The XFL numbers are not adding up for World Wrestling Federation Entertainment and NBC. As the upstart football league reaches the halfway point of its first season, XFL executives acknowledge that losses will surge 66% more than expected as revenues fall short and half the operation's ad inventory stands unsold.
WWF Entertainment CEO Linda McMahon said in Los Angeles last week that XFL co-owners NBC and WWF will each have to spend at least $10 million more in start-up costs than originally estimated. The two media companies originally planned to invest a combined $30 million in the first season, she said, and that figure will now wind up over $50 million. The XFL originally expected 2001 season revenue to reach $80 million.
"We are not going to make that projection," McMahon acknowledged. "That [revenue] model was built with a good portion of it on advertising revenue. With the shortfall in the advertising revenue, that will make the revenue not come in as high as we projected. I can't speak to exactly what it will be because we just started the second half of the season and there's a championship game to go. Where the ratings will be for that, I'm not sure."
In an SEC filing, WWF Entertainment revealed a well-known secret among Madison Ave. executives: The XFL was having trouble selling its ad inventory. Five weeks into its inaugural season, league officials admitted to having sold only 50% of their inventory. The XFL had earlier said that roughly 70% of available ad time had been sold.
The problem, McMahon said, can simply be attributed to one thing: ratings. XFL ratings on NBC, UPN and TNN have dropped nearly 75% since the first game, according to Nielsen Media Research. NBC, whose first-ever XFL telecast averaged a double-digit household rating, is now averaging a 4.3 rating/8 share in households and 6.6 million viewers. NBC's Saturday prime time game is also averaging a 3.0 rating in adults 18-49 through six weeks. UPN is at a 1.7 rating/3 share with 2.6 million viewers and a 1.2 rating/3 share in adults 18-49. TNN, down considerably from its first game, has improved its Sunday-afternoon time periods more than 50% in a number of areas, network executives say.
The March 10 game on NBC piqued the interest of 18- to 24-year-old males, whose viewership jumped 82%, doubtlessly lured by promises of XFL cameras' going into the cheerleader's locker room.
Despite the ratings, McMahon said WWF Entertainment is standing behind its first-year league. "I think, unfortunately from a TV perspective, the XFL is being looked at as a pilot series, where 'Okay, you've got six or seven episodes of a pilot, and it's not giving you the ratings you want, then you ought to just pull it,'" she said. "But that's not what building a brand or building a franchise is all about. The WWF is absolutely committed to building this alternative franchise."
She denied reports that NBC and WWF Entertainment are obligated only to one-year of the new league, saying both sides are committed to two seasons and there is an option for a third. An NBC spokesperson confirmed the network's commitment to the XFL.
But at a Bear Stearns investor conference in Boca Raton, Fla., two weeks ago, McMahon said the WWF was committed only to one year and the operation would be reevaluated.
In terms of turning the XFL into one of the WWF's weekly staged wrestling events, league officials say the action on the field will remain 100% professional football. Off the field, that's another story. On NBC's March 10 telecast, WWF Entertainment Chairman Vince McMahon and his wife Linda orchestrated a Raw Is War-type sequence in which NBC cameras went into the cheerleaders' locker room.
"I don't think that you'll see a lot more of that," said Linda McMahon. "What the fans are really looking for is innovative football."
