The XFL Has A WWE Problem

By most accounts, the XFL had a successful opening weekend. Ratings were decent, the football itself was better than expected, and the league has drawn more early buzz than last year’s failed league, the AAF. The XFL announced that they had sold more season tickets in the week lead up to the season than the AAF sold in the entirety of its existence. High end sports personalities on Twitter such as Mina Kimes and Robert Mays were actively talking about it all weekend.

There were a lot of fun things also involved. They had the coaches mic’ed up and occasionally let us viewers listen in on plays they were calling before they happened. The league also let viewers into the replay room and mic’ed up both the referee and the replay official, giving viewers an amazing amount of access into the thought process that goes into a potential play review. I could go on all day about the different rules that have made the game more fast paced, and before the week is over, I probably will.

For a first week, this was definitely something that the XFL could hang it’s hat on, showing it’s potential as a future potential spring alternative to Nascar and early season golf. If they can continue the momentum from the first week, there is definitely something there. It’s still exciting and new. It’s no longer about what the XFL did, but it’s about what will happen next. There is a bigger problem to the future of the XFL, and it has nothing to do with what is going on out on the football field.

Back when Vince McMahon stepped up onto a stage to announce that he was starting his own Football league, a reboot of his failed league, the XFL in 2001, WWE was literally flying high during the best of times for the company. Once a financial afterthought in the dark ages that came at the end of the Attitude Era (the era of wrestling between 1997-2001 that was best known for its raunchy television, over-the-top characters, and transcendent stars like The Rock and Stone Cold Steve Austin), WWE had rebranded itself as more family friendly, and still had a cache of popularity in a demographic that advertisers craves: Males 18-49. That isn’t to say that others weren’t watching, but that demographic is the one that is considered the advertising sweet spot. The people most likely to part ways with their money over things they see on TV.

LET THE GOOD TIMES ROLL


In 2018, WWE was able to parlay this into two unprecedented television deals. Near matching contracts with Fox and NBC Universal to the tune of 2.5 billion dollars over five years. NBC Universal paid to continue airing Monday Night Raw, the eponymous weekly wrestling program that had held the same time slot on the USA Network for nearly three decades (with a couple year gap in the middle during an unfortunate television deal with the Spike Network). Meanwhile, Fox paid to have Smackdown, then airing on Tuesday nights, to air live every Friday night, not on cable, but instead on the main FOX channel. It was going to be the first time that wrestling was on network television in decades.

News of these deals caused WWE stock to surge to levels nobody saw coming. It passed 100 dollars per share and became one of the biggest entertainment based shares in the country. The McMahon family’s wealth is heavily tied to the financial success of the company, as the main family members: Vince, his wife Linda, COO Stephanie, and booker/wrestler/agent Shane, all held millions of shares of the company so that the McMahon family would always continue to hold a majority of the company. A few years prior, WWE stock could be purchases for eight dollars per share. Now in 2018, that same share was worth 110 dollars. Vince McMahon had become a billionaire on the back of sports entertainment.

Vince had every reason to believe that the stock would stay in the stratosphere. They had secured television deals and their online network, WWE Network (think Netflix for wrestling fans) was now available worldwide. Every Pay Per View (major wrestling event) that could previously only be watched by shelling out 50 dollars to your cable provider, was now available along with every wrestling event WWE had ever produced, for the incredibly reasonable price of 9.99 per month.

It was at this time that Vince announced the reboot of the XFL. He would be funding the league personally, and would control every aspect of it. He started a brand new company, Alpha Entertainment, to show that the XFL and WWE would be two separate entities. This was a very important thing at the time. The stink of the original XFL still existed, and with the WWE doing so well, Vince needed to make it clear the two companies were separate, just in case the XFL fell apart gain.

When it came time for the rubber to hit the road though, it was WWE that would be funding the startup football operation, just not directly. As the league was starting to have a skeleton put together and money to launch the league was needed, Vince sold 3.2 million of his shares of WWE to fund the league. At the time, the stock was trading at 84.50. The stock was tending lower because the shine of the new television deal had worn off, but was still trading at 10x the stock value of just a few years prior. With the 270 million dollars from the stock now available, McMahon set forth in building his league.

NOT ALL THAT GLITTERS IS GOLD

Fast forward a few months to 2019. WWE was no longer riding as high. While they still controlled key demographics on television, the overall viewership was fading quickly. They lost, on average, over a million viewers from 2018 to 2019 on their flagship show, Monday Night Raw. The new television deals hadn’t even kicked in yet, but there were rumors that Fox was already unhappy about what was going on, and that they wanted their people in the building at all times so they could have a hand in what was going on, because they needed to protect their investment.

