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It Could Be Said #41 Vince McMahon's Endeavor Future
Vince McMahon scores a huge win over Wrestlemania Weekend
So for the second year in a row Vince McMahon headlined Wrestlemania weekend, with the news breaking hours before last Sunday’s show that he had agreed a deal to merge WWE with UFC. The latter will be spun off from its parent company Endeavor, who will retain 51% of the combined company, with WWE’s former shareholders having the remainder. Endeavor’s Chief Executive and President/Chief Operating Officer shall perform the same roles for the new company, with McMahon acting as Executive Chairman. Dana White will remain President of the UFC whilst Nick Khan becomes President of WWE.
It is of course way too know the full details as this is a developing story but here are some early thoughts from me.
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Vince McMahon Completes His Comeback
When we last wrote about Vince McMahon, I said that he had taken an almighty gamble by forcing his way back as Executive Chairman of WWE. He had broken free of the trap that his board of directors had erected for him by promising shareholders a sizeable return by securing a sale. But that meant he had to deliver on a sale, lest the value of the company in which most of his wealth is tied up, was to fall as quickly as it had risen.
Well McMahon has delivered on a sale but necessarily the one that his fellow shareholders were expecting. Rather than the always ridiculous idea that Saudi Arabia’s Public Investment Fund would buy everyone out in an all-cash deal and take the company private, they instead are being presented with an all-stock deal where their shares in WWE will be swapped for stock in a joint entity created by Endeavor spinning out UFC and merging it with WWE to form a new $21billion company. There’s no formal name for the new company yet, so we will refer to it by its stock symbol, TKO, which to be honest is as good a name as any.
What McMahon has done is brutally side-lined his restive shareholders. Endeavor as parent company will control 51% of TKO whilst Vince McMahon will control another 18%. And Endeavor is not some random company that he’s chosen to partner with but one that he has had a close business and personal relationship with for over twenty years. They proved their loyalty to him by parading him on global television at the height of last year’s scandal, welcoming him to sit ringside at a UFC Pay Per View. It also proven itself willing to ride out even the most severe scandals, standing by Dana White even when he was caught striking his wife a few months ago.
Before the merger Vince McMahon relied on WWE’s dual class structure to control the company but that made him vulnerable to legal complaints or a mass selloff from the 60% of shareholders that weren’t McMahon family members. It was exactly these fears that forced McMahon to retire last summer. In TKO, he and Emanuel will control 68% of all shares, meaning that as long as they don’t fall out, they can do what they want with the company. And a falling out seems unlikely, given their longstanding relationship, and McMahon’s underappreciated ability to maintain positive relationships with mainstream media executives.
By deepening his partnership with Emanuel, McMahon has tightened his grip on the company without paying his fellow WWE shareholders a cent. Instead, he is promising them jam tomorrow. McMahon has secured a $9billion valuation for WWE, which is even higher than their current record market capitalisation. The argument for this and UFC’s $12billion valuation is that both businesses have underperformed on the stock exchange in the past, and that together they we will start to secure the returns for shareholders the underlying business’s strengths deserve.
But for that to be true, TKO will need to increase both promotions’ profitability. And it will only do that by exploiting the synergies between the two companies.
Synergy Equals Eliminating Redundancy
The clear synergy between UFC and WWE was always the obvious reason to think Endeavor was the likely destination for WWE unless NBC Universalwere interested, and I repeatedly said as much, whilst being one of the few analysts to dismiss the idea of a Saudi takeover as clearly ridiculous.
That synergy comes in many forms but a crucial one is that WWE and UFC just do a lot of the same stuff on the back end, which means you can fire a bunch of people from either company, make the remaining people work twice as hard, and so miraculously increase your profits. This is doubly true when you consider the full breadth of Endeavor, which will undoubtedly continue to offer important services to its new subsidiary, in one way or the other. The cuts will presumably be most savage in WWE because it has back-office functions that UFC has already seen cut to the bone, and WWE has long been a company that underperformed in terms of profitability because it had such an extensive back-office staff.
Everything on the back end which doesn’t directly touch the product is fair game and it is important not to catastrophise this development. Obviously its very sad for the staff members in question but nobody will lose sleep over who does the WWE’s procurement or UFC’s HR, and there’s clear efficiencies of scale in combining these functions. This is why many organisations outsource these services to larger companies. Indeed, TKO will probably pay their parent company to handle these issues, thereby avoiding duplication of function between Endeavor and its new subsidiary.
