EDITOR'S NOTE: Eric Benner is SLAM! Wrestling's regular Friday columnist.
Friday, September 7, 2001
WWF and DirecTV play chicken
The facts in this case are relatively simple. Wrestling, over the past year and in 2000, grossed more on pay-per-view than any other sport or form of entertainment. In fact, as I recall, it grossed more than everything else combined. The WWF is the only wrestling game in pay-per-view town, now, so when I say wrestling, I mean them. Even toward the end of the WCW's existence, their pay-per-view numbers were a very small piece of the overall pie so even without them, wrestling is still on top.
Given that, you might think that the WWF, as all monopolies seem to do, would get greedy. You see, they have a deal with their pay-per-view providers (the cable companies, the distributors, and so on), and everyone takes a cut. The WWF usually walks away with a little less than half of the revenues. After all, without cable networks, they'd have nowhere to show their wares. Compared to standard business and industry, the WWF is actually keeping a fairly big piece of the pie, but because pay-per-view doesn't have to be transported or stored in a warehouse -- it's just data -- there are less middle-men between us and our Wrestlemanias.
So since the WWF means so much to pay-per-view business now, they could call the shots and demand a higher cut of the cash. Well, based on some rough numbers issued by the WWF which you'll see further down, pay-per-view revenues should (including DirecTV) amount to about $80-$120 million for the WWF over the next year. That's somewhere in the area of 10% of their total revenues. For the big cable outlets, WWF business and even pay-per-view as a whole is even less of their total revenues, so depending on how you look at it, the WWF can in some ways be considered the smaller player here.
And in fact, it wasn't greed on the part of the WWF that stalled negotiations. According to reports by Broadcasting & Cable, it was actually DirecTV looking to up their share of WWF pay-per-view gross. Their justification is that they provide not only the service of retailer (the cable companies themselves, who usually take about a 50% cut of revenues), but also a distributor (like InDemand, who 'distributes' the pay-per-views to cable companies and takes a much smaller cut off the top, leaving the remainder for the WWF). Consequently DirecTV now wants to take payment for both its retailer and distributor role, which would increase its share. In many ways, it does act as each a retailer and a distributor. It's a national carrier and does perform both functions in many areas. Still, it has always been seen as a retailer, as if the WWF were simply bypassing the distributor in this case.
In many ways, this was not a good time for DirecTV to make their case. As I explained above, the WWF is a behemoth in the world of pay-per-view, more so now than ever. And though DirecTV has other revenues than pay-per-view, they only provide about 15% of the WWF's pay-per-view business, or about 0.5% or 1% of their business overall.
It's all game theory, as economists call it. If you have a situation where you and a partner each take a cut of the profits, and both you and your partner are necessary components to make this profit happen, then some interesting situations can develop. For instance, if I were your partner, I could demand a 60% share (even though we're even partners). At that point, your choices would be to accept a 40% share or lose everything. If faced with that choice, it seems like you might want the 40%, except for your pride. But then, I'm faced with the same risk when I decide to make the 60% ultimatum.
All in all, it's a big game of chicken. Both the WWF and DirecTV consider themselves the big kahuna in this partnership, and both entities make each other lots of money. The question, as always in chicken, is who will give up first? The WWF let their cards out on the table at Summerslam, when they revealed the situation to their viewers, who protested en masse to DirecTV, so in many ways a parting between the two companies might be worse for DirecTV if they lose customers who follow the WWF brand. Without a more in-depth analysis, which would go on endlessly, it's impossible to say who will come out on top. I just hope they strike a deal. Game theory says that two players won't give up on something mutually beneficial, but if cable company executives are as brash as wrestling executives, then who knows?
Just a little insight for those who've read the news but found the situation as puzzling as I did.
Here's the mailbag.
Brad Wykes, from Morwell, Victoria Australia, firstname.lastname@example.org, (and formerly of Canada) writes:
"I read your column all the time over here in Australia in order to keep connected with what is happening back in North America. I was reading the Thursday September 6th Melbourne Herald Sun and saw full colour 1/8 page ad for a wrestling show at the Rod Laver Arena on the 27th of October. The show features: Bret 'The Hitman' Hart, Buff Bagwell, Road Dogg, Stevie Ray, Jerry 'The King' Lawler, Ken Shamrock, Jeff Jarrett, Gangrel, Konan, Crowbar with Daffney, Big Vito et al.
It's produced by Vince Russo and called World Wrestling Allstars. Did you guys at SLAM! Wrestling hear about Hart getting back into wrestling?"
It's always nice to hear from SLAM!'s many international readers, formerly Canadian or otherwise.
To the best of my knowledge, Bret Hart is being paid for appearances only and will not be wrestling on the card. Maybe he will referee. I don't believe his doctors have ever cleared him to wrestle, and so he'll be there in some non-wrestling capacity.
If he were to return to wrestling, I imagine it would be at a bigger, more heralded, and probably televised event.
Tama Wharepouri email@example.com
"Where's Norman Smiley? He was arguably one of the most over guys in WCW. I know he was one of the only wrestlers that I wanted to see during the real bad times. Bring back Screaming Norman Smiley - I would doubt he is one of the guaranteed big money contracts!"
It seems Oceania is taking over.
I don't believe that Smiley is still contractually obligated to AOL-Time Warner, but I haven't heard even the remotest of inklings that the WWF is interested in signing him. I'm not certain as to why he wasn't chosen, assuming he was even interested, but somehow he never seemed like he would fit the WWF's Attitude. Of course, there could be any number of other reasons, but I imagine he just didn't seem like a good choice.
It's too bad, I miss him too. You're not alone in favouring him above all others during the dark, final days of WCW.
Anyway, that's all for this week. Vacation was nice, thank you to those who asked. Have a great weekend!
Send email to firstname.lastname@example.org.