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WWE Network – The Launch, The Facts & The Future

January 14, 2014

wwe-network The recent announcement of the WWE Network is going to make 2014 the biggest turning point in the professional wrestling industry since the start of Hulkamania thirty years ago.  Whether or not this turning point will move things in a positive direction for WWE fans, wrestlers, owners, investors and partners is anybody’s guess at this juncture.  Indeed, the only party who definitely stands to gain from this is UFC, for reasons we will get onto in a moment. First, however, let’s just run down the facts:

  • WWE Network launches at 9am EST on Monday 24th February, the day after the Elimination Chamber PPV, with the first live broadcast a post-Raw show at 11:05pm EST that same day;
  • WWE Network will cost $9.99 per month for a six-month contract, which will automatically renew for another six-month period unless advance notification of cancellation is given;
  • There will be a free one-week trial period at launch, which will include a live, two-hour edition of NXT on Thursday 27th February, head-to-head with TNA Impact, including a Sami Zayn vs Antonio Cesaro two-out-of-three falls match;
  • All 12 of WWE’s current pay-per-view events will air on WWE Network, starting with WrestleMania 30;
  • All prior WWE, WCW and ECW PPVs will be available on WWE Network at launch;
  • Regular weekly programming for WWE Network includes repeats of Raw (likely the 90-minute version currently uploaded to Hulu), Smackdown and Main Event, after they have aired on regular TV that week, plus NXT and Superstars.  There will also be 30-minute pre- and post-game shows for Raw and Smackdown;
  • Other content includes Legends House (a reality show about retired wrestlers that was filmed in 2011 but never aired), WrestleMania Rewind (retrospective reviews of specific matches), Countdown (a self-explanatory rankings show), Monday Night War (a recap of the Raw/Nitro era), Total Divas (repeats of the first season that aired on E!), plus a daily live studio show that will launch in the summer, as well as “uncut and uncensored” classic matches;
  • At launch, around 1,500 hours of on-demand content will be available, with the remainder of the 100,000 hour video library being brought online in due course;
  • WWE Network will be accessible at launch through PS3, PS4, Xbox 360, Roku, Kindle Fire, Android devices, iOS devices, as well as on desktops, laptops and smartphones via the WWE App.  It will become available on Xbox One and select smart TVs later in the year;
  • Most shows on the network are to air without commercials, yet WWE will sell a “limited amount” of sponsorship and advertising time;
  • The network will broadcast in 720p HD;
  • WWE Network will be handled by MLB Advanced Media, the operators of the MLB.tv and ESPN streaming services, which will manage the streaming infrastructure, app development and operational support;
  • The aim is to launch the network in the UK, Canada, Australia, New Zealand, Singapore, Hong Kong and the Nordics by the end of 2014 or early 2015, largely dependent on the terms of existing TV contracts in each region

As you may remember, WWE’s original plan for the network was to launch it as a regular subscription cable channel.  In September 2011 they went ahead and announced that this was happening, going so far as to air this commercial on their programming:

The slated launch date of 1 April 2012, the date of WrestleMania 28, came and went without any public progress on the matter.  Behind the scenes, WWE realised their hubris when it became apparent that no existing cable provider was interested in adding such a channel to their packages.  As was glaringly obvious to everybody outside WWE at the time, this failure may have been an embarrassment but it was for the best.

Without wishing to sound too dramatic, the days of regularly scheduled programming on TV stations is on the way out.  The future direction is trending towards on-demand services in which viewers can access whatever content they want, at whatever time they want, in whatever place they want, on whatever device they want, all at the push of a button – no need to set your watch by the broadcast time, no need to fiddle about with recorders or go to unpleasant websites to obtain shows by some other means.  The rapid growth of Netflix in recent years is testament to this trend, which will grow apace as older generations more familiar with cable TV give way to newer generations more comfortable with on-demand streaming.

In adopting a Netflix-style model for their network, WWE is to a degree future-proofing it from technological obsolescence.  It is also granting WWE more independence over how they operate the network.  Apart from the involvement of MLB Advanced Media, which at the end of the day will do whatever their client requests, WWE is flying solo here.  They have to meet the considerable start-up costs and ongoing expenses of this venture, yet if they can make it work then 100% of the profits are theirs to keep.

This is the major advantage for WWE – and their biggest risk. Under the present model, WWE PPVs in the US are available for about $54.95.  The price can vary depending on the event, with WrestleMania costing more, and whether the PPV is in HD or not.  Regardless of price, WWE automatically has to give the cable companies that carry these PPVs 50% of the gross revenue.  Under the new WWE Network model, after the start-up costs and ongoing overheads, WWE will stand to gain 100% of whatever profit they can make.

