MR. TITO: Explaining Nick Khan's Methodology for Releasing WWE Wrestlers and Talent

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For the past 2 years, the World Wrestling Entertainment (WWE) has been fairly aggressive in its talent releases and they are often without any heads up to the wrestlers themselves. Just on a random Thursday or any day of the week, we’d see a whole list of wrestlers who were just released that are unexpected to many. Usually those job cuts are followed by upset wrestlers, who just lost employment, and also upset wrestling fans who like any particular wrestler from that released list. The consistent reason, as stated by the WWE on internal emails, has been “budget cuts”. Most look at WWE’s Financials and see record breaking revenues, thanks to the USA/FOX Television Deals, and wonder what needs trimmed from the budget. In fact, WWE Corporation is doing RECORD BREAKING right now.

Most of the cuts seem to be driven by President/Chief Revenue Officer Nick Khan‘s analytical models and also by Vince McMahon‘s reviewing Nick’s report plus his own personal choices. One thing that I want to emphasize from my column is that I WON’T be talking about NXT releases. Though Nick Khan is probably showing Vince McMahon expense numbers on the NXT and Performance Center, as both have been consistently generating losses for the past 10 years, what is causing NXT cuts is a difference in philosophy between Vince and his son-in-law Triple H. Reportedly, Vince McMahon wants SIZE and YOUTH for the NXT territory and Triple H was often signing older veterans and smaller talent. Thus, most of the NXT cuts have been due to a difference in philosophy and Vince McMahon’s impatience of a talent to “get it” in NXT before joining WWE. There will likely be no “Lifers” like Tommaso Ciampa or Johnny Gargano, whom I’ve heard Shawn Michaels is reportedly fighting to keep in NXT to help train others, moving forward.

What I want to talk about today is what Nick Khan is likely looking at to determine who should be released by the WWE. Remember, Nick is not a wrestling guy as his talents before the WWE dealt with providing agents to athletes and others in the sports industry. Where Nick excels is negotiating deals, as he reportedly acted as WWE’s representative on some of the TV deals before he officially became President/Chief Revenue Officer for the WWE (those TV deals helped land him the full-time WWE job). However, the WWE reportedly has a staff of anywhere to 40-50 people, whether that is internal or outsourced, who are statisticians and are working all day to crunch the WWE’s data for any trends or patterns within any key ratios of WWE’s revenue and/or expense numbers. I believe that Nick is relying on those folks heavily to help him make business decisions.

With All Elite Wrestling (AEW) not significantly growing since they began, as they debuted at 1.4 million but are “stuck in the mud” around 1 million viewers for AEW Dynamite, the WWE has stopped seeing them as a competitive threat during early 2020. Then, the pandemic hit and the WWE probably knew that crowdless shows would struggle to draw as well and would buy the WWE some time to get leaner on their talent expenses. Without AEW presenting a major competitive threat, Nick Khan was given the green light to unleash his analytics upon the WWE roster and likely presents Vince McMahon with monthly report based on how wrestlers are generating Revenue (merchandise, appearances, TV viewership quarterly hours) versus how much they Cost (Base Salary, Bonuses, Medical for Injuries, and Time Off). These reports are probably also reflecting how Corporate Sponsors analyze talent along with how the Broadcast Partners (Comcast & FOX) are analyzing talent.

Before I go deep into what ratios Nick Khan looks at, a little background on myself… I understand what Nick Khan is looking at because I once prepared such reports of key ratios on other employees’ performances based on how much revenue they are generating as it relates to their costs or existence. I have worked for several corporations who have worked directly with multiple types of financial firms and there were several roles that wanted me to analyze the performance of how financial institution personnel were meeting sales goals for convincing customers to take on more retail products, credit products, insurance policies, and securities sales. Basically, what I would do is look at the sales production of each employee and sadly divide that by the # of sales and their expenses… Then, the statistician in me tried to normalize the data and create “bell curve” like situations with converted standard deviations and compared them to the overall average or mean to the data.

