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Explaining WWE's Stock Selloff, Is WWE Network A Failure Already?, Bray Wyatt Stale?, WWE's Problems Deeper Than Roster Cuts

The following is today's edition of Ask WNW. Ask WNW is the most popular feature on the website where Richard Gray answers four questions daily, Monday through Friday. To submit your question for the next installment of Ask WNW, click here.
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How bad are WWE's problems following the major stock selloff after their new TV deal with NBCUniversal was announced?

WWE and Vince McMahon have a major problem on their hands and will look to quell investor concerns in a conference call on Monday morning. Many were operating under the assumption that WWE was on the verge of a landmark domestic TV agreement and the increase of the stock price was a result of that. When the deal was announced, it was a moderate increase, which resulted in a stock selloff. The fact of the matter is WWE's stock was overvalued on the anticipation that a big deal was going to be announced. The company was very confident when speaking with investors they would be able to significantly increase their TV licensing fees and while they did, the number wasn't "double" or "triple" what was earned from their previous agreement. Of course if you followed our reports going back to February, you knew WWE did not have the interest they thought they would. While WWE thought they would have many bids on their programming, it came down to Viacom and NBCUniversal and when Viacom found out WWE was asking them for more than what they were willing to accept from NBCU, they pulled out. However, while the value of the company dropping over 40% in one day is a major problem, I see it more as a correction from a stock that had been trading at an inflated rate.

Are the days of the WWE Network numbered due to financial concerns?

The second component to WWE's tumbling stock price relates to the WWE Network. Lemelson Capital Management, a private investment management firm, called for major changes within the company due to concerns with the profitability of the WWE Network. Their concern stems from WWE losing $45-$52 million with the WWE Network at a steady state of one million subscribers. WWE Chief Financial Officer George Barrios has stated on numerous occasions the WWE Network will be profitable in excess of 1 million subscribers. The numbers do not appear to add up, however, Barrios and Vince McMahon will address that in Monday morning's conference call. The WWE Network is something the company views as an investment until it reaches its steady state and some have speculated this could result in a price increase. However, to answer your question - no - the days of the WWE Network are not numbered. WWE knew it was going to have to make an investment to get their network profitable and have very high hopes for it. They believe the WWE Network will turn into one of their biggest assets.

As good as Bray What's mic skills are, I have already found myself leaving the room during his promos which seem to get longer by the week? Do you think it will hit the point where it's too much and becomes stale?

If you are leaving the room during Bray Wyatt's promos, you are missing one of the best parts of WWE television. It's hard for me to even fathom how one could not truly appreciate the brilliance that is Bray Wyatt. I've been doing this for 14 years and I am as high up on Wyatt's character as I have been on any gimmick in that time period. The only gimmick I can even compare it to is The Undertaker. The only question regarding the success of Bray Wyatt will be the "stay ability" of his character. Your boredom with the gimmick would be problematic if it were the majority but you are actually the first reader I've heard from that is tired of it. Let me ask you this, if Bray Wyatt is not entertaining, what on WWE television is?

Do you see talent cuts coming in response to WWE's stock woes?

The issues WWE experienced last Friday go way deeper than the talent roster. Investors began to call into question the very core of WWE's business model. We're not talking about downside guarantees here, we're talking about millions of dollars in regards to how the company functions. WWE recently cut some developmental names that didn't have a clear path to the main roster, however, they could cut their entire talent roster and not fix the things being called into question on Friday. What Vince McMahon and George Barrios have to do on Monday is explain how the WWE Network and their new domestic TV agreement with NBCU will ultimately work for the company's prosperity going forward.

From the Ask WNW vault…

February 2013: You’ve gone on record several times saying that you are against blading and I completely agree. But how do you feel about WWE going out of their way to avoid blood when a performer is busted open the hard way like they did by showing only the left side of Brock’s head when he was standing on the ramp last night? - I missed the opening segment of this week’s WWE Raw and had to result to the black and white footage WWE posted on YouTube (link here). While away, my phone was blowing up about Lesnar bleeding like a stuck pig. After reviewing the footage and listening to my sources, it’s clear Lesnar cut his head on an exposed hook underneath the turnbuckle pad. The reason WWE tried to keep the cameras off the blood and made the footage black and white on YouTube has to do with their PG initiative. Excessive amounts of blood will cause the TV parental guidelines to change the rating from PG to TV-14, something Vince McMahon refuses to do.

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The next installment of Ask WNW is scheduled to run on Tuesday, May 20, 2014.

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