Case Study - WWE`

Once each case study is read, a one page, summary should be typed and contain the following information:

A. Abstract of the case to include overview of the problem or issue.

B. Contribution of case to strategic management

C. Recommendations for solving the problem or issue.

Further Instructions:

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CASE 7 WORLD WRESTLING ENTERTAINMENT World Wrestling Entertainment was planning to crown its into its shows. Some of its most valuable younger viewers first ever WWE United Kingdom Champion live on the were turning to new reality-based shows on television such WWE Network during a special, two-night tournament on as Survivor, Fear Factor, and Jackass. January 14 and January 15, 2017. "Our passionate U.K. fans Since 2005, however, WWE has been turning pro wres- deserve their own Champion," said WWE's Vice Presidenttling into a perpetual road show that makes millions of fans Paul Levesque. pass through turnstiles in a growing number of locations Pushing a strategy to cater to local markets is one around the globe. Its flagship television programs, Raw and way WWE is trying to deal with the growing competition Smackdown! are broadcast in 30 languages in 145 countries from different forms of mixed martial arts, which pres- reaching 600 million homes around the world. WWE has ent a free-for-all of boxing, ju-jitsu, and wrestling, among also been signing pacts with dozens of licensees, including other disciplines. Ultimate Fighting Championship, for one with toymaker Mattel, to sell DVDs, video games, toys, instance, has been expanding around the world, while ONE and trading cards. Championship has been stealing markets in Asia by build- ing up local fighters in each market. Developing a Wrestling Empire WWE does not have much to worry about in the short run (see Exhibit 1). Its strategy of coupling its live wres. Most of the success of the WWE can be attributed to the tling matches with programming on television, on the webnile delinquent who went to military school as a teenager to social brands. The firm recently added to its presence on Vince joined his father's wrestling company which operated the Internet with an exclusive, multi-year agreement to in northeastern cities such as New York, Philadelphia, and bring WWE programming to Hulu Plus, offering next-day Washington, D.C. He did on-air commentary, developed access to its television programs and other exclusive shows. scripts, and otherwise promoted the wrestling matches. "We continue to see the distribution of our creative con- tent through various emerging channels," Linda McMahon eventually renaming it World Wrestling Federation. At that Vince bought the wrestling firm from his father in 1982, stated in 2009 when she was the firm's president and CEO. Clearly, WWE has moved out of the slump that it time, wrestling was managed by regional fiefdoms where everyone avoided encroaching on anyone else's territory. endured between 2001 and 2005. During the 1990s, Vince McMahon used a potent mix Stations around the country to broadcast his matches. His Vince began to change all that by paying local television of shaved, pierced, and pumped-up muscled hunks; buxom, aggressive pursuit of audiences across the country gradu- scantily-clad, and sometimes cosmetically enhanced beau- ally squeezed out most of the other rivals. "I banked on ties; and body-bashing clashes of good versus evil to build an empire that claimed over 35 million fans. The vast the fact that they were behind the times, and they were," said Vince. majority of these fans were males between the ages of 12 and 34, the demographic segment that makes most adver that wrestling matches were scripted. Although he made Vince broke another taboo by admitting to the public tisers drool. Just when it looked like everything was going well , missions, wrestling fans appreciated the honesty. The this admission to avoid the scrutiny of state athletic com- WWE hit a rough patch. Its attempt to move beyond wres WWF began to draw in more fans through the elaborate tling to other sports and entertainment was not successful. It failed with its launch of a football league during 2001, which folded after just one season. WWE has not done EXHIBIT 1 Income Statement ($ millions) much better with its foray into movies that use some of its 2016 2015 2014 wrestlers. The firm was also struggling with its efforts to build new wrestling stars and to introduce new characters Net Revenues $729.2 $658.8 $542.6 Operating Income (42.5) * Case prepared by Jamal Shamsie, Michigan State University, with the Net Income 33.8 24.1 (30.1) assistance of Professor Alan B. Eisner, Pace University. Material has been drawn from published sources to be used for purposes of class discussion. Source: WWE Annual Report 2017 55.6 38.8 Copyright 2017 Jamal Shamsie and Alan B. Eisner. CASE 7 :: WORLD WRESTLING ENTERTAINMENT C27 story lines and captivating characters of its wrestling advance, leaving the wrestlers to decide only the manner in matches. The firm turned wrestlers such as Hulk Hogan which the hero dispatches a villain to the mat. Vince refers and Andre the Giant into mainstream icons of pop culture. to his wrestlers as "athletic performers." They are selected By the late 1980s, the WWF's Raw Is War had become a on the basis of their acting ability in addition to their phys- top-rated