AS I SEE IT - 10/20/2000
by: Bob Magee

In what has been one of the wildest two month periods for the business end of the wrestling industry... history is finally about to be made.

WCW as we know it today will soon be no more.

Two weeks ago, it appeared that the buyer was the entertainment conglomerate Mandalay Sports Entertainment.

Now, of all companies...World Wrestling Federation Entertainment may well be the buyer for the struggling World Championship Wrestling, and for all intents and purposes, have won the "wrestling wars" (as we now know them) once and for all.

The opportunity for World Wrestling Federation Entertainment to even contemplate this move came out of a lawsuit filed by the WWF in 1996 of in response to the "Outsiders angle" where WCW made it appear that Scott Hall and Kevin Nash were still working for the WWF and "invading WCW". One of the stipulations involved in the settlement of this lawsuit gave the WWF a "first right of refusal" if WCW ever went up for sale. That means that if WCW was ever put up for sale, the WWF would have an opportunity to match any offer made for it. Given the business environment of that time, no one ever thought this would be a realistic possibility.

But with the AOL/Time-Warner merger and the sequence of business decisions outlined in the AS I SEE IT column of two weeks ago.... beginning with the Time Warner purchase of Turner Broadcasting in 1999, then this year's merger of AOL with Time Warner.... we now are realistically at a point where Vince McMahon may very well soon be the owner of WCW.

However, before you start thinking of dream matches like Austin-Goldberg and HHH-Ric Flair, there may well yet be some legal stumbling blocks thrown in the way of this takeover; not to mention the unbelievable number of logistical items to be worked out in terms of contracts, creative control, television programming, and the many contracts signed by each currently existing company with vendor companies for advertising, and outside revenue streams.

First, at least one rejected suitor may seek legal action against Time Warner for not allowing them to bid for the wrestling company. Some reports have indicated that those behind the Japanese-based martial arts company K-1 might be this unnamed company, which may seek to block the sale under the grounds that those brokering the sale are "violating their responsibilities to shareholders of Time-Warner by not considering all offers [for the company]".

Then, there is a not-so-small matter of anti-trust laws to deal with.

One possible lawsuit attempting to block the sale was reported by 1Wrestling.com, which has stated that WCW employees and wrestlers have asked a major law firm about the possibility of filing legal action to block the proposed WWF buyout of WCW on anti-trust grounds.

This wouldn't be the first instance of anti-trust questions becoming involved in wrestling. In 1948 when the NWA was formed, it was literally a "National" Wrestling Alliance, controlling most wrestling within the boundaries of the United States. The NWA had to be formed into regional territories to get around to avoid legal challenges under these laws.

In terms of today's regulatory landscape, antitrust and trade regulation attorney Jay Evans told the Pro Wrestling Torch about these issues concerning anti-trust laws as regards a possible merger:

"Natural monopolies as the previous report describes are not illegal, that is true. The antitrust laws go further, however. When a competitor is acquired in a merger, Section 7 of the Clayton Antitrust Act kicks in and there are serious consequences. If the acquisition involves companies over a certain dollar value (which both WCW and WWF clearly exceed), a filing must be made to both the Federal Trade Commission and the Department of Justice Antitrust Division explaining the reasoning behind the merger before the merger is finalized

Those agencies will then perform a market analysis to figure out whether the merger might 'substantially lessen competition.' Regardless of the motives, if a merger 'substantially lessens competition' it will be barred.

The market analysis will include a definition of the relevant market. The big question here is whether the regional promotions are included, whether Japanese and Mexican promotions are included, or whether the market would only consist of American companies with national television exposure.

Please understand that there is a real danger that the market could be as small as ECW, WCW, and WWF, or even WWF and WCW alone. Without too much detail, a reduction form 3 players to 2 or from 2 to 1 will almost certainly be challenged by the federal agencies. One possible defense is something called the 'failing firm' defense. While I don't know definitively if it would apply here, WCW's serious financial problems certainly would qualify it as failing."

I know many readers have been concerned that this column seems to focus too much on things outside the wrestling ring with too much focus on the issues surrounding the PTC. Some of you won't be thrilled about what I'll likely be discussing in this column in the coming weeks (as well as every other wrestling writer, for that matter) if this merger takes place. We'll likely be spending less time talking about super-matches than we will talking about legal and business matters.

But the fact of the matter is that to talk about the wrestling industry in an adult or even serious manner means we have to talk about issues like censorship and the PTC, talk about stock prices since the WWF's IPO, and talk about Nielsen ratings (as we all pretty much have for the last two years, anyhow).

Pretty soon, to have a relatively successful wrestling website won't just be a matter of who shows the most pictures of naked women (or who promises them, anyhow...) or who writes fake teasers. God forbid, we might actually have to write about wrestling like semi-literate people who do a bit of research on what we write.

But whether as writer or as a wrestling fan, I have concerns about what I think we're about to see with this merger, if it occurs.

First, consider the inevitable scenarios for WWF staff to revenge personal wrongs that have occurred over the years, such as Jim Ross with Tony Schiavone, Vince Russo, and Ed Ferrera. While there's a part of me on a personal level that wouldn't mind seeing some paybacks (particularly for the repulsive "Oklahoma" gimmick), one has to ask if WWF management will be disciplined enough to do the right thing for business first, and collect paybacks second. This doesn't even consider the the various real-life issues between workers of the two companies.

