WWE Takes a Condemning Charge

Not long ago, I discussed the terrible results of World Wrestling Entertainment's (NYSE: WWE  ) movie The Condemned, starring grappling superstar Stone Cold Steve Austin. Well, WWE has had to write down the asset. It's taking an impairment charge totaling $15.7 million; the movie has grossed a pitiful $7.4 million at the domestic box office. It will be recorded in the second quarter, which means that shareholders will have to put up with this dragging element during the next earnings report.

The film business has been a bust so far for WWE. Even with high-profile studio partners such as Lions Gate Entertainment (NYSE: LGF  ) , which handled See No Evil and The Condemned, and News Corp. (NYSE: NWS  ) , distributor of The Marine, the division hasn't been able to recognize any revenue yet because the costs of releasing the films haven't been recouped yet.

Talk about having egg on one's face. So far, I've been as wrong as a wrestler who enters the ring with the Undertaker during a Wrestlemania event thinking he can win. I thought the movie operations would have done a lot better by now, but they're not.

Not only are analysts getting ready to grill CEO Linda McMahon come the next conference call, but I'd also bet that more than a few shareholders are feeling a bit nuts regarding the capital expended on this Hollywood fantasy. Should WWE end its celluloid investment and cease competing with bigger studios like Viacom (NYSE: VIA  ) and Time Warner (NYSE: TWX  ) ?

Let me stick my neck out even further, and say "no." Although it seems like WWE has been at this forever, it's only been a little over a year since the first project, See No Evil, hit multiplexes. It just seems like WWE has been at the game for an eternity.

I'd imagine that the company will look at direct-to-DVD releases more strongly in light of the poor results, as well as releasing movies first on pay-per-view (perhaps one could pay a little extra for, say, a Royal Rumble event so that one might watch a WWE film right after it). I would urge the CEO to consider making movies with strong concepts first, and forget about using them solely as vehicles for the wrestlers.

No matter what, WWE should remain patient with its movie division. There will come a time when I may lose patience, I'm sure, but I haven't reached that point yet. Again, the key is to go for concept first. We'll have to wait and see whether Ms. McMahon can beat Tinsel Town at its own game.    

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Fool contributor Steven Mallas owns none of the companies mentioned. As of this writing, he was ranked 11,154 out of 30,824 investors in the CAPS system. Don't know what CAPS is? Check it out. The Fool's disclosure policy smells what The Rock is cooking.


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