show on cable, and the firm had also begun to ical stamina. offer pay-per-view shows. The firm owns the rights to the characters played by Vince faced his most formidable competition after its wrestlers. This allows WWE to continue to exploit the 1988, when Ted Turner bought out World Championship characters developed for the television shows, even after a Wrestling, one of the few major rivals that was still operat- wrestler that played a character has left the firm. By now ing. Turner spent millions luring away WWF stars such as Vince holds the rights to many characters that have become Hulk Hogan and Macho Man Randy Savage. He used these familiar to audiences around the world. stars to launch a show on his own TNT channel to go up By the late 1990s Vince had two weekly shows on tele- against WWF's major show, Raw Is War. Although Turner's vision. Besides the original flagship program on the USA new show caused a temporary dip in the ratings for WWF's cable channel, WWE had added a Smackdown! show on shows, Vince fought back with pumped-up scripts, mouthy the UPN broadcast channel. A continuous story line fea- muscle-men, and Lycra-clad women. "Ted Turner decided tured the same characters so that the audience was driven to come after me and all of my talent," growled Vince, "and to both the shows. The acquisition of the WCW resulted in now he's where he should be.* In 2001, Vince acquired a significant increase in the number of wrestling stars under WCW from Turner's parent firm AOL Time Warner for a contract. Trying to incorporate almost 150 characters into bargain price of $5 million. the story lines for WWE's shows proved to be a challenging Because of the manner in which he has eliminated most task, perhaps resulting in some loss of energy in the plots. of his rivals, Vince has earned a reputation for being as At the same time, the move of Raw to the Spike TV channel aggressive and ambitious as any character in the ring. Paul resulted in a loss of viewers. MacArthur, publisher of Wrestling Perspective, an indus- However, in October 2005, WWE signed a new agree- try newsletter, praised his accomplishments: "McMahon ment with NBC that moved Raw back to its USA channel. understands the wrestling business better than anyone else. Smackdown! is now carried by the Syfy channel, which has He's considered by most in the business to be brilliant." been climbing in the charts. WWE's newest show, Total Then in 2002, WWF was hit by a ruling from a British Divas, has recently been launched on the E! network. All court that their original WWF acronym belonged to the of these programs have done well in ratings, particularly World Wildlife Fund. The firm had to undergo a major for male viewers, because of the growth in popularity of a branding transition, changing its well-known name and new breed of characters such as John Cena, Chris Benoit, triple logo from WWF to WWE. Ray Mysterio, and Triple H. The visibility of these charac- Although the change in name has been costly, it is not ters is enhanced through profiles on the WWE website and clear that this will hurt the firm in the long run. "Their mobile apps. product is really the entertainment. It's the stars. It's the bodies," said Larry McNaughton, managing director and Managing a Road Show wife Linda stated that the new name might actually be ben A typical work week for the WWE can be grueling for the eficial for the firm. "Our new name puts the emphasis on McMahons, for the talent, and for the crew. The organiza- the 'E' for entertainment," she commented. tion is now putting on almost 330 live shows a year requir- ing everyone to be on the road most days of the week. The touring crew includes over 200 members, including Creating a Script for Success stage hands. All of WWE's live events, including those It is appropriate to call WWE's entertainments wrestling that are used for its two longstanding weekly shows Raw shows, rather than matches. The wrestlers are characters and Smackdown! as well as the newer ones, are held in in ongoing dramatic plots and adventure stories as much as different cities. Consequently, the crew is always packing athletes. The content of WWE's live events is akin to tele- up a dozen 18-wheelers and driving hundreds of miles to vision soap operas and Hollywood melodramas. From the get from one performance to another. Since there are no start Vince McMahon reduced the amount of actual wres- repeats of any WWE shows, the live performances must tling in favor of mesmerizing characters and compelling be held all year round. story lines, relying on "good versus evil" and "settling the The live shows form the core of all of WWE's businesses score" themes. The plots and subplots provide viewers with (see Exhibit 2). They give the firm a big advantage in the a mix of action, comedy, violence, sex, and even romance, entertainment world. Most of the crowd show up wear- against a backdrop of pyrotechnics. ing WWE merchandise and scream throughout the show. Over time, the "matches," or shows, have become ever Vince and his crew pay special attention to the response of more heavily scripted, with increasingly intricate plots and the audience to different parts of the show. The script for dialog. All the details of every match are worked out well in each performance is not set until the day of the show, and EXHIBIT 2 Principal Activities Media Network: Subscriptions