MR. TITO STRIKES BACK – Why the WWE is Reducing Pay Per View Events – Is the Brand Extension Ending?

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Welcome back to the Mr. Tito experience exclusively here LordsofPain.net / WrestlingHeadlines.com. Make sure that you bookmark our website or follow us on Twitter in order to quickly gain access to the non-stop content that we provide you. I mostly write at least once a week and if inspired or during Pay Per View weeks, several times a week.

But let’s talk about WWE Pay Per Views. I am RELIEVED that the WWE, starting with WWE Backlash following Wrestlemania 34, will start to have combined Pay Per Views each month instead of 2 separate Pay Per Views per brand. You have no idea how rough it is to produce the “INSTA-COLUMNS” where I write the columns as the Pay Per Views occur and proofreading spelling, grammar, and HTML coding on the fly. To just do that ONCE a month… THANK GOD. I’m relieved.

Then some of you are complaining about the Combined Pay Per Views being 4 HOURS long… So what? It’s just 1 more hour on top of the 3 hours that you’ve already watched. I’d rather watch 1 night of a 4 hour show versus 2 nights of separate 3 hour shows. Do the math with the previous scenario… That’s TWO Sunday Nights per month that you have to prepare for and make arrangements with your family, friends, and free time to watch WWE Pay Per Views. Then, if you add those 2 nights together, that’s 6 hours of programming that you’re watching instead of the Backlash & beyond policy of just 1 night of 4 hours. I’m 100% fine with that as WWE Pay Per Views have the WWE’s best in-ring stuff. I’m OK with that especially since it is mostly commercial-free compared to the 3 hour RAW marathon seen on Mondays.

That, and it ends the decrease in QUALITY seen during the latter half of 2017 from both RAW and Smackdown Pay Per Views… Some weak shows seen as both rosters are managing injuries and oddly enough, pushing the wrong guys (UGH @ those Jinder Mahal headlined shows).

Also, if you’re a dedicated WWE fan and watching RAW/Smackdown LIVE on the USA Network… TWICE a month, you’re asked to watch 3 or more hours of Pay Per View on Sunday Night, 3 hours of RAW on Mondays, and then 2 hours of Smackdown on Tuesdays. That is 3 straight evenings of watching WWE content only AND each of those days are before Workdays as well. It can be exhausting as a wrestling fan to watch all of that content. Oh, if you watch 205 Live on Tuesday nights following Smackdown and NXT on Wednesdays… Holy cow.

The thing is… It’s exhausting for the WWE too.

But before we discuss WHY the WWE may be willing to switch from 2 Pay Per Views per month (excluding NXT) to just 1 combined Pay Per View… Let’s review what the WWE RAW/Smackdown Brand Split has presented the WWE as noted in their 2017 Financial Statements (10-K):

WWE NETWORK

2016 WWE Network Revenues: $180.9 Million
2016 WWE Network Costs: $123.3 Million
2016 Profit from WWE Network: $57.6 Million

2016 WWE Network Subscriptions: 1,403,000

2016 WWE Network Profit Per Subscriber: $41.05

***

2017 WWE Network Revenues: $197.9 Million
2017 WWE Network Costs: $119.4 Million
2017 Profit from WWE Network: $78.5 Million

2017 WWE Network Subscriptions: 1,471,400

2017 WWE Network Profit Per Subscriber: $53.35

———–

LIVE EVENTS

2016 WWE Live Event Revenues: $144.4 Million
2016 WWE Live Event Costs: $99.2 Million
2016 Profit from WWE Live Events: $45.2 Million

2016 Total Attendance # of WWE Only (NXT excluded): 2,101,800
2016 Total # of WWE Events (excluding NXT): 344
2016 Average Attendance: 6,110

2016 Live Event Profit / Average Attendance: $7,398

2016 Venue Merchandise Sales: $10.9 Million

***

2017 WWE Live Event Revenues: $151.7 Million
2017 WWE Live Event Costs: $106.2 Million
2017 Profit from WWE Live Events: $45.5 Million

2017 Total Attendance # of WWE Only (NXT excluded): 2,170,200
2017 Total # of WWE Events (excluding NXT): 384
2017 Average Attendance: 5,652

