looking at more context.

According to http://www.networkworld.com/news/2009/011609-wii-tops-december-video-game.html, game sales DID slow in the fourth quarter from where they were before.

Moreover, whereas 2008 was a great year for the industry as a whole, several companies (including EA and THQ) have experienced massive cutbacks and layoffs. The general theory is that a few specific companies are making money, but EVERYONE is not. Look at the Top 10 games of the year - FIVE are Nintendo games.

And let us not forget the troubles at Miday, makers of TNA iMPACT the Video Game, still on sale now. To counter Ryushinku's point, the video game industry has not always been viewed as strong. In the early 1980's, the entire industry almost died in America and was saved by Nintendo and Super Mario Bros.. But after the 16-bit generation, the growth was steady, but not phenomenal. This past year, video game sales outpaced movie sales for the first time in history, so there has been a phenomenal growth.

That said, it makes sense that video game sales would be slowing down. As JAMRenaissance pointed out, there was a drop in Q4 that was offset by the rest of the year. After Q1, it may be a different story and Ryushinku is correct in that SmackDown vs. RAW 2009 is the early indicator. Captain Ron provides additional information around that:

Many high profile releases like Mirror's Edge and the new Tomb Raider have been selling much lower than expected. This year is the year that you'll see the recession hit the videogame industry. SvR is probably a forbearer of that.

Like just noted, you will most likely be proven correct in this.

On the subject of sales shrinking, Amy wants to know more around PPV buyrates:

Every WWE PPV seems to be down.

Is it due to the economy?

Will The WWE finally cut down on their PPV's?

First off, every WWE PPV since the middle of 2008 has been down or about even, but before that some were up and others were down. The lesser PPVs actually saw higher numbers while the "big" PPVs like SummerSlam and Survivor Series saw significant drops. There are a number of factors causing the drop in buyrates including:

The Economy: people have less free cash to spend on indulgences

Availability/Specialty: There is a glutton of available free product between the WWE, TNA, CMLL, AAA, and now NWA and ROH. With that much free product, do people really need to pay for additional product?

Price: The WWE has raised the costs of PPVs over the past 3 years placing them out of reach for many people.

PPV Competition: UFC is dominating the PPV market and had 8 of the top 10 selling PPVs of 2008. Since UFC's ratings on television are far below the WWE's, their conversion rate is significantly higher.

Entertainment Competition: The WWE in general is in competition with other television shows, DVDs, YouTube, video games, and anything else that takes people's attention away. With less eyes on the product, less people can be converted.

Changing Audience: The WWE's aging audience from the Attitude Era was already eroding in droves, so they made a conscious decision to be "family friendly" entertainment for kids. With that, the entire audience changes and it takes time to not only gain those new views, but also convert them into PPV buyers. The cost put in today may not pay dividends for years (if ever), so the WWE has to deal with short term loss.

Will the WWE cut down the number of PPVs? Not while they remain profitable. Even though buyrates may be down, overall sales can still be higher with the current model. We've done this math before, but here it is again:

Let's say the average PPV cost $40. With 14 PPVs, the average buyrate is 150,000. With 12 PPVs, the average buyrate will be 170,000.

$40 x 14 PPVs x 150,000 = $84.0 million
$40 x 12 PPVs x 170,000 = $81.6 million

Therefore, even though individual PPV buyrates are down, the total revenue is higher. This works the same with price, too. Let's the WWE raises the price $5 per PPV.

$40 x 14 PPVs x 150,000 = $84.0 million
$45 x 14 PPVs x 140,000 = $88.2 million

Again, even though buyrates dropped, the overall revenue increased and therefore it was a success. This is the type of financial analysis the WWE does. Of course, those numbers above are not reality and just done for simple math, but it gives you an idea of why there are such a number of PPVs at such a price. For the WWE, it is a profitable model. For the consumer, that is a different story.


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!!




This concludes Issue #72 (Volume 2) of THE HAMILTON AVE JOURNAL. Join us next week as we get ready to ring the bell again.

Till then!