United States Sports Academy - "America's Sports University"

Abstract

World Wrestling Entertainment (WWE) is best known for its promotion of professional wrestling as sports entertainment. Today, World Wrestling Entertainment is an integrated media and entertainment company principally engaged in the development, production, and marketing of television programming, pay-per-view programming, and live events, and the licensing and sale of branded consumer products featuring the highly successful World Wrestling entertainment brand. As the WWE brand continues to grow, a strategic decision has been made to place a greater emphasis on the expansion the WWE brand globally. This paper will present an overview of WWE from its beginnings as the WWWF (World Wide Wrestling Federation) to its recent decision to capitalize on the significant operating leverage of its business model through increase in its brand in markets throughout the world.

Background

Originally named the WWWF (World Wide Wrestling Federation), then the WWW (World Wrestling Federation), and currently called the WWE (World Wrestling Entertainment), professional wrestling has come a long way from its beginnings in the 1930’s. Today, nearly 50 million fans admit to watching the Monday night WWE flagship television program, WWE Raw Is War on the USA television network. This is the number one regularly scheduled cable TV program among young women. Among men aged 12 to 24, it topped Monday Night Football. More people attend the WWE’s live shows than attend an average music concert; the WWE’s Website gets more viewers than either the NFL or the NBA sites (Sully, 2005).

Wrestling was an early favorite of network TV, but it faded when the Dumont network folded in 1956 (Assael, 2002).

In an October 5, 2005 interview Kurt Schneider, Executive Vice President of Marketing, provided a macro perspective on the corporation’s international expansion efforts, outlining four reasons why logic would suggest that the WWE will be successful in this venture: 1. Unlike major sports leagues, there are no game “rules” to understand. It’s just a “Good vs. Evil” premise; 2. Fans do not need to understand a “language”; 3. Every single country has wrestling (in some form) as part of their culture; 4. WWE wrestling is seen as a “uniquely American export” (Schneider, 2005).

The WWE is, in effect, a hybrid of entertainment and sport.

Viewer Profile – Age Demographics

• 71% male / 29% female 73% are 18 or older
• 37% are between the ages of 12 and 34
• 23% are between the ages of 18 and 34
• 50% are 34 or younger
• 14% are younger than age 12

Perhaps most importantly, WWE made a conscious decision to create and develop two distinct brands: Raw and Smackdown! Each brand is unique and has different story lines and separate talent. This creates opportunities to capitalize not only on television programming, but also on highly profitable live event tours, doubling the merchandising revenue streams. Also, in keeping with its known youthful fan demographic, the company has fostered and encouraged new media ventures and a heavy internet presence (Rosner and Shropshire, 2004). The division of the WWE talent roster into two distinctive and separate entities proved to be a stroke of genius, reviving a company and sport that had previously suffered sagging ratings and significantly lowered attendance numbers from live events. This shift – a change in production strategy – was a necessary one, and resulted in higher quality for both entities (Lamb, et al, 2005).

Beginning to formalize its expansion process, WWE Corporate held true to its business model, a model which was highly successful domestically, which has proven even more successful in internationally. Figure 1 depicts the WWE model.

Figure 1: WWE Business Model1

WWE Expands Internationally

The internationalization of professional wrestling can be traced back to Japan at the end of WWII, specifically the 1950’s. Originally, no Japanese wrestler ever won a match, being associated with being the loser after WWII. In effect, wrestling became a metaphor for international politics.

The internationalization of wrestling then moved on to the United Kingdom, Germany, and Australia, its primary markets.

As early as 2002, the WWE had already begun to position itself within the international market. “WWE provides us with a global identity that is distinct and unencumbered, which is critical to our U.S. and international growth plans” said Linda McMahan, President of WWE. “As WWE, we will launch our further expanded U.S. and international touring, our international expansion of branded merchandise and licensed products, and further integration into the film, publishing, and music business” (Wagner, 2004.)

International expansion represents an important component of the continued growth of WWE. The broad appeal of its content has yielded high international demand for its television programs and its live events. To further nurture this growing demand, WWE plans to continue its international television distribution, currently available in more than 100 countries in thirteen languages, and increasing its television penetration internationally has the potential for increasing the demand for WWE live events, which, in turn, has the potential to greatly increase the sales of its branded merchandise. These brands enable WWE to execute its strategy by freeing up schedules for talent to perform at more events in more countries.

