*OT* - And on the front page of today's NY Times...
John
Pro Wrestling Tries to Pin Down a
Share Value
By EDWARD WYATT
Finally, a part of professional wrestling that might not be
rigged.
Most ardent fans of the World Wrestling Federation know that
matches between grapplers like Stone Cold Steve Austin and
the Undertaker are heavily scripted. Apparently, few care,
judging by the tremendous popularity -- and huge profitability --
of what is one of the most-watched events on television.
So after cashing in on the public's taste for increasingly
outrageous competitions, the company that promotes and
stages the most popular wrestling events, including
Wrestlemania, will try to cash in on the public's fervor for initial
public offerings.
On Tuesday, World Wrestling Federation Entertainment Inc.
said it would seek to raise up to $175 million by selling a
minority stake in the company, which produces such television
shows as "Raw Is War" and "WWF Smackdown."
Referring to its wrestlers as "athletic performers" who are
particularly prized for their "acting ability," the wrestling company
explains in its filing with regulators how it "develops soap
opera-like story lines employing the same techniques that are
used by many successful dramatic television series," including
"good-versus-evil or settling-the-score themes."
Whatever its shortcomings as a sport, wrestling is an extremely
lucrative business. It dominates the rankings of cable television
shows, delivering to advertisers millions of males aged 18 to
34, one of the most sought-after groups.
Those high ratings have produced stellar financial results,
according to filings with the Securities and Exchange
Commission. In those documents, which disclose for the first
time financial information about the privately owned company,
the World Wrestling Federation said its revenues tripled over
the last two years, to $251 million in the 12 months ended April
30. Pretax profits grew even more quickly, to $56 million in the
most recent period from a loss of $6.5 million two years earlier.
The rapid gains will probably make the shares highly attractive
to individual investors, particularly wrestling fans.
But the stock offering could also signal that wrestling has
reached one of its cyclical peaks of popularity.
Brendan Maguire, a professor of sociology at Western Illinois
University, who has studied wrestling as well as deviant
behavior, said that in its latest period of rising popularity,
professional wrestling has turned to more and more outlandish
and violent behavior.
"You can only go so far with that before you start putting people
off," Maguire said. "They may have already hit that mark."
Of course, professional wrestling and its practitioners have
gained a higher profile after last year's election of a former
wrestler, Jesse Ventura, known as "the Body," as governor of
Minnesota. Several other current and former wrestlers have
pondered public office, including Bob Backlund, who is a
Republican candidate for Congress from the Hartford, Conn.,
area.
Even Ventura has been loath to turn his back on the ring. Last
month, the WWF announced that the Body would act as a
referee for SummerSlam, a pay-per-view event scheduled for
Aug. 22 in Minneapolis. The WWF stages 12 pay-per-view
events annually; they account for roughly one-third of its total
revenues.
The World Wrestling Federation is not the only major televised
wrestling league; its archrival, World Championship Wrestling,
is owned by Turner Broadcasting, a subsidiary of Time Warner.
(So fierce is the rivalry that CNN, the Time Warner news
network, did not cover the announcement of Ventura's
participation in the WWF event, which was carried live by the
Fox News Channel and MSNBC.)
The WWF so far has the edge, at least in viewers. The
television ratings of the World Wrestling Federation are in fact
the envy of many sports leagues. Its flagship television program,
"Raw Is War," was the top-rated cable television program for 19
straight weeks through June 30, according to the Nielsen
ratings. And its two Monday-night hours on the USA Network
earned 26 of the top 30 rankings on the Nielsen list of most
watched shows among all basic cable networks in the second
quarter.
Perhaps not surprisingly for a company in the business of
staging dramatic fights, the WWF is engaged in plenty of its
own battles. Most recently, the family of Owen Hart, the wrestler
who was known as Blue Blazer, sued the company for
negligence following the death of Hart in May during a televised
pay-per-view wrestling match. Hart fell 50 feet into the ring as he
was being lowered from the ceiling of the Kemper Arena in
Kansas City, Mo.
The company said in its securities filing that it will fight the suit,
but added that an unfavorable outcome could have "a material
adverse effect" on its financial condition.
In contrast to its somewhat unwholesome reputation, the WWF
is a family business, spanning four generations of the
company's founding family. Currently, World Wrestling
Federation Entertainment is wholly owned by Vincent K.
McMahon, of Stamford, Conn., who serves as chairman, and
Linda McMahon, who serves as president and chief executive.
McMahon's father, Vincent F. McMahon, founded Capitol
Wrestling, a predecessor company. His father, Jess McMahon,
also was in the professional wrestling business. And Shane
McMahon, son of the company's chief officers, is now president
of the WWF's new media business.
The WWF has been a stunning success for the McMahons. In
June, the company paid McMahon $25.5 million of accumulated
profits, or nearly two-thirds of the company's total cache of
retained earnings. In addition, the company lent McMahon $32
million to pay taxes. Ms. McMahon also owns a travel agency
that provides services for most of the performers and
employees of the wrestling federation.
The McMahons will surrender little if any control by selling a
stake in the business. In an offering led by Bear Stearns & Co.,
the company plans to offer an as yet unspecified number of
class A shares, leaving the McMahons with voting control of the
company through their ownership of all of the Class B stock,
which has 10 votes for every one vote of the class A shares. The
company plans to use the proceeds of the offering to upgrade
its television facilities and expand its Internet operation.
It is not clear whether the wrestling business is quite as
profitable for the performers, who are classified as independent
contractors. The company's documents contain no details on
how much the performers are paid, although the most popular
performers are believed by sports and entertainment experts to
earn millions of dollars annually.
The company's 110 wrestlers do not now own stock, but the
company said it planned to use shares of stock "to assist us in
attracting and retaining key employees, directors, consultants
and performers."
Unlike professional athletes who are generally free to sell their
services to any team, the wrestlers do not own the characters
they portray. If a wrestler attempts to move to a rival wrestling
league, the WWF retains the right to the ring persona.
That unusual feature of the business has been the subject of
numerous legal disputes. For example, James Hellwig, a former
WWF wrestler, has filed a lawsuit in state court in Arizona
claiming he owns the rights to the characters Ultimate Warrior
and Warrior. The company has filed a countersuit in federal
court in Connecticut.
The company recently settled for an undisclosed amount a
lawsuit brought by Rena Mero, a former WWF women's
champion who wrestled under the name Sable and had sought
$110 million for a host of claims, including being harassed for
refusing to have her gown torn off during a match. USA Today
reported last month that as part of the settlement, Ms. Mero, who
recently posed for Playboy, agreed to stay out of wrestling for
three years and relinquished her claims to the Sable name.
Wrestling is not the company's only business. It owns a hotel in
Las Vegas, which it said it intended to sell, and recently signed
a deal to create a $25 million theme restaurant, seating more
than 600 patrons, in the old Paramount Theater site in Times
Square, at the northwest corner of 43rd Street and Broadway.
There, patrons will be able to sit amid memorabilia of their
favorite wrestling stars and debate whether the outcomes of
WWF matches are rigged. To that question, James Byrne,
senior vice president for marketing at the WWF, gives an
opaque reply.
"Wrestling is 100 percent entertainment," he said. "There's no
such thing as fake entertainment."
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