On the surface, that’s good.  Scratch a little deeper, however, and there are serious question marks about the numbers involved here.

The buyrate for the TLC 2013 PPV is not yet available.  From TLC 2012 through to Survivor Series 2013, however, WWE managed a total number of 2.25 million domestic buys in North America.  At $54.95 a pop, that’s a gross of $124m.  After the cable companies take their cut, that’s $62m.  If we assume WWE Network subscribers sign up for a whole year, that’s $120 spend per annum.  In order to generate $62m gross profit out of those subscribers, WWE would require 518,000 subscriptions. That might not sound unreasonable but bear in mind the average number of buys for the non-WrestleMania, non-Royal Rumble PPVs during that period was just 123,000, with a substantial tail-off in the last couple of quarters.

Granted, there are a myriad of unquantifiable factors that come into play here.  Over the course of a year, the WWE Network would be 82% cheaper than ordering all 12 PPVs, so that may persuade people who currently just buy one, two or no PPVs to subscribe.  Perhaps there are friends who get together and all pitch in a few dollars for each PPV that will now go off and all get individual subscriptions, ultimately spending more on the network than they otherwise would have done on the PPVs.  Not to mention the impact of the eventual subscriptions WWE can get outside of the USA, presumably for little additional cost once the infrastructure is up and running.

This is uncharted waters for all concerned.  WWE itself touted a survey during the network’s launch event that claimed 62 million homes in the USA had at least one WWE fan.  To be frank, they’d be lucky if 62 million people in the USA know or care what the initials WWE represent.  One can only hope that WWE is being run by brain, not ego, and has more sensible data to use when forecasting the long-term sustainability of this new model.

If they haven’t but are steam-rolling on with this plan regardless, there may not be any going back. Those very same cable companies who used to get a hefty chunk of income from WWE PPVs ($62m from the aforementioned 12 PPVs, remember) are not best pleased about WWE putting these events onto their own network at a fraction of the price.  Remarkably, despite the WWE Network’s revised, Netflix-esque strategy being known to the wrestling press for a long time, it appears that the likes of DirecTV and Comcast only became aware of the plan just after the New Year.  Fair enough, executives at such corporations may be more interested in the Wall Street Journal than in the Wrestling Observer, but it is amazing that word did not spread to any of them.

To say that they are pissed is something of an understatement.  DirecTV is already threatening to not air any future WWE PPVs, citing a contractual clause that stipulates WWE is not allowed to undercut their PPV prices on the internet, which is in essence what they are now doing.  If they follow through on that threat, WWE may lose out on whatever additional PPV profits remain to be had.  Of more concern to Vince McMahon and company, however, is the reaction of Comcast.

This is because Comcast owns NBC Universal, which ironically refuted WWE’s original network proposal back in 2011.  NBC Universal also owns the USA Network, which airs Raw, and Syfy, which airs Smackdown.  Despite WWE having cost them a hefty sum in PPV revenue without so much as batting an eyelid, WWE is also seeking a giant increase in TV rights fees for these shows and whatever other ones NBC might fancy.

It is a bold ploy.  WWE will be reluctant to leave the NBC Universal umbrella for any stations with less exposure and sponsorship appeal unless they get financially compensated to a suitable degree.  If there are no fitting suitors out there willing to make WWE an offer it can’t refuse – as was the case the last time the rights to Raw were up for renewal in 2005 and for Smackdown in 2010 – then WWE may find itself at the mercy of a very resentful NBC.

Make no mistake about it, WWE needs decent TV exposure to survive.  Ticket sales, PPV buys or network subscription, merchandise sales, sponsorship deals, mainstream press, it is all driven by TV time.  That might change as the landscape of broadcast entertainment continues to evolve, yet that will be a long-term process.  WWE is not just a TV product but TV is the gateway through which the rest of their business comes to the company. NBC is well aware of this.

If, once again, there is no bidding war then the anticipated giant increase in TV rights fees for WWE may not materialise, which will only serve to disappoint the investors that have driven up the company’s share price in recent months.  On the other hand, the changes to the TV business may necessitate a bidding war in some form or fashion.  As TV networks strive to survive in the face of on-demand services, it is live sports properties that have become the lifesavers.  The WWE brand might not have the perceived legitimacy of an NFL or an NBA, but 4 or 5 million prime-time viewers every Monday night and 3 million every Friday night is not to be sniffed at.