to WWE Network, fees for pay-per-view, video-on-demand Television: Fees for television rights Home entertainment Sales of WWE programs on various platforms, including DVDs and Blu Rays Digital media: Revenues from advertising on websites Live Events Live events: Revenues from ticket sales and travel packages for live events Consumer Products Licensing: Revenues from royalties or license fees from video games, toys, or apparel Venue merchandise: Revenues from merchandise at live events WWE Shop: Revenues from merchandise sales on websites WWE Studios WWE Studios: Revenues from investing in producing and distrbuting films Source: WWE Annual Report 2017. sometimes changes are made in the middle of a show. This years been quietly managing its day-to-day operations. allows the crew some flexibility to respond to the emotions Throughout its existence, she has helped to balance of the crowd as they witness the unfolding action. Vince the books, do the deals, and handle the details neces- boasts: "We're in contact with the public more than anysary for the growth and development of the WWF and entertainment company in the world." WWE franchise. Their son and daughter have also been The shows usually fill up. Tickets and the merchandise involved with various activities of the enterprise, with sold at the shows cover the cost of production. Sales of mer- Stephanie McMahon holding an executive position in chandise also represent a significant and growing portion charge of creative development. of the revenues from each of the live shows. The perfor- mances are the source for all the other revenue streams. They provide content for six hours of original television Searching for Growth programming as well as for the growing list of pay-per-view In 1999, shortly after going public, WWF launched an and video-on-demand programming. They create strong eight-team football league called the XFL. Promising full demand for WWF merchandise purchased apart from the competitive sport unlike the heavily scripted wrestling shows ranging from video games and toys to magazines and matches, Vince tried to make the XFL a faster-paced, home videos. more fan-friendly form of football than the NFL's brand. Much of the footage from the live shows is used on Vince was able to partner with NBC, which was looking the WWE website, which is the growth engine for its new for a lower-priced alternative to the NFL televised games. digital media business (see Exhibits 3 and 4). The firm The XFL kicked off with great fanfare in February 2001. produces a show, WWE NXT, exclusively for the website. Although the games drew good attendance, television rat- WWE also offers content on the apps that it has launched ings dropped steeply after the first week. The football ven- for smartphones and tablets. Fans can also follow program- ture folded after just one season, resulting in a $57 million ming on Hulu Plus, with which the firm signed an exclusive loss for WWF. Both Vince and Linda insist that the venture multi-year contract in 2012. All of these channels serve to could have paid off if it had been given enough time. Vince promote the various offerings of the firm and carry selec- commented: I think our pals at the NFL went out of their tions from its various other television programs. way to make sure this was not a successful venture. The entire operations of WWE are overseen by Vince WWE has also tried to become involved with movie McMahon, along with some help from other members production using its wrestling stars, releasing a few films of his family. While the slick and highly toned Vince over the past decade such as Steve Austin's The Condemned can be regarded as the creative muscle behind the grow- and John Cena's Legendary, and smaller films designed ing entertainment empire, his wife Linda has for many for release in a few theatres and on television. Besides CASE 7 :: WORLD WRESTLING ENTERTAINMENT C29 10.1 EXHIBIT 3 Breakdown of Revenues ($ millions) "While it is based in America, the themes are worldwide: sibling rivalry, jealousy. We have had no pushback on the 2016 2015 2014 fact it was an American product," said Linda." Network $180.9 $159.4 $115.0 Considerable excitement was generated by the launch of WWE 24/7, a subscriber video-on-demand service. The new Television 241.7 231.1 176.7 service allows the firm to distribute for a fee thousands of Home Entertainment 13.1 13.4 27.3 content hours consisting of highlights from old shows as well as exclusive new programming. Much of the firm's pro- Digital Media 26.9 21.5 20.9 gramming, both old and new, is also offered on its website, Live Events 144.4 124.7 108.5 which has continued to show strong growth. By enabling audiences to watch WWE programming whenever they Licensing 49.1 48.9 38.6 may want to these new forms of distribution have allowed Venue Merchandise 24.2 22.4 19.3 the firm to reach out to new audiences. The new push on mobile devices and also through the WWE Shop 34.6 27.1 20.2 Hulu channel has provided ever more opportunities for WWE Studios WWE to expand into digital media. The firm believes that 7.1 10.9 offering their programming on smartphones and tablets will lead to a significant growth in revenues, in part from Source: WWE Annual Report 2017 additional sales of their merchandise. "Our fans have proven that they want to consume WWE content day and night and now, through our new mobile app, they can stay EXHIBIT 4 Breakdown of Operating Income ($ millions) completely connected to the action wherever they are," said 2016 2015 2014 Jason Hoch, WWE's recently appointed senior vice presi- dent of digital operations." Network $43.0 $48.4 $(1.8) Television 119.8 97.0 61.9 Staying the Champ Home Entertainment 5.3 15.0 Although WWE may find it challenging to keep building on its already formidable fan base, there is no question Digital Media 4.6 that it continues to generate excitement. Most of the excite- Live Events ment is driven by the live shows, which fill up the arenas. 