The Economics of the PG Era

Paul AustinCorrespondent IJune 7, 2010

NEW YORK - JUNE 12:  WWE Chairman Vince McMahon (C) congratulates winners Sarah Furhman (L) and Steve Rosenzweig at the announcement of the First McMahon Million Dollar Mania Winners at the Hard Rock Cafe June 12, 2008 in New York City.  (Photo by Will Ragozzino/Getty Images)
Will Ragozzino/Getty Images

I've read a lot of comments over the last few years about the PG era. Why it's good, why it's bad, why we love it, or why we hate it. However, most of these arguments have been emotive arguments, based on subjective opinions and tastes.

What about the other side of the argument?

Has the PG era been a hit or a miss?

To answer that question we have to put our opinions aside, we have to forget what we like, or don't like, and instead look at the numbers.

When it comes to PPV buy rates, if we look back at the history of the two biggest PPV's of the year, WrestleMania and the Royal Rumble; we can see that these have varied immensely.

For example, in 2003 the buy rate for the Royal Rumble was 0.95, and for WrestleMania it was 1.40, and in 2004 the figures were 0.98 and 1.63 respectively, with 2005 bringing a new low for the Royal Rumble of 0.83, the lowest in the history of the event.

In comparison, the buy rate for the 2009 Royal Rumble was 1.12, and for this year it was 1.15, whilst WrestleMania achieved a buy rate of 2.42 in 2009 and a figure of 2.21 this year.

The buy rate reflects the number of homes which purchased a PPV broadcast; 1.0 roughly equates to 400,000 separate homes ordering the event.

Whilst the WWE will have been disappointed to see that this years buy rate for WrestleMania is considerably down on the previous years, they'll be heartened to see that it's still considerably up on the lows of 2003 and 2004.

In terms of how this all relates to stock values, in the week ending Oct. 14, 2002, WWE's stock fell to a new low, of $7.10, but with the changes implemented in recent years, it's risen to a high of $18.67 this year and is currently trading at $16.57.

And the WWE remains optimistic for the future, as can be seen in a three year business plan unveiled late last year, that called for a further 15 to 20 percent earnings growth through 2012.

Being a business, this is the sort of area that matters most to WWE, and the will be heartened by the success of recent years.

There have been a lot of wild conspiracy theories, as to the reasoning behind the launch of the PG era, and as to whether it's been a success or not. But these figures give us the bottom-line.

In 2002, Vince McMahon and World Wrestling Entertainment, Inc. saw share prices tumble to an all-time low. And between that date and the Royal Rumble of 2005, they saw PPV buy rates plummet, and new they needed a change direction as older fans were tuning out as their heroes retired (note: it coincides with the end of Steve Austin,= and the Rocks careers), and new viewers were not tuning in.

They looked around at the up-and-coming talent and at the other changing personnel, and they decided in combination with the changed demographics, that a more family friendly format was needed. And they started working towards this, and that strategy culminated in the PG era.

In terms of the success of the PG era, PPV buy rates rose again, stock prices rose again, and not only did these things rise but they also attracted the new audience that they wanted - an audience where women and young children now make up 40 percent of their viewing figures, thus building a new fan base for the future rather than relying on a dwindling fan base from the past.

Am I here to defend the PG era?

Not really. I can't say I've been it's biggest fan, but the truth of the matter is it's all about the money.

Vince McMahon is first and foremost a businessman. He's the guy that tripled the TV syndication of his father's company, and then after buying it off his father, he was the man who launched it as a national promotion and turned it into the mainstream behemoth it is today.

Whether the PG era works or doesn't work, for each of us as individuals it's certainly true that it's worked for the WWE and their stock holders, and that's the bottom line...'cause Paul Austin said so!