How WWE economics could make UFC more viable for Brock Lesnar in 2015

There are plenty of reasons why it makes more sense for Brock Lesnar to stay with WWE when his current deal expires in the spring. But WWE’s change in business based on launching its own network is a game changer for Lesnar’s value, in a way few expected.

Three years ago, Brock Lesnar left the UFC to return to the pro wrestling world where he first made his name.

Regularly, questions and rumors spread regarding him returning. Lesnar had verbally agreed to return once, for a fight with Fedor Emelianenko. The feeling was the fight could be promoted as the biggest event in UFC history, and it would have likely taken place at Cowboys Stadium and drawn the largest crowd ever in the U.S. for the sport

But it fell through when Emelianenko, after his father’s death, made it clear that he would never fight again. For Lesnar, and UFC, there was no opponent who he could viably be put in with that could draw that big. He’d have to win a fight or two to justify a shot at the championship. And he was making big money in pro wrestling, so at the time, coming back wasn’t worth his while. He then signed a second deal with WWE.

Just as he did during his UFC run, where there would be constant rumors he would return to pro wrestling, the teases went the other way, usually a few months out from contract time. Lesnar is the one person who is a proven revenue generator in two very different star-driven businesses, and is the only one who can negotiate them against each other.

Still, the Lesnar-to-UFC stories didn’t seem to make sense at first. His current deal with WWE expires after WrestleMania this year, which takes place in late March. By the time he’d be ready to fight, he’d be 38 years old. Granted, Mark Hunt is in a heavyweight title match in two weeks at 40, and opponent Fabricio Werdum is only two weeks or so younger than Lesnar. But neither took three-and-a-half years off. Lesnar’s main skill set, wrestling, declines with age more than Hunt’s, which is one punch knockout power. In addition, because the rest of his fighting skill set was behind mostly due to his limited time in the sport, he was getting by on his freakish athletic ability. That also declines with age, and not be overridden by adding experience and knowledge in the sport, which allowed Randy Couture to compete at a strong level well into his 40s.

Pro wrestling, where his star power can be protected by scripting, is, all things being equal, the right place for him at this stage of his life, particularly since his contract only requires three matches and about a dozen television show appearances per year.

But it’s that deal that could be his undoing come early next year.

The WWE in 2015 is in a very different place than it was in during 2011, when Lesnar was offered a reported $5 million per year to return on a limited schedule. That company turned a $24 million profit in 2011. Today’s company, almost entirely due to the gamble of starting its own network, which has nearly killed its pay-per-view business, as well as cut down on its own web site income significantly, is, based on current projections, looking at $40 million in losses this year.

While next year is projected as being far better, that is largely due to plans for extreme cost cutting. Roughly $15 million to $20 million of cost cutting was announced on Thursday at its quarterly investment call where the almost shocking lack of growth in its network numbers were the main topic of discussion. That’s on top of another $20 million in cost cutting that was announced three months ago. Both measures needed to be done both for the immediate bottom line and to avert a nosedive of the company’s stock.

Now the question becomes if Lesnar is worth his huge appearance money. Lesnar’s debut on pay-per-view in 2012, at a show called Extreme Rules, generated $1.1 million more revenue than the year before based on pay-per-view alone. If you factor in ticket sales for shows he was advertised on, and his merchandise sales, at best it was a wash, but the increase did help the stock price, as Wall Street felt WWE was stagnant, and shows with Lesnar and Dwayne “The Rock” Johnson greatly increasing pay-per-view numbers, even at a heavy cost, made it appear to outsiders that pay-per-view was up and the company was growing.

His second appearance generated $1.6 million more than the year before, and all things considered, paid for itself. His third appearance, at the 2013 WrestleMania, was down, but one could argue it would have been down far more without him, since it was the third straight Johnson-led WrestleMania and the novelty of a major movie star wrestling was no longer there.

Then things changed. WWE gutted its pay-per-view business to move to a monthly network subscription service, which is virtually the entire reason for the difference in 2011 profits and 2014 losses, and 2015 cost cutting. While long-term, it may prove to have been the right move, thus far it’s been an economic disaster, and that’s where Lesnar’s situation fits in. 

The WWE Network had 699,752 subscribers on June 30 of this year. On September 30, following Lesnar’s appearances on pay-per-views in both August and September, strategically placed because of expectations that people who had subscribed for six months when the service started were coming due, the total subscribers were 702,883 in the U.S. and 28,476 in 170 countries where the service was launched on Aug. 12. Keep in mind the foreign number is actually far larger, as many people from outside the U.S. subscribed from day one using foreign addresses.

