Does Shane McMahon's Return To Television Include A Corporate WWE Position?

| About: World Wrestling (WWE)

Summary

Shane McMahon departed WWE in 2009 to become Chairman and CEO of YOU on Demand.

YOD has struggled financially as it pursues subscription and OTT streaming services in China.

Shane McMahon's return to WWE could include reclaiming a position as an executive officer.

The Authority

When you're part of the McMahon family, reality and storyline blend.

Patriarch and promoter Vince McMahon is still the Chairman and CEO of World Wrestling Entertainment (NYSE:WWE). Recently, Vince was verbally sparring on a conference call with investors and analysts over drooping television ratings and significant talent injuries (John Cena, Seth Rollins, Randy Orton) leading into WrestleMania. In January, he showed off his 70-year old Muscle & Fitness cover-worthy arms as he portrayed a corrupt guest referee during the main event of Monday Night Raw.

His daughter Stephanie McMahon was elected to the WWE board of directors in February 2015. She is WWE's chief brand officer and has been traveling around the world for business insights and training as part of her Eisenhower Fellowship. On WWE television, she's part of "The Authority," always acknowledged as a principal owner of the WWE.

Her husband is Paul Levesque, better known as Hunter Hearst Helmsley, or Triple H. He joined the McMahon's company as a talent in 1995 (technically, wrestlers are independent contractors) and became one of the top stars in the organization. In a case of life imitating art, a storyline marriage between Hunter and Stephanie McMahon in 1999 was followed by a real-life marriage in 2003.

Today, Paul Levesque is still a television performer. He became a 14-time world champion in January after being an unannounced competitor at the Royal Rumble and will be defending his title at WrestleMania. Levesque is a new member of the WWE board of directors and currently serves as the Executive Vice President of Talent, Live Events and Creative. His major focus has been spearheading the expansion of WWE's developmental league, NXT, and the creation of WWE's Performance Center in Orlando.

While Vince, Stephanie and Hunter have continued to play prominent roles both behind the scenes and in front of the television cameras, there's been a noticeable McMahon heir missing.

Where's Shane?

Vince McMahon's eldest son, 46-year old Shane McMahon, has been absent from the family business since 2010. Shane had spent more than twenty years learning the proverbial ropes. He'd filled a myriad of roles ranging from in-ring performer (referee, in-ring superstar) to corporate executive (President of New Media and Executive Vice President of Global Media).

Internally, Shane's creative ideas for television programs were being rejected. The company's investment in emerging platforms such as the internet was narrowly focused on their online shop and collecting advertising revenue on their website.

In October 2009, Shane McMahon shocked many insiders when he announced his resignation from the WWE. In his letter, Shane wrote:

I have never even considered a future outside the walls of the WWE. However, sometimes life takes an unexpected turn and while it is the most difficult decision I have ever made, it is time for me to move on.

It was a surprising move.

Some believed it hinted at an internal succession power struggle between brother and sister (and brother-in-law). Others pointed to Shane's desire to fully run an independent organization (there had long been rumors that Shane had been in negotiations for purchasing established organizations such as Pride FC or to independently control the WCW brand after it had been acquired by WWE).

Vince McMahon was asked about Shane's departure during an interview with Steve Austin in December 2014. Vince said:

It was sort of a mutual feeling. It's a situation whereby he had talent which he could take other places. And let's face it, you know, family businesses are very, very difficult.

However, considering that Vince implied his son was working in Japan (Shane's business focused on the Chinese marketplace), as usual, Mr. McMahon's statements should be taken with a generous grain of salt. As the Los Angeles Times noted in 2011, "there remains some residual tension" with the relationship between Shane and Vince.

Why did Shane leave in the first place?

BuzzFeed published an in-depth piece in 2014 by Thomas Golianopoulos entitled, "How Vince McMahon's Son Left The WWE Empire To Make It On His Own." That profile quotes former WWE writer Court Bauer who suggested that Shane lacked the "ruthlessness" of Vince and knew that he wasn't going to be chosen as Vince's successor.

Shane also outright denies there had been any kind of a "civil war" with his sister. Instead Shane insisted that he just wanted to "make it on his own" and knew staying at WWE would mean he would be stuck in his father's long shadow.

Certainly, Vince McMahon shows no signs that he's planning to step down from his dual positions as Chairman and CEO. With decades of experience leading the company from 80's boom to early 90's bust to late 90's explosion through sole survivor of the 2000's, Vince McMahon's professional wrestling promoting prowess is well established. Meanwhile, questions about who could really fill his shoes have abounded, especially with Vince's age and relentless business style. When Shane stepped away from the family business, many wondered if he'd ever be back.

