WWE stock in sleeper hold as subscriptions stall

In a typical WWE wrestling drama, the champ gets off the canvas and saves the day by turning the table — or a folding chair — on his opponent.

Vince McMahon, WWE’s chairman and CEO, has orchestrated such a comeback hundreds of times in scores of arenas around the world.

But now, as WWE is experiencing a disappointing number of subscribers to its over-the-top network, sagging attendance at live US events, payroll cuts up to 10 percent and a body-slammed stock price, McMahon seems to be having trouble getting off the mat.

Some even question whether the 69-year-old showman is the right person to lead another WWE comeback.

“He really needs a professional CEO,” said Emmanuel Lemelson of Lemelson Capital.


Lemelson’s firm, which shorted WWE stock when it traded above $30 per share in March, rode the price down to below $12 in May. It then went long on WWE, calling for new leadership and a sale.

Forcing McMahon’s hand is impossible, as he controls 90 percent of WWE’s super-voting shares.

Lemelson believes, nonetheless, that McMahon shouldn’t be circumventing WWE’s longstanding TV partners by streaming WWE Network directly to their customers.

“The model itself is the problem,” he says. “Collaborating with your partners is always the right decision. Offending them is not.”

McMahon, though, still has supporters.

“He’s the first to admit a mistake, which he’ll then work on until it’s fixed,” says National Alliance analyst Robert Routh.

And that’s what McMahon’s doing now, Routh contends, “tweaking the network until he gets a format that works.”

The tweaks include two price cuts to the monthly subscription cost and the elimination of a six-month subscription commitment.

Wall Street is unsure the tweaks will help quickly grow the subscribers to WWE’s streaming network from the disappointing 731,000 level on Sept. 30.

If the network averages 2.5 million subscribers next year, WWE expects total operating income before depreciation and amortization, or Oibda, to jump from $30.4 million in 2013 to as much as $230 million.

But if the WWE can’t grow subscribers and, in fact, sees the total fall to 500,000, it could post an operating loss of $10 million.

To be sure, McMahon’s tireless tinkering helps explain why WWE remains a creative enterprise — as demonstrated by third-quarter ratings increases of 2 percent and 3 percent, respectively, for WWE TV shows “Raw” and “Smackdown.”

“Bear in mind those ratings increases came while ratings for the rest of cable were getting decimated,” says George Barrios, WWE’s chief strategy and financial officer. “It’s our view the network will create more engagement for everybody.”

But that’s not the view of Wall Street. Investors have trimmed $1.5 billion in market value from WWE in the eight months the streaming network has operated.
WWE shares closed Wednesday at $11.68 — down 30 percent this year.

Whether McMahon has the skill set to stage yet another comeback remains to be seen. Right now, Wall Street isn’t convinced.

source: nypost.com