In Defense Of… Vince McMahon not Buying Out WCW’s Contracts
A version of this article originally appeared on 411mania.com and was updated for the book IN DEFENSE OF… EXONERATING PROFESSIONAL WRESTLING’S MOST HATED. Learn more at https://www.jpprag.com
Certain people, events, organizations, and storylines in wrestling history have gotten a bum rap. Some writers have presented overtly critical comments and outright lies as fact, and others have followed suit. Well no more! “In Defense of…” has one reason: to bring the truth to the wrestling fan!
Some dame walked into my office and said…
Fixxer315 came in with a very convincing story about the InVasion and why Vince did not fail at it. Fixxer had a number of valid points, and I’d rather address them as we go than print them all here. The only problem was that there was too much to cover, and I wanted to focus on particular aspect in of the InVasion: the very beginnings.
But I don’t even want to print what I wrote back to Fixxer because I think that will give too much away. So without further ado…
On March 23, 2001, I was in a club in Montreal when a more than inebriated man walked over to me and — in a thick French-Canadian accent — said, “WWF bought WCW! Can you believe it?”
Of course I couldn’t, but was more surprised that someone would just think to walk over to me in a bar and start talking about wrestling. He then pulled out some sheets of paper from his pocket that he had printed out from a reputable website. It said right on top: WWF buys WCW. It was then I knew it was true.
I tried to get him to explain how this had come about, what had happened to Eric Bischoff and Fusient Media Ventures, how much the sale was, what was going to happen to WCW?
He could not tell me. It was loud, he was halfway gone, and there just was too much speculation and questions. Nobody knew what was going to happen.
It was probably one of the saddest days in wrestling I can remember. Here was the death of an organization I had spent a decade supporting. But at the same time it was exciting. There was a big question of “What’s going to happen next?”
A few days later, Nitro would have its last hoorah and Shane McMahon would be revealed to be the man who bought WCW right from under Vince’s nose. There was hope yet, even though it was kayfabe hope.
That hope would begin to arise on May 28, 2001 when Lance Storm ran into the ring during a WWF match, and the return of WCW seemed be floating to the surface. Things soon picked up with Hugh Morrus hitting the No Laughing Matter Moonsault on Edge the next week. And then it was quiet for a while, until June 25, 2001 when Mike Awesome jumped Rhyno in the back and won the Hardcore Title (24/7 Rules in effect). Thus, as PK said, the InVasion began!
But as time went on, something became obvious. Though important people like Booker T (the World and US Champion) and DDP (former World Champion) were on board with the InVasion, there were several people missing. Where were Hulk Hogan, Kevin Nash, Scott Hall, Scott Steiner, Ric Flair, Sting, Goldberg, and many others? Why had Vince not brought these men in?
And as the InVasion soured and slowly became WWF vs. WWF-turncoats, and finally ending in the Rock vs. Stone Cold, the question remained: why had Vince not brought in the big guns?
People say Vince intentionally wanted to destroy WCW, that he wanted to prove the superiority of the WWF, and that his ego would not let WCW shine. While this may or may not all be true, Vince had solid reasons for not brining in the big boys of WCW, and he was in the right to refuse them passage to the land then known as the World Wrestling Federation.
Where have all the good people gone?
First off, you have to understand a little bit about the then AOL-Time Warner’s corporate structure. Everyone who worked for any division of ATW had a contract with ATW, not with the division they worked for. Therefore, even if a division was sold off (like say when Time Warner sold off Warner Music), ATW could keep the key personnel they wanted and send the rest of the rabble with the sale. Much like in a bankruptcy sale, the person who buys these contracts also assumes all of the debt, that being the remainder of the employees’ contacts.
Everyone is WCW was under contract to ATW (with the exception of Eric Bischoff who was being paid as an independent consultant). When ATW sold all of the assets of WCW, including the WCW brand name, they did not sell off their wrestling division. They simply renamed the division the Universal Wrestling Corporation, which was the actual name for the Wrestling division when Turner first bought JCP. Kind of poetic, isn’t it?
UWC became a clearing house. Vince decided to take a lot of younger talent as prospects, and later Booker T and DDP negotiated for a settlement out of their WCW deals (which they did themselves) and then signed new WWF contracts. But what about the people left behind. What was wrong with them?