2017 Live Event Profit / Average Attendance: $8,050

2017 Venue Merchandise Sales: $10.2 Million

———–

TELEVISION

2016 WWE Television Revenues: $241.7 Million
2016 WWE Television Costs: $120.1 Million
2016 Profit from WWE Television: $121.6 Million

2017 WWE Television Revenues: $270.2 Million
2017 WWE Television Costs: $129.5 Million
2017 Profit from WWE Television: $140.7 Million

——————————————————————-

If you look at the numbers directly, QUANTITY from the RAW/Smackdown Brand Extension delivers financial results for the WWE:

(a) More WWE Network subscribers by almost 70,000 since 2016

(b) 40 more Live Events during 2017 than 2016

(c) Television revenues are up for 2017 versus 2016, likely due to the full realized year of Smackdown Live happening for all of 2017 versus 2016 having LIVE smackdown only half of the year.

Everything looks great, right?

Think about it from the WWE Employee‘s standpoint… TWICE a month, WWE puts on a Pay Per View on Sunday, Monday Night RAW on Monday, and Smackdown on Tuesdays. All 3 shows are live… However, for 3-4 months a year, there exists a NXT Pay Per View which could prompt WWE’s Production Crew and Ring Crews to prepare for FOUR straight nights of WWE televised shows and within multiple arenas! Think about how exhausting it must be just for the guys setting up the arenas.

And we haven’t even started on the management part yet…

WWE’s Creative Team has to prepare for 2 straight back-to-back LIVE television shows per week and twice a month, it becomes 3 straight back-to-back LIVE television shows (4 if NXT’s Pay Per View is around). While RAW, Smackdown, and even NXT have their own creative teams, management above that (Vince, Stephanie, Triple H, Dunn) overseeing those creative teams at the WWE nightly production meetings are reviewing each show. Oh, there’s 205 Live which Vince McMahon FINALLY stepped down from overseeing… Think about this for the 70+ year old Vince… On Pay Per View weeks, he was managing the Pay Per View, RAW, Smackdown, AND 205 Live! That was 9+ hours of live television to manage in 3 straight days!

And Vince McMahon is about to restart a professional football league in the XFL?

Then, think about all of the travel involved… On Pay Per View weeks, there are travel arrangements to manage by WWE staff and talent/employees affected by those arrangements. Then, WWE has to ensure that Merchandise is readily available for each of those 3 straight Live Events. Connection wise, they have to ensure that Live feeds for all 3 shows are being sent perfectly to WWE Network and USA Networks without issues. On top of all of that, you have to handle employee endurance and potential turnover. WWE likely employees multiple camera teams but the grind of working a 3 hour show from a very demanding WWE Production Truck and Vince McMahon has to be exhausting.

However, as you can see from the WWE Financials above… Revenues appear to be UP! Right? Surely, the WWE could just staff-up to management this exhausting pace.

Well, in Microeconomics, there is a theory called the Law of Diminishing Marginal Utility where “utility” is defined as satisfaction derived from the consumption of a good. Law of Diminishing Marginal Utility is defined as a situation where a person increases consumption of a good/service but the added utility (or satisfaction) DECLINES per each additional good consumed.

Think about it this way… Go to your local Pizza Store and buy 2 large pizzas to challenge yourself. The first slice is amazing because you’ve been hungry for a while and it is extremely satisfying. However, the 2nd slice is great but not as delicious as the first. After all, you were extremely hungry when consuming the first and not-so-much for the 2nd. The 3rd slice isn’t nearly as satisfying as the 1st and not as much as the 2nd. Think about it this way… The 3rd piece follows two slices of pizza that are already in the consumer’s belly. Ditto for the 4th, 5th, 6th, etc. slices… Each additional slices of pizza consumed DECLINES in utility or satisfaction as a consumer. It could get to the point where you’re FULL from eating too much pizza or actually sick.

