Lucha Underground: The Business Model

The goal of most companies in the wrestling industry is to produce a product good enough to get TV rights fees, use the TV rights fees to offset the cost of production, and make money on house shows, PPVs, and merchandise.

But this is not most wrestling companies…in fact I’m not entirely sure it even is a wrestling company…

The Setup

Lucha Underground is jointly owned by United Artists Media Group, a subsidiary of MGM Studios, and Asistencia Asesoría y Administración LLC (AAA), according to their media company FactoryMade. UAMG is run by Mark Burnett, who is the executive producer of notable hit reality TV shows like Survivor and Celebrity Apprentice. The breakdown of the ownership has never been disclosed, but former AAA booker Konnan recently stated on a MLW podcast that AAA was a minority partner in the venture. Given the production, style, and direction, it would seem pretty clear that UAMG calls the shots, while AAA provides the talent, and consults.

The Production

Both Mark Burnett and Robert Rodriguez (Director, founder of El Rey Network) have executive producer credits on the show, but the show appears to be run by three individuals. Eric Van Wagnen, a former executive producer of WWE Tough Enough, as well as a former EP on, for us Americans, our future president’s supreme leader’s former show, Celebrity Apprentice, acts as the de facto point man for the group. The production appears to be run by Anthony Jensen, another former Tough Enough alum, and Chris DeJoseph, who once upon a time put on a thong and oiled up to dance for DX, heads the writing team, which presumably would be from where most of your booking decisions and storylines likely originate (much to the chagrin of noted wrestling writer hater, James E. Cornette). The show is produced seasonally, taped in advance, and plays very episodically. El Rey Network, which itself is a joint venture by Robert Rodriguez and Univision, pays a rights fee to air the show. Unimas, a subsidiary channel of Univision, aired a Spanish language broadcast of Season 1, but did not bring the show back for Season 2.

What is El Rey Network? I’ve never heard of it!

Nor have most Americans. It’s only in about 40 million homes in the US, and for most, it’s buried deep in your digital cable package, likely in the section where the cable provider bundles Latino themed channels (which is somewhat strange because even though El Rey is Latino themed, it’s the only English language Latino channel in that group. So if you didn’t know what it was, you’d pretty much assume it’s a Spanish language channel and pass over it). To put things in perspective, TNA on PopTV has about twice the distribution (75 million homes) as LU on El Rey does. You can, however, stream El Rey through pay services Sling TV and Fubo.

So…El Rey pays them for the show…does this make money?

The short answer: Almost assuredly no. Dave Meltzer of The Wrestling Observer reported earlier this year that the company may have lost upwards of 20 million dollars on Season 1, and that the per episode cost of the show ran around $400,000. It should be noted that those figures were disputed by Van Wagnen, but Meltzer’s since reported that LU has lost roughly half of what TNA lost over a 10 year period. It’s possible that some of the dollar figures are inflated, and some of that cost is assuredly offset by El Rey, but given El Rey’s fledgling status, that could realistically only be a fraction of the overall bill. All you have to do it look at the show — it’s definitely an expensive show to produce. Add in that they cut the episode order for Season 2, have performed cost saving moves like taping Seasons 2 & 3 back to back, and are steadily on the hunt for a network and/or streaming partners, and it all adds up to a company that’s trying to stabilize itself while bleeding out.

Wait…they make no money?

Well, they likely make no profit. As far as I can tell they do bring in some income, but from only few discernible sources: The El Rey deal, selling their show on iTunes (Season 1 is $44.99, Season 2 is $39.99), their bare bones merchandise store, and a handful of international TV deals like the one they signed with TLN in Canada. While there’s no raw data on how the show has sold on iTunes, and I’m sure it’s been a help, it’s not making up the difference if the figures reported in WON are remotely accurate.

Could another network other than El Rey pick it up?

Anything is possible. El Rey could decide what they’re in for is too expensive, cancel it, and UAMG could shop it to someone who wants to put more money into it. But that seems extremely unlikely, and honestly, LU is one of El Rey’s flagship shows. There’s no reason for El Rey to cancel it unless the network’s about to fold. The more likely solution would be picking up a Spanish language partner again. Unimas carried the show for Season 1, but Univision appears to be under a certain amount of financial stress. Both El Rey (which it owns a stake in) and its Fusion network are big money losers to this point, and with Disney ending its partnership with Univision, the company seems to be scrambling to reorganize. It’s speculative, but part of the reason Unimas may have dropped LU, despite Univision owning both a part of El Rey, and Unimas, was that one network was cannibalizing the other’s audience.

The most likely fit for a Spanish language partner would be Televisa in Mexico, which would open LU to a huge audience in Mexico. Televisa has had a working relationship with Univision for decades, and with Univision having affiliations with both El Rey and Televisa, it seems plausible. But reportedly, LU negotiated, but failed to obtain a deal, this past offseason. Make no mistake, that would be a significant game changer if LU were to strike a Televisa deal. It would give them another (huge) TV partner to offset cost and really stabilize the company for the foreseeable future. But how Televisa feels about LU, no one really knows. It would also open up the awkward conversation of how do you reconcile AAA with LU in Mexico when both companies use the same wrestlers but exist in different universes. All that said, I’m not sure Televisa has been their goal, it would just be a really, really nice score.