Scott Steiner — Scott wrestled on the final Nitro and lost the World Heavyweight Championship to Booker T in the first match of the night. But even if WCW was not going to fold, Scott Steiner would not have been champion for much longer. He was fighting dropped foot syndrome, a disease that makes it impossible to hold his foot in a single position and maintain balance. This was common knowledge, along with nagging knee, neck, shoulder, elbow, and back problems. Scott needed time away from the ring, and was making a good deal of money since he had been with WCW so long and had moved into the main event scene. Acquiring his contact would only get Vince a few months of service when Scott needed serious time off to treat his injuries. Allowing UWC to pay Scott to sit at home was the best decision and gave Steiner the monetary protection while he got to recuperate. WCW did not need a mouthpiece in the WWF like Steiner, as there were plenty of other logical choices.
Kevin Nash — Kevin Nash was another man facing serious injuries and was already 40 years old. His contact was thus that he could come and go as he pleased, so Vince would most likely have to pay him a bonus on top of his contract to keep him around. Nash was also extremely burnt out by this point and needed time away from the business to regain his earlier form. Also, before Vince Russo stepped in, Nash had been involved in the booking process, and would expect more creative control. Vince and the other personalities in the WWF at the time (see below) would not want that, and therefore Nash would have been a disruption at the least. Shortly after the sale of WCW, Nash was also suing the UWC for back royalties and compensations he said he was owed. The WWF would not want to get involved in that lawsuit, and Nash would lose all ground if he took a job with the WWF at that time.
Scott Hall — Although Kevin Nash would try to protect Scott Hall when Nash was head booker, he would not push him (as we covered in the earlier Kevin Nash case). This is because Scott Hall’s personal problems far outweighed his professional ones. Despite dealing with some old injuries, Scott Hall had been away long enough to heal. But with so many other destructive personalities already around dealing with personal issues (Austin, Guerrero, Regal, Waltman), Vince could not afford to take on someone else who was going to need more help outside the ring than give back inside of it.
Sting — Sting was the franchise of WCW, and the only old-school main eventer who had never been in the WWF. Every dream match was possible with Sting, if it weren’t for three things. First, Sting was burnt out on wrestling. The booking era of Vince Russo had taken the passion out of Sting, and he really did not have the drive to wrestle anymore (although he would later get it back to return to the WWA and NWA-TNA). Second, Sting’s contract was set up so that he was only required to make a certain number of appearances per year (a la Goldberg), and he already surpassed that. He had 18 more months on his contact at the time, and therefore every appearance would be another pay special. Finally, well, I’ll let Sting talk for himself:
I’m disappointed that we turned to shock and munch to hang with [the WWF]… All these years I had parents telling me, ‘We’re glad we can actually let our kids watch your show.’ All those people that said that to me over the years can’t say that anymore.
Sting, as a born-again Christian and a believer in the family value of wrestling, could not stand the WWF’s product. Although that has not stopped people like Chris Jericho or Ted DiBiase from being a part of the WWE, it is at least one of the factors (money and appearances being the others) that — at that time — had stopped Sting from making a WrestleMania moment.
Rey Mysterio — Although not a main eventer, Rey Mysterio was often lamented as a top choice to join the WWF, especially if they wanted to do anything with the Light-heavyweight and Cruiserweight divisions. People now-a-days point to Mysterio’s excellent entrance and rise to the near top of SmackDown! as proof that Rey Mysterio would have been an excellent acquisition. Except people forget that Rey Mysterio was sans mask back then, and was running around as Konnan Jr. To keep up the storylines of WCW, Rey would come in as he was, which was not a very successful gimmick for him. Also, Rey was coming off of his about sixteenth knee surgery, an injury that has never healed (he had to take time off for it again not too long ago). On top of that, being in WCW so long, Rey was making substantially more than most WWF upper/mid-carders. Rey would most likely end up in a lower card position during the InVasion, but still be making more than guys that would now be pushed to the side. The investment was not worth it then, but giving him time to recuperate and come in at a lower cost with a new (old) storyline and mask became the best way for the WWF to capitalize on Rey.
Ric Flair — The other top name that personified WCW, Flair was well into his 50’s at the time of WCW’s purchase. Also, he was making top dollar beyond all over main eventers in the WWF. He was not in wrestling shape (why he wore a t-shirt on the final Nitro) and would definitely not work a full-time schedule. He had spent the past 10 years in frustration butting heads with Bischoff and Russo, and nobody thought then that he had any gas left in the tank. Although we were surprised later after the end of the InVasion to find out just how much Ric Flair could go, at this point in history it looked like Flair was ready to hang up the boots forever.