“From an international standpoint, I don’t think we’ve done a very good job, quite frankly, of exploiting the international market like we really should. We’re on television in many, many markets and do extremely well television ratings-wise, but that's only one aspect of what we do. We do licensing; we do merchandising, and live events, and publications, and DVD’s and everything else imaginable. And we haven’t integrated all of that in our international platforms, and (doing that) is one of our goals” (McMahon, 2004).

Regardless of country and culture, the insemination process at WWE is shockingly consistent and regimented. WWE Corporate Headquarters adheres to a simple three-step plan when tapping into new markets: 1. Sell TV programming first; 2. Sell live events tour; 3. Bring merchandise overseas.

As of 2003, admittedly, the process of expanding internationally was not overly formal within the company. There were essentially 3 groups: a) TV Sales (with a goal of disseminating product (ex: Raw, Smackdown), b. Live Event Touring (many “one off” events), and c. Licensing (completely dependent on a & b). Shortly thereafter, Jonathon Sulley was hired to handle the expansion efforts, with an overall goal of integrating all existent strategies. The new process helps WWE to build primary markets; while in the primary market, it allows WWE to build a secondary market and finally tertiary markets (such as Chile, Ecuador, and Panama City – all places that WWE has never been). WWE has plans of going to Australia in late 2005, New Zealand in early 2006, and the Philippines sometime in the near future.

Italy is currently the hottest market, surpassing success seen even over in the United States. According to company research, the licensing business is the deepest in Italy, and the WWE phenomenon is at peak. For Italian fans, pro wrestling is “polarizing” – you either love it, or you hate it. As Sulley (2005) said in an interview, “the Italian market is like no other.”

Revenues on the international front have more than doubled in the last three years, and steadily increased every fiscal year since 2002 - $38.5M (2002), $51.8M (2003), $63.2M (2004), $87.5M (2005). Figure 2 illuminates revenues, both for international expansion, but all in comparision to domestic revenues, which have steadily declined each year over the same period.

Figure 2: Comparison of Revenues (in $ millions)

Television:

One strategy for the further expansion of the WWE brand internationally is to duplicate its successful domestic business model overseas (Figure 1) by building on its already established television presence in over 100 international markets. One way to continue this market penetration is through the expansion of its live event touring. The following figures are representative of its growth in the international marketplace.

FISCAL YEAR	# OF TOURS	NUMBER OF EVENTS	REVENUE
FY 2002	3 tours	5 events	$4.3M
FY 2003	6 tours	19 events	$13.1M
FY 2004	9 tours	32 events	$20.3M
FY 2005	9 tours	49 events	$33.0M

Looking toward FY2006, business is expected to move into emerging markets such as Latin America, Eastern Europe, and China. This fits the WWE strategy to broaden its international footprint in the following manner:

Conduct 55-60 international events as compared to 49 in FY 2005
Attract over 1.6 million attendees worldwide
Sell television rights in over 100 international markets
Continue to develop and further pay-per-view distribution internationally
Expand WWE licensing agreements

Television Live Events:

For fiscal 2005, events were held in:

Berlin, Germany	Frankfort, Germany
Birmingham, England	London, England
Manchester, England	Aberdeen, Scotland
Glasgow, Scotland	Brisbane, Australia
Melbourne, Australia	Sydney, Australia
Perth, Australia	Helsinki, Finland
Dublin, Ireland	Belfast, Ireland
Seoul, South Korea	Nagoya, Japan
Tokyo, Japan	Monterrey, Mexico
Florence, Italy	Milan, Italy

Additional cities under consideration for future events include:

Rome, Italy
Bolzano, Italy
Ancona, Italy
Livorno, Italy
Montreal, Quebec Canada
Toronto, Ontario Canada

The WWE Show Stops in Israel

As early as October 1994 the WWF, as it was called before becoming the WWE, began presenting its live shows in Tel Aviv and Haifa. The WWF become one of the biggest fads in Israel. The fad is being fueled by an expensive but effective promotional campaign which included WWF photo albums being distributed to all six Israeli high schools at lunch hour, free of charge. The WWF was broadcast on Israeli cable television once a week, on Friday afternoon when the streets are devoid of teenagers. Wrestling is enormous, but not all wrestling programs are. Only the WWF is. As an example, in 1995 the WWF returned for shows in Jerusalem and Tel Aviv. The prior November saw ticket agencies scrambling for blocks of tickets to sell and within weeks half the 16,500 seats had been sold. he best seats, selling for $50.00, were sold within days.

