By taking money to put on shows in Saudi Arabia and considering its wrestlers independent contractors, World Wrestling Entertainment (WWE -1.42%) has gotten a lot of negative attention. That has been led by two long pieces featured on Last Week Tonight, the show hosted by John Oliver on HBO. The company has seen its stock dip due to some of these reports, but neither issue has gotten sustained mainstream attention.
In this segment from Industry Focus: Consumer Goods, host Nick Sciple and Fool.com contributor Daniel Kline discuss WWE's image problems.
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Dan Kline: The Saudi Arabia issue is a secondary one. They have a giant paid deal to stage major spectacle shows, two a year, in Saudi Arabia. It's a $40 million or $50 million deal -- they don't quite break it out, but there's been some backwards math that gets to those numbers. They throw all the stops at these shows. They bring out-of-retirement wrestlers. You'll see The Undertaker, you'll see Hulk Hogan. The last one, they paid Chris Jericho, when he was a free agent, to go.
But, Saudi Arabia -- as many of you know -- has been in the news for humanitarian issues. There has been, I'd call it minor pushback. I don't think the average WWE fans care. And they've straddled the line. They still do the shows, but they don't promote them over the broadcast airwaves as much.
Nick Sciple: I'll tell you, I'm a WWE Network subscriber, I like the product. I did watch one of the Saudi Arabian events, and there was...some stuff that felt very much like propaganda for --
Kline: No, no, it is propaganda. They're running videos about how progressive the nation is on a show where their female wrestlers aren't allowed to wrestle; where they inadvertently showed a video that had some of the female personalities in it, and they got a lot of blowback on that. At least at the last show, Renee Young, the female commentator, was allowed to be at the desk. It is a little hypocritical to be showing videos about -- and maybe in that world, this is a very progressive country. I'm not super up on the politics. But, it's definitely a dicey proposition.
Sciple: Right. And it's been controversial. You had some wrestlers who chose to opt out of that event --
Kline: And some who couldn't. Sami Zayn, because of his descent, wasn't welcome in Saudi Arabia. When you have a country that's dictating, "We don't want wrestlers who were born here," that is not how the American investor looks at things.
Sciple: Yeah. Definitely a problematic thing. I will say one thing before we move on to the independent contractor side. A little bit of that is, the company probably doesn't want to pay more expenses than they have to. But, part of it traces back to the history of wrestling. If you look at the legacy of wrestling before the WWE emerged, it was a regional product. You had different regions that had different wrestling promotions. Folks like Ric Flair and Andre the Giant would move from promotion to promotion to promotion, barnstorming across the country. With the rise of WWE in the late '80s, into the '90s, all those regions were consolidated into what is WWE today. So, the dynamics of the industry from the perspective of the wrestlers and who they can work for has really changed, but the relationship between the business when it comes to their employment status has not.
Kline: It's changing back. We're not going to talk a lot about competition to WWE, but it's worth noting that there are now a handful of companies where wrestlers can make a legitimate living. Ten years ago, it was high school Jim making $25 a night for WWE. Now, there's AEW, a company being started by Tony and Shad Khan, who own the Jacksonville Jaguars. They've spent seven figures to sign Chris Jericho and some of the biggest independent stars and Japanese stars. They're taking an interesting approach. A lot of their top talent are employees, but they're also performing office jobs. Some of their...I don't want to say lower-level talent, but, less high up on the card, they have contracts that don't forbid them from working elsewhere. There's a young wrestler, Maxwell Jacob Friedman, MJF, who is under AEW contract, but he also works on the indie scene. They have first priority on his dates. He might have rules about which TV he can work. So, some of the younger companies -- Ring of Honor takes that approach. New Japan, which is a Japanese program that has TV in the U.S. on Access TV, a lot of them are taking more the "we're going to let you do whatever makes sense for you as long as it doesn't impact us." But there's no reason for WWE to do that.
Sciple: Right. We're seeing these new folks emerging. I think AEW's probably the most exciting competitor to WWE now. They have big names that folks would be familiar with, like Chris Jericho, some big folks from the independent circuit. But, for at least the past couple of decades, since WCW fell back, it's been WWE and then everybody else. You've seen a lot of these smaller organizations have a remora strategy. "When WrestleMania is in town, we're going to have our biggest event of the year in the same town."
Kline: Even that is very recent. When I was a kid in the mid-'80s, all these regional territories existed, but they were struggling. What used to sell out two nights a week in Dallas, and then play one night in Houston, was now doing one night in Dallas to 300 people. That all completely went away. There were the two major companies and the occasional upshot third company. But now, we're seeing an explosion. There's probably 30 wrestling promotions in the United States where you can make a fair amount for a night's work and there's one or two contracted guys that are making a decent living, and they're not working the very difficult schedule. That's good for the business. Imagine if television had to produce all these hours of dramas and sitcoms, but there were no acting schools. Now, if you decide you want to be a wrestler, sure, if you're a big-time prospect, WWE signs you and puts you into their training system and you make it. But if you're not, you can take the hardscrabble approach and go to a wrestling school and work for $20 a night and barnstorm around the country and make a name for yourself.