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Wrestling's Marketing Muscle

A teary-eyed Stephanie McMahon, daughter of infamous World Wrestling Entertainment (WWE) Chairman Vince McMahon, vowed to avenge her father's presumed death. “Vengeance will be true,” said the shaken progeny of wrestling's impressario, who may or may not have “died” in a storyline currently running on WWE's cable and pay-per-view programming. Looking heavenward, she screamed, “I love you, Dad!” into a microphone emblazoned with the WWE logo.

The current “investigation” into McMahon's “passing” is a melodrama that has played out effectively for the last few weeks. Before the “Is McMahon Dead?” cliffhanger, the Chairman (as he is known in the ring) staged a battle of media moguls with Donald Trump, a stunt that culminated with winners Trump and wrestler Bobby Lashley shaving McMahon's head in the ring during WrestleMania 23. The stunt proved lucrative: The match broke WWE pay-per-view records, with global revenues in excess of $24.3 million.

Such staged spectacles are part of the over-the-top, soapy storylines that have propelled a small company into a publicly held global enterprise with a $1.2 billion market cap and thriving businesses in TV, film, live events, consumer products and digital media.

“At its heart, it really is a soap opera,” says Dawn Ostroff, who has worked with the McMahons for the past five years, first at UPN and now as president of entertainment at The CW. “The characters are really captivating. The [stories] that they tell are obviously always engaging, always inventive.”

Adds USA and Sci Fi Channel President Bonnie Hammer, “Vince absolutely knows his audience. And I think the key to true success is knowing who you're catering to and never forgetting for a minute the fans are your life.”

Indeed, Monday Night Raw is the No. 1 series not just on USA but on all ad-supported cable, with more than 16 million viewers a week. CW's Friday Night Smackdown is the most watched program on that network among all male demographics and is regularly the top-rated program of the night in all of television among men 18-34. And ECW: Extreme Championship Wrestling is Sci Fi Channel's most popular show, in households and total viewers.

“The most important thing that Vince has done is reinvent his product,” says NBC Universal Sports & Olympics Chairman Dick Ebersol, who met McMahon in the mid '80s when McMahon brought Saturday Night's Main Event to NBC late night. “He has an uncanny ability to grab the public's attention.”

WWE programming reaches more than 100 countries, including India, Japan, Germany and parts of the Middle East. Last week, WWE sealed agreements in Poland, Greece, Turkey and Siberia. With more than 346 live events last year, including more than 60 international shows, the WWE has generated a fiercely loyal base of fans who follow their favorite superstars across milieus and platforms. “We continue to grow our content and distribute it to our fans and to our consumers where they want it and when they want it and how they want to get it,” says CEO Linda McMahon.

New branding efforts

To that end, WWE recently stepped-up branding efforts involving its biggest stars. Current champion John Cena, for instance, has done national commercials for Subway and Gillette and appears in the Gillette-sponsored ABC reality series Fast Cars and Superstars. WWE's new sponsorship packages will integrate its platforms and focus on leveraging personalities, the way the NFL and NASCAR have done.

“We have this incredibly committed fan base,” says Gary Davis, VP of corporate communications. “We should essentially be going to marketers and to sponsors and showing them that we can help transfer that strong passion to their brands.” averages 17.5 million unique visitors a month. WWE Mobile offers exclusive content on AT&T. The company also has a movie studio, WWE Films (a partnership with 20th Century Fox); a magazine; a gaming division; a publishing imprint that boasts 20 New York Times bestseller; and a massive video library (thanks in part to the acquisition of Turner's WCW and ECW in 2001). WWE, which went public in 1999, generated $400 million in net revenue in 2006, up from $366 million in 2005.

WWE has built a “substantial brand,” says Laura Caraccioli-Davis, executive VP of entertainment at Starcom, the Chicago-based media company. And while the violence, scantily clad divas and sexual content may not be right for some advertisers, she says, “if you're going after that young-male audience you're going to be a little more lenient towards the content because you're never going to reach them.”

WWE's advertisers include Castrol Motor Oil, Lionsgate, Sony and Unilever's men's body spray, Axe.

The WWE has historically failed to diversify. The list of disappointments includes the XFL, a restaurant in Times Square, a hotel and casino in Las Vegas, and a spinoff body-building league. But some on Wall Street believe that the company's stock may be a buy. After the McMahons took the company public in 1999, the stock shot up to $25 per share and then bottomed out around $10 per share. The company is in the midst of an upturn, trading at $17 per share, a 60% increase in 20 months.

But the very character-driven formula that has propelled the family-controlled and -operated company to such head-banging heights also threatens its livelihood. The danger is penned most precisely in the company's 10-K filing to the Securities and Exchange Commission: “Our failure to recruit key performers could lead to a decline in the appeal of our storylines and popularity of our brand of entertainment.” Key performers are by definition those who have the “physical presence, acting ability and charisma to portray characters in our live events and televised programming.”

