WWE Feels the Pain - Broadcasting & Cable

WWE Feels the Pain

Wrestling stumbles and looks for a new star brute
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Hulk Hogan and The Rock have left the ring, leaving the future of World Wrestling Entertainment on the large shoulders of such relatively anonymous hulks as Goldberg, Randy Orton, Brock Lesner and Eddie Guerrero. They aren't household names, but WWE CEO Linda McMahon hopes they soon will be.

Viewer interest in the sport-slash-soap opera has waned over the past two years, with Dwayne "The Rock" Johnson going off to make action movies.

Acknowledging the ratings downward drift, WWE launches a new advertising campaign today tagged "Smack Your TV." The campaign offers extremely large men doing things like throwing other extremely large men into the ropes or two scantily clad women getting ready to rumble. With that, WWE hopes to draw in viewers who have never tuned in before.

"The problem is that wrestling runs in cycles and they have to develop some hot new names," says Dennis McAlpine, managing partner of McAlpine Associates, and the last remaining analyst covering WWE Inc. since its heyday in 2000 and early 2001.

What that translates into is a 41% drop in ratings among men 18-34 for UPN's WWE Smackdown!
on Thursday nights, compared with the show's high point three years ago. More than half the Smackdown!'s teen male audience has departed since the show's peak 2000-01 season. The declines have stemmed some this season. Still, compared with last year at this time, male teens are off 8% season-to-date, while men 18-34 are off 19%.

On Spike TV's WWE Raw
on Monday nights, ratings have dropped 28% among men 18-34, 35% among male teens and 36% among all teens, compared with Spike's best wrestling ratings two years ago. Raw
also is down 8% in male teens and 11% in men 18-34 compared with last year.

"As far as ratings go, we are never happy. If we were doing a 10 rating, we wouldn't be happy because we would think we could do an 11," says Linda McMahon, wife of the much more media-exposed Vince. He's WWE's chairman and public front man, but it's Linda who runs the day-to-day business.

Despite its recent woes, Smackdown!
remains one of UPN's highest-rated shows, particularly among young males. This season, the show lost many viewers during the broadcast networks' premiere weeks and baseball playoffs, but, since baseball's conclusion, Smackdown!'s numbers have been ticking back up.

"Smackdown!
continues to be a valuable franchise and consistently keeps UPN in a competitive third and fourth place in all the major demos on Thursday night," says Dawn Ostroff, UPN's president of entertainment.

Two weeks ago, Smackdown!
tied for first with NBC among male teens, took second among all teens, and won third among all six networks in every one of the key young-adult demos, including adults 18-49. Those numbers were UPN's best among young males since last December, and they beat ABC, Fox and The WB.

At Spike, Raw's 3.0 average rating in men 18-34 and 3.6 in male teens is far higher than Spike's overall prime time averages of 0.6 and 0.7 in both demos, and wrestling consistently remains among the top 10 shows on basic cable. Spike also relies on Star Trek
repeats to drag in the channel's core audience.

"I think both franchises have helped us gain awareness for our other shows," says Jim Burns, Spike's senior vice president of current series and sports production. "If we didn't have WWE, we wouldn't have been able to launch The Joe Schmo Show, for example."

Linda McMahon also attributes WWE's ratings decline to a strategic split of the WWE brand into two parts: Smackdown!
and Raw.

WWE wants to keep those brands clearly defined, and is not allowing the stars of one show to interact with the stars of another, except during special events, such as upcoming nostalgia-fest, Wrestlemania XX, at Manhattan's Madison Square Garden in March. That event already has sold out a crowd of 18,000.

"Splitting the brands was subsequent to our goal of growing our international business, not because the business here in the U.S. is saturated," McMahon says. "Now we have two sets of products to license and additional pay-per-views. And having two brands to tour internationally also was a bonus."

If U.S. audiences have grown weary of the WWE's chair-throwing antics and melodramatic plot lines, audiences in Europe, Asia, Australia and South America are only just being introduced to them. In fiscal year 2003, ended April 30, sales outside North America totaled $51.8 million, a 35% increase over 2002's $38.5 million take and a 79% increase over 2001's $28.9 million take. WWE reports second quarter 2004 earnings today.

While WWE can take its show abroad to find new markets, UPN, in particular, is left having to make do with what it's got.

This year, the network is down 18% in men 18-34 compared with last and 29% compared with two years ago when Star Trek
sequel Enterprise
premiered to big numbers. In UPN's key adult 18-34 demo, the network is down 18% from last year and 26% from two years ago, when UPN took Buffy the Vampire Slayer
from The WB and Enterprise
was delivering high ratings.

Viacom's UPN pays $300,000 a week for Smackdown!
and has an option to renew the $15.6 million deal in January, according to WWE's most recent annual report. UPN took over selling Smackdown!'s ad spots this fall, at a price of $38,000 for a 30-second spot, according to BROADCASTING CABLE estimates. If the network sells 22 minutes of advertising per hour, the industry average, it reaps $1.7 million each Thursday night, meaning UPN nets $1.4 million per show, or nearly $73 million per year. With those economics, it's likely UPN will re-up.

Viacom also pays $600,000 per week, or $31.2 million annually, to keep wrestling on Spike. Besides WWE Raw
and WWE Raw Zone
on Monday nights, Spike airs WWE's Velocity, Heat
and Confidential
on Saturday and Sunday nights. Spike's WWE contract expires in fall 2005.

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