Goldberg — Arguably the man that could draw the most money for a WWF-led WCW, Goldberg was completely burnt out on the business. Vince Russo had treated him horribly, and Goldberg was not a fan of the direction he was going. Much like Sting, Goldberg had also used up all the days in his contact and was more than happy to sit at home and pursue his acting dreams. Unlike Sting, even if Goldberg were to have had his contact taken over by the WWF, he probably would not have shown up. Besides all of that, do not forget that Goldberg lost a “You’re Fired” match to Buff Bagwell and Lex Luger in January. But this was in fact so he could go and have shoulder surgery. So acquiring an injured, disgruntled, and WWF-hating Goldberg would not be the best move.
Hulk Hogan — Hulk Hogan is the biggest name in professional wrestling. No, he transcends the sport. You can be as much of a Hogan hater as you want, it does not matter. The man was more important to wrestling history and bringing it into the mainstream than anyone or anything else. Even someone who has never watched a single wrestling match in their life knows the name Hulk Hogan.
So why wasn’t he brought in?
Hogan was last seen at Bash at the Beach in 2000, walking out with the Hulk Hogan Memorial Belt after pinning Jeff Jarrett. Because Vince Russo made so many disparaging remarks about Hogan, Hogan was busy suing WCW, a suit the WWF would not want to become involved with. On top of all that, Hogan had never fully recovered from his knee surgery, and obviously was well beyond his prime of adding to the product.
But Hogan’s contact was the real kicker. Not only could he come and go as he pleased, he would have to be paid $250,000 per appearance. And if you wanted him on PPV, that would cost you a portion of the PPV revenue! Beyond all that is what led to the Bash at the Beach incident to begin with; Hogan had a creative control clause in his contact. Vince had already learned his lesson in creative control clauses from Bret Hart, and could not have another talent in his company who had the legal right to refuse to do anything they did not want to do.
As you can see, none of these men with their current contracts would have been a smart move for the WWF. But you still might think the WWF could have pulled it off with their deep pockets…
Economic VS. Normal Profit
Even though these superstars would have been expensive beyond belief, many people still say that Vince could afford it. After all, this was just after the peak of professional wrestling, and Vince had more money than anyone could imagine. The WWF/E was a publicly traded company with a very large profit margin.
Despite the fact that acquiring these talents would cost tens of millions, many people say Vince McMahon should have bitten the bullet for the short term. In the end, he could have negotiated out better contracts or they could have hit the road. By then, all of the WWF vs. WCW dream matches could have happened.
But there is one major flaw in this argument: profit.
And this requires a little more explanation than you think.
The average person thinks of profit this way: the selling price of the goods or services times the quantity minus the cost to produce those goods times the quantity (and once in a while they might remember to take out the taxes). Now, if you take this a step further and also subtract out the overhead, administrative, and general business costs, the money left over would be what we call normal profit. I sold this, and this is how much I made.
There is another type of profit, though, that comes into play, and that is Economic Profit. Economic profit begins with Normal profit; you take what you sold, subtract all your costs, and there you go. But then you also start to subtract what are known as “opportunity costs”. Opportunity costs are what you gave up in order to make that money.
Take for instance your paycheck. Let’s say you make $10 an hour at the stationary store and work 40 hours a week, so your paycheck is $400 a week. Take out taxes, insurance, and other benefits, and you are probably taking home $300 a week. That is your normal profit. Now, what if you had turned down a job at the card store for $12 an hour for 20 hours a week? That’s another $240 lost opportunity, so you are down to $60 in economic profit. Or more so, what if instead of working for 5 hours, you could have gone to the beach with your girlfriend? What is the value of those 5 hours that you lost at the beach with your girl? Let’s say it is $200. Now, suddenly, your economic profit (or rather loss) is negative $140. So if you had taken the higher paying job with fewer hours but spent more time with your girlfriend, your normal profit would be lower but your economic profit would be higher! Interesting, huh?
Let us now apply this to the WWF.
Overall, we’ll say the superstars listed above would have cost the WWF $40 million. To make up those costs, there is a super PPV named InVasion that does a 2.0 buyrate, or about 800,000 buys. If this PPV cost $45, then that would be $36 million dollars. Add in the live gate attendance of 25,000 people with ticket, merchandise, and concession sales on average $100 a head, and that’s another $2.5 million. On top of that, home video units sell another 100,000 copies at $30 a pop, for another $3 million. And finally, ratings go up so much that the WWF can charge advertisers an additional $10.5 million for the month to advertise on RAW and SmackDown!.