Moreover, while ratings for WWE's television properties pull in the elusive young-male demographic, the numbers have fallen from the record highs of the late 1990s. Ratings peaked when The Rock was pummeling Mankind with a steel chair, but current champ John Cena has yet to break out. WWE's signature cable show Raw averaged 6.2 million viewers in 2000 and 1.4 million males 18-34. This year, it's averaging 5.6 million viewers and 1 million in the demo, according to Nielsen Media Research.

“I think we're holding our own in this fractionalized market that becomes more fractionalized every day,” Vince McMahon said. “I'm not particularly satisfied with where we are, and I don't know that I ever would be.”

The rise of mixed-martial-arts leagues, including UFC, which is carried on Spike, has not significantly hurt WWE's market share, says Michael Kelman, senior media analyst at Susquehanna Financial Group. “What drives wrestling is the development of the characters and the storylines.”

The history of the WWE has “different peaks and valleys,” he explains. “The last cyclical peak in their business was probably late 1999-2000 when characters like The Rock and Stone Cold Steve Austin were at their height in terms of mainstream appeal.”

A post-modern P.T. Barnum, McMahon is credited with turning a provincial genre into a modern-day spectacle, adding pyrotechnics, personalities and storylines. He joined his father's Washington-based Capitol Wrestling Co. in 1971. Eight years later, Vince and Linda founded their own live-event–promotion business in Massachusetts, Titan Sports. In 1982, the McMahons merged Titan Sports with Capitol Wrestling (which he had purchased from his father) and worked to fulfill their vision to take the company national. “He was doing the promotion,” she says, “and I kept the records.”

The vision of McMahon's empire unfolded quickly, sometimes serendipitously. When he saw his then-toddler son, Shane, playing with a GI Joe doll, inspiration hit. “He said, 'He should be playing with a wrestling action figure, not GI Joe,'” says Linda McMahon.

“I looked on the back of the [GI Joe] box, and it said, Hasbro Inc., Providence, R.I. So I called them, and I said, 'How does this work?' And they were very helpful,” she says. “It was just all incredibly fun and exciting and new and different.”

In 2006, and—where fans can buy action figures as well as T-shirts, sweatbands and WrestleMania DVDs—generated more than $22 million in revenue.

Vince McMahon has been consistently underrated. When Dick Ebersol's agent, the late Marty Klein of APA, told him he should meet with McMahon about doing a late-night wrestling show for NBC, Ebersol thought it was a joke: “I hung up the phone, and I called [NBC programming chief] Brandon Tartikoff, and I said, 'You'll never believe what Marty's done now? He's trying to convince me to get into business with Vince McMahon.” Ebersol, who was producing Saturday Night Live, was hooked by the McMahons. “There's no better salesman for himself and what he does than Vince,” he says. Main Event premiered Mother's Day weekend 1985.

By 2001, the McMahons acquired the foundering WCW (World Championship Wrestling) from Turner and ECW in 2001, cherry-picking from the companies' video libraries to amass a 50-year history of the sport and more than 90,000 hours of footage. Today, VHS and DVD sales represent a significant growth area, generating $42.6 million in revenue for fiscal 2006 vs. $20.1 million in 2005.

“I always like to say that the WWE is American's greatest export,” McMahon said recently, “because it speaks to our freedom of expression. It's the Wild West. It's big. It's grandiose.”

Body slams and folding chairs

Almost from the start, wrestling, whose audience is about 40% teens, has been a lightning rod in the media-violence debate. A 2006 study by the Wake Forest University Medical Center in North Carolina found that teens who watched wrestling, particularly females, were more prone to instigate violence when they date. The patina of fantasy notwithstanding, wrestling, independent of other media influences, said the study's author, Dr. Robert DuRant, professor of pediatrics and social science and health policy at Wake Forest, “has a significant negative effect on the adolescents that we surveyed.”

But the McMahons are unapologetic about their content. “Our programming does have aggression in it,” Linda McMahon acknowledges. “There are combatants. They clearly are dueling, if you will, for a goal. So there's definitely aggression there. I mean, you're charging. You're throwing someone down on the mat. You give them a body slam. Occasionally, you're going to hit them with a folding steel chair.

“I think you have step back from it and look at the fact that it is an entertainment product. We're not everybody's cup of tea,” she continues. WWE edited the footage of McMahon's exploding limo for The CW's Smackdown.

But Linda McMahon—who like her children, Stephanie, 30, and Shane, 37, appears in the ring playing an outsize version of herself—concedes there have been storylines that were not her cup of tea. One involved an affair that her husband was having with a WWE Diva while Linda was in a “comatose, drugged state,” she says. Another involved an altercation during which Stephanie slapped her mother. “While you know that a storyline is just a storyline,” she says, “when you're acting it out and you're there, [it] can be uncomfortable.”

Still, she says, the family business and commitment to charity, including a “Smackdown Your Vote” registration drive, remind her of larger goals. “Vince likes to say that the job description for everyone in this company is putting smiles on people's faces,” she says. “And that is really what the philosophy and the goal of WWE are.”