Friday, October 10, 2008

Wrestling's bottom line is no soap opera, von Brooke Masters - The Financial Times - 9th October 2008

World Wrestling Entertainment is spreading the American wrestling phenomenon abroad and raking in international revenue, in one of various attempts to make the sport appeal to a wider audience.

For investors unfamiliar with professional wrestling, World Wrestling Entertainment can be a bit hard to take seriously. Its central product involves near-naked men hitting each other with chairs in a carefully choreographed cross between sport and soap opera. Recently, it staged a purported "tragic accident" involving lighting equipment and Vince McMahon, the company chairman, as a plot point on its RAW weekly television show.

But that's wrestling. Having a showman in charge is as much a part of the wrestling ethos as a Texan oil company president wearing cowboy boots and flying his own planes, or a Wall Street magnate hob-nobbing with society matrons and amassing an art collection that rivals that of the Metropolitan Museum in New York.

Hokey image not withstanding, WWE is a $1.1bn company that saw $485m revenue last year from TV broadcast rights, live shows, consumer products and internet sales. It is a quintessentially American product and the vast majority of its audience remains in the US.

But Mr McMahon's wife, Linda, the company chief executive, makes no bones about her efforts to go global. WWE shows are broadcast in 130 countries and more than 20 languages. The company recently opened offices in Sydney, São Paulo, Tokyo and Shanghai, to bring its total of overseas outposts to six.

So far, the company has found that its products translate well for an international audience. "While it is based in America and there are a lot of American stars, the themes are worldwide: sibling rivalry, jealousy. We've had no pushback on the fact it was an American product," Mrs McMahon told the Financial Times.

International revenue has nearly trebled since 2002, from $45m to $119m last year and now accounts for 25 per cent of turnover. Mrs McMahon hopes to increase overseas revenue to between $180m and $200m by 2011.

"The company has come a long way from being a northeastern [US] events group. We've made it a global brand. We are a content company. We produce it, we create it, we own it and we distribute it."

Business development

WWE is descended from Mr McMahon's father's company, Capitol Wrestling Corporation and Titan Sports, the live event promotion company founded by Mr and Mrs McMahon in 1979.

While professional wrestling is usually considered a young man's product, WWE is making efforts to reach out to other demographic sectors. The company recently tweaked the scripts on Raw so that it could earn a TV-PG (parental guidance) rating rather than a TV-14 (parents strongly cautioned) in the US. Roughly one-third of the US television viewers are female.

WWE's combination of consumer, TV and live products mean it has few clear peers. It currently trades on 19-times forward earnings, compared with an average of 15 for similar sized travel and leisure companies, according to Bloomberg. Six of the 10 analysts who cover the stock rate it a buy, and four say it is a hold. There are no current sell recommendations.

The company has been publicly traded on the New York Stock Exchange since 1999, but the McMahon family controls about two-thirds of the shares. Its share price has outperformed the Standard & Poor's 500 rating by nearly 20 per cent since the beginning of the year.

(Credit: The Financial Times)

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