Zachary Haines may be the ideal fan to sustain the World Wrestling empire after a bruising year on Wall Street.
The 28-year-old owner of an Ohio wholesale business has been hooked on professional wrestling since he was 14. Each year, he spends thousands of dollars on VIP travel packages for Wrestlemania, the championship extravaganza making its South Florida debut this weekend in a headliner match featuring Dwayne “The Rock” Johnson.
When he comes home, Haines usually puts two new souvenir Wrestlemania chairs in his finished basement, where framed works of art by professional wrestlers hang from the walls. And as he and his wife jump up from their front-row seats to holler at Triple H, the Undertaker and their other favorite wrestlers, Haines says it doesn’t bother him that the victories get scripted by a team of writers working out World Wrestling Entertainment’s Connecticut headquarters.
“It would if I knew what the outcomes are going to be,’’ said Haines, who will be attending his 14th Wrestlemania at Sun Life Stadium in Miami Gardens on Sunday. “But I have no idea. I have seen the craziest stuff happen.”
That kind of devotion fuels the nearly $500 million WWE generated last year through ticket sales, video game licensing deals, pay-per-view revenue and merchandise sold around the world.
It is a corporate empire that traces its success back to the days of Mr. T and Hulk Hogan during the Reagan years. Yet it still produces top-rated cable shows, accounts for almost a half-a-billion dollars a year in revenue, and generates enough profit to pay its famous CEO and ringside provocateur, Vince McMahon, more than $100 million in dividends and salary in just the last three years.
But faced with waning profits, drooping attendance, and an ill-fated venture into the movie business, WWE approaches its biggest weekend of the year facing doubts about just how far fan loyalty can carry the company.
“They’ve got their fingers in so many pies now,’’ said Michael Kupinski, an analyst with Noble Financial Capital who follows WWE stock. “They have to, in my view, start concentrating on what the WWE is good at, and what makes them great.”
WWE saw its share price drop 28 percent in the last 12 months, from $12.05 a share to just under $8.80 while most of Wall Street was on a bull run. Last week, CNBC’s Jim Cramer declared WWE stock a “sell.” A disastrous experiment in the movie business played a large role in the slide. Attendance at WWE bouts is down 8 percent for the year, television audiences for WWE’s hit Raw cable show have shrunk in recent years, and WWE’s talent scouts and writers haven’t yet landed a red-hot young wrestler ready to hook a new generation of fans.
As a result, the real-life financial stakes for Wrestlemania 28 may be even higher than the fictional ones inside the ring.
“It’s going to be interesting to see how it plays out in Miami,’’ Kupinksi said. “They’re certainly trying to draw against their original fan base. And getting back to their core by bringing back The Rock.”
If Wrestlemania is the most celebrated day on the WWE calendar for fans, it’s also the most profitable for the company.
Last year’s Wrestlemania XXVII in Atlanta generated $36 million in revenue for WWE, including $24 million in pay-per-view dollars. The price isn’t cheap — WWE said the average Wrestlemania fan paid $55 to watch last year — but Wrestlemania generated 1.1 million buys around the world in 2011, according to WWE regulatory filings.
The annual smackdown rotates around the country and is considered such a draw that WWE recently began inviting cities to bid on the event with a package of tax-funded subsidies.
To win Wrestlemania this year, Miami-Dade sent a box of stone-crab claws from Joe’s to WWE’s Stamford headquarters and pledged up to $2 million in cash, free venue space throughout the county and other donated services.
“It’s the first event in Miami’s history to use SunLife Stadium, the AmericanAirlines Arena and the Miami Beach Convention Center,’’ said William Talbert, president of the Greater Miami Convention and Visitors Bureau. “This is not just the stadium being full. This is a major event.”
Fans can pay $40 to visit a four-day WWE expo at the Miami Beach Convention Center that opens Thursday night. For $80, they can watch WWE’s Hall of Fame induction ceremony at the AmericanAirlines Arena Saturday night. Holders of VIP tickets have the chance to spend $300 for a WWE charity party in a Star Island home, with proceeds to benefit a local hospital. The most deep-pocketed of fans can pay $2,500 to join three friends for a foursome with a WWE star in a pro-am golf tourney at Doral’s Blue Monster course.
It all leads up to the main event, Sunday night’s Wrestlemania. Out of about 70,000 available seats, roughly 1,700 were still for sale on Ticketmaster Friday. There were another 6,000 available on Stubhub, a resale site, with seats going for as low as $17. While almost one out of every two tickets on Stubhub were going to Florida buyers, site spokeswoman Joellen Ferrer said purchases were coming from as far away as Dubai and Finland.
All of the $1,500 ringside seats were gone from Ticketmaster, but were selling for $2,500 and up on Stubhub. Ferrer said one fan paid $7,400 for a seat in the third row.
