On Sundays when I was young I watched professional wrestling with my grandfather on his black-and-white TV. Even then I could tell the show -- designed primarily to drive attendance at live events -- was low-budget and, well, kinda seedy.
Later when I was in college I went with friends to a professional wrestling event at the local high school. In person the show seemed even lower-budget and seedy. And as we left I saw one of the wrestlers in the parking lot (a guy I had watched years ago nearly every week on TV) arguing about his pay; evidently he had been promised $50 but had only been given $30.
Pro wrestling in the 60s and 70s was a lot like the carnival business: A few performers made decent money, and a few promotions made decent money... but it definitely wasn't big business. If one end of the spectrum was Coca-Cola, professional wrestling was a ratty guy in the parking lot selling RC Cola out of a cooler.
And everything is different. Forbes placed WrestleMania in its Top 10 Sports Brands. Fast Company named WWE one of the World's Most Innovative Companies.
Last year, WWE generated $801 million in revenue, its highest revenue in company history and a 10% increase over 2016. In the 2nd quarter of this year revenues increased by 31 percent to $281.6 million, marking the highest quarterly revenues in WWE history.
On TV, WWE negotiated contracts to keep Raw on USA Network and bring SmackDown to FOX networks in 2019, increasing the average annual value of WWE's U.S. TV distribution to 3.6 times the previous deals. Raw is the longest-running weekly episodic television program (by number of episodes) in the U.S.; SmackDown is second.
Online, the WWE Network is the #2 sports OTT (over the top, meaning delivered on the Internet without involving a multiple-system operator) service, trailing only MLB.tv. Average paid subscribers increased 10 percent to 1.8 million in 2018. Elsewhere, video views increased 32 percent to 20 billion (yep, 20 billion), and media engagement rose to 1.2 billion.
The WWE YouTube channel is the most-viewed sports channel (yep, beating NFL, NBA, MLB, NHL...) and, with 24 billion total views, the second most-viewed channel on YouTube.
And if that's not enough, WWE performed more than 500 events in 2017 -- including 80 international events in 25 countries -- for a total live audience of more than 2 million fans. And global sponsorship rose 30 percent year-over-year due to deals with major brands.
So no: This ain't my grandfather's professional wrestling.
The rise of the WWE is an incredible story, not least because the company is not afraid to disrupt itself. Case in point, the WWE Network. In hindsight it looks like a no-brainer, but choosing to pivot away from the major revenue stream of Pay-Per-View (PPV) events to an online subscription service was met with broad disdain by the business media. In fact...
In fact, let's let an insider tell the story. Michelle Wilson is co-President of WWE and is responsible for strategy, day-to-day operations, and all revenue lines. She's also on the Board of Directors and was named to the Forbes 10 Most Powerful Women in Sports list, the Adweek 50 list, and one of Sports Illustrated's 10 Most Influential Women in Sports.
With SummerSlam coming up this Sunday at Barclays Center in Brooklyn, it seemed the perfect time to talk with Michelle -- who turns out to be as nice as she is smart -- about the story behind the story of WWE's success.
Half the world thought you were crazy to stop holding major events on PPV (and give up all that revenue) and shift to online delivery.
It wasn't half the world. It was the whole world. (Laughs.)
At the time the majority of our broadcast content was on cable TV, but to get the payoff of some storylines our fans had to pay $55 for a PPV. I recognized quickly that was a limited portion of our fan base. We had a sizable fan base watching weekly, but the PPV buying universe was limited to those willing to give us $55 dollars for the big events. I felt we should have a broader audience for those events.
So we talked to Vince about it. In his mind there would always be a day when there would be a WWE Network; he always had hte idea one would exist. Combine that with the fact our premium content wasn't getting broad distribution and we knew there was an opportunity.
But you still had to figure out the right business model.
We did a tremendous amount of research. Along the way we decided to do a linear network like the NFL Network. We had a deal on the table, were ready to do that deal... but we really dug into our research and realized that the WWE fan base over-indexed for watching digital video content. They were twice as likely to subscribe to a streaming service and watched 5 times the amount of digital content.
That data frankly made us think. Plus, Vince -- who is truly a serial entrepreneur -- pushed us by saying, "Do we really want to go the traditional route... or will the future be going direct?"
We finally decided that's where the future is: Direct to consumer.
Maybe so, but shifting away from PPV was a huge risk.
Our business was deeply rooted in PPV, in closed-circuit before that... PPV was extremely important to us.
We knew it was a calculated risk. But we objectively believed we didn't want to go the traditional way of premium cable and should instead go direct to consumer. We felt we were right.
We had no idea the market would react the way it did when we made the announcement, though. (Laughs.)
A new player disrupting an industry is one thing. An established player disrupting its own business....
Nobody else had done it. No one else had done what we wanted to do. We described it as direct to consumer but there was no playbook. It was absolutely a calculated risk on our part.
