Mark Shapiro, president and COO of TKO Group Holdings, treated his employees, shareholders and fans of his company’s two sports leagues – World Wrestling Entertainment and Ultimate Fighting Championship – to rare candor and a refreshing lack of euphemism during a teleconference with Goldman Sachs on Wednesday.
CEOs, executives, hedge fund pirates and private equity mutineers rarely find agreement with the truth, but Shapiro was in friendly company, speaking to likeminded peers at Goldman Sachs and those listening, just weeks after TKO secured multi-billion dollar deals with Paramount and ESPN for UFC’s entire rights package and for WWE’s PLEs, which will be part of ESPN’s recently released direct-to-consumer app.
Shapiro’s voice was bolstered with pride when he talked about plans for UFC Fight Night, and weekly WWE shows, to demand site fees from cities, like the company does for major shows.
“If you’re a St. Louis or a Des Moines and we’ve sold out both arenas and it’s broke records, you’re going to have to pay for us to come back to your town,” Shapiro said. “Or else we are taking it to another city.”
Sports leagues started doing this years ago, offering Super Bowls, March Madness, All-Star Weekends to the highest bidders. UFC and WWE followed. If you wanted a numbered PPV in your town, you had to get out the public money. If you wanted Royal Rumble or WrestleMania, some local “sports and event” organization signs away taxpayer dollars in hopes the cost of the site fees is offset by the fans coming to town and boosting the local economy.
Since TKO bought WWE, ticket prices exploded, along with site fees. If the local municipality is paying for the event, at least the local fans should get some of that money back in cheaper tickets, but that’s not the case. Thanks to new algorithms pushing the costs into the stratosphere, it has never been more expensive to attend anything. Even Vince McMahon, who was cutthroat as one could get, has nothing on Shapiro. TKO’s president told Goldman listeners McMahon kept ticket prices low in order to allow working and middle-class fans the ability to afford attending shows. Shapiro said that thinking is gone in the TKO-Nick Khan-Triple H era. Ticket prices are as high as they can place them.
TKO’s stock price nearly hit $200 a share today, doubling in around a year. They have more deals than a corner used car lot and billions in new streaming contracts across the industry in their two-front effort to monopolize the wrestling business and to imitate the NFL’s domination across media.
What more could TKO and Shapiro could ask for? Who cares.
Getting information on site fees paid by cities to leagues and companies is nearly impossible. The companies cite court precedent depending on the state, with a persistent argument that the public knowing how their tax dollars are being paid to TKO, NFL or other leagues puts those billion-dollar, bigger-than-God leagues and companies at a competitive disadvantage.
Shapiro said the new deals would likely lead to more money for some of TKO’s top stars. Shapiro mentioned Jon Jones and Conor McGregor, fighters who had received more than the usual take in UFC due to their drawing power. This would be the case for other fighters and wrestlers who showed their star-worthiness. Who knows if anything were shared if All-Elite Wrestling wasn’t around. The remarks didn’t sound promising for the two rosters overall.
For fans, it’s become much more expensive. Paramount will likely go through several rounds of price hikes. Coming out of the Skydance merger, new Paramount head David Ellison spent as much on UFC has he did on buying the network. That doesn’t include other deals with studios, Bari Weiss’s The Free Press which is rumored to occur soon and Activision for the rights for films based on the Call of Duty video games. There’s also the $16 million the company paid to President Donald Trump over an edited CBS interview with Kamala Harris that wasn’t actually edited and never went to court.
Watching Raw means a Netflix subscription. Watching NXT and Smackdown requires a cable provider CW and USA Network or a TV antenna for CW. ESPN DTC is $29.99 a month unless your cable provider has an early deal through carriage fees to allow subscribers to have access. One Twitter post estimated a monthly cost of $94 a month for WWE fans who want access to all its shows and products.
Nothing TKO is doing is anything that wasn’t done by companies, hedge funds or private equity firms years prior. General Electric and its legendary head Jack Welch pioneered this through the 80s and 90s through his retirement.
The idea is to not worry about making your customers happy (the fans), but making shareholders happy ($198 at close). During the 1970s, economist Milton Friedman popularized shareholder maximization theory, otherwise known as shareholder primacy. Friedman said companies had only one fiduciary duty – to maximize return to shareholders.
Telling the people who owned stock in the company that corporate focus should no longer be on customers, but on making them richer, unsurprisingly made the theory popular on Wall Street and in boardrooms. Within a few years, shareholder maximization was all the rage.
What’s this mean for WWE fans? Prepare to ride the snake. While McMahon always considered himself of a corporate raider in the guise of a Donald Trump or Gordon Gekko, he was the sole owner of his company and was by far the deciding shareholder when the company went public in the early 2000s. TKO has no such limitations in mind. McMahon would push deals or massive profit, even at the risk of not capably satisfying their partners (think Fox on Smackdown).
Maybe TKO’s stock rollercoaster will keep WWE and UFC honest about putting out a compelling product. Maybe that’s a good enough trade for having to pick and choose what providers you subscribe because that WWE Network and Peacock pricing is long gone. Maybe it won’t. The reality is UFC and WWE’s fandom is at the whim of Friedman.
How should that make fans feel? When General Electric giant Jack Welch retired, he gave an interview reflecting on his decision to push shareholder primacy all those years. In 2009, he called Friedman’s theory, “the dumbest idea in the world.”