1994 saw many of Israel’s major corporations joining the WWF bandwagon. The country’s largest confectioner, Osem, sold WWF snacks, and Israel’s largest sport shoe manufacturer, Gali, signed a deal to emboss WWF stars on a line of sport shoes. Israel’s second largest ice-cream manufacturer, Whitman, negotiated for the rights to put WWF stars on its boxes for the summer season.

The popularity of WWE merchandise can be seen in the Israeli example. Distributor of WWE merchandise in Israel, Boaz Dekel has stated that, “This is the fad of all time, way bigger than even the Ninja Turtles, The Simpsons, or Dinosaurs.” (Chamish, 1994). The items he distributes include WWE notebooks, shirts, lunch boxes, and dolls. Most popular are stickers and cards traded by teenagers. Monthly sales are reported to be in the area of millions of dollars.

WWE Asia

Wrestling’s reach is not exclusive to Europe. The Hong Kong free-to-air satellite platform, TVB, acquired 119 hours of wrestling programming from the WWE. Indonesian free broadcaster RCTI has bought 98 hours of WWE Smackdown, its weekly program that airs on Friday evenings on USA as well as eight specials to be aired in the next year and a half. South Korea’s SBS has committed to 208 hours of programming including the WWE programs Heat, Smackdown! and Raw is War.

From FY 2002 through FY 2005 international revenues increased at a compound annual growth rate of 23%. The forty-nine international events in FY 2005 attracted audiences in excess of 450,000 attendees.

“WWE provides us with a global identity that is distinct and unencumbered, which is critical to our U.S. and international growth plans” said Linda McMahan, CEO of WWE. “As WWE, we launch our further expanded U.S. and international touring, our international expansion of branded merchandise and licensed products, and our further integration into the film, publishing, and music businesses” (Wagner, 2002).

The WWE is now in the midst of a major paradigm shift from controlling everything to giving up partial control to enter new markets, such as, in this case, China, where it will partner with local business ventures to establish a foothold and learn the workings of the Chinese market.

In addition to live events, further expansion of WWE pay-per-views in new and additional territories along with increased marketing and associated sales of WWE licensed branded merchandise is expected.

Always seemingly ahead of other countries in terms of creation, adoption, and use of technology, Japan and WWE reached an agreement in 2005 for a “subscription video on demand service” via Plala Networks, Inc. of Tokyo. In essence, WWE will offer its content as usual; however, the medium will be broadband internet instead of TV, and the format will be a broadcast titled WWE 24/7. The impact of such a deal has yet to be assessed, yet it appears to be an incredibly low-risk venture, given that the Japanese company is actually a subsidiary of one of the major telecommunications companies in Japan. In addition to driving subscription sales for Plala, it also positions WWE on the technological cutting edge in an extremely large international market.

“WWE is a global franchise, and WWE 24/7 was conceived as salable concept that would scale worldwide for partners and fans,” said Tom Barreca, Executive Vice President, WWE Enterprises. “Signing with a leader like Plala is a significant breakthrough for WWE 24/7 internationally, and we see a great future in contracting with other telephony and telecommunications providers around the globe” (WWE 24/7).

Wrestling Hits South America

In late 2005, WWE struck a television deal with Latin America’s FOX station – FX Latin America - to broadcast bilingual (Spanish and Portugese) programming for the next two years. The station reaches approximately half of all television homes in the Pan market. Emiliano Saccone, VP of Marketing for FX-LA, was pleased that professional wrestling will now be a significant driver of viewership for their network. “We are thrilled to have World Wrestling Entertainment on FX featuring WWE Velocity and WWE Experience. FX is committed to offer to its viewers the best quality in programming. WWE, having been involved in the sports entertainment business for more than 20 years, is one of the most popular forms of global entertainment today on FX screen, and will contribute to establish stronger brand loyalty with subscribers, affiliates and advertisers in all Latin America” (WWE Signs, 2005).

International Television

It is expected that international television will pay an important role in WWE’s expansion into international markets. Presently, 7,500 hours of WWE programming are syndicated each year in the 100 markets WWE serves. WWE programming is currently distributed throughout Europe and Asia in the following manner:

• Sky Sports – England, Wales, Northern Ireland, and Scotland
• J Sports channel – Japan
• TAJ TV LTD – India
• PREMIERE – Germany
• CJ Media – Korea

Pay-Per-View

Pay-per-view also plays an important role in the internationalization of WWE events:

• Canadian Partners
  • Viewers choice
  • Shaw Communications
  • Bell Express
• International Partners
  • BskyB – England, Wales, Northern Ireland, and Scotland
  • J SPORTS – Japan
  • Premiere – Germany
  • CJ Media – Korea
  • Sky Italia –
  • Main event – Australia

