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In the jargon of professional wrestling, "heel heat" is the negative reaction of fans to a villain or other unpopular artist. These days, the best wrestling company WWE (NYSE: WWE) draws a lot of heat in business by continuing with Crown Jewel, an event planned in Saudi Arabia.
The moment could not be worse: the event comes shortly after the journalist Jamal Khashoggi was killed at the Saudi consulate in Istanbul, causing outrage from the international community. Let's explore the decision to hold the event as planned and what it might mean for the company.
Source of the image: WWE
Fight the controversy
Earlier this year, WWE signed an agreement with the Saudi General Sports Authority to hold a series of events in the country for 10 years. Neither of the two parties revealed the financial data of the agreement. Media reports estimated that this amounted to approximately $ 450 million in total for WWE. Crown Jewel will be the second event in the series.
The first, The Greatest Royal Rumble, went well. The only real controversy around this event is its total lack of matches with wrestlers.
But it was before the Khashoggi incident. After that, WWE was sharply criticized for its plan to hold Crown Jewel. Veteran star fighter John Cena is absent from the competition (he apparently refused to participate), forcing WWE to replace him with Bobby Lashley. Meanwhile, nothing is okay. Daniel Bryan, the biggest draw, was also a non-runner.
Bad company
WWE spends a lot of effort and, we can assume, improving its image as a good guy society. He is very active in the field of charity and emphasizes that his wrestlers are only artists who do not really try to destroy themselves. He has effectively positioned his entertainment brand as a semi-clean entertainment for the whole family.
Doing business with an allegedly murderous scheme may break that image and distract fans or even investors.
Several months ago, the company was really efficient for its shareholders. A pair of successful TV affairs signed with 21st Century Fox (NASDAQ: FOX) (NASDAQ: FOXA) and Comcast (NASDAQ: CMCSA)makes the stock a darling market. This was reinforced by the results of the second quarter.
But the recently announced third quarter of the WWE has been weaker than expected in several respects. This, combined with a general decline in stock markets, dampened enthusiasm for stocks. These days, the company could really use good news to boost the morale and attitude of the public.
The decision to go ahead with Crown Jewel has not resulted in that, nor has the company's latest statement on it. In part, it says that "[s]Like other US companies that plan to continue operations in Saudi Arabia, the company has decided to meet its contractual obligations to the General Sports Authority and to organize the event. "
In other words, it's that tired old rationale of "they do it, so it's good if we do it too".
That's to be a good, smart company.
What does it mean?
WWE is well aware that its decision is not popular. At the recent all-female Evolution-only show, the crowd booed at a Crown Jewel video promo; it was closed abruptly.
But in the end, I do not think that the controversy and the ugly way in which society deals with it will split the stocks. Investors are more concerned about financial and operational performance, as evidenced by the sharp rise in share prices after the announcement of the Fox and Comcast agreements, as well as the decline in earnings after the third quarter.
Be that as it may, it's never a good sign when management makes a bad decision, alienating some of its fans and talent, and then weakly tries to rationalize and conceal it. The way this situation is managed is worrying. Hopefully the other movements of society will be considered more wisely.
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