WWF slams expectations
McMahon credits strong marketing, soap-opera like storylines for positive 3Q
NEW YORK (CNNfn) - The growing popularity of shows like "WWF Smackdown!" and "WWF Raw" helped World Wrestling Federation Entertainment Inc. bodyslam Wall Street's third-quarter expectations for the company Tuesday.|
But the company on Tuesday reiterated its plans to launch a new football league, XFL Football, that would run for a full 13-week season, and the news prompted downgrades of the company's stock by analysts. †The new league makes it nearly impossible to project the company's future cash flow, analysts said.
Though analysts are skeptical over the WWF football venture, Linda McMahon, the company's president and chief executive officer, and wife of Chairman Vince McMahon, said brand building is not one of the company's weak points.
Within a decade, the McMahons have transformed professional wrestling's image from tough, but goody-goody, to tough, edgy and in your face.
"You clearly saw there was one focus or concentration," said Linda McMahon in an interview with CNNfn.com of the wrestling federation in the 1980s and early 1990s. "Hulk (Hogan), even though he was not always straight up with the things he was doing in the ring, he would say take your vitamins, obey your parents. That played very well for the time, but now we have edgier kind of programming, and we continue to push the envelope."
And the strategy is working.
For its fiscal third quarter, ended Jan. 28, Stamford, Conn.-based WWF earned $15.7 million, or 23 cents a share, up from $10.2 million, or 18 cents a share, in the year-ago quarter. Revenue rose 51 percent to $98.4 million from $65.2 million.
Analysts surveyed by earnings tracker First Call Corp. projected earnings of 18 cents a share for the quarter.
For the first nine months of its fiscal year, WWF earned $35.1 million, or 57 cents a share, compared with $20.2 million, or 36 cents a share, in the year-ago period. Revenue rose 67 percent to $292.9 million from $157.7 million a year ago.
Television, licensing drive revenue growth
Strong ratings for its television programs and advertising, along with high turnout for live events and sales of licensed products, helped boost earnings for the young company, which had its initial public offering last October.
"What it is that attracts people is that they're irreverent," said Jordan Rohan, an analyst with Wit Capital. "In today's world of polished branding campaigns and well-thought-out strategies, they're a little bit fresh. That is very appealing to the average American, especially to the young male."
McMahon said the company continues to attract a bigger audience of men aged 18-34, but is also beginning to attract young women.
The addition of women wrestlers is helping to drive that interest, McMahon said, adding that she believes her daughter, Stephanie, one of the WWF owners, has done a lot to help market wrestling to other women.
Average attendance at live events grew 6 percent from a year ago as the average ticket price increased 20 percent to $28.
McMahon said the edgier programming, combined with more in-depth story lines, keep loyal fans coming back while hooking legions of new fans. Cross-marketing the federation with shows on cable and UPN, live events, and sales of licensed memorabilia also enhances high exposure.
"We're pushing the edge, developing more in-depth story lines. This is really an ongoing action adventure soap opera every week," McMahon said. "...We have all the elements of entertainment built into the program. Having that flexibility not only to react to the market, but to stay ahead of that curve and maybe lead them a little bit as well."
Revenue from WWF-branded toys, such as "Wrestlemania 2000" For Nintendo 64 and the debut of "WF The Music - Volume IV," rocketed 243 percent from the year-ago period because of these new products, the company said.
The nearly two-year-old WWF Web site is also expanding. McMahon reported the site received 187 million page views last month.
McMahon said the WWF currently is working out agreements with overseas media to spread wrestling's popularity in England, and domestically to establish a WWF record label.
And given the fact that professional wrestling has been around as long as television, she doesn't foresee waning interest from fans.
Also Tuesday, McMahon said the WWF is underwriting its own football league, and currently is negotiating with television networks to broadcast two or three games a week for the full 13-week season. The league is scheduled to debut next February.
"I think Vince very eloquently addressed ... his own real passion for the game, the way it used to be played. It wasn't such a tidy game," McMahon said of their decision to enter football. "It's something he has talked about for the last few years, and of late, he heard some of the announcers talk about the good old days. Also, it's a brand extension for the way we market live events, production and management, merchandise sales, television; all of that rolls into one, and I think we can make it very successful."
Analysts are more skeptical, but given the McMahons' success with WWF, anything is possible.
"It attracts a lot of eyeballs. Their distribution on UPN has made it an even more powerful platform," Rohan said. "Its robustness is pleasantly surprising. If any company can make a football league work, they can."
WWF (WWFE: Research, Estimates) shares were up 1-3/8 to 13 shortly before the close Tuesday.