Perhaps that number would have nosedived during the quarter when so many renewals came due, had he not appeared on those shows. But to justify his price tag, he needs to bring in roughly 188,000 new network customers for every one of his matches. Unless the next quarter numbers collapse, since his next match is in late January, the economics have changed to where he’s not worth anywhere near what he’s used to earning. In three months, that question will be answered, several months before this current deal comes due.

Worse, the creation of the network has killed any affect he’d have on pay-per-view numbers. In July, the last show WWE did without him, they did 31,000 U.S. buys on pay-per-view. While they did 63,000 in August with him, that was SummerSlam, a show that would be expected to be way up, the September show he headlined was only 30,000.

Last week, Dana White talked about Lesnar on the UFC.com site,

“I have a great relationship with Brock, we talk all the time,” he said. “I don’t know, we’ll see. If he wants to fight, he knows my number. It’s pretty amazing what he did and accomplished here while having diverticulitis. It would be interesting to see a 100 percent healthy Brock Lesnar compete.”

The problem is, even if he is 100 percent healthy today = and keep in mind that was the claim when he fought Alistair Overeem, a first round TKO loss, in his final UFC fight at the end of 2011 – the age and time off is a huge issue.

From a business standpoint, Lesnar was a huge draw for UFC. UFC is struggling on pay-per-view this year due to a ridiculous amount of injuries and loss of people like Georges St-Pierre, Wanderlei Silva and Chael Sonnen for a variety of reasons. The Lesnar who showed up on their doorstep in 2007 asking for a chance, and became the company’s biggest drawing card for the next three years, would be a godsend.

But it’s a different world than it was in 2008. The novelty of a pro wrestling star in UFC has run its course and will not be a draw on its own. Lesnar isn’t going to be nearly as freakishly fast as he was then, nor as good a wrestler. Perhaps Lesnar can draw big the first time coming back, based on curiosity. Without question, he would draw big if he could get into championship contention. But even in a heavyweight division that still has less depth than most, it would be a surprise if Lesnar could return and thrive with the top tier.

Would he be worth more money to UFC than WWE in April of next year? Short-term, it’s almost a sure thing. And that’s why the plight of WWE’s business now makes it far more of an economic reality that Lesnar could return.

There are plenty of reasons why it makes more sense for Brock Lesnar to stay with WWE when his current deal expires in the spring. But WWE’s change in business based on launching its own network is a game changer for Lesnar’s value, in a way few expected.

Three years ago, Brock Lesnar left the UFC to return to the pro wrestling world where he first made his name.

Regularly, questions and rumors spread regarding him returning. Lesnar had verbally agreed to return once, for a fight with Fedor Emelianenko. The feeling was the fight could be promoted as the biggest event in UFC history, and it would have likely taken place at Cowboys Stadium and drawn the largest crowd ever in the U.S. for the sport

But it fell through when Emelianenko, after his father’s death, made it clear that he would never fight again. For Lesnar, and UFC, there was no opponent who he could viably be put in with that could draw that big. He’d have to win a fight or two to justify a shot at the championship. And he was making big money in pro wrestling, so at the time, coming back wasn’t worth his while. He then signed a second deal with WWE.

Just as he did during his UFC run, where there would be constant rumors he would return to pro wrestling, the teases went the other way, usually a few months out from contract time. Lesnar is the one person who is a proven revenue generator in two very different star-driven businesses, and is the only one who can negotiate them against each other.

Still, the Lesnar-to-UFC stories didn’t seem to make sense at first. His current deal with WWE expires after WrestleMania this year, which takes place in late March. By the time he’d be ready to fight, he’d be 38 years old. Granted, Mark Hunt is in a heavyweight title match in two weeks at 40, and opponent Fabricio Werdum is only two weeks or so younger than Lesnar. But neither took three-and-a-half years off. Lesnar’s main skill set, wrestling, declines with age more than Hunt’s, which is one punch knockout power. In addition, because the rest of his fighting skill set was behind mostly due to his limited time in the sport, he was getting by on his freakish athletic ability. That also declines with age, and not be overridden by adding experience and knowledge in the sport, which allowed Randy Couture to compete at a strong level well into his 40s.

Pro wrestling, where his star power can be protected by scripting, is, all things being equal, the right place for him at this stage of his life, particularly since his contract only requires three matches and about a dozen television show appearances per year.

But it’s that deal that could be his undoing come early next year.