36.9 27.8 "They have the most excited fans that have come through Licensing 27.4 our doors," said the director of sales and marketing at one of the arenas that holds WWE matches. They make signs, Venue Merchandise 7.7 dress up, and cheer constantly."12 The interest in the live WWE Shop 7.3 5.1 3.5 matches is most evident each year with the frenzy that is created by WrestleMania, the annual pop culture extrava- WWE Studios (0.2) (1.5) 0.5 ganza that has become an almost weeklong celebration of everything wrestling. No wrestlers become true stars Source: WWE Annual Report 2017 until their performance is featured at WrestleMania, and any true fan must make the pilgrimage at least once in his or her life. generating some box office revenues, these movies provide WWE has begun to expand its audience by toning revenues from home video markets, distribution on pre- down the sex and violence to make their shows more fam- mium channels, and offerings on pay-per-view. ily friendly. They no longer use fake blood and have toned The firm has all along sought growth opportunities down the use of abusive language in order to get a rating of that are driven by its core wrestling business. With more TV-PG for their television programming. The new media, characters at their disposal and different characters being such as the launch of shows through streaming video, is used in each of their shows, WWE has been ramping up the expected to bring in younger viewers. "I think any good number of live shows, including more in overseas markets. entertainment product has to change with the times," said By 2014, the firm was staging almost 70 shows in locations McMahon. "You have to have your fingers on the pulse of around the world. WWE has been expanding its live per- the marketplace. * 13 formances, introducing them in six new countries, such as Vince McMahon is aware of the growing threat of UAE and Egypt. The company has opened offices in six mixed martial arts, which started in Japan and Brazil, but cities around the world to manage its overseas operations. is spreading. Because of its similarity to wrestling, this 4.6 0.3 40.1 28.8 20.9 9.8 8.9 new combat sport is likely to pull away some of WWE's fans. However, everyone at WWE is convinced that these "real sports" cannot match the drama and passion of the story lines and characters that enliven their stage and draw audiences to their matches. As Dana White, president of Ultimate Fighting Championship, said: "People have been trying to count the WWE out for years. They are a powerhouse."14 Nevertheless, there are questions about the future of WWE after McMahon, who single-handedly built his wrestling empire from his father's small regional business. Although he has involved his wife and children in the firm, Vince has always been the brain behind the strategic moves over the years. The launch of the WWE Network, which represents a significant new step. could be his final act, according to industry observers. "If he has changed how pro wrestling and sports entertainment will reach audi- ences in the future, I don't think there's a better way to go out," said Brandon Stroud, a wrestling commentator and editor at the sports site With Leather." As for the enduring appeal of pro wrestling. Marty, a 19-year-old wrestling fan quoted in Fortune (October 6, 2000), may have expressed it best: "Those who understand don't need an explanation. Those who need an explanation will never understand." ENDNOTES 1. WWE to crown U.K. champion. Entertainment Newsweekly, December 30, 2016 2. WWE. World Wrestling Entertainment, Inc., reports Q3 results. Press release, February 23, 2005. 3. Bethany McLean. Inside the world's weirdest family business Fortune, October 16, 2000, p. 298. 4. Diane Bradley. Wrestling's real grudge match. Business Week, January 24, 2000, p. 164 5. Don Mooradian. WWF gets a grip after acquisition. Amusement Bresiness, June 4, 2001, p. 20. 6. Dwight Oestricher and Brian Steinberg ww... E it is, after fight for F nets new name Wall Street Journal May 7, 2002, p. 12. 7. David Finnegan. Down but not out, WWE is using a rebranding effort to gain strength. Brandweek, June 3, 2002, p. 12. 8. Fortune, October 16, 2000, p. 304. 9. Diane Bradley. Rousing itself off the mat? Business Week, February 2, 2004. p. 73. 10. Brooke Masters. Wrestling's bottom line is no soap opera. Financial Times, August 25, 2008, p. 15. 11. Business Wire WWE launches free mobile second screen app. August 17, 2012 12. Brandi Ball. The face of the WWE. McClatchy-Tribune Business News, January 13, 2011. 13. Seth Berkman. The body slam is buffering. The New York Times, March 31, 2014, p. 37. 14. R. M. Schneiderman. Better days, and even the candidates, are coming to WWE New York Times, April 28, 2008, p. 33. 15. New York Times, March 31, 2014, p. Bl