In summation, that brings us to a total revenue of $52 million for a total cost of $40 million, or $12 million in normal profit.
Sounds pretty good, right? A quick $12 million to line the pockets of the WWF, McMahon, and the stockholders, and everything would be great!
Except it is not really $12 million.
What were the opportunity costs to make that $12 million? Well, first off, you would put the pushes of Benoit and Jericho on hold, two superstars that could make you a lot of money down the line. And what about all of the guys in OVW and HWA who would now have to spend another year or two waiting to get up to big show because there wasn’t a spot for them? There is a wasted cost of investment and future stars that could also be important to the company. More so than that, what about time? These guys were coming directly from the end of WCW, an extremely political environment. How much time would have to be spent to keep their egos in line and to stop problems from arising. How much time would be spent trying to convince them to go along with a storyline or a job? Even more than that, what could Vince, Stephanie, Shane, Slaughter, Brisco, Patterson, et al have been doing to earn the WWF more money if they were not so busy dealing with these personalities?
The time spent to create that $12 million “profit” could end up in the neighborhood of $100 million, and just like that the economic profit (loss) turns into a negative $88 million.
And of course, I was being extremely generous with the normal profit numbers to begin with. That is an absolute best-case scenario, and we all know that that never happens. In reality, bringing in the top dogs from WCW would have hurt the WWF short and long term financially, while also draining the other resources of the company. The true cost of business far outweighs the normal costs.
The millionaires you already know
Let us not forget, though, that there were a number of big-name millionaires already in the WWF. The short list includes Stone Cold Steve Austin, the Rock, Kurt Angle, the Undertaker, Kane, and the Big Show (Triple H was out with injury). Do you think for a moment that any of these men, especially Austin and Taker, would step aside so that a WCW guy could take their place at the top of the card? Absolutely not! Look at how Austin reacted to being pushed down the card to fight Scott Hall at WrestleMania as proof. Not to mention that Rikishi, Benoit, Jericho, and Bradshaw were all getting sort-of pushed at this time, and none of them would want to lose that momentum.
Every political factor in the WWF would fight against any WCW guy getting a top spot above the people that had “paid their dues” in the WWF already. But there was another big outside factor with three initials that was holding WCW down, and it had nothing to do with wrestling!
The “X” Football League
On February 3, 2000, Vince McMahon announced that the World Wrestling Federation would be branching out again. After having had so much success in professional wrestling, the WWF was sitting on a lot of cash. Investors did not want a dividend, because it would mean the company did not know what to do with money and had no growth prospects. To buck this idea, McMahon and other WWF officials came up with ideas to diversify the WWF’s holdings and to branch out into new businesses. One of those ideas became the XFL.
Over the next several months, McMahon engaged in negotiations with NBC and his new partner for WWF programming Viacom and came up with the final concept. The XFL would be an off-season football league with less rules, more action, more cameras, more sex, and a compensation based on winning the game, not contacts. NBC bought into the idea so much that the two companies (WWF and NBC) formed the joint venture XFL, LLC. NBC would get the first choice prime-time games, and UPN and TNN would get to air other games. Thus, the XFL was born! And remember: the “X” did not stand for extreme. It actually didn’t stand for anything. It was just to let you know that the XFL was different.
One year to the day of the initial announcement (February 3, 2001), the XFL kicked off with a game between the Las Vegas Outlaws and the New York/New Jersey Hitmen, which the former won 19–0. The game was seen by an estimated 54 million people, but that would not last. Ratings would continue to slide on NBC (despite doing well on UPN and TNN) until the Million Dollar Championship Game on April 21, 2001, which drew a paltry 2.1 network rating.
NBC shortly thereafter decided they wanted to pull out of the XFL and would not be renewing the league for television. UPN and TNN were actually ready to renew since the league did well for their networks. But when UPN said they would only do that if the WWF trimmed SmackDown! down to an hour and a half (probably so they could try to re-launch Gary and Mike or pick up the long-cancelled PJs from Fox), Vince would have none of it. Therefore on May 10, 2001 Vince announced the end of the XFL at a cost of $70 million.
A few weeks later, Lance Storm ran into the ring on RAW.
