Dueling Fools Dueldown
Bear Argument

By Rick Aristotle Munarriz (TMF Edible)

( December 15, 1999 ) -- Wanna see a stock in a sleeper hold? Stick around. Shares of the mighty WWF have lost half their value since peaking at $34 on its first trading day. Don't bet on it picking itself off the mat before the ref counts to three.

Face it, the one thing that WWF has in common with Bogey's expectations for the stock to bounce back is that neither are real. What we have here is really little more than the McMahon clan going public to cash in at WWF's cyclical peak. It's a predictable story line from a company that typically excels on the storyboard.

Earnings estimates, from the biased companies that took WWF public two months ago, are calling for less than 10% in bottom-line growth next year. That's a significant decline after this year's heady growth. What does this mean? Well, it means that even those who have a financial stake in the company faring well recognize that this year has been all about maxing out its exposure. Next year, the demand will be fully satiated. Next year, overexposure will begin to wave familiar flags of consumer indifference.

I know it's hard to think in those terms today. Mankind's book is atop the bestseller list. Stone Cold's "Austin 3:16" T-shirts are everywhere. But recent injuries have plagued the stars of WWF, and now the fundamentals are also slamming the company into the turnbuckle headfirst.

When the WWF was under investigation for steroid use, Ted Turner bought out the WCW upstart. It was a difficult time for the McMahons. No question. Turner went from ally to competitor. Worse still, WCW was signing on WWF's prized talent.

WWF fought back brilliantly. WCW had its wrestlers but WWF had flexibility that Turner's Time-Warner (NYSE: TWX) did not. It figured that if Turner's own wife was aghast at the Atlanta Braves' signature tomahawk chop, that WWF would have unmatched leeway in coloring outside the lines.

So in came pimps with scantily clad harems, ringside beer guzzlers, and catch phrases that aren't appropriate even for Dueling Fooldom. The popularity came, too. Who needed Hulk Hogan while The Rock was cooking.

But there is a price to pay for going extreme. The burnout factor runs high. Let me know the next time Alice Cooper and Culture Club come to town. The heavier price comes from the enemies one can make along the way.

Shocking viewers might have won the company huge pay-per-view gigs, but it also turned off the sponsors who would eventually sponsor the WWF in commercial television. Sponsors like Wrigley (NYSE: WWY), AT&T (NYSE: T), and Coke (NYSE: KO) have walked away, shaking their heads.

Vince McMahon called Coke's departure an "affront to free speech." How shelf-steady is that kind of remark? McMahon was clever enough to write himself into the WWF storyboards as a greedy villain, but he apparently didn't realize that there comes a time when acting ends and leading begins.

He then said that the ad defection "could be the worst marketing decision since the fiasco introduction of New Coke." McMahon apparently was not very astute in terms of history since New Coke inspired a public outcry that embraced the return of Coca Cola Classic, propping consumer enthusiasm for Coke to even higher levels.

But maybe he gets it. Maybe what we've been seeing is WWF's New Coke, and now it will tone down some of its offerings as a throwback to WWF Classic. Can McMahon be so theatrically skilled to burn bridges he plans to erect even higher in the future?

Don't bet on it. This is one small step back for McMahon, one giant leap back for Mankind & Friends. If it has to tone down its act, then it gets lost in the three-letter wrestling league acronyms of WCW and ECW.

I imagine Bogey might be thinking that $4 million worth of Surge ads from Coke isn't really worth the hassle. WWF claims they quickly resold the ads at higher levels. But will WWF continue to load up its sponsorship dance card? There's a logical assumption that folks who think wrestling is real will buy anything, and I won't argue with that. However, isn't that the same target audience that is quickly swept away by the next big craze?

I respect McMahon, a third-generation wrestling promoter who was able to take on a fragmented wrestling entertainment industry, divided by region, and create a national powerhouse. Unfortunately, he also paved the way for the WCW and ECW of today. There are way too many competitive risks and long-term industry viability risks to bank on any one company.

Sorry. The tag is made. Bogey reenters the ring.

Bull's Rebuttal »

 This Week's Duel

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  • Bull's Argument
  • Bear's Argument
  • Bull's Rebuttal
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