WHERE WE ARE

This week, a tantalizing notice materialized suggesting that WWE will be making a major announcement on January 8, 2014 in Las Vegas. That coincides with the International CES 2014 (Consumer Electronics Show). Most are speculating that Vince McMahon will finally be making a blockbuster announcement regarding the launch of the WWE Network.

Compared to other observers, I’ve been quite bullish on the promise, possibility and potential of a full blown WWE Network (as evidenced by last month’s piece “Can the WWE Network Succeed?“, the slightly updated version that appeared in the subscription-required Nov 22 Figure Four Weekly and my comments during the two-hour WWE Network Roundtable on Good Will Wrestling).

I still believe that the linchpin for a successful WWE Network is offering new content that is monumentally important to WWE Fans. The best suggestion so far has been the idea that the WWE Network airs live PPVs at a much lower cost to the customer. While this model does endanger their already crumbling domestic PPV infrastructure, it prepares the WWE for their next era which is built on the bedrock of new TV Rights Fees (starting in 2015).

This quarter has been filled with WWE Network speculation fueled by credible statements from the WWE:

First was Stephanie McMahon’s statement at NYC Television Week that they were “targeting first quarter next year.”

Next came the Q3 Conference Call which included many of the same talking points including using “traditional and non-traditional means of distribution” (Vince McMahon) for the WWE Network and the possibility of distribution via “traditional cable, satellite and telco partners’ or through over the top digital distribution.” (CFO George Barrios)

A few weeks later Matthew Singerman was named the Executive Vice President of Programming with responsibility “for the strategic development of content, including original, unscripted and scripted shows, scheduling of all programming and operations across all distribution platforms, including a potential WWE Network.”

That same week news broke from Cable Distributors that WWE was discontinuing the VOD (Video on Demand) service of WWE Classics on Demand on 1/31/14.

WWE issued a series of internal promotions including Chief Revenue and Marketing Officer Michelle Wilson (who is “spearheading the company’s efforts to launch a WWE Network“) and Chief Strategy and Financial Officer George Barrios (who will “take over management of WWE’s day-to-day Television Operations” and “With Wilson, Barrios is co-leading WWE’s television rights negotiations“)

Meanwhile, wrestling websites, analysts, observers, personalities and pundits have been feeding a steady stream of unconfirmed, but plausible details into the delicate WWE Network Rumor ecosystem:

PWInsider reported that the exact “first quarter next year” launch date for the WWE Network would be 2/24/2014 – the day following the Elimination Chamber PPV.

Dave Meltzer wrote in the 11/25/2013 Wrestling Observer Newsletter (subscription required) of a myriad of details including offering Wrestlemania on the WWE Network this year and the possibility that the network would be offered through Netflix instead of traditional Cable/Satellite distributors.

Former WWE Writer Court Bauer discussed on the MLW Bauer + Pollock Podcast that WWE was struggling to gain any clearances with Cable Networks and streaming sites such as Hulu were unlikely to carry the WWE Network due to recent upper management shake-ups.

Yesterday (12/5), Wrestlezone’s Justin LaBarr posted a titillating series of claims about the WWE Network. Summarized by David Bixenspan the important parts were that WWE Network would be available “online only on all major connected devices, 24/7 stream plus an on demand library that includes every Raw, Smackdown, and PPV to date at launch.” Also, the price would be “$10/month with a $60 up-front at launch for the first 6 months but that would include Wrestlemania 30 and all subsequent non-WM PPVs as part of the subscription.“

Throughout the rumor mill (and reaffirmed today), WWE has remained non-committal: “In addition to not being able to confirm timing of WWE Network launch, WWE is still considering all options for distribution, pricing and role of pay-per-view.”

WHAT IT MAY BE

The signs for the WWE Network launch seem to be pointing to three things:

WWE will be launching the Network during the first quarter of 2014. It makes the most sense to launch it during the Royal Rumble to Wrestlemania period when the WWE Viewership and Interst is the highest. The oft-repeated launch date of 2/24/2014 seems quite reasonable (more on that below). WWE is likely already working with top companies in the area of streaming media so they’ll be capable of providing a reliable WWE Network stream. This would be completely outside of using the traditional Cable/Satellite distributor Premium Channel realm. In order to provide maximum incentive to lure fans to subscribe, WWE would include a major launch enticement such as including Wrestlemania as part of the Network this year.

Increasingly, we’re not hearing about traction for traditional distribution over Cable or Satellite Networks for the WWE Network (either as a regular channel or a premium channel).

