Being dealt its own brand of Smackdown, shares of World Wrestling Federation Entertainment (Nasdaq: WWFE) were flagged for a $4 3/16 loss today when the company announced that it would start its own extreme football league next year.

The XFL, which will kick things off with eight teams next February, won't find history to be a kind shoulder. In the 1970s, despite signing on eventual Hall of Fame greats like Larry Csonka, the World Football League's presence was short-lived. In the 1980s, young slingers like Jim Kelly and Warren Moon were lured into the USFL with payday promises only to find barren stadiums.

Has WWF's colorful CEO, Vince McMahon, finally lost it? Merrill Lynch downgraded the stock on the news. But did the stock deserve to shed $300 million in market value?

The start-up costs, which the company projects to be less than $100 million, and the early losses could be substantial. Deeper pockets have spent more and failed in the past. Even General Electric (NYSE: GE) and Time Warner (NYSE: TWX) recently ditched plans for its own gridiron league.

It seems unlikely that NFL teams will lend developing players to McMahon the maverick like they have in Europe. The XFL will probably be down to pecking at players in the Canadian Football League and NFL cast-offs. Watch out, world, here comes farm-league football.

But is talent the only criteria for success? Wrestling fans might argue that many WWF performers lack the injury-defying athleticism one sometimes finds at ECW, which remains a distant third behind WWF and Turner's WCW. WWF has gotten to the top through savvy marketing and crafty reinvention.

Arena football has long aspired to be the edgy version of football. With smaller indoor fields and less players on the field, the high-scoring contests ooze adrenaline. Music blares even through the fast-paced play-calling. But is it profitable? Shares of perennial arena favorite Orlando Predators (Nasdaq: PRED) now fetch just two bucks and change.

Maybe the Merrill Lynch analyst has it right. Or maybe not. While WWF has continued to grow its wrestling franchise, with revenues up 78% through the first six months of this fiscal year, can one blame McMahon's quest for another egg basket?

The same bad-boy venom that turned the WWF into brand-name gold at the risk of becoming a parent's worst nightmare might be just the ticket to give the NFL a worthy off-season substitute.

The helmetcams won't whitewash any skirmishes that arise. Fierce sideline banter might give the censors itchy fingers. How skimpy will the cheerleader outfits be? McMahon's XFL may set out to offend everybody, but will they be able to turn away? His mastery of live events, merchandising, and television (through regular broadcast channels and pay-per-view) has fueled -- and surprisingly sustained -- the success of something as basic as wrestling. Those are the three keys to pigskin mastery too.

While McMahon has alienated traditionalists, he still has friends in welcome places like the USA and UPN networks. The opportunities to cross-promote the WWF and XFL are limitless. WWF powerhouse The Rock was a collegiate football star. Let's just hope Steve Austin doesn't try to sing the national anthem. Ultimately, the new venture makes more sense than the market gives McMahon credit for.

Before today's announcement, analysts were projecting earnings to grow from $0.75 a share this year to just $0.81 next year. While taxes and share dilution seem to exaggerate the slowdown (since the company was organized as a personally taxable Subchapter S Corporation before the October IPO, which increased the number of shares outstanding) one would hope that eventually McMahon would line up another growth vehicle.

As it turns out, Smackdowns and touchdowns might pack that lucrative one-two punch of entertainment and athletics that will score big for WWF. Let's hope it doesn't bobble the snap.

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