Examples of economic principles exist all around us. But perhaps the most unlikely teacher of economics comes in the form of entertainment wrestling, where creating individual value is of the utmost importance. Prior to my research into the economic wonders of the WWE, I thought the entire business was able to thrive off of a handful of young rowdy boys and “backwoods” folk who were easily impressed by the “fake” fighting occurring in the ring.
But after I had more exposure to the truly unique industry of entertainment wrestling, my assumptions were not only proven wrong, but I also learned that the WWE pay structure is brilliantly modeled in a way that allows value to be traded for value on an individual basis.
When I entered the Verizon Center in Washington, D.C for my first live wrestling event years ago, what first caught my eye was all the “side hustling” going on by the older wrestlers.
The bigger stars were nowhere to be found—most likely backstage getting preparing for the show—but many of these wrestlers had retired years ago and live events gave these “has beens” the opportunity to make a few extra bucks selling autographs and pictures to nostalgic older fans and wrestling fanatics.
However, while all the wrestlers were allowed to be there thanks to WWE, each was acting as his own promoter, responsible for marketing his, or her, own products. The WWE might be the platform where they rose to fame, but each was responsible for marketing his or her own individual brand.
The next thing that caught my eye, but which could hardly be missed even if I had tried, was the size of these crowds. Where had all these people been hiding? I had no clue there were so many wrestling fans, and this was just one venue!
Thus, the more money you bring in, the more money you make.
Trying to find my seat among a sea of excited fans comprised of excited young children, men of all ages, veterans groups, and yes, even a few women, was daunting, to say the least.
I was then terrified to learn I had been given floor seats just three rows from the actual ring. If there was one thing I did understand about wrestling, it was that that folding chairs were always the first objects to go flying into the audience once things started heating up. I had no intention of getting whacked in the head with a folding chair—at least not during my first event.
Within the first hour, I knew my prejudices had been wrong.
Not only were these wrestlers real athletes taking real hits and falls that were anything but fake, they were doing it night after night.
Aside from the clear talent and stamina possessed by each one of the athletes, there was something else about their showmanship that I found equally thrilling. They were, in many ways, fighting for their financial livelihood.
To clarify, WWE does not engage in any Hunger Games activities, at least not to my knowledge, but each athletic entertainer is, quite literally, fighting for more ring time and thus, higher pay.
This is because in the WWE universe, a personality’s contracted rate of pay is directly correlated to the success of his or her character. In other words, if your character brings more value to the company, you will most likely earn more than other characters who are not as successful.
Just as a capital good’s price point in a free market would be based on its marginal productivity, in wrestling, pay is based on the character’s popularity with the audiences and their ability to sell merchandise, which, at the end of the day is making more money for the company.
So, as far as market value is concerned, Ryback simply has it wrong.
While loyalty to the company is certainly appreciated in other ways, it has almost nothing to do with a salary of a WWE athlete, which has angered some long-time employees.
WWE star “Ryback” created waves last year after canceling his appearance on a wrestling program after a salary negotiation dispute.
True, WWE’s outcomes are predetermined but that doesn’t make the conventional “loser” any less valuable than the winner, especially to Vince McMahon, the company’s CEO.
In fact, the heel characters—the bad guys who set up the plot and make the heroes look even better— often become some of the most popular—and best-paid—WWE personalities because they put on such a good show for their audiences.
Legendary characters like Macho Man Randy Savage, Ric Flair, Triple H, and even Hulk Hogan were all heels at some point and each lost his own fair share of matches. But they sold tickets and merchandise in droves, because they each branded their characters in a unique manner that resonated with their audiences. As a result, they were compensated accordingly.
It is hard for someone to hear that they may not be as valuable as someone else, but with that knowledge, and especially in the WWE, this information can be used to incentivize a person to work harder or maybe rebrand their character.
There is no set caste system in the WWE. You are constantly fighting for your place in McMahon’s kingdom, but that also means there is a constant opportunity to grow and be noticed.
Yes, we all know wrestling matches are scripted, but the business of wrestling certainly is not. The performers selected to be used in those big headline matches are based on who is able to cultivate their characters and fill arenas—and sometimes the losers are better than the winners.