Keep Calm and Ignore the WWE Stock Crash
Back in the 1980s, when Mongolian monster turned avuncular voice of the WWF Gorilla Monsoon was the company’s main play-by-play man, he used to spice up his commentary not just with catchphrases (“What a maneuver!”) but with gravitas-laden lingo like boxing parlance, fabricated anatomical details, and bogus technical observations from the wrestling business. My favorite Monsoonism — with all due respect to the “external occipital protuberance” — was the way he constantly referenced the winner’s purse and the loser’s purse, meaning that winning the match meant you went home with more dough than your defeated foe. It was a put-on, of course, but he still managed to confer the feeling of some real-world stakes upon the proceedings.
Monsoon would go on to be the (fake) president of the WWF, the onscreen authority figure after the departure of (fake) president Jack Tunney. (For health reasons, Monsoon was replaced in that role by commissioner Sgt. Slaughter in August 1997, but a few months afterward came the Montreal Screwjob, which exposed Vince McMahon as the WWF’s owner and diminished the necessity for such fake authority figures.) But in real life, before his role as president, Monsoon had been a part owner of the WWF. In 1982, when Vincent J. McMahon sold the WWWF to his son — the Vince we all know and love — he also sold shares of the company to his top lieutenants Monsoon and Arnold Skaaland. Monsoon, though, gladly sold his shares to the younger McMahon in exchange for lifetime job security, reasoning that if Vince sunk the company, his shares would be worthless anyway.
Suffice it to say that Monsoon was a better play-by-play guy than he was a financial soothsayer. Vince Jr. reshaped the wrestling industry and turned his dad’s regional promotion into a national (and later international) entertainment powerhouse. Vince may have mortgaged everything he owned to pay for the first WrestleMania, but that gamble paid off, and a decade later, his real-life feud with rival promotion WCW briefly had the WWF teetering on the edge of insolvency. But since McMahon regained the upper hand on WCW, he has hardly looked back. When WCW’s parent company, AOL/Time Warner , decided to get out of the rasslin’ business, McMahon acquired his rival and, as can only happen in professional wrestling, he turned the acquisition into an onscreen story line in which his son Shane bought WCW from AOL/Time Warner right under Vince’s nose. Their conflict would end, however, with an inevitable fizzle: Vince McMahon ran the WWF — soon to be known as WWE — and no story line could negate that fact.
There is one factor that slightly mitigates Vince’s power over the company, though. In October 1999, the WWF had an IPO and the company went public. The McMahon family retained a majority of the stock, but with that offering, the little wrestling company that could became a publicly traded enterprise. But over the years, this change in the business’s structure has rarely come into play with the onscreen product.
Despite a litany of onscreen presidents and commissioners and general managers, WWE has been comparatively reluctant over the years to toy with fictional ownership of the company. (And maybe bringing in superfluous owners simply wasn’t necessary, what with Vince’s children, Shane and Stephanie, as well as his wife, Linda, all flaunting various ownership powers at various times.) There are two exceptions. When Ric Flair made his return to the company in late 2001, he was said to be the head of a consortium that had purchased the shares of WWE stock belonging to Shane and his Stephanie. (McMahon eventually won back the company in a wrestling match against Flair with the illicit assistance of Brock Lesnar.)
Then, in the summer of 2009, McMahon appeared on Monday-night Raw to announce that he had sold the show to none other than Donald Trump. It was a publicity stunt that quickly went awry. WWE and the USA Network (which broadcasts Raw) sent out a press release touting the announcement, which lent credence to the notion that this was more than a story line. Even though they tried to use a semantic trapdoor to say that Trump only bought the Raw TV show and not WWE, the stock price quickly dropped 7 percent. “Doesn’t the SEC consider it a crime for public companies to mislead investors?” asked Deadline Hollywood in great earnestness. The story line came to an end the next week, when Vince bought the show back from Trump for twice what he’d sold it for. For some reason, the Donald was eliminating commercials and refunding tickets, and because of whatever insane, made-up deal he’d struck with McMahon, those losses were still coming out of Vince’s pocket even though Trump now “owned” Raw. (Even if the circumstances were just part of the story, consider Vince’s lack of business know-how to be foreshadowing.)