What Is YOU On Demand?

Following Shane's resignation from the WWE ecosystem, Shane McMahon became the Chairman of YOU on Demand (YOD) on July 30, 2010. He'd been approached earlier by friend-of-a-friend Marc Urbach about joining related company's China Broadband Inc.'s board of directors.

Shane investigated and became interested. He had corporate experience with global media and pay-per-view distribution from WWE. The Chinese marketplace was big, growing and the opportunity seemed ripe. In the end, Shane McMahon invested millions in the company directly and through loans. In later years, he would even forsake his salary in YOD in an effort to conserve company cash.

What does YOU On Demand do? In a recent SEC filing, YOD lists their company objectives as follows:

• The Company's intends to become a new generation leader in pay media in operating a state of the art pay content virtual network operator.

​• The Company intends the prioritize building business values centering around the content Virtual Network Operator with content cloud, ubiquitous distribution and consumer data management and service.

​• The Company intends to develop distribution access to all of China's cable TV networks, telecom, over-the-top and mobile platforms.

​• The Company intends to offer a branded pay content service delivered to consumers ubiquitously through all of its platform partners, tracks and shares consumer payments and other behavior data, operates a customer management and data based services and develops mobile social TV based costumer management ecosystem.

​• Through its shareholder and strategic partner Chang Yuan Guo Xun, who is the exclusive digital copy right registration agent authorized by the National Copy Right Bureau, a division of State Administration of Radio, Film and Television, the Company intends to provide exclusive digital copyright registration service for video content, offer a digital rights management (DRM) enabled third party content delivery service with access to all media platform operators.

​• The Company also intends to form partnerships with hundreds of content providers and to develop the capability to provide premium content in film, television, game and video e-commerce content.

​• The Company also intends to expand its unique VNO service outside of mainland China in the near future.

When you go through their filings, you'll see a lot of buzzwords and interlocking company structures. YOD wants to be a "leading multi-platform entertainment service company delivering premium content, including leading Hollywood movie titles, to customers across China via subscription and transactional streaming services." However, financially has consistently struggled for years.

There's been a significant net loss from operations since before Shane McMahon took over. From 2009 to 2014 (even following initiatives such as deconsolidating Shandong Media in July 2012), revenues dwindled while Selling, General and Administrative Expenses blossomed. Annual losses have ranged from six to sixteen million dollars over the past seven years.

As noted in the Buzzfeed article, there appears to be enormous potential for growth in China for a company such as YOD. However, regulations are complex. Piracy remains widespread. State-censorship can create significant impediments for a company trying to import Western content.

In recent years, Shane McMahon's position in YOD has significantly evolved. Currently, Shane's title is "founder and vice chairman".

The Chairman position recently moved to Bruno Wu whose Sun Seven Stars Media Group Limited company just invested $10.0 million into YOU On Demand in December 2015.

As of January 2016, YOU on Demand's CEO is held by Mingcheng Tao. He just replaced CEO Weicheng Liu who had been the YOD CEO since July 2013.

That's when Shane McMahon "voluntarily stepped down" so there would be a chief executive officer located within China "for both strategic and operational reasons".

Shane McMahon remains on the board of directors for YOU On Demand and was just reelected. He continues to own a significant portion of YOD shares and has made several million dollar loans to the company. His most recent employment agreement with YOD was in January 2014 which included a "term of two years, which will automatically be extended for additional one-year terms unless terminated earlier".

As other investors move in, Shane's role with YOD appears to be diminishing. He doesn't speak the language. Chinese OTT marketplace suffers from both "device and marketplace fragmentation". The company is afloat, but new larger investors appear to be calling the shots.

He's Back

On February 22, 2016, moments after Stephanie McMahon received a storyline award from her father Vince, fans at the Joe Luis Arena in Detroit, Michigan were surprised by the return to WWE television of Shane McMahon.

After a six year absence from the WWE, fans and pundits alike were shocked to see the prodigal son return. The television angle culminated with Vince McMahon booking his son to face The Undertaker in a Hell in a Cell match at WrestleMania.

For a character who has been off WWE television since May 2009, the crowd's reaction to Shane McMahon was surprisingly positive.

Google Trends shows searches on "Shane McMahon" have retained remarkable consistency despite being out of the WWE spotlight since 2010.

Shane McMahon's comments on Raw mirrored a fascinating "worked-shoot" dynamic as he mentioned WWE stock price declines, low television ratings and "plethora of talent injuries". All of these subjects were recently covered as part of the Q&A during the WWE Q4 results conference call. His promo was also heavy on the topic of company succession.