But where do you draw the line between combined functions and separate realms?
For example, whilst it’s easy to have to same unit handle payroll, both UFC and WWE have different processes in place when it comes to handling performer travel, accommodation, and injuries. If you really want to streamline everything, you would ideally align the treatment of WWE and UFC performers, which would surely mean WWE pro wrestlers are treated more like UFC fighters (get hotel and travel paid for but lose control about where they say). Likewise, rather than WWE paying for surgeries on an ad hoc basis, it would make sense to add their pro wrestlers to UFC’s accident injuries programme for fighters. These would theoretically be wins for the pro wrestlers.
In both cases, combining both sets of performers into the same programme doesn’t just make it easier to administer, but it avoids arguments about preferential treatment between the two promotions, and increases the company’s leverage over the external providers by increasing the business that is being handled through one contract.
The same dynamic applies to things more closely aligned to the product. You might think promoting pro-wrestling and mixed martial arts require different skill sets, but the way PR operatives and journalists bounce across both sports, suggests otherwise. Indeed, there’s a good chance that most of marketing won’t even be handled in-house by TKO, but will instead be kicked upstairs to Endeavor, who were originally a talent/marketing agency.
A more intriguing questions is what happens to both organisations production units. Here are where real savings could be made, above and beyond what Endeavor made when they purchased UFC, assuming its technically feasible to significantly reduce the number of people working in production for the combined company. The sheer amount of content may well make that difficult, as one crew isn’t going to be able to handle both a UFC fight week and a regular week of WWE programming. That’s before you consider that both promotions have their own distinctive styles, which the new owners may be loathed to tinker with too much.
Even if the outside broadcast crew members (many of whom are part-timers or freelancers) stay separate, it might be everything else can be merged. For instance, would WWE and UFC really need separate studios responsible for pumping out shoulder content such as show adverts, match previews, online interview programmes, or graphics? And couldn’t management be merged, even if they were managing staff working to different playbooks? Such moves would not just reduce the number of people employed by TKO but also save money in terms of office space, as you would no longer need to have two separate production facilities.
Indeed, if you wanted to be really radical, you would presumably look to merge office facilities as well, with TKO having a joint office complex that brought together UFC and WWE management. That might be too jarring a development to do straight away, but it would unlock a lot of money if TKO can sell Titan Towers and remove that expenditure from its books moving forward. And with his hair dyed and moustache primed, McMahon looks like he’s ready for Vegas anyway.
Speaking of facilities, there’s then the question of talent development. UFC and WWE have significantly different approaches to developmental, with UFC happy to delegate it to independent gyms and regional promotions. They highlight whole promotions by broadcasting them on UFC Fight Pass, whilst individual fighters get given a shine through The Ultimate Fighter. It’s a remarkably bare bones approach to talent development, based on the knowledge that nobody can provide fighters with the kudos or cash they can earn in the Octagon. WWE meanwhile has for the past decade tried to centralise talent development, either training promising athletes from scratch, or reprogramming experienced but raw performers, at its state-of-the-art facilities in Orlando, Florida.
That the UFC approach is cheaper, would surely incline the new integration team to encourage WWE to follow their new sibling’s model. After all, the WWE Performance Centre has struggled to turn out accomplished performers. Getting WWE to instead rely on similar relationships with the sport’s grassroots would not only allow TKO to sell the facilities for a profit but eliminate a significant amount of money from the bottom line in terms of paying both trainees and trainers. It also helps that the UFC’s approach bears more than a passing resemblance to how Vince McMahon handled talent development, until Levesque started empire building.
That would free up TKO to focus on WWE’s more promising idea; exploiting the relaxation of rules on sponsoring college athletes to offer them NIL (Name, Image, Likeness) deals. No reason this couldn’t be changed into a broader initiative, with the two promotions working together to sign up promising college athletes, then have them sample both sports during an induction period, before deciding in which they will start developing their skills by training and performing with grassroots organisations affiliated with TKO. The great advantage of this is that it keeps TKO’s financial investment to a minimum, and stops UFC and WWE fighting over talent, thereby reducing the leverage of the prospects they’re trying to recruit.
But that of course raises a problem.