Ultimately we were disrupting a legacy business model to go where consumers were going. It came down to one question: "Where do we think our fans want to enjoy our content?" The data showed digital consumption and subscription services were the future, and we thought it was a smart choice to go that way.
Even though it was a long process to make that decision.
Feeling confident in a prediction is one thing. When did you realize you had made the right decision?
The day we launched. Our launched focused on WrestleMania 30 since that was obviously an opportunity to capture a big audience. I remember sitting in the bowels of the Mercedes-Benz Superdome, watching our subscriber numbers... and realizing we were absolutely on to something.
After that WrestleMania we had 700,000 subscribers and by January we had hit 1 million. And we really knew we were on to something.
Here's the key: We wanted a live live stream where all of our big events would air, and we also wanted to launch a library of on-demand content. And we wanted those things because we knew that's what our fans want.
Of course plenty of people said, "Why would you do that? No one watches old sports content." We knew our fans would. We knew they would watch our library content.
And every piece of data we have absolutely supports that premise. We're now up to 10,000 hours of content on our service, and every single minute of that content has been consumed by at least one subscriber.
Like many hugely successful things, that seems obvious in hindsight. If I'm a Brock Lesnar fan, I want to see his journey.
Absolutely. Our fans are already interested. We just had to give them a user interface that made doing that easy. We created a collections area where you can look at old storylines. To your point, we curated the history and story of Brock Lesnar.
In a broader sense, we made the decision from day one to be available on 10 platforms: Android, iOS, Roku, PlayStation, Xbox... we wanted to be on multiple platforms and create a user experience that is easy for our fans to do you just said: Watch live, but also relive some of your favorite moments. And learn about the history of your favorite superstars.
There really was no playbook, but we had enough data to know that if we provided every PPV and thousands of hours of content, and if we delivered it right... we could succeed.
That doesn't mean we got everything right, though. (Laughs.)
I wasn't even going to ask what you got wrong.
I'll tell you anyway. (Laughs.) We didn't know what the turnover would be. Would you leave after WrestleMania? So we established a six-month commitment to protect the economics around losing $55 per person in PPV revenue for WrestleMania.
Our fans really didn't like the six-month commitment. Their reference points were Netflix and Hulu where you had the right to cancel at any time. We got the value proposition right. We, and our fans, were happy with the subscription rate. The perceived value was definitely greater than the cost.
So ultimately we moved to a one-month free trial offer, and that has become a great acquisition tool.
If I'm a wrestling fan, all you need to do is get me to check out what you offer. Once I do, I'm in.
Let's talk about live events. Your approach to your "tent pole" events has changed.
Our "big four" events are Royal Rumble, SummerSlam, Survivor Series, and WrestleMania, which is our our biggest event: It's our Super Bowl, our Oscars... it's a huge event.
We saw the opportunity to make our major events bigger than just one night. Take WrestleMania in New Orleans last year: We had an NXT Takeover event, a Hall of Fame event, WrestleMania itself, Monday Night Raw, Tuesday Smackdown... we create week-long activities around live events. We have WWE Fan access, our version of the NFL Experience, we have meet and greets, community events, sponsor activations...
Greatly expanding our tent pole events has been a major business driver.
So much so that even choosing the cities and venues has changed. In the past we would book WrestleMania just like any other live event, negotiating with the building.
Now, because those events are so successful, because we typically generate $150 million in economic activity for the market, we have a formal bidding process in place. Cities bid for our events just like they would for the Super Bowl, the NCAA Finals, etc. We have multiple cities hoping an event like WrestleMania will come to their market.
You mentioned sponsor activation. Your roster of brand partners has come a really long way.
Ten years ago we felt we were one of the best-kept secrets in sports and entertainment. When I talked to Vince about rejoining the company in 2009, the year before that WWE had shifted to TV PG. Our TV product was family entertainment. But the business community had no idea.
I had no idea. When I was interviewing and he said, "We're family entertainment," I said, "I didn't know that. We have to get the word out on what WWE really is."
Our audience, and the number of viewers, beats every sports property besides the NFL. And we have scale. We're turn-key. Our talent works for us: We can write, produce, deliver creative content across platforms... versus sports leagues where if you want to do a deal with, say, Serena Williams, you have to deal with the tennis association, agents, managers...
We had scale and could deliver turn-key, cross-platform, family friendly... and no one knew.
So we set out on a journey to do the B2B work. Stephanie (McMahon) was out on the road, I was out on the road... and after we got a couple of great wins under our belt, after well-known brands like KFC and Mars Snickers came on board, after agencies saw the results we delivered... that really built momentum.
NBC Universal has also been a terrific partner. They recognized they had to tell our story to the advertising community, too.
Now if you look at the roster of advertisers, we have over 200 blue-chip companies. Ten years ago our major advertisers tended to be video games and theatrical releases. Not anymore.