But there are a few things you have to take away from the history of the XFL:
(1) The XFL began before anyone knew that WCW was going to be on sale, and way before AOL-Time-Warner decided to cancel all WCW programming on TNT/TBS.
(2) Vince was extremely focused on making the XFL happen, and much of his development and marketing resources, as well as the resource of himself, were going towards that.
(3) With the falling ratings of the XFL, Vince was under pressure from stockholders and NBC to get the XFL to turn around, or at least to bottom out. He was not able to do either.
(4) At the end of the XFL, Vince lost at least $35 million (half the total shutdown costs of the league, of which he might have had to take on more), and thus had taken a huge chunk out of the WWF’s cash reserves.
You can see by all of this why bringing in a lot of those big-name wrestlers would not have even been possible with Vince. When WCW was bought out, Vince was in the middle of the XFL season trying to do anything and everything possible to make the league succeed. When was he going to negotiate through the incredible complex contacts of the big-name WCW stars and manage them and a new brand and his current roster? How would that even be possible?
By the time the XFL closed down, it had already been two months since the end of WCW. He knew he needed to start getting the guys back on TV and bring back the WCW brand. He could not wait any longer than he had to start the InVasion, so he started it. As the InVasion went on he was able to acquire some big names (notably Booker T and DDP), and that would have to suffice for the time being.
How much more money and time could Vince afford to lose? The answer was none. The XFL had drained so much from everyone. What resources were left for anything else?
You own what?!
Believe it or not, there were quite a few “anything else”s.
The XFL was not the only asset that the WWF owned at the time. Looking over the 10Q (quarterly) report filed on January 26, 2001, it can be seen that the WWF had recently purchased the WWF Entertainment Complex for approximately $23.6 million and was amortizing the costs over ten years. OK, here is a little story about amortization: it’s fake! Basically, you pay cash for something up front and on your balance sheet assets move from cash to fixed or other assets. That’s fine. But you need to record the cost of the purchases as an operating cost somewhere, so you put it on an income statement. Now, instead of just saying “we spent $23.6 million this quarter and have negative results because of it” you spread the costs over years. That way, it does not look like you have had a really bad quarter or year on the bottom line, and you still get a tax benefit (less profit means less tax you have to pay. Don’t worry, you still pay the tax in the end, it’s just a matter of when). So when you look at the WWF/E’s bottom line for the quarter and they look positive, they weren’t. Follow the cash. Cash is king.
Anyway, the WWF sent this out in a press release:
“We want WWF New York to be a showcase for all our brands, including the WWF, XFL and WWF Racing,” said Linda McMahon, WWFE President and CEO. “By taking control at this time, we believe we can unlock the potential of this facility. We want to make WWF New York as synonymous with fun and entertainment as our other brands.”
The complex features a soundstage for TV production and live entertainment that was technically designed and equipped by WWFE independent of the licensee’s investment. The complex also contains an active merchandise store and restaurant. In the first year of operations, the facility is expected to generate approximately $20 million to $25 million in revenue with $4 million to $6 million in EBITDA (earnings before interest, taxes, depreciation and amortization).
Although now we know that WWF New York (or the World, as it was later called) did not even come close to making these projections, it was still a substantial investment by the company at the time. So that is an additional $23.6 million that was being used for other resources and not for wrestling talent, not to mention the actual operating cost of the restaurant and store. Also take away from Linda’s comments that there was a WWF racing team. Though the investment for that was not in the tens of millions, it was still another piece of the puzzle that held Vince’s and the WWF’s focus.
The World, actually, was not the WWF’s first venture into real estate. Take a look at this press release from December 26, 2000:
World Wrestling Federation Entertainment, Inc. (NYSE:WWF) today announced the sale of the WWF Hotel and Casino located in Las Vegas, Nevada. The net proceeds from the sale are approximately $11.2 million and are net of closing costs and other selling expenses.
The property was purchased in the second quarter of fiscal year 1999 and classified as an asset held for sale on the balance sheet. The company expects to record a gain of approximately $1 million.
The WWF was trying to develop a casino in Vegas (can you guess why? ::cough cough:: Nitro Grill ::cough cough::). This was another unsuccessful operation that had the focus of the WWF prior to the WCW purchase. Although they made money on the sale of the land, that press release does not tell you about the amount of money and time they lost trying to create the casino. All of those costs were wrapped up into the SG&A expenses that hardly ever get broken out. But that still isn’t all that was going on!