But what of, in some ways, the most important factor in all of this – the fans?

It seems that there are two types of fan who are excited about this network.

The first type is looking forward to getting all 12 PPV events for the cost of just 2 at the moment, with access to thousands of hours on the WWE video library thrown in for free.  This fan should go in with his or her eyes wide open.  These events are no longer going to be “pay-per-view” as such and will instead be three-hour monthly TV specials.  In the long-run, it seems inevitable that, aside from the Rumble and WrestleMania, these events become little more than hype vehicles for WWE’s real money show, Raw.  Would you like more Battleground with your subscriptions, kids?

By the way, if the PPVs are the main attraction for you then there is little point in signing up at first.  Aside from the inevitable technical difficulties… Triple H Technical difficulties …that will present themselves in the first couple of weeks, there are six weeks between the launch date and WrestleMania 30.  Your subscription will also end on 25th August, whereas if you started on 6th April, the day of WrestleMania, it would expire on 5th October, meaning that the Night of Champions PPV in September would be covered by your first six-month subscription.  It would also mean that your second six-month subscription would not expire until 5th April 2015, which would therefore include WrestleMania 31.

Just a little tip.

Anyway, the second type of fan is powered by nostalgia and does not give a hoot about seeing John Cena vs Randy Orton part XXVIII at Extreme Payback, or whatever they call these darn shows nowadays.  This type of fan pays to access the network’s video library and just gets the PPVs for free as a bonus.  This fan should bear in mind that the pipe dream of the network having every single show, ever, available to watch is unlikely to materialise.  As noted, at launch all of the old PPV events by WWE, WCW and ECW will be available.  That’s grand, yet there is no clear sign of how or when or what the library will be updated with.  If you want to watch old episodes of Raw, or Mid-South, or WCW Saturday Night, there is no indicator that you will be able to watch these in chronological order.  You might, but equally you might have to wait until they upload shows by theme or by some other means.  You might receive them in volumes, with each new upload causing the previous volume to be removed, in which case you will be time-pressured to get through everything.  Even Netflix is notorious for removing content without warning.

All of which is not meant to sound too negative about what is a very exciting venture.  It’s just a warning to WWE.  If the PPVs, or monthly specials, or super-cards, or whatever we call them now, are not of a sufficient quality then they will lose out on a lot of subscriptions.  If the on-demand library does not contain enough of the shows that people want to watch, they will lose out on a lot of subscriptions.  People will still get three hours of Raw for free each Monday night, it is up to WWE to tempt them to pay extra.

If WWE is able to appease both camps then there is every chance this could make the company more profitable than ever before.  WWE could get their giant rise in TV rights fees, surpass the break-even figure for network subscriptions and Vince McMahon could go swimming in a pool full of gold, Scrooge McDuck style.  Of course, if the worst case scenario comes to pass, WWE could wind up with a humiliating and expensive failure of a network and see their TV product shunted off to some no-name channel on a pennies-for-the-dollar deal, leading to massive cost-cutting requirements that diminish the quality of their product and so run off viewers.

The truth will likely lie somewhere in between.  One thing that is true, however, is that there is no going back here.  WWE cannot turn around and ask people to pay the old PPV prices, even if the cable companies agree to carry them on a 50-50 split again.

This is great news for UFC.  Other than the occasional Floyd Mayweather and/or Manny Pacquiáo boxing show, now that WWE has removed itself from the PPV industry only UFC remains as the major player in it.  They will benefit from increased PPV promotional focus from the cable companies and be left in a very sweet bargaining position.  If the WWE Network does succeed, they can go ahead and mirror that business model without incurring the risk of doing it first.

The WWE Network story is shaping up to be a turning point not just in the history of WWE and the professional wrestling industry, but in that of television, pay-per-view, cable companies, UFC and the big-money investors behind them all, as well as the fans.  Not to mention the wrestlers themselves, of course.  Quite how the WWE Network’s royalty system will operate remains a mystery, although on the surface it seems unlikely that they will be able to earn as much as they do from appearing on PPVs at present.

Although it seems odd to give such short mention to the wrestlers in this article, it is oddly appropriate.  The lucrative brand remains WWE, not John Cena or any other wrestler.  The biggest wrestling news story in 2014 will indeed be the WWE Network, not anything in specific that happens inside of the ring.  Let’s just hope that it works out for the best, for them and for us.

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From → Wrestling, WWE

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