Our sponsorship revenue has quadrupled since 2010. I told Vince when I took over that we should be doing 5 times the sponsor revenue we were doing, and he said, "Okay, let's see you do it." And we're almost there. (Laughs.)
But a lot of hard work brought us to this point. To borrow Vince's words, we bet on ourselves a lot. We knew if we got a brand in the door we would deliver for that brand... and that would start the dominos falling.
You mention telling your story. There's another story that doesn't get nearly the attention it should.
When we were talking about our brand, I found out WWE has been a partner with Special Olympics for 30-plus years, with Make a Wish, we great work in the community...
That goes back to Vince and Linda (McMahon, Vince's wife.) Their feeling has always been that as we travel all around the U.S. and host live events, we don't just want to just take -- we also want to leave something. It has always been in the DNA of WWE to make the communities part of what we do.
But we never really talked about it. So we decided to tell our corporate partners, not because it made us look good but because they could help us make community outreach an even bigger part of what we do. Our athletes and performers care about giving back -- so how can we be even more strategic and offer a platform to community organizations?
Some years ago John Cena said, "We know female fans love WWE." (Forty percent of the audience are women.) "We should have an initiative that supports breast cancer awareness." So I cold-called the Susan G. Komen foundation and said, "We want to help your organization."
Their first response was, "We don't get it. Why would we want to do that?" We explained our audience demographics, how we over-reach for certain demographics... one of their priorities was to make women aware of the resources they provide and I said, "We can do that."
For a number of years we've been a partner, helping raise awareness about the importance of screening, and we can reach an audience they weren't able to reach. Not only can we help raise money but our platforms really help get the message out.
Overall we feel we have made a huge difference in an area that matters to our audience. We believe we should leverage our platform for social good. It's an important priority for our organization. We love doing it, and our superstars love being a part of it.
That raises an interesting point. Data shows that your women's segments are often among your best-rated.
For a time our female performers got time on our shows... but it tended to be limited.
Then in 2015 a match between two female performers literally lasted 30 seconds. That match created a social media firestorm. The popularity of the hashtag #GiveDivasAChance really opened our eyes to the fact our fans wanted to see more of our female performers. They're great, incredibly talented athletes. And men were vocal about wanting to see our female performers more.
In response, Vince tweeted #keepwatching. And things have definitely changed. Our female performers aren't Divas anymore; they're WWE Superstars. They do matches they had never done before: Hell in a Cell, all-female royal rumble, the first ever-all women's live event will be in New York at Nassau Coliseum...
Any opportunity we give our women, they knock out of the park. in front of our women they knock out of the park. According to Nielsen ratings the women's segments do extremely well. We're not surprised: They have great storylines, they're incredibly entertaining... they're great.
And it's all because our fans told us they wanted more.
Let's talk about social media. One factor in whether a wrestler moves up from a development program to the main roster is social media engagement.
Once upon a time Nielsen ratings were literally the only metric we had to measure whether a product, storyline, performer, etc. was doing well.
Social media has obviously changed all that. Now we look at how content is consumed across all platforms. Time is a huge metric: If we see significant time is spent watching certain talent on YouTube, on our platforms, if there's significant engagement on social platforms... that's extremely meaningful.
Our access to data has fundamentally changed the way we do business. Our live events used to be our focus groups: Audience response was all we really had. Now we have a massive amount of data we can use to determine what our fans want.
A friend in the TV business says WWE programming on TV is DVR-proof. I'm sure that's just one reason why your new TV deals are huge.
Another is that our brand perception has evolved dramatically. Another is our numbers: Week in, week out we deliver more live viewers than any major sport than the NFL.
TV partners look for live eyeballs, an audience at scale, a product that is DVR-proof... all of that allowed us to get higher revenue on a dollar per viewer hour basis. We deliver eyeballs, at scale, with live content. Eighty-five to 90 percent of our content is viewed live or same day.
Our fans want to know what happens, and they want to know now. And if they do miss a live show, we make sure they can stay engaged with our storylines. TV, digital, direct to consumer...
It's the quintessential flywheel.
What are the plans to keep that flywheel going?
We'll continue to create great content. We'll continue to leverage data and technology.
But one thing we haven't talked about is international. International growth is a huge priority. Seventy percent of video hours are consumed from outside the U.S., but only 30 percent of our revenue is international. There's a huge opportunity to leverage and monetize what we've done in the U.S.
One of the keys is to localize our content. We already have a huge digital and social and TV footprint, but monetizing by localizing in language, in short form on digital and social, is a big priority.
Take India. Or the U.K. Both have been large markets for a long time, but we believe there's significant opportunity to grow in those markets.
And we've been very open in talking about our interest in replicating our performance center and recruiting presence in those markets. We'd love to get local talent from India. Or China; we'd love to find our Yao Ming, if you will.
That's the best part of my job. Looking back at how we got to this point is fun, but it's even more fun to think about where we're going.