WWE in trouble financially? Hardly

05/23/2014 12:29 AM

05/24/2014 5:12 AM

Like a masterful storyline, presenting that anticipated knee-jerk reaction at the onset, only to develop into a surprising swerve, something you didn’t see coming, fooling you ala Mark Henry retiring.

Last week the stock market pundits fueled the fire of the WWE Boo-niverse -- those who gleefully knock WWE by claiming the company doesn’t know what it’s doing, is losing money and will soon be going out of business.

Those who analyze stocks said the company’s owner, Vincent Kennedy McMahon, lost $350-million.

Let the Inter-negative and social meania bashing begin.

And it did.

Well, sorry naysayers, because I’ve got news for you. (Spoiler alert)

The swerve. Mr. McMahon and the company are doing OK, making money, and they’re going to be around for a good many more years.

WWE’s stock took a downward spiral late last week, falling hard from the $20 price per share to the $11 range, after investors did not like the TV deal WWE signed with NBCUniversal. Investors expected a bigger deal financially.

Let’s look at two areas.

1) The television deal

WWE did not get the dollar amount investors wanted, but WWE did increase the amount of money it will receive from NBCUniversal annually for its television rights.

It’s been reported WWE’s new contract with NBC Universal will net $150 million annually, which is nearly a 70-percent increase from the previous deal worth $90 million per year.

What? The stock dropped. I thought WWE was losing money.

This is a fact and a big one. The company received a 70-percent raise from NBCUniversal.

2) WWE stock

The stock market is volatile.

A stock can go up and down at anytime like a yo-yo.

Buy low. Sell high.

Let’s look at WWE’s stock not just by last week’s dive but by a year’s time frame, the past 52 weeks.

If you bought WWE stock, when it was at its low during the past 52 weeks, you purchased it in the $8 range.

Did you know that? In the past year, WWE’s stock sat at $8.

Its high reached $31.98.

When WWE announced the amount of subscribers to its new WWE Network did not reach the alleged projections, investors started selling, feeling the company peaked on the stock market, and the price worked down to the low 20s.

Then, after last week’s TV deal announcement, the price dropped more to $11.

If you bought the stock at $8 and held, even after those 52-week ups and downs, you are still in the black (profit).

Investors are smart. They will buy low and sell high. The stock market is about making a profit.

Investors hear the company’s numbers, and some didn’t believe in the product anymore. They sold.

Some believed in the product but wanted to make a quick profit or did not want to lose making money. They sold.

Nothing wrong with either. Buying stock is like playing the ponies. There is risk.

The WWE Network is in its infancy stages. It’s not a sprint, when building a network and a subscriber base.

Important, the network has not gone international, yet. WWE does a good amount of business internationally.

I would not be surprised if some who sold already purchased it again at the $11 range, expecting to see the stock rise, once WWE starts to build momentum with the WWE Network.

Mr. McMahon knows the pro wrestling/sports entertainment business. He has not only survived but succeeded over the long haul -- even longer than cable television mogul Ted Turner.

If something doesn’t work, Mr. McMahon will pull the plug. He did it with the XFL and bodybuilding.

You learn from the mistakes, and any good business person has made mistakes.

Way too early to tell if the WWE Network will succeed and no reason to jump ship. It takes time.

• Fundraiser for Mr. McMahon

When the stock dropped from the $20 price range to the $11 price range last week, Mr. McMahon was not worth $1-billion anymore. Now he is only worth $750-million. Time for the bologna sandwiches.

Can we start a fundraiser for him?

• Understanding the hoopla

The stock price per share effects Mr. McMahon’s net worth. The stock price does not effect if WWE is making money (profiting) or not.

If the company is making or losing money can effect the stock price. Evaluations, projections and outcomes can effect the stock price.

Even with the stock’s rise and fall, WWE has been making money over the long haul. Plain and simple.

When you read the blogs, the stories, watch the video links, listen to the podcasts, concerning WWE or any company, just remember this:

A company wants to make more money than it spends.

If a company is in the black (profit), then it’s good. If a company is in the red (deficit), then it’s bad.

Hypothetical. If you have a bagel business and spent $50,000 last year to run it and returned $100,000 in that year, the business profited $50,000. That’s good.

If the next year, your bagel business spent $50,000 again in that year to run it and made $75,000 in that year, it profited $25,000. That’s good, too, and the main point of this, because although the company did not make as much money as it did the first year, it still made money. It made another profit.

You’ll read periodically from others how WWE lost money, but you really have to know the numbers to understand. You can only lose what you spend. If a company spends money and does not make more than it spends, problem.

In that hypothetical case above, the bagel business had $50,000 to spend. It did not lose any of that in year two. It gained $25,000.

Did it make as much money as the previous year? No, but it still made money, a profit.

Would WWE or any company want to make more money than it did the prior year? Of course.

A company, any company, is in trouble when it spends more money than it makes. That’s really the focus, when reading those who write about the company’s quarterly reports or business endeavors or blogs or vents or tries to turn opinion into fact.

They don’t look at the money WWE profited but rather compare how much it profited between the years, and if the company made less profit than it did the prior quarter or year, then they raise a red flag, when they should be raising a black one (for profit).

Now, if any company continues to spend more than it makes annually, does not profit, then trouble looms.

The first quarter of 2014, WWE reported a $8-million loss because of the advent of the WWE Network, part of the new venture’s growing pains. That’s a quarterly loss. The company did not make a profit. Not good. Is there reason for concern or panic? Not right now. Prior, the company has been profiting consistently. The report also did not factor the new TV deal with NBCUniversal which increased WWE revenue about $60-million annually. That’s very important, and here’s why.

Do the math. WWE lost $8-million for the quarter. There are four quarters in a year. Hypothetical, if WWE continued to lose $8-million a quarter because of the WWE Network, that’s a $32-million loss for the year. Not good. But factor the new TV deal raise of about $60-million annually. Take the $60-million gain and subtract the $32-million loss, and you still profit about $28-million for the year between the two.

By the numbers, which always matter most, WWE is not in trouble financially.

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