In attempts to gain viewers back, WWE took a lot of stabs in the dark on storylines and characters to drum up new popularity. They brought Hulk Hogan back occasionally, even though he had been seen as a pariah just a year before. They were no longer trying to woo new fans, but going on television every week, throwing out old stars in an attempt to beg former fans to come back. Oh look, its Steve Austin out there saying “hell yea.” Cool.

Trotting out former stars like an Old Timers Day in baseball didn’t do anything to help the ratings, and they would continue to fall throughout 2019. Vince himself returned to television in the hopes that his presence would help things. He even bled at one point on television to bring some hype to the show. The issue wasn’t the people on the show, though. The issue was with the show.


Slight side tangent: We wrestling fans are incredibly aware that wrestling is fake. We know that these are highly skilled athletes doing things we could never do for our entertainment, all with the production value of a professional sporting event. The reason we watch isn’t to suspend belief, but instead merely to be entertained. Whether it be through story lines which keep our attentions, or just incredible action, we just want to sit down, watch, and enjoy. It’s no different than watching any sport, or reality television show, or scripted show for that matter. We know it’s scripted. You don’t have to condescendingly explain that to us thinking you are clever.

The show itself had become stagnant. WWE could do a great job of building up characters through their minor league affiliate, NXT (more on this later), but when those wrestlers would come up to the main roster, they were often stifled with bad gimmicks (the persona they use in the ring) or kept down by veterans who were so cemented at the top of the show that some of the best wrestlers were bouncing their heads off the proverbial glass ceiling. On top of this, some other things would emerge that would show just how out of touch WWE was with their fans or the outside wrestling world in general.

Jon Moxley, who wrestled as Dean Ambrose in WWE, let his contract run out and left the company in late 2018. WWE tried to keep him, attempting to sign him to a multimillion dollar per year contract to stay with the company. Jon wasn’t a fringe character for the company that comes and goes from TV. He was one of the main stars for years. He was a World Champion. He was a part of one the most successful groups of all time in wrestling, the SHIELD. His leaving meant something. And he wasn’t the only one.

A few months prior, Chris Jericho had walked out the door as well. Jericho isn’t just a star. He is an icon. He was one of the biggest success stories of WWE competitor WCW in the 90’s. When he left WCW to come to WWE (then WWF), it was a huge deal in wrestling. He was a huge personality who was also great in the ring. Jericho stuck with WWE for nearly two decades and in that time, went from huge star to the standard bearer for wrestling. He was the guy that young wrestlers would try to become. He was a steadying veteran hand for the company who held the respect of everyone in the business.

When Jericho and Moxley did a podcast together after they left, they laid out in plain terms just how dysfunctional, and at times toxic, that being in WWE could be. Vince was outed as an out-of-touch meddler who had a sense of humor that would play better in an insane asylum than it would on television. Vince had his hand in everything, even as he was supposed to be taking a step back and focusing on his football league. Jon even went so far as to explain a situation where Vince tried to force him to mock another wrestler, Roman Reigns, for having cancer. Reigns really did have cancer, and he and Moxley were friends in real life. Moxley refused to do it, knowing that this would cross a line of poor taste that was beyond the pale.

MONEY CREATES AUTHORITARIAN BEDMATES

A few years back, WWE started doing massive shows in Saudi Arabia. At first, it seemed like a one off event. Then they went back. And then went back again. They bastardized their own events to make these shows in Saudi Arabia seem big. They did a show called the Greatest Royal Rumble, so it would be bigger than The Royal Rumble, their second most popular yearly show. They had another show that they called “Bigger than Wrestlemania.” Wrestlemania is the biggest wrestling event in the world every year. It is the benchmark event of the wrestling year. Now a slapped together wrestling event in Saudi Arabia was bigger.

From a wrestling standpoint, it was an utter joke. They brought out old wrestlers who couldn’t really compete anymore. They forced a bunch of gimmicky stuff down wrestling fans throats. Even casual fans were tuning out for this, and people were actually starting to cancel their subscriptions to the WWE Network, their streaming site (more on this later).