While this was an television angle intended to set up a professional wrestling match at WrestleMania, the elements of what he discussed resonate greatly with WWE's current position. As noted, many analysts are concerned that if Vince McMahon suddenly passed away, the succession plan for WWE is quite opaque.

Both Stephanie McMahon and Paul Levesque are still building their Wall Street credibility and business acumen. Running the creative department for the television product is a far cry from running the entire Corporate WWE behemoth.

CFO and Chief Strategy Officer George Barrios and Chief Revenue and Marketing Officer Michelle Wilson have been a powerful force in shaping WWE's strategic vision and negotiating key agreements. They've spent a lot of time charming the Wall Street analysts and explaining the company' lofty vision for the potential of the WWE Network. However neither have the all-important McMahon namesake.

Likewise, other long-time insiders such as Basil DeVito or Kevin Dunn understand the WWE business and have served on the Board of Directors. However, neither would be very strong candidates for CEO or Chairman except in a very limited and transitional role.

Honestly, the top candidate would likely be Vince's wife, Linda McMahon. She may have turned her sights to political ambitions, but she does have a track record as both President and CEO of the company in the 1990s. She may lack Vince's killer instinct, but she's a well-respected and experienced business professional whose is part of the McMahon family.

The sudden return of Shane McMahon, seasoned with outside business experience, could change the odds. While YOD may not have been a rousing success, he certainly hasn't embarrassed himself during his time away from the family business.

Yet, it's important to emphasize that at this time, Shane McMahon's role with WWE appears to be strictly as a television performer and in-ring talent for WrestleMania. There's been no formal announcement of a new executive WWE position involving Shane McMahon. Nor has there been any announcement that his involvement with YOD has concluded.

The WWE has changed significantly during Shane's time away. They've pivoted from a pay-per-view provider to running their own global over-the-top streaming network. WWE popularity may be stagnating and their television audience is graying, but they're achieving record net revenues. They've lined up guaranteed television rights escalations and seemingly stemmed the massive impairments for peripheral divisions such as WWE Studios. The company needs to continue to find growth drivers, and an experienced hand such as Shane McMahon would certainly be a welcomed addition.

WWE's plans for China

According to WWE's investor presentation, one of the company's key objectives remains launching the WWE Network in China. Yet, as CFO George Barrios admitted in November at the Wells Fargo Securities Technology, Media & Telecom conference that the company has "no direct time table on a China WWE Network launch".

In my recap of the Q3 2015 conference call, I noted that WWE is "refocusing their efforts in China":

Barrios noted that WWE has been investing in growing their business in China since 2007 through distributing content on local TV stations to build audiences. He also mentioned that WWE is reshaping their strategy in China to recognize the rapid changes in the "media ecosystem" in that country, and the emphasis in China's new five-year plan towards investing in sport & entertainment. They're planning to expand their Shanghai office. As always, WWE teased that they're exploring launching the WWE Network in China somewhere down the line without getting into any specifics.

At this time, the WWE Network may be available in most countries in the world (outside of China, The Philippines and Thailand) but the majority of users are still from the United States. While the company continues to focus on "increasing share of revenue from international markets", it's going to be a gradual process. The large population and rising economic fortunes create an intriguing environment, but even streaming juggernaut Netflix continues to struggle with breaking into the Chinese market. A recent Wired article even went so far as to speculate that "Netflix May Never Break Into China".

In this context, Shane McMahon remains a tantalizing puzzle piece.

He has spent years focused on the issue of how do you generate real revenue with Chinese OTT media. That's a topic where WWE needs an expert. While YOD's results in this space have shown the ability to garner investment (including millions from Shane McMahon himself) but little positive return, perhaps the backing from the larger WWE corporate entity can change the game.

Certainly, WWE could absorb a company like YOD although that seems unlikely at this time unless there is a clear asset that WWE desires.

Adding Shane McMahon to the WrestleMania card as a performer is an intriguing coup. The audience reaction in Detroit has proven fan memories are much longer than many would have imagined. However, how exactly Shane fits into the WWE corporate structure is a very open-ended question.

It's entirely unclear whether his desire to escape his father's shadow have really changed during his time apart from the family business.

Shane's sister and brother-in-law now serve on the WWE board of directors. Shane does not. Shane's position with YOD has progressively diminished, especially in the latest restructuring. Perhaps Shane will return to the WWE as an executive officer. Or perhaps this is just a one-off ploy to strengthen a WrestleMania card that has been weakened by talent injuries.

Chris Harrington is a writer who covers the financials of professional wrestling on his podcast, Wrestlenomics Radio. Follow him on Twitter @mookieghana.

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