This afternoon Entertainment and Media Analyst Laura Martin (Needham & Company) sat down with three WWE executives—Paul "Triple H" Levesque (Executive Vice President of Talent and Live Events), Stephanie McMahon (Chief Brand Officer) and George Barrios (Chief Strategy and Financial Officer)—for a "fireside chat" about the WWE during the Needham Interconnect Conference in New York City.
Laura Martin, who has been quite optimistic about the potential for the WWE Network, facilitated the free-wheeling lunchtime conversation. They discussed the WWE's unique business model, the creative process for developing superstars, global expansion of the WWE Network, longevity in wrestling, social media interaction and the difference between scripted sports entertainment and unscripted sporting events.
THE MCMAHON FAMILY
The first question was directed at Stephanie McMahon. Martin noted that she's "been covering the stock since your mom was running it" and wanted to know what life was like at the nightly dinner table.
Stephanie confirmed that there was "never a dull moment" and often "increasing arguments between my dad and my brother." Stephanie also related a story about going to a live event as a very young girl (three or four years old) and running into George "the Animal" Steele, who completely terrified her. When she ran to her daddy (Vince McMahon) for solace, he just laughed and laughed.
She said she learned a lot very quickly from those sorts of experiences. And, as has been alluded to in storyline, Stephanie made sure to again note that Andre the Giant was one of her best friends.
Later in the conversation, a guest wanted to know whether Vince McMahon was still "active and engaged"? Both his daughter and son-in-law had to giggle at this query. Triple H responded, "He's the most active person I know. He works at two in the morning because he's absolutely dedicated to driving himself and the executive team as hard as possible to create the best product as possible."
BECOMING A SUPERSTAR
Laura Martin asked Triple H to quantify how difficult it was for a performer to become a superstar. In particular she asked, "What differentiates superstars versus 'good enough to be on television' versus 'the vast majority who didn't make it'?".
Triple H called it "charisma, the 'it factor.'" When you're training someone the more pieces of "the puzzle" that they get, the better they will do. If they're a good communicator, they'll do well in front of a large audience. However, while all of those pieces are important, a lot of them can be taught. He emphasized, "The one thing you can't teach is charisma."
Triple H talked about WWE as a global company. Some people they recruited wrestled on the independent scene or the "periphery of the industry" for years. On the other hand, others had never stepped in a ring before. At any given time they have about "60 to 80 performers" down at the performance center in Orlando (NXT) who are "learning this craft." And people will always be coming and going. As the EVP of Talent explained, "Some will go up (to television) and some will go away."
Barrios commented on how costs, such as the Talent Development Process, which includes NXT, are part of the "Corporate & Other" financials and it's been growing larger each year.
When Martin asked how long it takes for a performer to make it on to television, Triple H said: "Some guys pick it up like that (snaps his fingers). Some guys it's a longer process. Do they have something? If it takes longer to develop one part of the puzzle, we'll keep at it. In our process, we have people at all different levels."
Husky Harris was brought up as an example. Triple H explained:
"He wasn't quite connecting with the crowd. Decent hand. Talented kid. Right person. They were going to let him go and I said, 'Let me take him and do something with him.' We moved that character to NXT. We put some other people around him that fit the package. Moved him back onto Raw and Smackdown, and he's one of our most popular superstars Bray Wyatt. I'll go out on a limb and say in 10 years Bray Wyatt will be one of the most memorable characters in WWE."
Also, Stephanie McMahon talked about how the "over 320 live events every year" give them a chance to test how audiences are going to react to talent. Triple H added that NXT gives them a chance to figure out which sorts of storylines work best for certain talent. Steph also noted that the agents are part of the process of identifying who has "that ability" to make angles work.
Martin asked an interesting question of the panel, "How do you prevent being 'held up' by talent?"
CFO Barrios took this one explaining that WWE viewed the "economic model with our talent, the independent contractors, as a win-win. They are paid a percentage of our revenue streams."
Triple H also chimed in that, "There is no one performer who is bigger than the WWE. There are superstar performers and megastar performers like John Cena. But he's still not bigger than the WWE. Why doesn't anyone 'hold us up'? Because it would only be a short-term gain. There's no upside for them behind it."