Look at what the WWE DEMANDS of its consumers. Twice a month, please do the following:
(a) Watch a 3-5 hour Pay Per View on Sunday
(b) Watch a 3 Hour Monday Night RAW show on Monday
(c) Watch a 2 Hour Smackdown Live show on Tuesday
(d) Watch a 1 Hour 205 Live show on Tuesday following Smackdown
(e) Watch a 1 Hour NXT show on Wednesday nights

Oh, and if the WWE has a LIVE EVENT nearby, please attend that! From my MATH above, in case you didn’t notice, LIVE ATTENDANCE per show is DOWN from 2017 versus 2016 but Revenues per show is UP. What that means is that WWE has raised ticket prices and loyal fans, for now, are willing to pay a higher price per show than before. But how long will that last? And in bigger cities, which could potentially see multiple Pay Per Views, RAW shows, and Smackdowns per year… How long can this momentum last? The fact that LIVE attendance is declining could be a signal to the WWE that “diminishing marginal utility” could be setting in across their fanbase. LIVE WWE events, per city, are becoming “less special” because you’re able to see Pay Per Views, RAW, and Smackdown often to water down the experience and the WWE is asking for higher prices, too. It’s becoming expensive to attend live events…

Here’s what I’m wondering… Where are the viewership numbers for Pay Per Views on the WWE Network?

In my opinion, THAT IS THE KEY… WWE, unlike Pay Per View numbers on Cable/Satellite which they HAD to review, they only have to show total WWE Network Revenues, Costs, and # of subscribers. That’s it… They are not obliged to show WWE Network viewers per show because they are already financially reporting on each show. When WWE Network first started during 2014, they had a Top 10 list which showed what WWE fans were interested in watching… That quickly disappeared and has been unavailable since 2014.

Chances are that Viewership per Pay Per View held on WWE Network is DECLINING aside from the “Big 4” events which are trending strong with combined RAW/Smackdown viewers. WWE Corporation is likely seeing those numbers and wondering why they are exhausting their resources for this RAW/Smackdown Brand Split.

If it could be assumed that WWE Network subscriptions WON’T change, why bother pushing the Production Truck and Crews out to 7-8 additional Pay Per Views. Maybe there is a bigger incentive to make better Houseshows on those Sundays instead? You’ll get 6-7 thousand fans in attendance, which would be less than a Pay Per View, but the Cost overhead is much less. Also, the energy given for RAW/Smackdown events could become more upbeat and employee retention on Production, Management, and Ring Crews could become stronger. There could be a chance that WWE is paying excessive Overtime to handle twice-a-month when you have to manage THREE Live Events in a row of 3 hours or more each. That is exhausting!

To me, it isn’t so much that the RAW/Smackdown Brand Split is “failing” but it’s just that the effort to hold 7-8 more additional Pay Per Views just isn’t worth it both financially and personally. On top of that, asking WWE fans to go THREE STRAIGHT nights of 3 hour+ wrestling viewership on nights before Workdays is brutal. Sending more WWE Live Events to bigger cities more often could be burning out WWE fans who LOVE to attend Live Events… Yet, they are asked to pay more in prices per show and maybe the quality has diminished with a split roster.

Things were much easier when WWE held a Pay Per View on Sunday, RAW Live on Monday, and TAPED Smackdowns on Tuesday for a Thursday/Friday airing. Much easier to film for a TAPED show than a LIVE one where things could go wrong and cannot be edited.

I also believe that the WWE has seen a “substitution effect” on the WWE Network versus seeing RAW/Smackdown live on television… Why watch RAW/Smackdown when you can just watch 2 Pay Per View events on the WWE Network? If that is true, then I’m wondering if the WWE is purposely slowing down the WWE Network in order to help/assist the USA Network show viewership. That sounds crazy but Television revenue STILL provides the WWE 34% of its Total Revenues. Because the WWE median age of WWE television viewers is now older (reportedly 54 in 2016 versus 28 in 2000), their fanbase aren’t as big of cord cutters as believed. People in their late 30s, 40s, and early 50s can probably afford Cable/Satellite while also having WWE Network.

In summary…

(a) WWE Corporation is getting burned out from hosting 2 Pay Per Views per month and hosting 3 LIVE events in a row twice a month.

(b) WWE Fans are getting burned out by having too much WWE to watch during Pay Per View weeks to watch 3 straight nights of 3+ hours of wrestling content.

(c) Live Attendance is down, as having more Pay Per Views per month is sending the WWE to the same bigger cities more often. Hard to ask higher ticket prices when you’re bombarding your fans with quantity. Several cities are getting multiple Pay Per Views per year… What is so special about that? Gets expensive and the quality declines if you’re seeing a Brand specific Pay Per View (especially from last year’s efforts, thank you Jinder Mahal).

That is my take… It’s NOT the “end fo the world” for the RAW/Smackdown Brand Extension.

SO JUST CHILL… ‘TIL THE NEXT EPISODE!

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