Fans with those tickets actually sit in souvenir Wrestlemania folding chairs featuring silk-screen images of the night’s headliners. Haines obtained his chair collection for his Cincinnati basement through the VIP tickets, with fans encouraged to walk out of Wrestlemania with chairs in hand.
“If you go through the airport after Wrestlemania, you will see people carrying their chairs,’’ said Andrew Stein, interim chief marketing officer for Kmart, where fans can buy the Wrestlemania chair for $75 after spending $30 on WWE action figures, sheets, t-shirts, video games or other merchandise sold at the department store. “It’s part of the phenomenon of Wrestlemania.”
WWE reported an overall profit of $25 million last year, and Wrestlemania contributed about $11 million to the bottom line. Television sales, pay-per-view buys and tickets from WWE’s scripted live events, including Wrestlemania, account for about 70 cents of every dollar the company brings in. Last year, the company’s revenue hit $484 million, up 1 percent from 2010 and down 8 percent from an all-time high of $527 million in 2008.
WWE is best known for its weekly cable shows Smackdown and Raw, which will air live from the AmericanAirlines Arena on Monday April 2. That will be one of WWE’s roughly 320 live events throughout the year, 80 out of them outside of the United States. The tally doesn’t count bouts by WWE training outfits performing at small venues, including a recent appearance by the Florida Championship Wrestling squad at Miami-Dade’s County fair.
Each year, WWE characters land on the Top Five list in the action-figure category, behind whatever movie is hot at the moment. (Last year, WWE finished second to Transformer action figures, WWE CFO George Barrios said.) And with WWE’s weekly Raw and Smackdown cable shows now broadcast in 60 countries — more households in China receive WWE programming than do homes in the United States — the company sees its brand poised to hook growing middle classes in Latin America, Asia and India. On March 1, WWE announced the opening of a Miami office to run its Latin American operations, including the key markets of Mexico and Brazil.
“We’re like an action telenovela,’’ Ed Wells, WWE’s senior vice president for international operations, said in a telephone interview from Buenos Aires. “Our storyline continues week to week, 52 weeks a year.”
In May, WWE will bring its stars to Rio and Sao Paolo for the first time. As usual, the wrestlers will berate each other in English; WWE executives say their characters are so well-known, no translation is needed for the 80 bouts it holds worldwide. That included a stop last year in Abu Dhabi, where Wells said the audience had no problem following the action.
“They knew every catch phrase, every gesture, every gimmick from every super star,’’ Wells said. “Our international crowds can chant along as well as anyone.”
As Wrestlemania readies for its 30th anniversary in 2014, the company sees opportunity in a new media environment, with plans for a stand-alone WWE channel and a partnership with Google for fresh digital content. Executives cite statistics they say prove WWE’s advantages in a digital age: 8.5 million “likes’’ on Facebook (compared to 5 million for the NFL), WWE superstar John Cena’s 1.7 million Twitter followers (Tim Tebow has 1.4 million), 270 million views on WWE’s official YouTube channel (still far behind the NBA’s 766 million views).
But WWE also faces competition from the upstart popularity of “ultimate” fighting bouts and mixed-martial arts. And then there is the perennial challenge for McMahon and his creative team: keeping fresh what a WWE employment ad for its writing staff described as “the last of the great variety shows on television.”
On Sunday, Cena, 34, will take on The Rock, a one-time University of Miami tackle who gained fame in the WWE in the late 1990s. He left wrestling in 2004 to pursue a successful movie career, but now he’s back in the ring at age 39. It’s a casting move that some fans see as a lack of confidence in WWE’s current roster.
“Bringing Dwayne Johnson to Wrestlemania is indicative of how their current stars are viewed,’’ said Sergio Hernandez, who writes about the WWE for Cageside Seats, an independent blog. “They don’t think they can get to the level they want with their current stars.”
Wrestlemania producers often reach beyond the WWE roster for novelty bouts — Jersey Shore’s Snooki joined in a tag-team match last year, and Mickey Rourke took on WWE regular Chris Jericho when Wrestlemania went to Houston in 2009. Still, talent is enough of an issue that Barrios had to address it this month at the annual Roth investors conference in Laguna, Calif.
“One of the things we are going through is a fairly significant shift in the roster. Some people wanted to retire. Some of the people, we wanted to retire,’’ Barrios told analysts. “It has forced us to energize the next wave of stars... We have them in the fold today. We just don’t know who they are.”
Whatever talent gap WWE may face as Cena and its other stars age, it will mean the latest challenge for McMahon, who has managed to become the last man standing in what was once a competitive wrestling industry.