So…what’s the point of this, then? Aren’t they just lighting money on fire?

This is where you get into the “this is uncharted territory for wrestling” portion of this discussion. If the goal of LU was to be a competitive wrestling company, the answer to those questions would be “yes.” But from all indications, the goal of the company is to create a television property that can make money on the back end.

That’s where you can say this isn’t really a wrestling promotion. It’s a TV show. They’re not trying to become popular enough to draw houses or sell PPVs. They’re trying to create enough episodes that they can sell the show in syndication, and on streaming, as well as around the world, and begin to make their money back through those deals.

This is actually pretty consistent with the economy of the TV business in general. Most TV shows lose tons and tons of money when they’re launched. If they carry enough of an audience, long enough, to create enough episodes to score syndication, then the episodes are bundled and sold, and the production company makes its money back steadily over time by selling the property to anyone and everyone who needs content. While it’s the driving force of the TV business, it’s actually a completely foreign concept to the wrestling business, which is what makes this so interesting. But think of LU in a similar (but significantly more expensive) boat to Louis CK and what he’s gone through recently with Horace and Pete. He made a show that cost him a lot of money. Now he has the show. It’s up to him (and how good the show is) as to whether he makes it back and anything on top of that. That involves selling it direct to the consumer and licensing it to other outlets. It may work, or it may not. That’s the risk of producing a TV show, it’s just usually not as pronounced as it is in Louie’s case, because it’s usually shrouded under network finances.

WWE and WCW, among others, used to produce and sell syndicated TV shows like WWF Superstars, or WCW Worldwide, back in the 80s and 90s, but the idea of there being a rerun audience for a wrestling show seems to be one that’s never really been explored. Will someone watch old wrestling on TV at random hours of the day? Will someone sit down and stream episodes of old wrestling (a question WWE is still figuring out with their network). Wrestling has always been a form of entertainment that’s driven by promotion for big fights, and the uncertainty of who’s going to win, and what the fallout is going to be. Clearly, LU is aware of those pitfalls of the genre, which is why they’ve tried to make such an episodic product, with its own mythology, and broad story arcs to accompany the wrestling aspect of the show, hoping that those twists and turn will make it seem more desirable than trying to sell someone on why they should license old episodes of guys who fake fought a couple years ago.

Theoretically, through the spread of syndication (which in of itself will create a cash windfall), the show would gain notoriety, and draw people back to the first-run episodes on El Rey, helping both the network and the popularity of the show, and El Rey will be able to sell more ads for it (meaning a bigger rights fee), and from there, they’d have a hit and be able to license the characters and trademarks of the show for all sorts of stuff like spinoffs, toys, comics, the long-fabled goal of the LU movie, and so forth. And if it ever reaches that point, it becomes a profit machine.

But can that really work?

It’s the $64,000 $20,000,000+ question. They do have a few things going for them:

  • The show has been widely lauded critically.
  • There’s some logical sense behind it in relation to the TV industry.
  • They’re most of the way to their episode goal (100 episodes used to be the conventional standard for the number of episodes needed to begin shopping a show in syndication. That’s since been revised down to about 88, but given how content starved the media landscape is, that could even be a little lighter). After Season 2 concludes, LU will have 63 episodes (approximately 65 hours) of content in the can. With Season 3 just about finished taping, and another 25-30 or so episodes/hours added on to that, they’ll be right in that 88-100 sweet spot to begin shopping the show.

To me the biggest pitfall, other than people just looking at the show and not thinking syndicated reruns of wrestling are worth it, and passing, is they’ll finish taping Season 3 this month, but it probably won’t air until 2017. Which means if there is a Season 4, they won’t start taping until mid-2017.  Let’s assume everything works out perfect in terms of them being able to sell the show. Is their talent really going to sit out an entire year waiting for Season 4 tapings, especially with WWE on the hunt for talent? They could end up in a situation where they sell their episodes for the cash infusion the show needs to keep running, but the roster gets raided and the show is a shell of its former self.

So…why don’t they run house shows and PPVs?

Probably two reasons: One, there just might not be an audience for it. They ran a house show at SXSW as a trial balloon and it did fairly well from all accounts, but LU on El Rey only draws about 150k-200k viewers per week. Let’s just say their “reach” given cord-cutters/iTunes/illegal streamers is double that figure — it still makes running profitable house shows and PPVs kind of dicey. Look at TNA and their empty arena tour from their last big house show run. It’s an easy way to lose more money if you overshoot. But the second reason is the nature of the product would just make the house show experience strange. The first-run LU viewer is nearing the end of Season 2. In reality, LU is finishing taping Season 3. So what do you do about titles? How do you build a PPV for shows that were taped over a year ago? They’re not the easiest questions to answer. Could you potentially run “exhibition style” limited house shows in small venues in select markets just so people could see the talents? Maybe. Many of the LU and AAA guys seem to be doing well on the Independent Circuit, and theoretically should be able to draw under the LU banner. But it’s a risk/reward situation. The amount of money they might make from that probably won’t change their business model. It’s still a content licensing enterprise if it’s going to succeed.