Branded Merchandise

Branded merchandise leverages WWE talent with their television products. Within the WWE brand, WWE branded merchandise includes:

• Licensing of books, home video, video games, toys and, apparel
• Apparel, novelties, and memorabilia sold through events, catalogs, and online
• Home video of pay-per-view events and feature performer titles sold through
  retailers and available on VHS and DVD
• Magazines such as WWE and RAW sold at the newsstand and through subscriptions
• Digital Media such as WWE’s interactive website: www.wwe.com

All of these are available internationally. Watching his son Shane play with his GI Joes, McMahan decided that wrestlers would make great action figures too. In 1984, his wife Linda called Hasbro to learn the licensing business.

Role of the Internet in International Expansion

It is a strongly held belief within the WWE that Globalization holds the key to its continued growth. It is believed that the Internet levels the playing field, since anyone can watch from anywhere with a computer. For instance, in Japan WWE events are broadcast as early as three weeks after the event has aired in the United States. The Internet, as a medium, is involving. WWE research has shown that half of the Internet users who get WWE information are international.

Expansion Efforts by U.S. Major Professional Sports Leagues

NBA

In terms of an international presence, the NBA has had a history of playing teams from around the world both at home and abroad dating back to October 23 - 25, 1987 when in the McDonald’s Open played at the Mecca in Milwaukee; the Milwaukee Bucks played Tracer Milan and the Soviet National team. This trend of exhibition games continued throughout the 80s, 90s, and into modern day when several NBA teams played in such varied locations as Madrid, Rome, Barcelona, Tokyo, Paris, the Bahamas, Mexico City, Japan, London, Tel Aviv, the Dominican Republic, and Puerto Rico.

As is the case with the WWE, expansion into international markets began in Europe. Since 1988, NBA teams such as the Boston Celtics, the New York Knicks, Miami Heat, the Houston Rockets, and the Seattle Super Sonics have played exhibition and regular season games in the following countries: Spain (1988, 1990, 1994, 1996, 2003); Italy (1989, 1994, 1999); France (1991, 1994, 1997, 2003); Germany (1993, 1996); England (1993-two games-1995); Russia (1988, 2004).

In addition to Europe the NBA also played exhibition games in the Middle East (Tel Aviv, Israel on October 11, 1999); Latin America, where the NBA has staged twenty-two games preseason games (sixteen in Mexico, five in Puerto Rico, and one in the Dominican Republic); and Asia (six regular season games in Japan since 1990 and a 2004 game in Beijing, China).

The NBA, under David Stern’s leadership, has made a concentrated effort to specifically promote the international players who have come into the NBA. Stern is credited as being a marketing mastermind in the international arena, and the effort of the NBA commissioner has helped the NBA to advance its growth in international markets through fan identification with players from countries throughout the world. It has also indirectly altered the face of scouting, drafting, and developing talent (Stone, 2002).

MLB

Major League Baseball has two prominent internationally focused baseball initiatives. The most recognizable and recent was the World Baseball Classic (WBC) which was held in March 2006. Organized by MLB, the WBC was a tournament styled after the Soccer World Cup, and involved sixteen nations from across the world. Players were allowed to play for their “home” countries. Overall, the tournament – won by Japan over Cuba in the final - was considered a success from a media standpoint. There are plans to hold future WBCs every four years, starting in 2009. From this standpoint, MLB is well-positioned to maintain and grow their presence in other countries, even though the U.S. team did not finish in the top four in this most recent WBC.

Nearly one-fourth of all professional baseball players have Latin American roots. Consequently, Major League Baseball has exerted great effort in scouting and developing the future talent of their league. Puerto Rico is a hotbed for baseball, and a location that MLB has already tapped as host to some of the leagues’ games in the last few years. Almost five years ago, in 2001, the first-ever regular season Major League Baseball (MLB) game on Puerto Rican soil was played between Texas and Toronto. Two years later, in 2003, the (Montreal) Expos played approximately half of all of their “home” games in San Juan, Puerto Rico. And in April 2005, MLB celebrated its annual “Opening Day” of games by announcing that 25 percent of all players on MLB rosters (204 players) had been born in Latin American countries. This is a significant increase over the 170 total Latin major leaguers reported by MLB during the 2000 season, of which, thirty-four were from somewhere in Puerto Rico (Sanchez, 2005). These figures are astounding and continue an upward trend of talent migration (Bale and Maguire, 1994) predicated by advanced scouting techniques, greater global communication, and increased talent development in these countries.

