2HRS2GO: IPO grapples with the Web
IPO analysts were wrong in thinking the stock market would go hippie.
The disappointing debut of 1-800-Flowers.com shouldn't have been too surprising. The company isn't so much a Web winner as it is an FTD wannabe. Even were 1-800-Flowers entirely online, it's not like the Internet offers much advantage over the telephone when it comes to ordering floral arrangements.
If you're going go public with a dot-com-that-isn't, at least appeal to the white collar machismo affected by many stock buyers, both in the hallowed halls of Wall Street and among the PC clusters populated by swaggering daytraders. Give us a combination of the Web and untamed, naked, overblown aggression.
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Give us the World Wrestling Federation.
For months, the WWF's IPO filing has been expected. It finally came yesterday, as the largest purveyor of real-life cartoons in the United States submitted a prospectus to the U.S. Securities and Exchange Commission. Before you dismiss the WWF's offering, ponder these June figures:
-- 100 million pageviews for WWF.com.
-- 489,000 registered users
-- 1.581 million unique visitors, according to Media Metrix.
-- Fourth ranked sports only website, behind CBS Sportsline, ESPN and CNN/SI.
-- Third ranked news and information site for males 12- to 17-years-old.
Sounds like a bona fide Web play here.
Ridiculous? Of course -- this is pro wrestling, after all. But faux fighting is no more ridiculous than putting an Internet facade on a company with "1-800" in its name. Besides, silliness doesn't preclude profit.
Technology philosophers paint the Web as a medium of enlightenment through information distribution; one pundit in Wired magazine went so far as to say the Internet would deliver world peace. Wow! Last time that happened it was preceded by 40 days and 40 nights of rain.
The e-business crowd views the Web as the ultimate tool of market efficiency. IBM and its ilk boil the Internet down to exchanges of goods and services.
Both perspectives provide a Utopian view of the Web. It will revitalize society.
Maybe someday. But for now, the most popular uses of the Internet involve pop culture in all its forms, including pornography, gambling, sports and sports entertainment, a.k.a., wrestling.
Arguably, the Internet helped revive the industry from its doldrums of the early ྖs, when no one seemed to care. Now a thriving Web community abounds with wrestling news sites; even a respected outfit like Sportsline USA (Nasdaq: SPLN) has jumped in, as a backer for the Wrestleline website.
("How will the WWF IPO affect wrestling fans?" asks one of Wrestleline's articles. Probably not much, other than taking the Oooh-I'm-So-Evil character of WWF owner Vince McMahon off TV for awhile because of the IPO quiet period).
Vertical plays seem to be the latest investor rage, and pro wrestling happens to be one vertical market with an enormous amount of untapped potential online. The World Wrestling Federation's still nascent website registered June merchandise sales of $207,000. Assuming June is an average month, that yields an annual rate of almost $2.5 million. Compare that to the top line of a company such as, say, WebMD, which is about to be acquired for several billion dollars despite seeing less revenue last year than a WWF wrestler earns in six months. Or even a single quarter, in the case of McMahon's top stars.
The WWF is well on its way to achieving the nebulous convergence dream espoused by other companies. Pro wrestling justifiably can be called sleazy, possibly corrupt, and certainly unkind to its talent, but the industry is a media mogul's dream. McMahon's operation includes the top ranked cable TV show in the United States, two magazines with a combined circulation pushing 6 million, and of course, the popular website. Pay-per-view events are not only televised, but also webcast for a much cheaper price (not to mention quality ranging from horrible to merely bad).
McMahon may act like a buffoon on TV, but he runs an efficient operation, at least for the entertainment field. The former Titan Sports Inc. earned $56 million on revenue of $251 million in fiscal 1999, although if the company were publicly traded, taxes would have cut that profit down to $33.2 million. Either way, most e-commerce companies would commit patricide for that kind of net margin.
Not that everything shines in the WWF. Like any entertainment field, pro wrestling has its boom and bust cycles; the WWF lost money as recently as fiscal 1997. And as with many entertainment companies, the WWF's business can easily slide if prominent on-air talent -- including McMahon and his son Shane, whose day job involves overseeing the WWF's New Media group -- gets seriously hurt or simply loses heat (to use an industry term) with the fans.
From an Internet standpoint, it's not something to worry about for now. Whether the wrestling industry grows much more or hits the wall, the online operation has lots of room for increased merchandise sales, advertising, and pay-per-view webcast content, especially as broadband becomes ubiquitous.
Some legal clouds hang over the WWF. Three lawsuits come from men who used to wrestle for McMahon. Another suit stems from the recent death of wrestler Owen Hart, who plummeted from the rafters a couple of months ago in a Kansas City arena. The WWF is suing and being sued by rival promotion World Championship Wrestling, which currently runs a very distant number two in TV ratings. And despite public declarations about cleaning up the industry, pro wrestlers continue to be targets of accusations, suspicions and innuendo about steroid use.
Hey, no one is saying this is a gathering of angels. Besides, nearly every publicly-traded company finds itself in court from time to time; that's nature of U.S. business nowadays.
Perhaps you're just not interested in something that isn't a pure Internet play; certainly, the the WWF isn't and likely never will be. But remember that many would-be Web giants (CNet and Ziff-Davis, to name two) consider themselves not so much Internet-only operations as much as powerfully branded companies cutting across multiple mediums.
Maybe the CNets and ZDs of the world will reach (or have reached) that point, maybe they won't. You can argue either way. But you can't reasonably dispute that the WWF is already there.
Other issues:
A few months ago I criticized the former Computer Literacy's choice for a name replacement. I still dislike the new moniker -- but you can't argue with results.
Since becoming Fatbrain, the company's ad sales reps get much faster answers from clients, according to CEO Chris McCaskill. "It's amazing how much difference it's made in our ad response rates," McCaskill said yesterday, after his formal presentation in San Francisco, during an investment conference organized organized by BancBoston Robertson Stephens. "People don't forget our name. ... Sales reps walk in now and say, 'Hey, you're a cool company.' "
That's about the highest praise available for a Web operation.
Don't expect immediate upside with the stock, not with such a large offering -- 20 million. But that's just short term.
Unfortunately, the long term is no sure winner either, although it does have promise. As a maker of low-end semiconductors for all kinds of markets, Fairchild is less susceptible than Intel or Micron to the chip industry's extreme cycles. On the other hand, acquisitions have loaded the company up with debt. Even after today's IPO -- the entire proceeds of which go to settle a senior credit line and a couple of outstanding notes -- Fairchild has more than $700 million to repay
Blue chips rose while the rest of the market fell throughout the morning and into the latter part of today's session. With two hours left in regular trading, the Nasdaq Composite Index was down 16.14 to 2571.85, the S&P 500 lower by 2.27 to 1319.91, and the Dow Jones Industrial Average higher by 101.63 to 10778.94. 22GO>