In the grander scheme of things, though, it was a horrible look for a company that had done everything in their power to look good in public. They worked heavily with charities. They worked with children with cancer and disabilities. They recognized survivors of breast cancer every October. They used February as an informative month about Black History. But they were also making many millions of dollars working with a brutal ruler who had just had a dissident journalist very publicly murdered. After the brutal killing of Jerome Khassaghi by Saudi military members, the world started to look at the relationships that Saudi Arabia had with major companies around the world. WWE became one of the harshest companies to be seen through this light. Not only were they making millions by having these shows, they were in essence creating pro-Saudi propaganda. The shows were made with vignettes about how well Saudi Arabia was treating them, all the activities to do while vacationing there, and how beautiful the country was. Top members of WWE, including Stephanie McMahon and her husband, HHH, carried water for how progressive and welcoming the country was, while even a cursory Google search could show that they weren’t even telling a remote version of the truth.

After the Khassaghi murder, they hemmed and hawed and said they would keep track of how things were going with it, but in reality, they were never going to break their deal with the kingdom. All they did was tone down some of the rhetoric on their tv shows, and hilariously, after the murder, they did a show there without actually saying where they were doing the show there on any of their television shows. Six months later, though, they were in total propaganda mode. This would make things look even worse for them when they went back in October of 2019.

While an official story was never actually released to the public, the following things happened. WWE did a show in Saudi Arabia. The show was terrible. It was headlined by professional boxer Tyson Fury “wrestling” WWE giant Braun Strowman and former UFC fighter Cain Velasquez trying to fight Brock Lesnar, even though Velasquez was wearing a large knee brace and very obviously wasn’t in an position to do a wrestling match. I cannot stress enough how bad the show was.

After the show, which was held on a Thursday, a plane was set to leave Saudi Arabia to fly into New York just in time for the Smackdown wrestlers to do a live show on Friday night. The plane never left the tarmac. Some of the biggest people in the company: Vince McMahon, Brock Lesnar, etc, got on a private jet before the show even ended and were long gone. The wrestlers were given conflicting stories as to why they weren’t leaving. It was mechanical on the plane. They couldn’t find another plane. There were visa issues. The flight didn’t take off until many hours later. Rumors began to spread about what possible issues there could have been that the wrestlers were held there. One prevailing one was that there was a major issue involving the money changing hands for these shows. Vince hadn’t been paid, and in turn, the event hadn’t been shown on local Saudi television.

This talk was written off as dirt sheet rumors for roughly a week.
The very next week, WWE had to do its quarterly investor call and the bottom started to fall out. It turns out, WWE HADN’T been paid for the Saudi shows. When they did their quarterly performance review on the call, they fell short of their financial expectations by almost the exact amount that it cost to run the show in Saudi Arabia. They then tried to spin this by bragging that they had signed a contract with Saudi Arabia and that the contract was groundbreaking and that they were very happy to have it. The WWE didn’t actually have a contract for two years while doing this. They tried to sell the new contract that was actually a contract signed to retroactively cover shows they said they had a contract for in the first place. Do you know who saw through this façade? Wall Street. Stocked fell all the way into the $50s per share before slowly recovering to around 65 dollars per share.

COMPETITION ARISES

After World Championship Wrestling collapsed in 2001, WWE operated unopposed in the wrestling landscape for two decades. Doing this caused the company to have a bit of a laissez faire attitude towards any other wrestling. When WWE turned a blind eye, people started to rise up, carving out a new path in wrestling. By 2019, wrestling fans had more options than ever when it came to wrestling. You could watch independent wrestling all over the world on the internet. NWA (National Wrestling Alliance, not the hip hop group) launched a weekly show on Youtube. Impact wrestling continued to act as an undead zombie, refusing to die. Fans were eating up New Japan Pro Wrestling, and their completely different style of production and wrestling. But the biggest competition showed up at WWE’s door step in October.

All Elite Wrestling was started by some of the biggest independent wrestlers on the planet. They were able to get the backing of billionaire Shad Khan, and were able to score a television deal to bring a weekly live wrestling show to cable. It would be the first competition WWE had since 2001. AEW was going to air a weekly show on Wednesday nights, and were not acting in direct competition for eyeballs. WWE decided that could simply not stand. So they took their weekly NXT show, which had aired every week on their streaming service, and put in on the USA Network at the exact same time as AEW. If AEW wanted a war, then Vince McMahon was willing to give it to him.

Since then, AEW has consistently won in the ratings every week, and have walloped WWE in the area that they crave so much: guys 18-49. What felt like a small mistake at the time has turned into a giant mistake given news that came out last week.

THE BOTTOM FALLS OUT

Two weeks ago, announced they were firing their two top executives, George Barrios and Michelle Wilson. WWE tried to bury this in the evening late in the week. The international trading market took notice, and the WWE stock started to spiral out of control. It got really noticeable when the stock dove below 55 dollars per share. It got a HELLUVA lot of notice when it dropped below 50 dollars per share, and hell broke loose when it got below 45 dollars per share. All of this happened within a day. Though no official reason was given as to why the longtime executives were fired in spite of there being no replacements place, rumors started to leak out.

