After several months of speculation, the WWE announced the launch of the WWE network, which will feature a 24/7 schedule and on demand events streaming online. Basically, the entire video library will be accessible to subscribers for $9.99 a month when purchased as a six month package, including pay-per-view events. Obviously, the WWE is using the emerging technology of online streaming to attempt to advance distribution and in the process offer more content at a cheaper price. Sounds great, right? As with anything in wrestling, time will tell, but there’s a lot of potential for this new business venture.
The major plus for anyone that subscribes to the WWE network is that it will include PPV events, which cost $45 using traditional distributors. The video library access is a perk, but the current PPVs offered are the major selling point because without the PPVs being offered, the WWE network would be a streaming version of WWE 24/7 On Demand that was available on different distributors for a few years. Reportedly, the WWE 24/7 service had around 100,000 subscribers and was deemed profitable, but not necessarily a major success.
As mentioned, the PPVs being offered at such a cheap price is the major selling point of the network, but it could also be the major risk of it. Various news outlets have reported that the WWE has spent $40 million dollars on the network and it would need 1-2 million subscribes to cover the cost of the launch of the network. The cable companies that offer WWE PPVs get a percentage of the buy rates so doing things more “in house” so to speak would allow the WWE to make more of a percentage of the network sales, but they are using the same company that streams MLB so there’s probably a percentage deal for them as well. The bottom line is for the WWE network to be a success, there would need more people to subscribe and get access to PPVs at a lower price than the buy rates that they get for people that order PPVs for $45 dollars. Basically, they will need enough subscribers to cover the traditional revenue lost if people subscribe to the network. Obviously, there has to be more of the WWE audience that will pay for the network than order the PPVs. If the projected 1-2 million subscribers is correct for the WWE network to become profitable, the WWE would need 30-40% of the weekly TV audience to pay for the network, which is significantly more of the audience than those that by traditional PPVs. It’s more than possible, but there’s certainly risk involved when launching a new business model, considering that traditional PPVs have generated millions for the company.
Some fans might be in the “wrestling bubble” and not realize that a major portion of the WWE audience are causal fans with a variety of entertainment options so just because they watch Raw, it doesn’t necessarily translate to them paying to watch a 24/7 wrestling network. If 24/7 accessibility to wrestling was a major draw, the On Demand service would’ve had more subscribers. The other major draw back is that the WWE could indirectly cost themselves money because with the amount on content that is being advertised for the network, will it effect potential DVD sales?
As was mentioned earlier, the WWE network is a cheaper option for PPVs than the cable companies, which isn’t exactly good news for them, as the WWE generates major PPV money. Dish network released a statement that implies they might drop WWE PPVs, but it’s a bluff. WWE is a proven brand and it will probably still be profitable for them.
The question here is, why would the WWE risk traditional PPV and potentially sabotage one of their most profitable revenue streams? Anyone that tries to tell you that the pay-per-view business is declining is incorrect, as UFC 168 did an estimated 1 million PPV buy rate. If you have a product people want to watch, they will pay to watch it, but the WWE has had some sub par PPVs the past few months, which is why there were lower buy rates. Will the more affordable price translate to more subscribers? A cheaper price makes it an easier sell, but there’s no guarantee that fans will pay to watch it if there’s lackluster PPVs. As for the potential of the network, I think that initially, the WWE will get the subscribers they project to cover the cost of the launch because the subscription includes Wrestlemania, but the success of the network will be if the fans renew the subscriptions after Wrestlemania. There’s business risk, but there’s potential for major money and it will be extremely interesting to see how many people pay for the network.
Until next week
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