Is losing 7-10 Million Dollars in profit something the WWE can sneeze at?

[It's...Baylariat!]

-They expect a $7-$10 million loss for the second quarter of this year

The WWE held a conference call for its first quarter financials and according to their records, they expect a 7-10 million dollar loss in the second quarter. One is to assume that with the launch of the WWE Network and other things generating revenue, that things will pick up and profits will rise.

Other revenue streams are good, and making a profit, including house shows.

What's everyone think of this news? Any cause for concern at all for the WWE, or do they have too many revenue streams for a 10 million dollar loss during a quarter to matter?

 

[Jericho91]

It's nothing compared to the 50 million that Linda McMahon threw away when she tried to win the elections. So in short, the answer is no.

 

[laodaron]

There are tons of economic terms at play here, but minimizing loss or rather maximizing negative profit is typical. In addition, short run losses mean nothing to a long term firm. The WWE doesn't care about this loss.

 

[Jack-Hammer]

I'm hardly some sort of financial expert but based on what I've read in terms of WWE's financial report and various stories online regarding WWE stock, it sounds as though this wasn't something that was unexpected. While WWE was optimistic that the WWE Network would have closer to a million subscribers than was initially reported, the actual number of 667,000+ wasn't unexpected.

The WWE Network is something that's ultimately expected to deliver over time rather than right away, at least that's what every report I've read indicates. WWE's goal, and this was announced before the network was launched, was to have a million subscribers by the end of 2014. The network is supposed to launch very late this year or early next year in the United Kingdom, Canada, Australia, Singapore, China, New Zealand, Denmark, Norway, Sweden, Iceland and Finland. So if the network is able to garner a million subscribers just in the United States by the time it's available in other countries, then things will most certainly be looking up.

As I was reading over the report, I'm not certain if the projected $7 to $10 million loss means that they're actually going in the hole or if that they're expecting to make $7 to $10 million less than they did during the same quarter last year. After all, DISH Network and Direct TV aren't gonna be carrying WWE ppvs going further, at least not the B ppvs, and that's certainly gonna cut into WWE's revenue. I'm leaning more towards the latter because when you total up the revenue from all their 1st quarterly report, it still comes out to about $125 million, when you take into account the missed revenue due to a large number of fans not ordering WM XXX from through traditional ppv outlets. Even if it does mean they're taking an actual loss of $7 to $10 million even after all their revenue is totaled, it's a short term loss. Again, based just on what I've read and what I'm able to gather, it doesn't seem like it was at all unexpected. However, if they're able to get the subscribers, then it'll be all good. For instance, Extreme Rules last year drew 231,000 buys with a price of about $50, which would come to about $11.5 million before taxes and before satellite and cable providers get their cut. This is only a guess, but I'd definitely bet that the WWE Network has over 700,000 subscribers by now. Even if you didn't watch ER on the network last night, you still paid your $10 monthly subscription fee, so that'd be $7 million, all of which goes right into WWE's pocket. Plus, WWE ppvs are still being carried by cable providers even if DISH & Direct TV have opted not to, so there's still some money to be brought in from there.

If the network gets a million subscribers, stabilizes and even continues to gain more subscribers nationally and internationally, which is ultimately what WWE hopes, they'll be able to cut out the middle men altogether.

 

[No Count Pup]

In the grand scheme of things, $7-10 million is a paltry amount. The only problem is the Wall Street narrative. If WWE starts to look bullish, it can affect stock investment and value.

The television deal will be the real barometer of WWE standing. If WWE gets double or triple their licensing monies, the minor second quarter shortfall will be forgotten in short order.

 

[shafe_41]

Hammer kind of nailed it as he usually does. They launched the Network and the loss wasn't something unexpected. Launching the Network and not garnering all the PPV buys from cable and satellite is what likely did it. You could probably get that 7-10 million in just PPV buys alone from the people that saw Mania on the Network. I read I believe 400k actually ordered Mania. I believe Mania is $60 a pop. Then around 650k saw Mania on the Network. Take those 650k and assume they would have paid $60 for Mania. You're looking at $39 million right there. I'm also no financial genius, but in that $39 million, I'm sure you find your 7-10 million you're losing. I wouldn't bat an eye at it honestly. WWE doesn't have anything to worry about. Once the Network goes global, we'll see what happens. But for now, I believe the loss was expected and Vince's pockets aren't exactly worried.

 

[ShowOffHEEL]

They may be taking that loss now, but when business picks up they'll be bringing in ALOT more than that. They want 1 million Network subscribers by the end of year in the US alone, imagine what the number will be when it goes worldwide!
I'm in Australia and you can bet your bottom dollar that I'll be getting it and I know alot of people that will be doing the same.

This loss doesn't affect them in the slightest because the WWE, and all big corporate companies, look at the long term.

 

[Pedigree1]

This should not come as a shock to WWE. Also,i believe they were expecting this. 667,000 subscribers is not bad at all,remember this is only may the network came out the day after EC. I would venture to guess,the number of subscribers is over 700,000 which at $10 a pop equals to 7,000,000 right into the WWEs pocket.

Diretv and Dish chose not to carry anymore WWE PPVs going forward maybe the lesser ones anyway.. Why split the revenue with the cable companies when you can have it all? I would be intersted in the number of people that bought it only for comcast..

The WWE in doing what their doing and when successful they will completely cut PPV out all together.. PPV is already in the past,when streaming is available.. Now at only 10 a pop you can watch quality PPVS in HD. They could charge 15 and still make money. I would wait until after SummerSlam to really get a grasp on the numbers and where this might be headed

 

[Vespula]

As long as a company has enough cash on hand and doesn't have debt it cannot pay there isn't strictly a need to show an accounting profit. Lots of companies choose not to operate at a profit, Amazon for example is almost never profitable because it chooses to make massive capital investments every year.

The reason Amazon hasn't gone bankrupt is they generate enough revenue that they can still pay for all their costs of business and the sole reason they are showing a loss is they are choosing to spend money on capital investments instead of choosing to basically not spend it in order to keep margin high or do things like pay dividends to shareholders.

Given the small loss WWE showed, if they had chosen not to start the WWE Network they could have shown a paper profit this quarter. But they are looking at the WWE Network as a long term boost to their competitiveness and are basically planning long term versus short term. You tend to see long term planning in companies that are owned/ran by their founders. That's the situation with Amazon where founder Jeff Bezos is CEO, and in WWE where Vince still has overall control of the company.

"Employee" CEOs tend to do anything they can to show paper profits because their compensation is tied to it, but corporate founders tend to judge their success on whether they've built a company that will last long after they've died.

 

[tvcolosi]

Next year, it would hurt. This year, yes. I imagine the losses this fiscal year are mostly due to up front cost with the WWE network. After all that its only about 10% of their total value. So it wont be an issue this year most likely.

 

[THTRobtaylor]

...and then they fire they guy in charge of the schedule...

THAT is a big indicator the Network hasn't gone over as well as they wanted... either not enough content was online quick enough or too much was... but the news above coupled with is is a massive clanger for the WWE... At best, this will be the guy who said "Make Mania and all the PPV's part of the first $60" at worst, this is Vince trying to shuttle blame for a bad move on his part... losing the PPV companies one month in was not "part of the script" the numbers weren't great, SEC are nosing and now they get dropped by the PPV providers... someone was gonna go... not this guys fault, they still barely OWN half the libraries to make the concept of the network work for them... But No McMahon is taking the fall this time...