WWE was about to come in under financial expectations again in their upcoming 2019 quarter four earnings call. They had also lost nearly 10 percent of their subscribers to their network. As of writing today, the stock is currently sitting at 42.23. Its 52 week high is 100.45 cents. The stock has lost nearly 60 percent of its value in one year. Wells Fargo has already downgraded the stock. Analysts all over have listed WWE as a must sell due to uncertainty in the WWE’s ability to be profitable this year both domestically and internationally.

Beyond that, WWE and Vince McMahon have made a series of missteps that are more likely to hurt the company long term than help it.* Vince McMahon, in the quarterly call, hinted heavily that the pay per views the company throws every month would be moved to a different streaming service. He claimed that all sorts of companies were wanting to get their hands on it. That’s the type of thing you say when nobody wants your product. Rumors have swirled that Amazon could buy the rights to it with a long term view of buying the entire company someday. Others have suggested that FOX would be interested in picking it up to put on a new streaming service they could release. McMahon said in the call that its events now could be set up like UFC events, where you have to already subscribe to ESPN+ and THEN pay for the big shows. Essentially, you would be paying 9.99 for ESPN+ and potentially another 30-40 to watch the wrestling event. This is a bad idea for many reasons…

1. If someone really wants to keep watching the events, then why continue paying for the WWE network when you are taking the most popular thing off the network.
2. The second most popular thing? That would be NXT, the show that WWE took off its network so they could try to spite WWE.
3. People are more likely to not only get rid of the WWE Network, but also not follow the shows to whatever streaming platform they go to.
4. Its very obvious that this is being done by Vince to try to bump the stock up like it did when he got the TV deals with Fox and NBC Universal*. This is, at best, trying to use a band aid to cover a bullet hole. At worst, it will completely alienate fans and people will continue to turn off even their weekly shows.
5. I can almost see this coming from a mile away, but not only will WWE not lower the cost of the WWE network, there is a near definite chance that they will begin selling wholesale advertising across the streaming service. It would seem like they are trying to get the network to die.
6. They very well might be trying to kill off the network. It isn’t cheap to operate, and people are already tuning out. They might just try to wring every penny out for as long as they can and then just shut it down as a cost cutting measure.

*Personal story. Selling the PPV rights to a third party and having them handle the streaming of it feels like something that happened while I was at Toys R Us. Things were starting to take a downturn while working for the company. You could tell it was getting bad because we went from getting 80 hours per week during Christmas season one year, to barely getting any overtime the next.

In an attempt to make money quickly, TRU sold their entire trucking line to a third party trucking company. The company gave Toys R Us a bunch of money up front to purchase the trucks, trailers, and rights to ship all of the trucks to the TRU locations. Also a part of the contract was that TRU would now have to start paying this trucking company for the rights to ship their product. Essentially, in an attempt to get money really quick, Toys R Us lost a fortune within 12-18 months because of the money they were spending to ship product in what used to be their equipment. Five years later, the company was dead.

WHAT DOES THIS MEAN FOR THE XFL?

I’ve painfully explained WWE’s finances for a very specific reason. While they are separate companies, the XFL is very much financially dependent on the success of WWE’s stock price to ensure its long term viability. Vince McMahon owns every aspect of the XFL. He owns every team. He owns the logos. He owns the licensing. When he says it’s his league, it’s HIS league. Before the league got going, he said he had enough money to run the league for three years. The AAF said they had years of money to potentially lose before becoming profitable, as well.

If Vince McMahon needs an infusion of cash to keep his league going, he will have a decision to make. Sell WWE stock at a heavily depressed price (currently trading at half of what it was when he made his initial stock sell) and hope the league becomes profitable before he loses his majority share of his own wrestling company. OR, sell WWE to a company like Amazon and try to follow your football dream.

The realistic scenario is to sell majorities of each team in the league to eight millionaires who would buy, say 75% of the St. Louis Battlehawks, while McMahon continues to hold 25% of each team and controls the league. He could take some of the financial responsibility off of his back and spread it around, ensuring that his financial wellbeing isn’t the sole factor in whether the XFL lives or dies.

Having watched wrestling for as long as I have, though, I have a feeling that this league will die out because no ego exists larger than Vince McMahon’s, and no person thinks he knows more about everything than Vince McMahon. The WWE is Vince McMahon, and Vince McMahon is WWE. The XFL is just a silly game he is playing.

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