And it's all about the long-term investment. Hulk Hogan was brought as someone who was synonymous with the WWE and while he's not able to get in the ring anymore, he still has value. He can still do promotions, and that's the benefit that talent receives when they form a long-term partnership.
When Martin asked whether The Rock was the only successful guy to leave and create his own career, both Stephanie McMahon and Triple H were quick to offer counter-examples including, "Dave Bautista was just in the No. 1 movie this weekend, Jesse Ventura was the governor of Minnesota, Chris Jericho has a successful rock band and podcast and Stone Cold Steve Austin still does movies, has a very successful podcast and his own show Redneck Island."
They also cited Edge as an actor on SyFy's Haven. They noted he was smart, saved his money and just had a baby. So when he wasn't acting, he was happy to just "live in his house on the side of a mountain and sit next to a fire."
However, both Stephanie and Triple H were quick to kowtow Duane "the Rock" Johnson. While not willing to go into the details of the arrangement about using the nickname "The Rock," they both insisted that "there's a healthy respect between Rock and WWE... It's a mutually respectful collaboration between Rock, Vince, Steph and myself (HHH). He doesn't need to come back. But we see ourselves as part of his success."
When Laura Martin asked if they "ex-communicate" many guys, Triple H went back to his television catchphrase: "We do what's 'best for business.' It's all about our fanbase."
Stephanie also carefully noted that the WWE retains all of its own intellectual property. It's able to capitalize on it from the beginning. It's very clear that WWE wants to reinforce that it controls the "brand perception" of each of its television characters and without it, those superstars are worth a lot less.
Regarding their stable of stars, Barrios did note that they are currently seeing the "broadest distribution of merchandise across the largest group of talent." It was unclear whether that's an indication that we're just lacking the mega-draws of previous eras, or it's a positive sign that more talent is getting a piece of the pie.
When asked about the "huge influx of new data" that was available with the network, Triple H talked in the abstract about the importance of using information to learn new things. He mentioned that they have focus groups, social media and ratings that all drive the decision-making process. They did mention that they're going to carefully track which countries are watching the most WWE Network content to help them with the prioritization for which regions get "localization" first (namely, where we'd see emphasis on foreign language commentary).
Barrios mentioned that they had a 150,000-hour library of which they've digitized about 40,000 hours. He insisted that they "own 100 percent of the rights," which sidestepped the minor points about whether that includes all aspects including music. While they have "licensed them (the rights) from time-to-time around the world, we still own them."
The CFO defended the "slow roll-out" that WWE has adopted with adding video-on-demand content to the WWE Network. He insisted that they need to "promote it as it comes alive." One interesting revelation was that as the "Monday Night War" series finally comes online, WWE is planning on rolling out corresponding WCW Nitro episodes.
Stephanie McMahon also noted that during the week of WrestleMania they had "over seven million hours of content consumed on the network." She also insisted that, "We have more families watching WWE than any major sports franchise with the exception of the NFL."
Triple H tried to expand on that point by giving the analogy of a family watching the WWE Network and the father telling his son, "You like this John Cena guy? You should take a look at Bruno Sammartino or Chief Jay Strongbow." (While his scenario is interesting, it should be pointed at that unfortunately at this time, there isn't much Sammartino or Strongbow footage available on the network.)
One questioner pointed out that WWE's deal with NBC Universal (which the Wall Street Journal characterized as "generous but well short of what Wall Street had come to expect.”) appeared to have been damaged by launching the WWE Network ahead of time. Even Vince McMahon admitted that he was disappointed and that the WWE Network probably did hurt the deal. Therefore, the questioner continued, "How do you measure success of the network?"
Barrios supplied the same stock answers that WWE has used before. They believe that "two to four million subscribers over time is achievable," and that's what they're focused on. The "measure of success is acquiring subscribers every single day and making sure we have content that engages them." He went on to tout the 90 percent satisfaction rate for the WWE Network.