John Williams has made an excellent case for how WWE missed an opportunity to launch WWE Network as a regular channel replacing G4 when Comcast was looking to sell it. (Even UFC wasconsidering buying the channel back in 2011 prior to their blockbuster Fox deal.) As a premium channel, there’s been little buzz from distributors and no leaked reports of potential coverage. That’s telling. Presumably, the lure of taking a monthly split off the $10-$15 WWE Network subscription price versus the monthly split off the $45-$55 PPV price was not exciting cable or satellite partners.

An online-only WWE Network is certainly a mixed bag. From a forward-looking and long-term perspective, I believe it’s ultimately the right move. You’re looking at the trends of a cord-cutting younger generation geared towards obtaining content online, a massive Netflix subscription boom (30 million subscribers, with over “31% of downstream bandwidth in North America is for Netflix alone”) and phenomenon of people canceling Cable in the Great Recession as Cable bills skyrocket. Conversely, it’s the Networks (primarily NBCU) which are fueling the WWE through TV Right Fees (currently over $160M/year and possibly poised to double with the latest negotiations). While Networks haven’t been showing WWE much love when it comes to carrying the WWE Network, they can’t be giddy about the notion WWE might be cutting them out of the picture.

Coverage through streaming players (such as a AppleTV, ChromeCast or Roku box) and major gaming consoles (PS3/PS4, XBox360, XBox One, WiiU) will allow WWE fans to watch the WWE Network on their television sets and not just on their tablet and computer screens. Furthermore, WWE has invested heavily in promoting their free WWE App (5 million downloads) and a well-executed subscription streaming service would be an excellent tie-in for mobile devices and tablets that have already shown their interest in WWE content. (It is worth noting that WWE is already offering streaming PPV through XBox and Playstation but though the number of actual buys for PPVs through them was quite low – 17,300.)

Launching the WWE Network on 2/24/2014 (the day after Elimination Chamber in Minneapolis) has some auspicious timing. Typically, WWE releases their annual report and holds their 4th Quarter/Year-End Conference Call either the last week of February or the first week of March. The buzz from a successful (and they will be cagey on defining success up front) WWE Network launch would likely be a boon to their attempts to continue to impress investors. Plus, they won’t have to actually answer the difficult question about the impact of selling a subsidized $10 HD stream of Wrestlemania while also asking for $60+ for the same product on traditional PPV. WWE also leads with their biggest event (rather than a weaker PPV like Elimination Chamber or their #2 or #3 best performer with Royal Rumble).

From a pricing standpoint, using a bundled 6-month price up-front (with Wrestlemania) has an intriguing strategy in that it prevents WWE customers from early cancellation (after just the one mega-event) and shields WWE should they have some early streaming iPPV problems (which have notably plagued wrestling companies all over the world – especially ROH, but also the juggernaut WWE.) Presumably, the split on a $9.95 price (keeping prices below $10 seems important in the online world as both Netflix and Hulu hover around $8) while being distributed online is far more favorable than what they’d see with Cable/Satellite distributors. I’d wager WWE can retain at least 80% of the online subscription package (depending on card fees and their deal with the streaming providers) while they’d be looking at more like 30-45% for a Premium Cable Channel.

It’s difficult to know the impact on the domestic PPV business as PPVs will continue to be offered ala-cart via normal distribution methods (and normal PPV prices) throughout 2014. I believe that an online WWE Network model will have several hundred thousand subscribers at first (depending on whether this service expands from a purely North American Network to an International Network), but will not come close to the million subscriber number (that WWE touted as their requirement for a traditionally distributed WWE Network Break-even point). It’s also likely that the WWE Domestic PPV base won’t collapse as rapidly in 2014 with an online-only distribution model versus a premium channel. Last year, CFO George Barrios estimated WWE Network would spend between $30 and $45 million to get things running and it will probably take at least half a million subscribers annually to just off-set that cost alone. (And we’re just talking WWE Network startup costs. Someone has to cover the $38M+ in annual costs to produce PPV events.)

Still, if WWE can keep things together until 2015, they have the promise of vast TV Rights riches from new Raw and Smackdown contracts to carry the business into the future.

Chris Harrington (@mookieghana) is working on his first book, #Wrestlenomics—a collection of pro-wrestling analytics and statistics. He can be reached at [email protected] and regularly updates his wrestling statistics websiteindeedwrestling.com and his blog indeedwrestling.blogspot.com