McMahon started his own promoting career in 1971 shortly after graduating from East Carolina University and joining the family business. His father enjoyed success as a small-time promoter, and gave his son the uphill task of filling seats for matches in Bangor, Maine.By the early 1980s, the younger McMahon had bought his father’s company, and was expanding telecasts limited to the Northeast into national syndication. In 1985, he orchestrated the biggest show yet: Wrestlemania. Held in Madison Square Garden, it featured Hogan versus Mr. T and mixed pop culture with the spectacle of wrestling, with MTV favorite Cyndi Lauper in one corner and the Iron Sheik in another.
At the time, other wrestling outfits vied for television audience and ticket sales. But by the start of the 2000s, McMahon’s WWF had knocked the competition out of business.
“I am not necessarily a Vince McMahon fan,’’ said Joseph Hamilton, 73, who wrestled as the Assassin and then ran a WWE training camp in Georgia before McMahon deployed a moving crew to shut it down overnight in favor of a new one in Tampa. “But the fact still remains the guy has been a brilliant business man.”
With lucrative cable deals and a cadre of stars who had mostly signed away their likenesses to the company (not to mention their gestures, voices and gimmicks, according to contracts made public in stock filings and court papers), McMahon and his family were on their way to reaping millions — if not billions — from their wrestling empire.
McMahon ran the company from the early days with his wife, Linda, who went on to serve as CEO. Their personal fortune helped make Linda a player in Connecticut politics, and she left the company in 2009 for a failed Senate bid. She is running again for the GOP nomination for the seat currently held by Joe Lieberman.
Their son, Shane, was a WWE wrestler until he left in 2010 to launch a Chinese cable venture. Daughter Stephanie serves as a top WWE executive. Her husband, Paul Levesque, is a popular WWE wrestler known as “Triple H” and also serves as executive vice president for talent of the company.
With some 40 million shares of special voting stock, Vince McMahon has full say over the company. And while he’s best known to the public for his menacing appearances on WWE programs as a stern ringmaster, off camera he is described as an exacting CEO. He has had one famous flop: the XFL. Unveiled to much fanfare in 2001, the outlaw version of football — looser tackling rules, teams named Hitmen and Maniax — folded after one season with horrible ratings.
And while McMahon’s bid to take on the NFL got far more attention, he is now in the midst of another plot to take WWE beyond its popular cable shows and live events to become more of a stand-alone entertainment company. WWE reported spending $34 million on six films starring its wrestlers in the last two years, an effort designed to broaden WWE’s reach from die-hard fans to young moviegoers. But the movies only brought in $20 million in revenue, adding to a nearly $30 million loss for the studio arm that helped send companywide profits down 52 percent last year to $25 million.
Despite the beating suffered in movies, WWE plans to double-down on that venture that Barrios admits was initially a “disaster.” Still, WWE will spend as much as $20 million more on the studio, this time with Fox and other Hollywood partners. One project in the works: reviving the 1993 campy Leprechaun horror flick. Along with a new digital channel being developed as part of Google’s takeover of YouTube, WWE plans an even bigger play for viewership. Sometime this year it plans to launch its own cable channel, one that could rival USA (host of Raw) and SyFy (host of Smackdown).
Attendance dropped 8 percent at WWE events in 2011, a slide company executives blame partly on a still-shaky economy. They note that a smaller roster of events in 2011 skewed the number, with average attendance down just 4 percent. Toy revenue dropped 15 percent in the fourth-quarter, and overall licensing revenue was off by 23 percent.
The two-hour Raw program that airs live Monday nights on the USA Network remains a top 10 cable show, but viewership has been dropping for the last two years, and the average of 5 million viewers is off about 11 percent compared to 2010.
Last year’s retirement of Edge, a WWE stand-out, along with injuries of some leading wrestlers, including Latin favorites Rey Mysterio and Sin Cara, didn’t help. WWE executives also point to competition for wrestling’s young-male demographic as they turn to streaming video, not to mention video games.
Indeed, a look at WWE’s bottom line over the years hints at how much harder it has gotten in the wrestling business.
In 1999, the company made $56 million profit on $251 million revenue. In 2010, before its movie studio took a dive, revenue hit $471 million and profit ended the year at $54 million.
Barrios, the CFO, sees the missteps in the movie studio and lingering economic woes as contributing to a bad year and obscuring the otherwise successful run of WWE in the digital age. Attendance at live events in the U.S. and television ratings rebounded in the fourth quarter. Operating profits — before taxes, depreciation and other items — hit an all-time high in 2010.
“2011 was a tough year for us,’’ Barrios said. “But how do I feel about the future? Just about every brand metric we look at feels good to us.”
The company officially dropped the word “wrestling” from its title last year in an effort to reposition “WWE” as more of a generic entertainment brand. With an exploding amount of outlets for digital content, WWE see its deep fan base as even more valuable.
“We’re going to do really well if we can monetize an increasing amount of original content,” he continued. “We have this massive brand with a huge audience that’s passionate about what we do.”