By Merissa Marr
Holed up backstage during the taping of a recent match, World
Wrestling Entertainment Inc. Chairman and CEO Vince McMahon barked
instructions into a headset about camera angles before leaping out
of his chair to give a pep talk to a heavily-bearded wrestler
preparing to do damage in the ring.
The Chairman, as he is known in wrestling circles, can be found
most weeks with his sleeves rolled up, orchestrating WWE matches
from the so-called gorilla room where wrestlers prep before going
on stage. Charged with running the public company he founded, Mr.
McMahon is still intimately involved in the product itself, flying
to weekly matches in the red-and-black-branded WWE jet and helping
craft story lines and characters.
But as he approaches his 69th birthday, questions are emerging
about what the future holds for WWE. Its stock plummeted 44% on
Friday after Mr. McMahon failed in a high-stakes effort to wring a
huge increase in television fees it receives from Comcast Corp.'s
NBCUniversal--part of an effort to boost the company's stagnant
revenues and declining profits.
The episode highlighted a shortcoming in Mr. McMahon's
leadership style: While an unbeatable promoter and a creative
genius, Mr. McMahon has at times struggled to master corporate
negotiations and dealings with Wall Street.
In recent years, he has bolstered his executive ranks and
groomed his son-in-law Paul Levesque--better known to fans as
"Triple H"--and his daughter Stephanie McMahon to take bigger
roles. But Mr. McMahon, a self-confessed workaholic and the
company's controlling shareholder, still makes all the key
decisions--both at the corporate level and at events.
At a recent taping, Mr. Levesque, 44, and Ms. McMahon, 37,
flanked Mr. McMahon in the gorilla room, studiously observing him
in action. After a series of improvised body slams ran long, Mr.
Levesque was dispatched with his walkie talkie to reorder the
scenes. Mr. McMahon sat jiggling his leg as he sipped an energy
drink and directed a sequence involving Fandango, a flamboyant
ballroom dancing-themed wrestler he dreamed up after watching
"Dancing with the Stars."
The television recordings--"Raw" on USA Network and "Smackdown"
on Syfy--are the bread and butter of the business, accounting for
around 30% of revenue. The shows' ratings have held steady, and
they remain among the most-watched weekly cable-TV programs. The
events themselves bring in another 20% of revenue.
Mr. McMahon has spent much of this year renegotiating the
television contracts. Determined to get a better deal for wrestling
in light of the inflation in sports and event programming, he
played hardball in discussions with NBCUniversal, demanding to more
than double the value of their previous deal of just shy of $100
million. He looked around for possible alternative TV partners,
unsuccessfully, ending up renewing the NBCU deal with an increase
that analysts estimate at around 50%--still generous but well short
of what Wall Street had come to expect.
The company has also struggled to manage expectations for the
launch of an online subscription video service showing WWE
programming which Mr. McMahon calls "one of the most important
things I've ever done."
Since its launch earlier this year, the WWE Network has drawn
more than 660,000 U.S. subscribers and it is on track to reach a
goal of one million by year-end, says finance chief George
Barrios--one of a band of executives hired to bring more corporate
expertise to the Stamford, Conn., company. Long-term, the company
expects to draw two million to three million subscribers--a range
described as "very conservative" by the effusive chairman. But the
company's latest profit guidance implies the network's fixed costs
will be much higher than expected, says Daniel Moore, managing
director at CJS Securities.
"This management has a history of over-promising and
underperforming" adds Bradley Safalow, chief executive of PAA
Research, who describes the new online network as a "black
hole."
In an emailed statement on Friday, Mr. McMahon defended the
company's record: "There should be no confusion on Wall Street as
it is extraordinary to have reached more than 660,000 WWE Network
subscribers only 42 days after launch, putting us on track to reach
1 million subscribers by the end of the year." He added: "We feel
good about nearly doubling the value of our four largest TV deals
around the world."
Mr. McMahon has made a career of taking big and risky bets. When
he bought his ailing father's wrestling business in 1982, he says
he was winging it financially. He took what was a fiercely
territorial business and went national.
Today, WWE spans live events ("the heart and soul"); television
shows (reaching 13 million U.S. viewers); movies; action figures
(John Cena is the top seller); videogames; apparel; and
paraphernalia from championship belts to Rey Mysterio's mask. But
the competition has become fierce, whether it be videogames or
mixed martial arts luring younger viewers.
"Vince's philosophy has always been to stay ahead of the curve,"
Ms. McMahon said of her father in an interview before this week's
events. "One of the secrets to our success is that we listen to our
audience and we can do that because we have 320 live events a
year."
A key to securing the future of the WWE is characters, says Mr.
McMahon. With that in mind, Mr. Levesque, who spent 20 years in the
ring and still sometimes appears as Triple H, was put in charge of
talent. Last summer, he launched a performance center in Orlando,
Florida, where WWE wannabes are put through their paces to see if
they have what it takes.
"We were doing nothing to create the future talent," says Mr.
Levesque, who says he learned 90% of what he knows from his
father-in-law.
Mr. Levesque has made a hard push into recruitment, building
relationships with sports leagues including the NFL, NBA and the
Olympics. "If you're a hammer thrower and you have a huge
personality, what's next when you're done?" he explains. "There
aren't a lot of professional hammer throwers."
At the opposite end of the floor of WWE's nondescript
headquarters, Ms. McMahon is leading the charge as the chief brand
officer. It is a role she took on a few months ago after heading up
creative writing and digital media.
Ms. McMahon was at the center of WWE's shift in recent years to
a more family-friendly brand, free of curse words and risqué
programming like bra-and-panties matches--an effort to broaden its
appeal and draw a wider swath of television partners and
advertisers, who historically shied from wrestling. The WWE's
biggest star, John Cena, morphed from a rapper known for a
signature move called the "FU," to a Hulk Hogan-like superhero
idolized by young boys--a move he equates to "an R-rated comedian
shifting to a Bill Cosby routine."
The question is whether Mr. Levesque and Ms. McMahon--whose
in-ring characters these days portray a pair of judgmental
co-owners of the WWE--will be able to one day fill Mr. McMahon's
shoes. Mr. McMahon, who describes himself as a thickheaded Irish
man, says he can't be succeeded by just one person.
"It started out as a one-man band but if this is really going to
take off and be everything I think it should be, it can't be one
man's vision, " Mr. McMahon said in his distinctively gravelly
voice in a recent interview. "If I get hit by a bus, there will be
a couple of hiccups along the way but my position would be split
into different directions. We have a lot of creative people and a
lot of executives of a high caliber."
Write to Merissa Marr at merissa.marr@wsj.com
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