Synergy Shouldn’t Be About Eliminating Competition, But The Merger Won’t Be Blocked
In capitalism, competition is how we ensure that consumers choose who to buy goods or services from, rather than producers getting to choose who to sell good to. If a company has a monopoly on selling a good, then they can present the consumer with a “take it or leave it price”, for which the consumer has no choice but to pay if they want the item.
UFC and WWE merging undoubtedly eliminates competition. The Number One and Number Two most profitable and popular combat sports properties in the world are joining forces. Both companies have had a long history of being accused of being monopolies, and one of their go-to tactics has been to point to the other whilst saying the accusers have defined the market too narrowly. This merger stops them doing that.
But it won’t matter, because the America has long not judged mergers based on classic capitalist theory. Instead, Robert Bork’s “consumer benefit test” rules the roost, which merely calls upon companies to prove that consumers won’t be disadvantaged from a merger or acquisition. TKO will undoubtedly argue that the efficiencies from the merger will reduce cost pressures on the consumer and highlight how cross-promotional activities could create a stronger product for the consumer (more on that later). Whilst the Biden Administration would surely love to test its more stringent anti-trust theories, given the hammerlock the Republicans have on federal courts, it would almost certainly fail. And maybe deservedly so given how small this company is compared to the behemoths of the entertainment industry.
But that doesn’t mean the concerns that this deal is anti-competitive concerns are make believe, just that it’s hard to see how they will negatively impact consumers in the short term. Across TKO you see areas where the two promotions can conspire to increase their leverage at the expense of their workers and partners.
For example, whilst there is a limit to how standardised contracts can become across UFC and WWE, one would assume that they will now cooperate much more closely about the activities of their performers in each other’s realm. All UFC fighters need Dana White’s permission to perform in pro-wrestling, and it is only eighteen months ago when several fighters performed on AEW television as part of American Top Team’s feud with Chris Jericho’s Inner Circle. You must assume that is now impossible. Likewise, in today’s landscape, would UFC be such a hospitable bolthole for WWE refuseniks such as Brock Lesnar or CM Punk? Seems doubtful.
Likewise, WWE has long tried to maintain exclusive relationships with leading arenas, to stop rivals being able to easily promote marquee shows. The existence of UFC has complicated those efforts, as already UFC runs major arenas outside Las Vegas less frequently than WWE, it tends to draw bigger gates. So, arenas insist upon the right to host both WWE and UFC, which usually makes it difficult to draw up contracts that doesn’t create loopholes for their rivals to exploit. That changes with the merger, with TKO being able to demand that arenas agree to exclusivity in return for not just regularly hosting RAW or Smackdown, but getting a big UFC pay per view.
The same will be true of other business partners, who will no longer be able to play UFC and WWE off against each other. And what happens to journalism in this space? MMA and Pro-Wrestling shares many leading journalists, and its rare for somebody to have good relations with both WWE and UFC. Will the new landscape see the two promotions swapping notes, and ensuring that those who are on the outs with one, are on the outs with both?
The danger for fans is that we’re left with an overmighty promotion whose employees, performers, stakeholders, and journalists are all less able to challenge and hold to account. That will ultimately lead to the company making worse decisions, thereby degrading the product.
Synergy Risks Confusing Everyone’s Branding
It has been striking how cool Dana White has been towards the merger with WWE. He has retweeted the announcement, and said a few begrudgingly positive comments here and there, but his focus has been on reassuring UFC fans that Vince McMahon won’t suddenly have a say in their sport. The message is less, “behold the transformative power of the new alliance” and more “this is deal is more about enhancing WWE, than us”.
And you can understand why White is cautious. Having liberally borrowed from WWE’s playbook throughout his promotional career, he is far from being a snob towards pro-wrestling but understands that many of his fans and stakeholders do look down on “fake fighting”. There is a danger that becoming stablemates with WWE would risk diluting the brand of a promotion whose tagline is literally, “as real as it gets”.
And this is no empty concern, it could be genuinely damaging to have people laughing about Vince McMahon scripting finishes to UFC fights when there’s a controversial decision. It will take finesse to navigate these waters whilst moving beyond firing employees, and stiffing freelancers or business partners, to creating added value through cross-promotional opportunities.
Take for instance video games. The problem that both UFC and WWE have repeatedly faced is that they don’t have enough juice to support annual releases like larger sports, but modern-day game development makes it impossible to move away from such a cycle because otherwise the developer would have to start laying off the staff that just finished making your game, as they can’t afford them to be sitting around doing nothing. Selling the video game rights for both companies as a combined deal would facilitate a bi-annual release cycle for both promotions, as the developers switch between the two. It might even open up the possibility of there being an arcade-style WWE vs UFC game, which I think if it was focused on both sports’ legends, and threw in some action movie and boxing superstars, could be a big hit.