The WWE in 2015 is in a very different place than it was in during 2011, when Lesnar was offered a reported $5 million per year to return on a limited schedule. That company turned a $24 million profit in 2011. Today’s company, almost entirely due to the gamble of starting its own network, which has nearly killed its pay-per-view business, as well as cut down on its own web site income significantly, is, based on current projections, looking at $40 million in losses this year.

While next year is projected as being far better, that is largely due to plans for extreme cost cutting. Roughly $15 million to $20 million of cost cutting was announced on Thursday at its quarterly investment call where the almost shocking lack of growth in its network numbers were the main topic of discussion. That’s on top of another $20 million in cost cutting that was announced three months ago. Both measures needed to be done both for the immediate bottom line and to avert a nosedive of the company’s stock.

Now the question becomes if Lesnar is worth his huge appearance money. Lesnar’s debut on pay-per-view in 2012, at a show called Extreme Rules, generated $1.1 million more revenue than the year before based on pay-per-view alone. If you factor in ticket sales for shows he was advertised on, and his merchandise sales, at best it was a wash, but the increase did help the stock price, as Wall Street felt WWE was stagnant, and shows with Lesnar and Dwayne “The Rock” Johnson greatly increasing pay-per-view numbers, even at a heavy cost, made it appear to outsiders that pay-per-view was up and the company was growing.

His second appearance generated $1.6 million more than the year before, and all things considered, paid for itself. His third appearance, at the 2013 WrestleMania, was down, but one could argue it would have been down far more without him, since it was the third straight Johnson-led WrestleMania and the novelty of a major movie star wrestling was no longer there.

Then things changed. WWE gutted its pay-per-view business to move to a monthly network subscription service, which is virtually the entire reason for the difference in 2011 profits and 2014 losses, and 2015 cost cutting. While long-term, it may prove to have been the right move, thus far it’s been an economic disaster, and that’s where Lesnar’s situation fits in. 

The WWE Network had 699,752 subscribers on June 30 of this year. On September 30, following Lesnar’s appearances on pay-per-views in both August and September, strategically placed because of expectations that people who had subscribed for six months when the service started were coming due, the total subscribers were 702,883 in the U.S. and 28,476 in 170 countries where the service was launched on Aug. 12. Keep in mind the foreign number is actually far larger, as many people from outside the U.S. subscribed from day one using foreign addresses.

Perhaps that number would have nosedived during the quarter when so many renewals came due, had he not appeared on those shows. But to justify his price tag, he needs to bring in roughly 188,000 new network customers for every one of his matches. Unless the next quarter numbers collapse, since his next match is in late January, the economics have changed to where he’s not worth anywhere near what he’s used to earning. In three months, that question will be answered, several months before this current deal comes due.

Worse, the creation of the network has killed any affect he’d have on pay-per-view numbers. In July, the last show WWE did without him, they did 31,000 U.S. buys on pay-per-view. While they did 63,000 in August with him, that was SummerSlam, a show that would be expected to be way up, the September show he headlined was only 30,000.

Last week, Dana White talked about Lesnar on the UFC.com site,

“I have a great relationship with Brock, we talk all the time,” he said. “I don’t know, we’ll see. If he wants to fight, he knows my number. It’s pretty amazing what he did and accomplished here while having diverticulitis. It would be interesting to see a 100 percent healthy Brock Lesnar compete.”

The problem is, even if he is 100 percent healthy today = and keep in mind that was the claim when he fought Alistair Overeem, a first round TKO loss, in his final UFC fight at the end of 2011 – the age and time off is a huge issue.

From a business standpoint, Lesnar was a huge draw for UFC. UFC is struggling on pay-per-view this year due to a ridiculous amount of injuries and loss of people like Georges St-Pierre, Wanderlei Silva and Chael Sonnen for a variety of reasons. The Lesnar who showed up on their doorstep in 2007 asking for a chance, and became the company’s biggest drawing card for the next three years, would be a godsend.

But it’s a different world than it was in 2008. The novelty of a pro wrestling star in UFC has run its course and will not be a draw on its own. Lesnar isn’t going to be nearly as freakishly fast as he was then, nor as good a wrestler. Perhaps Lesnar can draw big the first time coming back, based on curiosity. Without question, he would draw big if he could get into championship contention. But even in a heavyweight division that still has less depth than most, it would be a surprise if Lesnar could return and thrive with the top tier.

Would he be worth more money to UFC than WWE in April of next year? Short-term, it’s almost a sure thing. And that’s why the plight of WWE’s business now makes it far more of an economic reality that Lesnar could return.