If that was over your head, many statisticians try to find outliers in a data set and they do so by trying to compute the mathematical distance from the normalized (without bias) average of the data. With a bell curve, it assumes that the middle data, both above (47.5%) and below (47.5%) the average, contains about 95% of the data deemed “statistically insignificant” within the data. For example, if I were analyzing Insurance Policy sales and Person A sold 100 policies during 2021 while Person B sold 70 policies in 2021… If both Person A and Person B are both within the 95% of the data, then they are considered, in statistics, as technically the SAME person. How much more commission expense is there between 100 and 70? Probably not much and the person generating 70 policies is still making the company money.

What matters in statistics is the TOP 2.5% and the BOTTOM 2.5% of the data. Those are the outliers. Now the top 2.5% are going above and beyond their performance, likely to earn a major promotion so that they won’t get elsewhere. Think of 2.5% as Stone Cold, Rock, John Cena, Hulk Hogan, etc. Just once in a lifetime talents… The bottom 2.5%, however, are statistically significant from the rest of the data, too, but severely underperforming compared to the normal or average workforce member. Those are likely individuals that the company would seek to terminate.

| Lower 2.5% Significant || Upper 2.5% Significant |

Other places use a 90% model to assume that the middle 90% of the employees are normal while the top 5% and bottom 5% are the statistically significant ones. It would look like this:

| Lower 5.0% Significant || Upper 5.0% Significant |

Sadly, I started using this statistical analysis in reports that I sent to management and it raised a few eyebrows. After a few meetings to explain my methodology, I heard a few “interesting” comments from executives and a few “let’s see more of this kind of analysis” comments as well. Then, weeks later, I started seeing Termination Notices of the people that I showed in that bottom 2.5%. *Face Palm* What have I done? But if it wasn’t me that created that methodology, someone would have later… Needless to say, because of the results of my reports, I got out of that realm and jumped into the production side of things at another financial firm. Now, I run a revenue generating department and am very conscious of my key ratios. I probably operate a bit leaner than I should, which makes absences of employees or vacations cause the rest of the staff to be a big busier than normal, but I’m also protecting my folks from any reports that might suggest “cuts”. I’m also crunching data, on my end, to watch for any revenue or expense trends. I am constantly analyzing what my employees do and am presenting reports to management, myself, to display how productive they are and what revenue/expenses they are generating. I’m trying to control the narrative against what other outside parties might suggest to upper management.

I know that many of you dislike my Pro Wrestling takes and that’s fine… But what I’m telling you is that I fully understand what Nick Khan is doing because I lived and breathed it. I was once on the side that produced analytics reports that Nick looks at and now I’m on the side of the talent that those reports are analyzing (and I’m trying to protect them).

With all of that said, let’s look at what Nick Khan is probably looking at…

At a high level, the WWE has key ratios that analyze their overall performance versus the size of their company. WWE has a Balance Sheet in which is measures the revenue generating Assets versus the expense generating Liabilities that help make those Assets exist. As a company, you need to ensure that your REVENUES are always greater than your EXPENSES. Obviously… But in the financial world, each publicly traded company looks at key ratios to help measure how they are performing as a company. WWE has a Net Income number, which is Total Revenues – Total Expenses, and they utilize that number and measure it against their Total Assets number. This is called “Return on Assets (ROA)”. They also measure their Net Income against their Total Equity or $ total of the Shares of WWE Stock in existence. This is called “Return on Equity (ROE)” and this really measures the performance against the value of the WWE stock.

For both ROA and ROE, you want these to be as HIGH as possible.

