CALDWELL'S TAKE CORNER CUBE TUESDAY 5/6 - Quick hits on WWE Financials: WM buys below expectations, International biz, Kids effect May 6, 2008 - 10:55:22 AM

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By James Caldwell, Torch columnist

Updated Tuesday, May 6, 2008

WWE reported first quarter earnings this morning, and investors apparently were not satisfied with the results to snap up shares of WWE stock. In morning trading, the price of stock dipped 4.5 percent to the mid-$17 per share range. Some analysts last month had predicted WWE stock would jump to $20 in the first-half of the year.

Looking at the financial report, it's difficult to compare and contrast the numbers for this year's first quarter to last year's first quarter or even last year's second quarter, which is when WrestleMania 23 took place. The impact of all-things WrestleMania affects every revenue stream, so this year's first quarter takes into the account the sweeping effect of WrestleMania on TV revenue, licensing revenue, home video sales, etc.

Whereas, last year's first quarter had all the build-up to WrestleMania, but the sweeping results and subsequent two months of post-Mania cool down were all reflected in the second quarter. The timing skews the results, so it will difficult to truly measure the impact of WrestleMania this year compared to last year in a side-by-side comparison. That said, there are some specific takeaway points just looking at this quarter's numbers.

- WrestleMania buys. Today's lesson is: the drawing power of Donald Trump > the drawing power of Floyd Mayweather. WrestleMania 23 generated 1.2 million PPV buys and $24.6 million in PPV revenue, compared to this year's WM 24 figures of 1.06 million buys and $23.8 million in revenue. WWE increased the PPV price $5, which accounts for the revenue figure being close to last year's, but not enough to surpass it.

- International revenue. It's always interesting to read CEO Linda McMahon's "second paragraph commentary" that is always included in WWE's quarterly earnings press releases. This quarter, she references the power of the WrestleMania brand. She also acknowledges international expansion by opening new offices internationally.

International business has been the story of this company for several years now, and next quarter will reflect the strong business from WWE's post-Mania tour in Europe. In WWE's press release, they include a note that revenue derived outside of North America was $34.0 million, compared to $24.1 million in the first quarter of 2007. A portion of that came from more lucrative TV deals with international distributors, which contributed an additional $2.0 million in revenue.

Kids. WWE won't report business on their newly-launched WWE Kids magazine, but kids (or their parents) continue to help WWE's business. Licensing revenue was up $5.5 million thanks to an increase in video game and apparel sales. Kids are playing the video games and buying merchandise.

Speaking of which, I was reading an article in Newsweek last night about the interactive market in the video game industry created by Guitar Hero and assorted copycat games that have followed. If WWE really wanted to reach the kids and get them hooked on the WWE product, there's an opportunity to strike while the iron is hot by creating a Guitar Hero-style game set to WWE theme songs.

Or, it could be an opportunity for TNA to work with Midway Games on a second release if they ever get that first release out on store shelves. After all, TNA already has Lance Hoyt and Jimmy Rave pretending to be Guitar Hero rock stars on TV.

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Updated Monday, May 5, 2008 (Cinco de Mayo)

Last week, WWE went for the big cliffhanging endings to Raw, ECW, and Smackdown. Who won the WWE Title match? Why did Adamle walk off the set? What's the status of the World Heavyweight Title? Why is Trevor Murdoch singing country songs? OK, scratch the last one.

Last week's endings, which were more suitable for weekday soap operas or "Lost", should become clearer this week. After all, WWE has another PPV in an absurd 13 days, with tonight's Raw starting a Week of Resolution to set up PPV matches.

Somehow, WWE is going to connect the dots on William Regal cutting off Raw to Triple H vs. Randy Orton in a steel cage match being signed for Judgment Day. Point A and Point B seem quite distant from each other, so the intrigue is for the journey.

It's like using Yahoo Maps to adjust the route from A to B and create all kinds of odd journeys with deviations off the suggested route. WWE could throw a few twists in the route tonight, as has been suggested Vince McMahon will return in some capacity to sober up William Regal, who was drunk with power on Raw.

History indicates that's a strong possibility. When WWE's ratings have slipped in the past, they've usually given up on developing the undercard with McMahon putting himself back on TV in attempt to boost ratings. This time around, I'm hoping for a more disciplined approach to developing the personalities of the mid-card wrestlers. It's simply impossible to believe fans are going to jump for joy at the prospect of a Super Crazy vs. Paul Burchill match if there is no reason to care about the individuals.

As for ECW, they celebrate 100 episodes of TV with the main angle being... the fate of the announcers. My, ECW, how you have grown. Of course, I didn't expect ECW to stay on the air after Week 1, which was one of the worst episodes of TV wrestling ever, so at least they made it this far. I just thought the top angle 99 episodes later would involve actual wrestlers, not a terrible announcer.

Really, there's not much else on the ECW front to be intrigued about in the Week of Resolution. C.M. Punk is apparently starting a program with Chuck Palumbo, as they wrestled on the weekend house show tour in Canada. Meanwhile, Chavo and Kane are still doing whatever they're doing. I'm just waiting for Tony Chimel to grab a headset and call a match. Chimel and Tazz. Let's make it happen.

As for Smackdown, they have a vacant World Title, which sounds all-too familiar to last year when Taker dropped the belt due to injury. This time around, it's just to set up a fresh program for Smackdown when ratings are slipping and they're a few months away from moving to a new network.

Based on the ratings, they have to try harder to grab the attention of viewers during the competitive NBA Playoffs and the start of a new baseball season. MLB is proclaiming record attendance during the first few weeks of the season, so that's certainly affecting viewership with many Smackdown viewers at the ballpark on Friday nights.

The Week of Resolution on Smackdown will set up the next round of programs to be featured on the brand. If they're going to strip Taker of the belt, it would be a waste of time to simply throw it back on Edge. It doesn't make Edge more credible of a champion, and it doesn't elevate mid-card wrestlers when they could use a day in the spotlight competing for the title.

Whether it's a tournament, battle royale, Tear-a-dome, or Deuces Wild Lethal Lottery Battle Bowl Reverse Battle Royale, WWE simply need to find a way to elevate the second and third tier Smackdown players by putting them in the title conversation.

Should be an interesting week for Raw, ECW, and Smackdown. The intrigue is there. The cliffhangers are in place. Now it's up to WWE to deliver a suitable payoff after leaving viewers hanging last week.

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