Once an off-season haven for American big leaguers – where a winter baseball league was immensely popular – Puerto Rico gained considerable steam in the world of professional baseball. After serving in 2003 as the part-time home of the Montreal Expos (a franchise now known as the Washington Nationals and located in Washington, D.C.), San Juan, Puerto Rico should have become a bustling year-round sport attraction. In the winter it hosts a very competitive and popular “Winter League”, where developing talent showcases for the ever-growing contingent of scouts and media. However, that has not been the case. Lou Melendez, Major League Baseball's vice president of international operations, states that MLB is now considering assisting the Puerto Rican league financially, and he admits that an eight year decline in interest and attendance is a concern (Ortiz, 2006).

MLB is grappling with larger issues surrounding this, as well, namely: a) The issue of “stacking”. In other words, as noted by González (1996), despite a healthy on-field Latino representation, there are still virtually no Latino managers, and there are an incredibly small number of Latinos in MLB’s team management offices. b) How can Major League Baseball assess and improve on their expansion and outreach efforts? Arbena (1992) stated that Governments have long tried to use sports to promote national unity and political stability, but often without success. Klein (1997) studied how baseball contributes to nationalism on different levels outside of US borders.

NFL

In 1991, the World League of American Football was formed, and eventually became ‘NFL Europe.’ Known essentially as an NFL-backed and funded developmental league, NFL Europe currently boasts six teams (Amsterdam Admirals, Berlin Thunder, Cologne Centurions, Frankfurt Galaxy, Hamburg Sea Devils, and Rhein Fire). The league has thus far been unstable and unpredictable at best, due mostly to lack of star power and media coverage. However, other attempts to further expand the NFL’s brand internationally have been made, most significantly, plans for U.S. teams to play on international soil. Proposed sites are Mexico, Canada, the United Kingdom, and Germany. This addresses both of the stumbling blocks encountered by NFL Europe, infusing existing U.S.-based stars (and teams) with the proper amount of television, internet, and radio coverage. "It now gives us a platform to grow the game internationally with a concept of clarity," says Mark Waller, head of NFL international development (Haniman, 2006).

While none of the major professional sports leagues would appear to be natural competitors for the unique “sport/entertainment” offering by WWE, the recent move of Monday Night Football to ESPN surely will impact cable-television ratings, something previously dominated by professional wrestling (Jones, 2006).

Assessment

Most successful businesses conduct extensive market research to assess the effectiveness of their efforts. This is of paramount importance when attempting world domination as the WWE is currently doing in its expansion throughout various countries of the world. WWE depends upon four major research streams to keep in tune with its fan-base: 1) Online research surveys. They use a 900 base method with their fans, hoping to pinpoint consumer attitudes. Specifically, “What do you think of this property?” (attributes), 2) Live events. WWE conducts exit polling at events, with an average of about 10,000 people per event. Goal is to assess attitudes regarding items such as ticket prices and merchandise, 3) TV Companies themselves. WWE is able to garner information from networks, which helps to shape their other research efforts. Ex: “how many people view their wrestling shows?” 4) Licensees/consumers. Some corporate partners are willing to share some of their information with WWE.

Conclusion

World Wrestling Entertainment is indeed a unique business entity that has, thus far, been incredibly successfully as it has expanded its fan-base into international waters. In fact, the data shows that while domestic earnings have continued to diminish, they have steadily climbed each of the last five years internationally. More success is yet to come as even more countries become partners with the wrestling corporation, and as new revenue streams continue to develop. Many sport corporations (NIKE, Adidas, etc.) have expanded into other markets, and have done so successfully. But Jonathan Sully, WWE’s VP for International Marketing, pointed out that while the company traditionally likes to totally control its own Intellectual Property, the key to its success is embracing a fundamental shift towards more corporate partnering.

Manchester United is a recent case that paralleled some of what WWE experienced when they first plunged into new markets: increased bootlegging issues and difficulty tracking revenues in foreign countries, branded television channels, and tours that bring talent to the consumer (Grimshaw, 2005). However, as WWE’s domestic marketing head Schneider pointed out, this brand of professional wrestling is still seen as a “uniquely American export”, a form of entertainment that essentially has no direct competition and is so dissimilar from its indirect competition that it operate on its own cloud. The WWE simply must stick to its plan, adhering to its business model, and achieve continued growth by continuing to bring its brand of entertainment to new markets around the world.

NOTES
¹SOURCE: http://corporate.wwe.com/documents/WWEPrimerAugust2005.pdf

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