Remember how I said at the beginning of this piece that the WWF was trying to diversify their properties? Well, another one of those was SmackDown! Records. And look at this press release from March 1, 2001:
SmackDown! Records, a division of World Wrestling Federation Entertainment, Inc. (NYSE: WWF), and KOCH Records have launched WWF The Music: Volume 5 into the #2 spot on the Billboard Top 200*, making it the highest debut of the week. The CD is already Certified Gold in the United States, Canada, and the UK and is on its way to becoming Certified Gold in Australia and Chile.
SmackDown! Records and KOCH Records shipped 1.5 million copies worldwide, including one million units in the US, 100,000 in the UK, and 70,000 in Canada. In addition to its strong showing on the US sales charts, WWF The Music: Volume 5 debuted at #2 and #5 in the UK and Canada, respectively. The CD is a top seller at retail chains such as Tower Records, Best Buy, Kmart and Target and continues to sell well at several other retail outlets.
You see, SmackDown! Records was actually showing success, and so the WWE wanted to move forward with that. Maybe if they had someone like John Cena at the time it could have been more successful. They did sign a few bands to the label, but eventually dropped them when they dropped the whole division. But at the time, it was another part of the WWF becoming a multi-media powerhouse. And again, this is right before they purchased WCW, so yet another piece of what the WWF and Vince were investing in becomes common knowledge.
Stuart Snyder, then President and COO of WWF/E had this to say:
We’re extremely pleased with the successful launch of SmackDown! Records. As the company continues to grow and we diversify our entertainment product offerings, we expect the new label to be an integral part of our portfolio of brands.
But while branching out into a portfolio of brands, there was something else lurking behind.
Let’s take it to a higher power!
This came from the WWF/E’s 10Q report mentioned above:
On April 17, 2000, the WWF — World Wide Fund for Nature (the “Fund”) instituted legal proceedings against the Company in the English High Court seeking injunctive relief and unspecified damages for alleged breaches of an agreement between the Fund and the Company. The Fund alleges that the Company’s use of the initials “WWF” in various contexts, including (i) the wwf.com and wwfshopzone.com internet domain names and in the contents of various of the Company’s web sites; (ii) the Company’s “scratch” logo; and (iii) certain oral uses in the contexts of foreign broadcasts of its programming, violate the agreement between the Fund and the Company. On August 29, 2000, the Company filed its defense and counterclaim. On January 24, 2001, the Fund requested leave of court to amend its complaint to add a count of money damages. Leave has not yet been granted. The Company believes that it has meritorious defenses and intends to defend the action vigorously. The Company believes that an unfavorable outcome of this suit may have a material adverse effect on its financial condition, results of operations or prospects.
But as we know, leave was later granted. And not only that, the “Fund” won and became the WWF. By the way, be sure to check out wwf.com and wwfshopzone.com to see how much the “Fund” has done with the properties they fought so viciously over.
The point being, the WWF was getting sued… a lot. This was the biggest case going on, but not the only one. And all of those lawyer fees and court times had to be paid well before they would recover any damages (IF they ever recovered anything). This was yet another drain on cash, resources, and time that the WWF had to worry about before going into negotiations with some of the biggest names in the industry.
This might also be a good point to mention that the WWF was also fighting in bankruptcy court for the assets of ECW. Do not let anyone fool you, the WWF/E did not acquire the assets of ECW until June 17, 2003, well after the end of the InVasion. Again, this was yet another drain on the focus, time, money, and resources of the WWF.
But shouldn’t they focus on their core business anyway: wrestling?
The Intentions of the Man
And who is to say they weren’t? The WWF was taking the WCW purchase very seriously. In a press release on March 23, 2001, these comments were made:
“This acquisition is the perfect creative and business catalyst for our company,” said Linda McMahon, Chief Executive Officer of World Wrestling Federation Entertainment. “This is a dream combination for fans of sports entertainment. The incendiary mix of World Wrestling Federation and WCW personalities potentially creates intriguing storylines that will attract a larger fan base to the benefit of our advertisers and business partners, and propel sports entertainment to new heights.”
“The acquisition of the WCW brand is a strategic move for us,” said Stuart Snyder, President and Chief Operating Officer for World Wrestling Federation Entertainment. “We are assuming a brand with global distribution and recognition. We are adding thousands of hours to our tape library that can be repurposed for home videos, television, Internet streaming, and broadband applications. The WCW opens new opportunities for growth in our Pay Per View, live events, and consumer products divisions, as well as the opportunity to develop new television programming using new stars. We also will create additional advertising and sponsorship opportunities. In short, it is a perfect fit.”