Likewise, an obvious area to look at is licensing. Endeavor will undoubtedly look to centralise the licensing operations of TKO, and everyone has openly talked about how a key goal is getting WWE’s sponsorship and advertising up to UFC’s level. Given the fact the fact that boxing is fragmented and overwhelming skews towards a poorer, older audience in America, TKO will have a dominant position in young male advertising. WWE and UFC also complement each other very well, WWE has the larger audience when it comes to weekly television, but UFC runs more frequent super shows. That should mean that combined sponsorship packages are greater than the sum of their parts.
Indeed, one can see the shop window presented by WWE television being one of the things that makes Dana White more amenable to working closely with their corporate sibling. WWE giving up a segment on RAW or Smackdown to push that week’s big UFC PPV, would be free advertising that would cost millions to replicate. That would then be amplified by WWE’s social media channels now being on board with pushing UFC’s marketing, something they’ve previously been reluctant to do so, even when it would’ve benefited them i.e. Brock Lesnar’s return at UFC 200. Of course, that we require some coordination when it comes to media sales, given that WWE’s broadcaster could not necessarily be relied upon to support promoting a product, especially if it was on a rival station.
There is an irony when considering how TKO will handle media rights deals – for all the talk of WWE needing to learn from Endeavor and UFC, WWE beat them both during the last rights negotiations due to the brand split and the efforts of Nick Khan.
UFC was trying to do a deal where they would sell TV rights to FOX and streaming rights to ESPN+, but FOX got tired of being held up, and went with Smackdown instead. UFC awkwardly had to announce its deal with ESPN twice, because the first time hadn’t included the stuff they intended to stay with FOX. However, given that Khan was only hired by WWE to handle the negotiations due to McMahon being told that Emanuel couldn’t do them due to Endeavor’s ownership of UFC being a conflict of interest, one has to assume that Emmanuel will lead on those negotiation's as TKO's CEO.
As many people in TKO have said since the merger was announced, the intention is not to sell all television content to one broadcaster. And there’s a very good reason for that – few broadcasters would want it. Even a station as hollowed out as USA Network worries about being seen as a WWE station, and no station wants to become dependent on one external production studio for nearly all its original prime-time programming. It’s why the WWE brand split is such an important feature of the programming because it makes it possible to sell Smackdown as a separate product, so increasing the number of interested bidders.
But separate does not mean independent. TKO will surely structure the products WWE and UFC offer to ensure they are not crowding each other out and that they are given a freehand for cross-promotion. In the same way that the Performance Centre must be in jeopardy with this deal, one would assume that Endeavor will object to basically giving away NXT, when Tuesday nights could be a night that USA Network bids to host other TKO content, be that UFC or (snigger) Dana White’s Power Slap League. Whilst they’ll struggle to get it, you could see Endeavor pushing for both UFC and WWE to get some control over the advertising sales for their television programmes, so that they can run a combined ad sales network. They’ll certainly want clear provisions in the contracts that allow them to cross-promote UFC and WWE products on each other shows.
Whereas nobody would want to broadcast wall-to-wall TKO content on their television station, securing the rights to both WWE and UFC programming would be a boon for a streaming service. Both promotions proved themselves unusually good at converting viewers into OTT subscribers, and the theory will be that having both on the same service would not only increase the overall number of subscribers but improve retention, because you can persuade those who come aboard for a big WWE show to stick around for a UFC grudge match, or vice-versa. Indeed, if I were a betting man, I would suggest that WWE joins UFC on ESPN+ when the deal with Peacock runs out in 2026, regardless of where either promotion’s television programming ends up. That of course would (in a very limited sense) be a benefit to the consumer, who would now get both WWE and UFC for the same subscription payment, rather than having to subscribe to both Peacock and ESPN+ to receive the same programming.
