WNS Column: Billionaire Gone Tomorrow

Once upon a time in a universe known as the WWE lived an enigmatic and rather rich fellow by the name of Vince McMahon, Vince quite enjoyed being a larger than life billionaire so much that even his daughter Stephanie was affectionately known as The Billionaire Princess. All seemed well until one day Vince attempted to sign a new TV deal, what could go wrong? after all Vince had and has a track record of company performance.

Well what actually transpired is that the once filthy rich business man Vince McMahon was no longer a billionaire, still very rich but only a mere millionaire. So what exactly occurred which led to a net loss of an estimated $350 Million Dollars? Let's roll back to when WWE began to negotiate a new television deal with broadcasters. WWE spoke to and subsequently renewed a deal with the US cable TV network by the name of NBC Universal, according to Forbes.com estimations of this deal placed it around "50% over the previous TV agreement" which sounds impressive.

Further research into the NBC Universal Television rights contract throws up an interesting article in the LA Times.com which states that "NBCU was paying around $50 Million Dollars annually for the previous TV deal, this is predicated by analysts to grow to $150 Million Dollars annually" programming included in this deal are Smackdown, Total Divas and Monday Night Raw. For all you eagle eyed viewers out there this equates to around a 70% increase according to the LA Times

Well this is odd and it gets even more confusing when viewing WWE global TV revenues, Reuters.com states that all of WWE's global TV deals have increased "revenue by $90 million dollars to an average value of $200 million per year"

Wait a minute! this is not adding up, how can someone loose $350 million dollars when company revenue has increased? do I need a pencil and paper? Indeed this is slightly confusing, but all is clear when looking at the causes of such a staggering monetary loss. Firstly under the microscope is the much hyped and much delayed WWE Network, WWE projections indicated up to 2.5 million people would sign up to the Network by the end of 2014, according to the La Times.com so far there have been "700.000 subscribers with expectations that WWE could lose between $25 million to $60 million dollars this year on the Network" This seemingly has caused instability among investors of WWE's profitability,

A further development upon researching this specific issue has been reported by Reuters.com who suggest that "WWE could spend $25 million to $60 million to support the streaming service in 2015" Before I give my own conclusion on this topic I thought I would note a rather humorous statistic with which I have stumbled across while researching for the article, as you are aware during Monday Night Raw WWE pops up an infographic which boasts that it has the largest viewership, or that most people have watched the show compared to any other show etc, this is all very well until after a while when I find that I couldn't careless, where was I? oh yes, Reuters.com also reported that NASCAR which WWE boasts that it has more viewers signed a "$820 million annual deal with FOX (FOXA.O) and NBC"

My own conclusion to this subject is one of optimism, I do feel that WWE has room to grow its revenue in the coming years, but I also feel the problem lies with the over optimistic profit forecast for in particular the WWE Network. WWE is also in a difficult position when it comes to shareholders and also the stock market. Now I am

not a financial guru as in the case of Warren Buffet but I am aware of how volatile the market actually is, from boom and bust, prosperity and recession any disappointing news of missed projections will lead to a steep loss in share price. If WWE intends to sit at the higher end of the business table, then it needs to post accurate forecasts which will lead to shareholder confidence in the business.

Was the Network too ambitious? my view of this question is that I think WWE made a good decision in launching the Network, as more and more technology is been streamed over the Internet as in the case of Netflix etc, but I do think the initial per month membership fee of $9.99 was perhaps too cheap. This is of course taking into account every PPV throughout a 12 month period, but having said that, would this be the case if WWE had hit its customer sign up projections?

Too many questions and perhaps more factors at work here for me to cover in this column, one thing is for certain, putting aside a more than 40% stock fall to just below $20 dollars as of last Thursday (15/05/14), I do feel Vince can still cope with a reported $750 million dollar fortune.

It may be a hard knock life, but it's not that hard.

- Christopher Files