Linda was optimistic about being able to make WCW into a brand like the WWF, but Snyder was being a little more realistic. He saw the potential revenue in the extended tape library, something the WWE has really started to take advantage of in recent years. He, in this situation, was the forward thinker. Do not forget, this was the day of the WCW purchase, so the future was completely uncertain. All we could get then were intentions.
Still, some would have you believe that Vince would never want the WCW guys and he wanted them to fail from the get-go. Well, in a financial release on April 23, 2004 we saw this:
World Wrestling Entertainment, Inc. (NYSE:WWE) announced today that it has filed an amended Form 10-K for fiscal 2003 and amended Form 10-Qs for fiscal 2004 with the Securities and Exchange Commission to revise the accounting related to the March 2001 acquisition of certain assets of World Championship Wrestling, Inc. (“WCW”(TM)). These changes principally affect fiscal 2001 and 2002 as follows:
• $6.6 million of costs, which were originally recorded and capitalized as intangible assets, are now recorded as $1.7 million and $4.9 million of selling, general and administrative expense in fiscal 2001 and 2002, respectively. These costs arose from the termination of certain WCW licenses and related agreement assumed in the transaction.
• The remaining $2.5 million of purchase price, which was originally assigned an indefinite life for accounting purposes, is now being amortized over a six-year period. This increases annual amortization expense by approximately $0.4 million in fiscal 2002 through 2007.
• There were no changes to revenue or costs of revenues in any of the periods.
The company has also amended its fiscal 2004 quarterly financial statements to reflect the impact on the opening balance sheet, most significantly a $6.6 million decrease in its gross intangible assets, and additional amortization expense of approximately $0.3 million for the nine months ended January 23, 2004.
I know, I know, that was a lot of jumbled mess in there. Let me put it to you this way: When the WWF purchased WCW, they listed everything as assets (IE, they just shifted the cash on their balance sheet into tangible and intangible assets, they did not record it as a normal operating expenditure). That means that the WWF had every intention to make WCW as much a part of the WWF/E umbrella as any of their other brands (XFL, SmackDown! Records, WWF Entertainment Complex, etc…), not the intention of just writing it off. It would not be until two years later, when it was apparent that there was no future for WCW as a separate brand in the WWE did the company write off the costs.
Despite this care for professional Wrestling, you have to realize that the WWF/E was not a wrestling company. It was a mass media company that had wrestling as one of its brands. Take a look at how the company viewed itself according to their own quarterly report:
We are an integrated media and entertainment company principally engaged in the development, production and marketing of television programming, pay-per-view programming and live events; the licensing and sale of branded consumer products featuring our highly successful World Wrestling Federation brand; and the development and start-up of a professional football league, the XFL.
Our operations have been organized around three principal activities:
The creation, marketing and distribution of our live and televised entertainment and pay-per-view programming. Revenues are derived principally from ticket sales to our live events, purchases of our pay-per-view programs, the sale of television advertising time and the receipt of domestic and international television rights fees.
The marketing and promotion of our branded merchandise. Revenues are generated from royalties from the sale by third-party licensees of merchandise, the direct sale by us, including from our internet operations, of merchandise, magazines and home videos, and from our operations at WWF New York entertainment complex.
The Company’s professional football league, the XFL, which consisted of costs related to its development and start-up through January 26, 2001.
That says it all. The WWF/E was a media company, and wrestling was not the only focus. While important (as it obviously should be for the first two points), the WWF/E was branching out in many different directions at once. The sale of WCW was just an additional windfall that they were able to take advantage of. But with so many other projects and concerns going it, the company simply did not have the resources to take advantage of the situation as many fans wished they could have. The cards were laid down, but there was nothing but mixed twos, fives, and sevens.
Sign on the dotted line
Wrestling was a different landscape in 2001, as different as Vince McMahon the person and the World Wrestling Federation Entertainment the company were. When Vince had finally vanquished his foes and gobbled them up, he was unable to execute on the dream WWF vs. WCW matches and events that people wanted to see. He was unable to capitalize on the hopes of WCW fans worldwide that their beloved promotion would live on. He was unable to save the InVasion.