(Incidentally, it sure is strange that WWE chose a date for the end of their streaming deal that coincided with UFC’s ESPN deal, rather than their own television deals. I’m sure that’s just a coincidence and not a sign this deal has been cooking in the background for a while)
Another benefit for consumers would be the merger of UFC Fight Pass and WWE Network, with the emphasis being placed more on affiliated regional/indie promotions and archives that TKO’s broadcasts aren’t interested in. Given WWE’s greater success in producing its own documentaries, it would be interesting to see if this is something a combined production house would try to do for both brands, or just continue to give the more historically minded pro-wrestling fans what they want. A combined subscription service would also give both companies more clout to drive a harder bargain overseas, as it would make it more viable for them to go independent, rather than accepting lowball offers.
Of course, the downside for WWE fans is as these operations become integrated, WWE will adopt the lessons from UFC. And one of those key lessons is that internet pay per view works. As far as we know, UFC has done incredibly well with regards to its ESPN+ deal. There is no reason to assume that TKO won’t try to repeat the same success with WWE – it is the surest way to increase the promotion’s revenues. Some say that WWE could never go back to charging for its biggest shows, but I firmly believe that this is motivated reasoning. AEW does fewer viewers than TNA or ECW at their peak and charges a higher price for their pay per views, but regularly surpasses both promotions’ all-time records in terms of number of buys. If AEW can break the 200K households for the return of CM Punk, then there is no reason to think that WWE couldn’t do at least three times that with a Wrestlemania, especially when you factor in the push they’d receive if ESPN+ was handling American sales. I understand people don’t want to go back to paying for individual shows, and I do think WWE would be wise to keep their B-shows as subscription specials, but there’s no reason to think WWE wouldn’t make more money by charging for their biggest shows.
Vince Wins Again…But At What Cost?
There can be no doubt that the world of professional wrestling will never be the same again. Dozens of people will lose their jobs, WWE will lose its freedom of manoeuvre, and the company will become just another cog in a larger machine.
It was a frayed, but the McMahon family still controlling WWE was the last link with the old world of territories. That’s been brutally snapped now. And whilst Vince will get to roam across the promotion, those who come after him won’t be so lucky. Consider Triple-H who is nominally responsible for WWE’s creative direction, he is now part of a corporate structure that once Vince finally dies will closely resembles WCW under Time Warner, with him answerable to corporate departments and remote executives. Even if he ultimately replaces Nick Khan as WWE President (which I think is likely), he would have far less freedom to do what is right for WWE’s performers or fans.
And whilst Vince wants to just continue booking Otis segments and maximising the theoretical money he will die with, it’s worth considering what Endeavor wishes to achieve from this deal. Ari Emanuel did not grow up dreaming of controlling combat sports, as has been shown with his behaviour since buying UFC. He sees combat sports as a cash cow to fund his other business interests, with WWE just another perpetual money machine from which he wants to collect from. I would strongly argue that today’s UFC is less interested in winning over new fans than Zuffa was, and the same will be true for WWE once this deal goes through.
It is easy to mock Vince McMahon or indeed Tony Khan’s obsession with the details of their programming, and fun too. But we’ve seen before what happens to pro wrestling when its ruled by absentee landlords. And the only thing delaying that future for WWE is the health of a seventy-seven year old maniac.
I think it’s became clear that NBC Universial weren’t a serious candidate, most likely due to the fact that the legal blocks to them buying out Disney’s shareholding in Hulu or merging with Warner Bros Discovery are due to lapse shortly. As when they were offered Electronic Arts, it makes sense for them to stay their hand, until they have explored those more natural tieups.
They simply don’t have the money to spend billions of dollars on one project. Yes their Public Investment Fund is huge but its dangerously overstretched trying to achieve everything MBS wants to do in entertainment, tourism, and industrial diversification. There’s a reason they bought a fixer-upper football club in Newcastle United for hundreds of millions of dollars than go and buy one of the already elite clubs for billions. And how would they extract greater value from the company than Vince McMahon could by himself, given the fiasco of LIV Golf?
The actually benefit to pro wrestlers is overstated, companies aren’t charities, and whatever they spend on providing hotels and travel, they’ll simply deduct from whatever they planned to allocate for increased salaries. Indeed, if you were a performer who was frugal on the road, or rarely travelled, then you may find that such a change in approach leaves you worse off.
That does raise the question about what Nick Khan will actually do as WWE President, especially given his unfamilarity with product. One has to assume that either he will lucratively but impotently serve out his contract as WWE President before going off to do something more rewarding, or will ultimately rise to a more senior position within TKO/Endeavor that better suits his skillset. Could easily go either way given his and Ari Emanuel’s past history.