There’s one more incident that’s worth mentioning. In June 2007, Raw held a conspicuous “Vince McMahon Appreciation Night,” immediately after which Vince’s limousine exploded with him “inside” it. WWE.com announced that Vince was “presumed dead.” And again the media raised hackles. “By announcing that he is ‘presumed dead’ on their official Web site, they could be charged with misleading stockholders,” said CNBC. (The story line was aborted shortly thereafter, when Chris Benoit murdered his wife and son and committed suicide, whereupon Vince was rushed back to life to deal with the real-world crisis.)
All of this is of particular interest this week, since WWE’s stock, which had soared over the past several months to a value of more than $30 per share, came tumbling back down to earth. The causes were more or less straightforward: The WWE Network came up more than 300,000 subscribers short of its WrestleMania goal of 1 million, and WWE’s new television deal with NBC/Universal, while it looks to be about 50 percent more lucrative than the last one, was nonetheless lower than McMahon had promised when he told Bradley Safalow of PAA Investments that he could put Vince in a hammerlock if the new deal wasn’t at least double the old one. WWE’s stock price had soared based on speculation over the TV rights deal and the technological innovation of the network and, thanks to one day of less-than-stellar news, it fell back to earth. (The impending neck surgery of the WWE champion, Daniel Bryan, was not a significant factor. Nor was the surprise departure of CM Punk earlier this year.) As of press time, WWE stock was trading for $10.95; it had basically been a $10 stock for the two years prior to the boom.
Of course, mainstream media outlets leapfrogged one another to see who could lock in the most pun-filled copy: “Talk about getting body-slammed,” “a super smackdown,” “That’s gonna leave a mark,” “WWE shares take a beating,” “WWE Is on the Ropes,” and so on. To make matters worse, an investment firm called Lemelson Capital announced it had bought a stake in WWE and started agitating for the board of directors to replace the management team or to explore a sale of the business. (Coincidentally, over the past couple of months, there have been sporadic rumors about WWE possibly selling to AMC or Disney or some other company. Nobody with any real knowledge thinks for a second that Vince would sell — my guess is he let the rumors fly to goose his value while heading into the home stretch of the TV deal negotiations.)
In their complaint, Lemelson accuses McMahon and the WWE higher-ups of being dishonest because of McMahon’s claims that the network would be a “home run” and his failed TV contract guarantee. Lemelson also accuses WWE of obscuring the potential future losses to pay-per-view revenue that the network could lead to. (The WWE Network includes PPVs in the subscription cost, and DirecTV and the Dish Network have stopped airing WWE PPVS in protest of that; PPV numbers have fallen commensurately. According to WWE CFO George Barrios, the network will probably mean a $60 million loss in PPV “cannibalization” in the United States and another $20 million worldwide.)
If this all sounds rather like a pro wrestling angle, rest assured that it’s not. I talked to the WWE analyst Safalow (who declined to apply the hammerlock, by the way) the other day about this turn of events. “Management quality has always been perceived as an issue by investors,” he told me. “Most people recognize Vince, Triple H, and Stephanie are among the few people in the world who are best positioned to run a wrestling business. It’s everything else associated with running a modern-day media company that concerns people.” According to Safalow, Lemelson’s calls for change are mostly posturing, however — as long as the McMahons hold a majority of the stock, there’s no number of press releases that can upend their reign.
To help quell investor unrest, WWE hosted a conference call on Monday, in which McMahon called the new TV deal “a good deal” but admitted was “not what we wanted.” Barrios said that after investing $75 million in the network over the last two years (and $40 million more in staffing), they were on pace for a net loss in the $50 million range for 2014. The overall vibe was one of shoulder shrugging, a tacit acknowledgment that WWE was sailing into uncharted media waters, and that they were going to have to figure it out as they went along.
There was an unusual absence of bombast from McMahon, who might have been worn out from a recent European trip, or maybe he was just depressed over the reported $340 million he personally lost when the stock price nosedived. That’s not a bad thing: Vince’s detractors have long wished that he had greater circumspection. And even if he doesn’t emerge from this more humble than before, there’s one thing we learned from WrestleMania 1 and the Monday-Night Wars: When Vince is in financial dire straits, good things usually happen. He might have ended up with the loser’s purse in this match, but just like in the ’80s, the winner’s purse and the loser’s purse are just an imaginary construct. Vince will be on top of WWE for as long as he wants to be.
Let’s just hope he doesn’t sell the company to Donald Trump.