ROA for 2019 = 77,061,000 (Net Income) / 992,233,000 (Total Assets) = 7.77%
ROA for 2020 = 131,771,000 (Net Income) / 1,297,322,000 (Total Assets) = 10.15%

ROE for 2019 = 77,061,000 (Net Income) / 275,326,000 (Total Equity) = 28.0%
ROE for 2020 = 131,771,000 (Net Income) / 388,794,000 (Total Equity) = 33.9%

As a company, the WWE is significantly grew on the Return numbers for 2020 versus how they performed in 2019. That said, the 2020 numbers have the FULL television numbers baked in whereas 2019 only has 4 months of the new TV deals realized. If I were to guess within the WWE, and I could probably prove this with full access to their TV deal money data, is that when you normalize the data for consideration of those TV deals, there is likely a dependency of 2020’s data on those television deals. After all, WWE held NO live events beyond March 2020 and merchandise sales significantly tanked. It’s likely that Khan’s group backed out the TV revenue data and reconsidered the ratios. I’m betting that both ROA and ROE tanked hard for 2020 without the TV revenue present.

Then you get into things like Efficiency Ratios, which are defined by expenses not related to interest divided by Net Income. If we ignore the interest that WWE pays on their borrowings from their Bank Loans, you’re looking at more pure expenses like Marketing, Salaries & Benefits, Production Costs, Travel, Medical, Branding and Copyright Costs, Legal Costs, etc., and all of that is divided by Net Income. Of course, you can focus your own homemade Efficiency Ratio by dividing Salary/Benefit Costs against Net Income. What you’d want is the smallest % or ratio possible for this metric.

Go back to 2019. What was the WWE doing? They saw Jon Moxley and Chris Jericho joining All Elite Wrestling and then AEW receiving their own Prime Time show on TNT. WWE scrambled to sign wrestlers to extensions which actually paid the talent MORE money to protect them from leaving. Then, however, 2020 hits and WWE doesn’t feel as threatened by AEW’s presence as they feared. AEW’s viewership numbers were dropping below 1 million consistently… In addition, COVID-19 hit the world hard and WWE figured that would limit AEW’s growth for the time being. However, WWE’s internal efficiency ratios based on Salary/Benefits probably skyrocketed. If you back out the TV Deal revenues out of the equation, it’s highly likely that WWE Management was TERRIFIED at what they saw for Nick Khan’s reports.

I believe that is what WWE is doing… They are ignoring the TV Deals from their data analytics and figuring that the WWE BRAND is what made those TV Deals happened. Thus, if you’re a wrestler and your Revenue generated as it relates to your Base Salary + Bonus is low, you’re gone. That explains what probably happened with both Braun Strowman and possibly Bray Wyatt, two former WWE World Champions of 2020. Both of those guys had much higher base salaries than other wrestlers from their Main Event status and being around for a slight while. Braun Strowman, we know, was one of those wrestlers who signed an extension during 2019 that paid him lots of extra cash to stay with the WWE. However, by 2021, it’s likely that Nick’s analytics were showing that the revenue generated against that higher base salary was not significantly profitable to the WWE.

But what about Bray Wyatt? Now, in my criticisms of Bray Wyatt not performing well in matches, I kept hearing it from fans that he was a “big merchandise seller”. That baffles me because of the following numbers pulled from WWE’s 10-K report regarding Consumer Product sales:

2017 – $113.7 Million
2018 – $102.6 Million
2019 – $91.7 Million
2020 – $86.1 Million
2021 (annualized from first 6 months) – $87.1 Million

And then I performed a Google search and everything seems to tie to what somebody told the Wrestling Observer Newsletter. Even Forbes.com is quoting the Observer as their source of information. Yet, we’ve never seen the actual report of the Sales Numbers. Observer has a source within the company that is just telling them the list, as that source would get in a ton of trouble if they emailed or faxed the Observer the official list with actual sales data on it. As a publicly traded company, you cannot have internals like that shown to anyone because if Bray Wyatt were truly on that list, the news of his release would create an impact to the WWE’s Stock Price.

But even if Bray Wyatt was among the top merchandise sellers… He’s among the top members of a DECLINING merchandise sector. Look at what I posted above… WWE merchandise sales are in a declining pattern, even before the pandemic. And remember, it wasn’t until 2018 before Roman Reigns topped Part-Time John Cena as the #1 Merchandise guy. Cena was the merchandise cash cow and the WWE has never been able to successfully replace him. Even if Bray Wyatt is somehow selling merchandise, it’s not increasing the WWE’s bottom line. He’s topping a declining list, if he’s truly selling merchandise as the Observer’s WWE source suggests.