When the recent mid-cycle departure of more than 128,000 subscribers was brought up, Barrios was nonplussed. He said that they knew there would be two elements to churn-renewal and billing, and he wouldn't confirm whether these numbers were higher than internal expectations.
Regarding the international roll-out of the WWE Network, several points were discussed. It's going to be the "U.S. product" available in each country. In other words, don't expect to see different versions of the WWE Network in each country. Instead, they hope that by putting the same product out around most of the world, it would be easier to execute a global marketing campaign. In particular, WWE will be using a lot of SEM (Search Engine Marketing) and SEO (Search Engine Optimization) with Google to create "global awareness."
Martin noted that Netflix's strategy is same number; different currency. For instance, a plan in the United States would be eight dollars and a plan in Europe would be eight Euros. Barrios instead said they were going to be using $9.99 everywhere. They weren't planning on charging more in other countries.
The plan was to launch the WWE Network globally in over 170 countries on August 12 followed by UK launch in October. That would only leave eight markets without the WWE Network: Italy, UAE, Germany, Japan, India, China, Malaysia and Thailand.
This brought up an interesting ongoing debate between analyst Martin and WWE executives. Laura Martin has long held that global demand for the WWE Network would be larger portion of the aggregate subscriptions. Conversely, WWE original domestic projections were for one to three million subscribers and original international projections only had 250,000 to 1,500,000 subscribers. WWE still believes the lion's share of subscribers will be on the domestic service while Martin disagrees. Considering the larger-than-expected WWE Network Global roll-out, both sides have a chance of winning this argument.
Discussing the creative team, Triple H noted that:
"We have a whole creative writing team that fluxes over time. We produce eight hours of in-ring content each week. It's a ton of content. There can be anywhere from 20 to 35 writers on with us. There's a churn rate on that as well. At the end of the day, it's all about churning out as many storylines as possible and looking at the business as a whole. You can write the greatest story in the world and have an actor with no charisma. The story will tank. They're interdependent on each other."
A question about how the emergence of UFC has impacted the WWE led Triple H on a long analogy about what was the difference in his mind. He said:
"UFC is not really a competitor to us. I explain it to our talent. They are like boxing. It's completely different from what we are. We're like the movie Rocky. We're a story. We're a great story that just happens to take place in the wrestling ring. In a boxing match, you'll watch one time. You're not going to go back and watch it a bunch of times unless you're a connoisseur of boxing science. Rocky the movie? You'll watch over and over again. It's a triumph story. It's a love story. We create characters you gravitate to. That you connect with. Whether you hate them or love them. We put them in unique storylines with creative passions. We have good guys and bad guys. That's what makes the network successful. Who is going to go back and watch the Super Bowl from 1984? Who is going to go back and watch boxing from five years ago? Our product is evergreen."
Triple H was very passionate about this point, and clearly this is the speech that he's given many times.
WWE also trumpeted some Cena social media statistics including the claim that he's the "#1 most-followed active American athlete on Facebook. (non-retired)."
Stephanie noted that during the first NXT live event, just four days into the WWE Network existence, the company saw it had "21 worldwide trends" and it was the "No. 4 most social program across all of broadcast and cable that night." Either that says something about how little "trending" really means, or it suggests that despite WWE's attempts to ignore it, a large portion of its audience accessing the U.S. version of the WWE Network is coming from overseas.
To end the conversation, the panelists tied social media activity to the Daniel Bryan "Hijack Raw" angle from March. In their mind this was an example of how they melded social media activity with exciting storylines. And in the end, like in the movie Rocky, they were able to create a cathartic outcome. To emphasize the point, they played video from that the episode and ended the panel.
WHAT WE LEARNED
In the end, there were a few revelations:
- We can expect to see WCW Nitro episodes on the WWE Network in the next 45 days (alongside the new Monday Night War program).
- The WWE Network that is being rolled out globally should be the same as the U.S. version. This included pricing—$9.99/month with a six-month commitment or just $19.99 for just a single month. Expect to see a lot of Internet advertising.
- WWE adamantly believes that Charisma is the X-factor that separates superstars and megastars.
The event was webcast live and a replay is available. Quotes in this piece were transcribed from listening to the webcast.