By James Caldwell, PWTorch.com assistant editor

WWE was fortunate to have a one-time revenue item from their previous book deal. After their recent book deal expired, WWE was owed $6.3 million. If not for the one-time item, WWE's Consumer business would have declined by 22.7 percent.

All aspects of WWE's business were affected by the U.S. economy taking a dive between October and December 2008, but Consumer Products held up reasonably well compared to the Live Events and PPV business. Thankfully, WWE sold some quality books the previous few years.

Looking at the overall picture, WWE's business model has shifted. A greater portion of WWE's revenue is coming from the Consumer Products division than Live Events and PPV business. The shift will help WWE keep business strong until the Live Event business recovers.

Consumer Products business consists of revenue from Home Video, Licensing fees, magazine revenue, and general merchandise sales. 26 percent of WWE's total revenue came from this division in 2008. The trend has shifted upward in recent years.

Comparatively, in 2007, it was 24 percent. In 2006, it was 22 percent. As I identified in yesterday's WWE business report, the reverse is true for Live Events where a lesser percentage of WWE's revenue have been generated through live events, PPV, and TV.

Although revenue from WWE's Consumer Products division decreased by 6.0 percent in the fourth quarter 2008, the division held strong in a very tough economic period.

The decrease was mainly attributed to the timing of WWE's DVD releases. Revenue from the Home Video segment was down nearly $5.0 million compared to the prior year fourth quarter. However, WWE released seven new DVDs this year compared to twelve new DVDs in the fourth quarter last year.

In WWE's conference call with investors, WWE CFO George Barrios told investors to compare the final two quarters of each year to evaluate the Home Video business fairly. Revenue from the final two quarters of 2008 was $26 million compared to $25 million in 2007.

Revenue actually increased in the final two quarters, but the problem is that WWE's key growth area was DVD business prior to the economic slowdown that affected all aspects of the company's business.

Barrios said the two percent increase in tough economic times was "significantly below" their first quarter 2008 results. He added that WWE is seeing the "trend deepening downward." That's not good for future outlook.

CONSUMER PRODUCTS BREAKDOWN - FOURTH QUARTER 2008

- HOME VIDEO REVENUE decreased from $19.8 million to $15 million in a fourth quarter comparison to last year. As I touched on above, WWE sold only seven DVD titles in the fourth quarter compared to twelve titles in the prior year fourth quarter. As a result, DVD shipments declined by 36 percent.

- LICENSING REVENUE was boosted by the $6.3 million revenue item from WWE's book publisher. The one-time item helped Licensing Rev. increase to $14.7 million from $9.4 million. If not for the item, the segment would have declined by 11 percent.

The one-time item also boosted the profitability of the division by 81 percent compared to the prior year fourth quarter. The increase is misleading, though, as WWE didn't record a comparable "expense" associated with the $6.3 million revenue item that was virtually dropped in their laps.

- MAGAZINE REVENUE dropped significantly to $3.5 million from $6.0 million in the prior year quarter. Last year, WWE sold several special edition issues that boosted revenue. In the fourth quarter 2008, WWE reported fewer magazines sold on newsstands.

Also, WWE's mix of special issues consisted of one special and two WWE Kids issues. Last year, WWE had three specials and no WWE Kids magazines.

Although the drop appears to be significant, it's important to look at where WWE's Magazine business was and where it is now. After changing from a "WWE specific" magazine to more of a "Men's Lifestyle" magazine like Maxim or FHM, WWE has re-established a solid benchmark for magazine sales. They just came in a little under the rough estimate $4.0 million benchmark.

Magazine Publishing Revenue
2007 Q1 - $2.9 million
2007 Q2 - $3.7 million
2007 Q3 - $3.9 million
2007 Q4 - $6.0 million
2008 Q1 - $2.9 million
2008 Q2 - $4.3 million
2008 Q3 - $4.7 million
2008 Q4 - $3.5 million

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