Furthermore, you don’t know what the expenses are on that Bray Wyatt/Fiend merchandise. For example, the Replica Bray Wyat Title Belt that the WWE Shopzone was selling. That belt has a unique design that probably cannot be as easily produced as the other title belts. Each are fully painted and I would assume hand-painting is needed on a few parts. In addition, the Fiend’s mask was created by Tom Savini. That is artwork created by him and he might be receiving a cut anytime his artwork is being presented. Thus, when you see that Fiend face on merchandise, WWE video, or video games, Tom might be receiving residuals for that (good for him if true). Even despite higher merchandise sales revenues reported, the EXPENSE of making Fiend stuff and also possibly paying out the artist could be cutting into that.

Bray Wyatt’s merchandise sales might not be as profitable as you’d think and that’s on top of having a HIGH base salary. Plus, Bray Wyatt gets injured and I would imagine that Nick Khan is factoring in Medical Expenses + availability into the equation as well.

But what if Nick Khan is also performing analytics on web searches and Social Media trends regarding WWE performers? Thus, when ALL of us crapped all over the Fiend vs. Randy Orton at Wrestlemania 37, maybe some negative metrics of web searches and Social Media trends went off the charts regarding Bray Wyatt. Instead of blaming the Creative Team, which Vince McMahon protects with is life because he oversees it, the blame is always put on the talent. Doing the supernatural stuff is tied to the Bray Wyatt character and thus he took the blame for that AWFUL Wrestlemania 37 match instead of Randy Orton or Alexa Bliss. Speaking of Alexa Bliss, it is very likely that Nick Khan’s Social Media trends are “off the charts” when it comes to her and hence why she not only kept her job after Bray’s departure, but kept the supernatural gimmick going in his place.

In addition to WWE’s own internal analytics, they are also listening to their Corporate Sponsors and their Broadcast Partners (Comcast & FOX) who have their own analytics departments. Sponsors are constantly testing out how their advertisements track following what segment and linked to what actor (or wrestler) who was just on the screen. In addition, both Comcast and FOX have expressed concerns over the Talent Rosters given to them by the WWE through the Draft process. Remember, during 2019, FOX was a bit upset with Brock Lesnar being swapped out for Bray Wyatt during the 2019 Draft and then FOX had to endure months of Bray Wyatt as the World Champion. There’s a GREAT chance that FOX was sending their own analytics to the WWE about how Bray Wyatt was tracking and then Comcast did the same when Bray moved to USA Network. That could be a major subtracting factor that lessens Bray Wyatt’s revenue number impact.

Bray Wyatt aka The Fiend had multiple things possibly going against him that were probably place in some sort of statistical model that Nick Khan reviewed:
-Higher Base Salary
-Injury Prone
-Mask Copyright
-More costly merchandise to produce
-Corporate Sponsors disliked him
-FOX/Comcast disliked him

Just remember that by going on FOX, WWE is more heavily regulated by the FCC. All it takes is a handful of callers to say that Bray’s Fiend mask terrifies and/or offends them and the Government starts forwarding those complaints to the network. It happened before over WWE’s content when they were on UPN.

What wrestling fans need to realize is that WWE is fully invested in the Analytics Doctrine right now. They are using statisticians to crunch numbers on EVERYTHING from merchandise sales, quarter hours of TV shows, YouTube views, web searches, Social Media follows/trends/searches, and all other sources of revenues and expenses related to a wrestler. There are up to 50 people crunching data and I guarantee you that each of those folks has some sort of Finance, Economics, or other type of business or social science degrees who know how to sort data, plug data into models, and use statistics to analyze results. Trust me on this one, folks… I’m totally speaking from experience and I’ve seen what 1 report from me could do to a workforce… Imagine 50 of me producing many more reports for management to look at and consider. They’ll use any kind of documented report to justify “budget cuts”.