The catalyst of that being he was not able or wanted to acquire the contacts of WCW’s top performers. Much of that has to do with the performers themselves, whose contacts were enormous, filled with creative control clauses, performance bonuses based on just showing up for work, and date appearances that were already filled. Many of them were injured, too, or so burnt out at that point that they would not have been productive members of the organization anyway.
Still, there were many other considerations, from the existing top-tier performers’ feelings, the costs of dealing with such large egos and obtuse contracts, and the costs of other existing enterprises — such as the XFL, SmackDown! Records, and WWF New York. All of these were a drain on the time, resources, and cash of the WWF/E and Vince McMahon; time, resources, and cash that could not be freed up for potentially dangerous contracts.
Vince McMahon had every reason in the world not to buy out WCW’s contracts. And most of all, it was the right decision for the WWF/E as a whole.
The defense rests.
After the Trial
IN THE CASE OF THE IWC VERSUS VINCE MCMAHON NOT BUYING OUT WCW’S CONTRACTS, VINCE HAS BEEN ACCUSED OF DOING THE WORST THING POSSIBLE FOR BUSINESS, DESTROYING ANY HOPE WCW HAD OF BEING A VITAL BRAND, NOT GIVING THE FANS WHAT THEY WANTED IN DREAM MATCHES, AND INTENTIONALLY TRYING TO HURT THE WRESTLERS AND THEIR FAMILIES.
With exactly 62 and 2/3 percent of the vote, Vince Not Buying Out WCW’s Contracts was found:
And this verdict came despite a case of mistaken semantics and some people’s interpretation of the law.
A number of readers who voted guilty did so because of the fantasy of everything that the InVasion could have been. I cannot stress this enough: Vince’s trial was not about the InVasion, it was about not acquiring WCW’s top tier contracts. And at that, to find Vince guilty based on what could have been (but still would probably have not been) is just against justice. Would you find someone guilty of murder because they chose to stay in bed instead of taking their normal root to school where they would have seen the murder happening? No! It’s pure fantasy; and finding someone guilty of not living up to your hopes and dreams does not take away from the actual actions they have done.
Some people additionally came up with very rich and creative fantasy booking that I did enjoy, no doubt. I would have loved to have seen some of those matches, but people were trying to bend the laws of time and reality. Anything involving Triple H (torn quad), Chris Benoit (neck surgery), Scott Steiner (dropped foot syndrome), HBK (still retired), or Goldberg (shoulder surgery) just could not have happen. I mean that: physically could not happen. But yet Vince was voted guilty on those accounts. Since when is evidence of fantasy permitted in court?
I’ll skip over all the fantasy booking and InVasion criticism and go to a more interesting question:
I think you had a great [argument] about the contract dispute, but there is a question lingering in my mind about the entire situation. Why didn’t Vince wait [until] the losses from the other ventures healed, sign the stars who were already free agents, wait [until] all the other WCW contracts had expired, and then bring in all WCWs name roster (only the ones who could draw money and were willing to work for Vince) in with deals on his own terms? There could have been a story about the [WCW] waiting to do a WWF invasion with “only their strongest” (an Eric Bischoff promo quote perhaps?) and Vince doing what he planned in real life and give them their own show.
WCW vs WWF, with inter-brand PPVs, dream matches, and all profit going into his pocket because he runs [both] [companies]. Sure[,] it would have been about
2003 when it all could have happened, but it could have possibly… [been] HUGE business.
To which I replied:
Because the losses still have not healed.
The WWF is still suffering from the loss of the XFL, they did not know the World and SmackDown! Records were going to fail (those were investments), and they had hired 20 WCW guys. What were they supposed to do with them? Send them all down to OVW?
At that, there was no guarantee that any of these guys would have signed contracts, especially all together. I was still shocked years later that he got Hogan, Nash, and Hall to sign short term deals. But look, people came and left when they wanted to. How was Vince supposed to see the future and get them all to sign good contracts at the same time and manage all of their egos?
And Bischoff was the biggest shock of all! We’re so used to seeing him on RAW now, but it was the most shocking moment in wrestling history in my opinion when he showed up in the WWE. Nobody saw that coming (and anyone who says they did is a liar).
Waiting two years on a possibility while guys got older [and] the iron got colder did not make sense. Vince had to act if anything was going to happen. Also, do not forget that he was under pressure from the wrestlers he had hired, his own company, and the investors to do something with the WCW brand. Vince was forced to start to play that hand, and just because he only had a pair of 4’s doesn’t mean that he should have tried to hold out for a full house.