Second is the widely rumored potential slaughter of the WCW offices. It's been reported that the WWF wants to only be obligated to retain no more than five percent of the current WCW office staff. While "putting your own people in charge" is hardly unique within business after a takeover or merger, it's hardly a way for WWFE to avoid potential legal troubles.

With the volatility of its stocks right now, and with investors already questioning the WWF's involvement in the XFL...the last thing WWFE, Inc. needs right now is to be confronted with tons of wrongful dismissal and/or discrimination lawsuits resulting from a wholesale layoff within the WCW office staff.

Those investors will already be questioning the purchase of a company like WCW, which is on pace to lose $80 million this year....the reason it was being sold in the first place.

Third is the question of overexpansion. Does Vince McMahon now have too much on his plate?

It's certainly true that the WWF has had problems in the past when they have expanded in business projects outside of wrestling. Three of these were the Sugar Ray Leonard-Donny Lelond PPV boxing match, the World Bodybuilding Federation, and the ICOPRO steroid-replacement dietary "supplement".

McMahon does seem to have learned from these three failed projects. A crucial difference this time is that McMahon was smart enough to bring in partners like NBC to help him get the XFL afloat.

But if these three significant issues can somehow be avoided or minimized, there is certainly long-term potential for WWFE, Inc. to make tons of money from this purchase, and to create a very different entertaining product.

Whether or not these concerns can be dealt with remains to be seen.

The one thing that many people are worrying about that I don't worry about is that Vince McMahon will become complacent and that the quality of WWF programming will suddenly drop since there's "no competition".

First, any publicly held company will be judged by its investors by stock prices...which in turn will be driven by profits...which are driven by everything from house show attendance to advertising revenue to merchandising revenues to PPV buyrates to outside revenue streams.

It's not in Vince McMahon's best interest to become complacent. Instead, it's in his business interest to look for more ways to make a dollar for his company and his stockholders, and insure maximum profitability. Two possibilities for that include:

Merchandising WCW has been historically been incredibly weak in merchandising for years. The WWF has done a tremendous job since the Hulk Hogan days in merchandising their characters and their overall product in dozens of different ways. McMahon largely succeeded in the 1980s, and has done so today owing to his willingness to treat sports entertainment as a business, not "the business". As a result, he understood that different divisions of his business all had to interact with and benefit from the others.

WCW didn't do this. As far back as the Bill Watts regime, each generation of new management within WCW pointed this out. But the Turner empire never utilized their various forms of potential media synergy. Turner management always treated the fact that they owned a wrestling company as their "dirty little secret". That wouldn't happen under McMahon-owned WCW.

Online media WCW initially had a far better Internet presence than the WWF did. But in the last two years, when Vince McMahon finally decided to use the Internet to his advantage; the WWF's New Media Division came on with a vengeance, to the point where WWF.com has consistently been in the top 10 of all search terms on Lycos search engines, and is one of AOL's 15 most frequently visited sites.

Further, they've used their online presence to communicate storylines, sell merchandise and advertising, and to advertise their pay-per-view and televised entertainment product.

WCW hasn't done this in an effective way. There is little question that a McMahon-owned WCW would certainly be taken in that direction.


But even with being able to think about all the business implications of a WCW-WWF merger....as a wrestling fan, I have to shake my head.

It doesn't seem that long ago that you could easily divide wrestling fans with one certain question...

Hogan or Flair?

For years, those two names represented for wrestling fans, a choice between what fans saw as "the circus" of the WWF and the "real wrestling" of WCW...the difference between cartoon-like characters and a more athletic product. You could get real arguments going on this one between wrestling fans.

That clear distinction began to change on the day in 1988 when Arn Anderson and Tully Blanchard came to the WWF. Arn Anderson's book stated that when Anderson asked why he wanted a tag team like he and Tully, that McMahon answered "you give me legitimacy".

It changed forever in the summer of 1991 when we heard something we never thought we'd hear: Ric Flair was coming to the WWF. I can remember to this day Bobby Heenan, with the classic NWA/WCW belt in his hands... doing the promo to introduce "the real World Champion.... Ric Flair".

Philadelphia always was the home of heel fans that appreciated our "old school heroes" from the NWA. In Ric Flair's debut at a matinee show at the Philadelphia Spectrum as part of a tag match with Sid Vicious against Roddy Piper and Hulk Hogan, the majority of the crowd popped for Hogan, but more than anyone expected popped for Flair.

After the introductions, but before the match began, two friends of mine who somehow got ringside seats had signs for Flair and Piper saying something like "Old School: Flair and Piper". Flair grinned from ringside and yelled audibly to Piper: "Look..". Piper smirked in response. Hogan had a basically clueless look on his face and Sid just sort of stood there.

WCW still had a far more wrestling-based product until Hulk Hogan's entrance into the company in 1994. But the change had begun. The roles slowly reversed, after one brief swing back by WCW in 1996 with the infusion of New Japan and AAA talent like Eddie Guerrero, Dean Malenko, Chris Benoit, Rey Misterio Jr., Juventud Guerrera and Psicosis that had been working for ECW.

Finally, by 1998 and 1999, the WWF was known as the company with the wrestlers, even if their matches were shorter than we liked, and even if they were mixed in part of the WWF soap opera style. Last year's entrance of Chris Jericho and the New Japan Three (along with Perry Saturn) as the "Radicals" cemented that sea change.

Despite the events that (now) obviously led to what is about to happen, this story is something that we never could have forecast a year ago.

With this potential merger, and the fallout that will no doubt result, God only knows how different the professional wrestling industry that we watch and endlessly talk about will be at this time next year.

Until next time...

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