The game is changing, folks, and what everyone needs to realize is that the WWE is beholden to its Shareholders and NOT you, the wrestling fan. As long as WWE main shows are drawing consistently above 1 million viewers and the loyal fans are still paying $9.99 per month for WWE Network, paying for WWE’s higher ticket prices, and still buying merchandise, the WWE knows that they’ve got you no matter what. Right now, the WWE knows that you are finally enjoying Roman Reigns as a superstar and they are delivering him to you each week on Friday Night Smackdown. You’ll keep paying as long as Roman is there and then they’ll sprinkle in a little Brock Lesnar here, a John Cena there, and possibly a Rock or Undertaker there as well for Wrestlemania 38 to keep that loyal fanbase around to keep RAW and Smackdown above 1 million viewers.

But for the rest of that WWE roster, LOOK OUT. Nick “the Dick” is coming for you and you better start convincing your fans to buy your merchandise or tuning in to certain quarter hours where you appear to help “pop” numbers on Nick Khan’s analytics reports. Otherwise, you’re a threat to get released and AEW or Impact only have so much room…

Look around you, folks… Do you ever wonder why, despite your experience or education, why many firms are lowballing you on job offers? Because their statistical models have told them that THIS is the $ amount that you should offer any incoming employee. Unless you have a proven track record that makes you appear like an upper 2.5% guy on that Bell Curve (see my explanation above), they companies know what they should pay you ahead of time to remain excessively profitable. Because they can find another person within that 95% normal pool of data who is closely the same as you.

Look at Pro Sports Leagues right now… Analytics is on the attack for Baseball and Basketball, particularly. Ever notice how there aren’t too many “back to the wall” kind of Centers or Power Forwards any longer? No, they are all taking jump shots with range right now. Also in basketball, everybody is shooting more 3 pointers because that is proven to be the faster, more efficient way of scoring. Anybody who is above 40% from the 3 point line is highly valuable in the NBA and it helps many players with that skillset score big salaries, even if the rest of their game is bad. Look at baseball… “MoneyBall” and other analytics based analysis has mowed through Major League Baseball. Rarely do you see people stealing bases and now you’re seeing teams defensively shift for each and every player based on the trends on how that player hits. On base percentage is a huge statistic now for Baseball and it wasn’t 25 years ago. Pitching numbers are managed, as players getting above a certain count or seeing changes in their velocity are micromanaged now by baseball managers.

Analytics are also there for football and hockey, but there is so many human factors to both physical games that it’s hard to figure out. That said, in the NFL right now, speedy Wide Receivers are a hot commodity right now and Running Backs are now considered as a “dime a dozen”. In the NFL, you’re really starting to see Rookie Wide Receivers immediately have impact whereas in the past, it took a while. Analytics are changing the way plays are being called and developed while attacking the NFL’s current rules to exploit them.

Statistics are used to measure everything that you guy… Ever wonder why there are few chances taken in video games? Now, you’re just getting additional entries on Franchises instead of new intellectual properties created. Ditto with movies… You’re seeing nothing but Franchises instead of individual movie chances. I just watched Ghostbusters and analytics of that 2016 “reboot” film told Sony that what fans want is something involving the original cast and not a female reboot that ignores the past. Thus, Ghostbusters Afterlife is well received by that diehard Ghostbusters fanbase and I would expect that Sony will start to see returns on that investment. All you’re seeing from Hollywood is endless Superhero movies, as well. It’s a safe investment… Why roll the dice and lose money on something unknown when you can pile on to what consumers already like? The data tells Hollywood so…

You have NO IDEA how much you are being micromanaged by your own company’s analytics department while also getting worked by everbody’s Marketing Departments. They are measuring data on everything that you do, consume, or spend money on daily. Trust me, that little Smartphone that you carry and are highly dependent on is telling firms everything they need to know about you. As you read this wrasslin’ column on NoDQ, you’ll probably start to see suggestive Social Media follows on other wrestling entities, Amazon advertisements for WWE merchandise, and probably see advertisements follow you from NoDQ’s website to other websites. Why? Because again, your data is being tracked by big corporations and statistical analysis is being performed, on the spot, to understand what you’re doing as a human and as a consumer. Then, they can exploit it to try to entice you as a consumer.

