This Week's Duel
A few months ago, the World Wrestling Federation Entertainment, Inc. (Nasdaq: WWFE) had its initial public offering, which valued the company on the first day of trading at about $2.3 billion. Since then, the stock has fallen 50% and is worth just north of $1.1 billion. Last year's sales were $251 million, with net income of $56 million ($0.59 per share). Estimates for fiscal 2000 are $336 million in revenue and $0.75 per share in earnings. (Here's some numbers via a Wit Capital Research report on WWFE).
The Story Line -- Before you dismiss these guys as a bunch of men (and women) running around in their underwear pretending to beat up one another, you should know that the WWF is broadcast in more than 150 countries in nine different languages. They do more than 200 shows a year in some of the biggest arenas around, regularly selling out places like Madison Square Garden, the Skydome in Toronto, and the Arrowhead Pond in Anaheim, CA.
The company has 12 pay-per-views each year, and does nine hours of television programming each week. Their flagship television program, "Monday Night Raw" on the USA Network, had the distinction earlier this year of being the highest-rated cable television show ever, and is consistently on top of the ratings for cable shows. Their Thursday night program on the UPN Network, the raucous "Smackdown," has virtually saved UPN from extinction. The WWF sells videos, music, toy action figures, video games, and a thousand other things that I won't go into here. The WWF has come a long way from the smoke-filled local house shows of the '60s and '70s. This is big business, and it's not likely to go away anytime soon.
What's all the fuss? The WWF absolutely owns the male demographic, ages 14 to 34. Officially labeled "sports entertainment" by the company, this is like a big soap opera for men. Good guys are slamming bad guys over the head with steel chairs, scantily clad women are running around having "evening gown" matches where the winner is the one who pulls off the other's dress. Everything a hormonally raging 14- to 34-year-old boy needs. This is an incredibly rich demographic.
The WWF is so powerful on Monday nights that, although ABC won't admit it, they moved Monday Night Football up an hour so that it would start before Monday Night Raw comes on. Raw was taking Monday Night Football's audience away from them.
The Box Office Gate -- The WWF isn't without competition in the wrestling world. Ted Turner's company owns Georgia-based World Championship Wrestling (WCW), and there are several small "factions" around the country, most notably the Extreme Championship Wrestling (ECW) out of Philadelphia. Although WCW and ECW don't publish revenue numbers, it's estimated that the entire market is worth more than $1.5 billion each year in sales, and growing.
With the company expected to take in $336 million next year and $386 million in 2001, it's trading at about three times forward sales and 20 times next year's earnings. With the continued dominance of the WWF brand and the possibility of other revenue streams -- such as their new theme restaurant and nightclub in New York and a rumored purchase of a major sports franchise -- the WWF is in a great position to bodyslam its competition and continue to flourish.
Conclusion -- The WWF has dominated their market and has etched their brand in the minds of the American public. Love 'em or hate 'em, everyone knows the WWF and their style of entertainment. Don't be mistaken, this is no Cisco Systems or Microsoft; but at $17, the WWF offers value to the prospective shareholder. Best of all, you can keep your eyes on your investment every Monday and Thursday night!
This Week's Duel