World Wrestling Entertainment, Inc. (WWE), The Madison Square Garden Co (MSG): WrestleMania’s Grapple with Growth

The much ballyhooed 29th edition of WrestleMania, World Wrestling Entertainment, Inc. (NYSE:WWE)’s flagship event, reels off April 7, with its progenitor pulling all stops to elevate anew its ranking on Wall Street. The company, which also maintains a movie-making segment, is refocusing on what it does best—developing, producing, and marketing pro-wrestling events.

WWE indicated its renewed thrust at the end of February, when it reported improved 2012 fourth quarter results. The company revealed a three-year business plan with the potential of “doubling or tripling” World Wrestling Entertainment, Inc. (NYSE:WWE)’s $77 million in 2012 EBITDA by 2015. The transformation of its business, the company said, will be based on the global appeal of WWE’s powerful brands, and that marketing will be one of the foundations of the company’s future growth.

Intensified efforts to build media values around events

The reinvigorated WWE brand-building is evident during this year’s “WrestleMania Week” leading up to the company’s April 7 extravaganza at the MetLife Stadium in East Rutherford, N.J. Prior to the event, certain World Wrestling Entertainment, Inc. (NYSE:WWE) star wrestlers, along with Hollywood celebrities and other professional athletes, will participate in an auction/fundraiser for Hurricane Sandy relief.

A greater media presence is likely to be found at the induction ceremonies for Bruno Sammartino, who’s entering the WWE Hall of Fame. With a record-setting eight-year reign as WWE champion, Sammartino will be inducted by his longtime pal and Hollywood and bodybuilding icon, former California Gov. Arnold Schwarzenegger.

A brewing sideshow in the Garden

Fittingly enough for added media hype, the World Wrestling Entertainment, Inc. (NYSE:WWE) Hall of Fame induction will be held at the The Madison Square Garden Co (NASDAQ:MSG) sports arena, which hosted the WrestleMania inaugurals in 1985 and spread the mat again in 1994 and 2004. Sammartino, for his part, has reportedly sold out events at the Garden 187 times.

Such nostalgic vignettes and other historical qualities at the Garden, however, seem trivial for the Regional Plan Association and the Municipal Art Society of New York. In March, these two leading city-planning groups launched a joint advocacy campaign to relocate the Garden after its land-use permit expired in January.

Expansion of Pennsylvania Station, which is beneath the arena, is the main rationale for the move. The Madison Square Garden Co (NASDAQ:MSG) has already objected to the plan, citing economic contributions and the arena’s 130-year history as being integral to New York City. Plus, a three-year renovation costing nearly $1 billion is also under way at the Garden, the company added.

This brewing tempest in a teapot fortunately, for the moment, spares Madison Square Garden’s other cash crops, such as marquee teams New York Knicks and New York Rangers. With the company reporting strong fiscal 2013 second quarter results and the NBA and NHL now humming at the tills, The Madison Square Garden Co (NASDAQ:MSG)’s scorecard still tallies a buy among several stock analysts.

Raking it at the tills and PPV

The brewing Garden controversy aside, “WrestleMania Week” indeed manifests the strength and potential of the WWE brands. Tickets to the Sammartino induction have become one of the rarest commodities on the planet, wags say. Record live attendance valued at $12 million and pay-per-view orders worth more than $1 million are also forecast for the MetLife main event.

Local public transportation utility NJ Transit seeks to cash in on the expected mammoth turnout with a special transit service to various WrestleMania events. Besides the April 7 championship card, the week-long WWE hoopla ranges from an art exhibit displaying the works of WWE divas, superstars, and legends to an interactive fan event, WrestleMania Axxess.

Digital platforms as portable growth sources

Given its huge U.S. and global fan base, WWE is also seeking future growth by broadening the portability of its product brands. Toward this pursuit, the company is banking on its strong online presence to use more gamification, or gaming techniques, with its content and further develop its digital products, such as mobile apps, where growth momentum in the estimated $67 billion video game industry has shifted.

There’s wisdom in the pursuit of this path. The World Wrestling Entertainment, Inc. (NYSE:WWE) pro wrestling video game series, now playable in various consoles and mobile devices, has shown market durability after 14 editions. One of its most successful iterations was the 2009 edition, which sold 47 million copies and ranks among the best-selling video game franchises.

Strength in new tag teammate

What is also good to know is that the 2K Sports unit of Take-Two Interactive Software, Inc. (NASDAQ:TTWO) has acquired  the publishing rights for the WWE game series from the former publisher, THQ, which went bankrupt.

World Wrestling Entertainment, Inc. (NYSE:WWE) has a much stronger tag teammate in Take-Two, whose properties are regulars on the hot list of video gamers, with the company spending bundles in game development and advertising.

Take-Two spent some $200 million, for instance, for its much-anticipated “BioShock Infinite” offering. Moreover, Take-Two is on solid financial footing upon reporting $416 million in revenue and $0.59 EPS in the December 2012 quarter, results that were ahead of most analysts’ estimates.

In wrapping things up, however, don’t expect World Wrestling Entertainment to deliver results as robust as Take-Two’s anytime soon. The company, for one, is still trying to earn more from its TV programming, options that include introducing an exclusive broadcast network,  which will monopolize resources in the interim. At best, World Wrestling Entertainment is a long-term play with a favorable three-year profit margin averaging nearly 9%, per analysts’ estimates.

The article WrestleMania’s Grapple with Growth originally appeared on Fool.com and is written by Arturo Cuevas.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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