All of this time, you though that the Pro Wrestling industry was working you based on their scripted storylines and how the business tries to protect itself from reality. Little did you know how much your employer is working you along with any retailers, communication ratings agencies, anything involving your Smartphone device, and onward. You’re getting WORKED all day long, as the numbers resulting from your employment, Smartphone habits, or consumer spending are being analyzed somewhere. Big brother is watching you.

On the wrestling front, here is my advice to all WWE wrestlers:

– Promote yourself more on Social Media, but not just your real life to exploit the business, but sell harder what you’re doing storyline wise on television and promoting upcoming matches. Do it harder like never before and come up with unique ways, online, to get your followers caring more about your matches. Make sure that your posts align with what WWE wants or expects out of your Social Media, however.

– Promote your merchandise and come up with unique ways to help advertise it.

– Don’t be negative, ever. Today’s corporate climate HATES negativity of the workplace, especially when they catch it via hearsay or when posted on Social Media. Gotta play the game, folks… Be positive in attitude at all times while on the job and offer solutions to problems instead of just bring up problems.

For the wrestling fans, here is my advice to protect your favorite wrestlers:

– BUY their merchandise. Period. Those numbers pop on WWE’s reports, but consider the items that will give the WWE the most benefit. See my Bray Wyatt Title belt discussion above. Buying fabrics like T-Shirts provide the WWE huge profit margins based on the mass production and probably outsourcing to other countries making those shirts cheaply. If you want to spread the wealth to many wrestlers, BUY THEIR THEME MUSIC. That’s a cheap way to support your favorite wrestlers. Best $1.29 you’ll ever spend to help support your favorite wrestlers.

– Always tune in to your favorite wrestlers when they appear on USA Network or FOX. You never know if your Cable/Satellite Box is a Nielsen rated one or not… But if you hate watching the entire WWE show but love a particular wrestler, MAKE IT A POINT to consistently tune into to the Quarter Hour for which the wrestler appears. THEN, go to YouTube.com and view their match while also pressing “Like”.

– Follow your favorite wrestlers on every single Social Media platform that they use and participate in discussions about said wrestlers. POSITIVE discussions, of course. Don’t bash your favorite wrestlers…

– Ratio WWE accounts in support of your favorite wrestlers. In other words, when WWE’s social media account posts something about your favorite wrestler, just “Like” it. Simple as that… Ditto with any media posted. Just “Like” it…

– Attend live events and and buy their merchandise there… This one is a tough ask, but if you attend live events and buy a wrestler’s merch at that event, it’s heavily tracked and noticed by WWE officials.

The WWE system is now looking at analytics so thus both wrestlers AND fans should play the game… Be proactive and do something BEFORE the WWE analytics reports come out and help determine who gets released next. Otherwise, if wrestlers do nothing to help support themselves and fans don’t participate with their time and dollars, the WWE analytics reports will determine who remains on WWE television to entertain you. Wrestlers and fans have more power than they think to determine what the WWE presents on television.

If you do nothing, then Nick Khan’s metrics on wrestlers will go right to Vince McMahon and help him determine who gets released next. And then when Vince McMahon retires and/or passes away (God forbid), Nick “the Dick” will really be unleashed upon the WWE and Analytics will be the ONLY reason that determines wrestler employment. I guarantee you that there are a handful of wrestlers who favor badly on Nick’s report that Vince McMahon has nixed. Vince is still a wrestling promoter, at heart, though he is easily swayed. Still, there are probably many wrestlers on Nick’s analytics report that are not profitable but Vince has kept them employed. With Vince gone, though, Nick will have ZERO filters and employment will be determined by statistical mathematics only.

So just chill… Until the next episode!

Comments and feedback are welcome. Follow and Tweet me @titowrestling or login in below to post comments.

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