CFO George Barrios' Comments Strongly Hint at Online Future for WWE Network

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CFO George Barrios' Comments Strongly Hint at Online Future for WWE Network
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Yesterday at the UBS 41st Annual Global Media and Communications Conference in New York, WWE Chief Financial and Strategy Officer George Barrios gave a presentation followed by a question-and-answer session with financial analysts.  A full transcript is available (free registration required) at SeekingAlpha.com. The two main topics of discussion were the changes in the landscape of pay-per-view with a potential WWE Network and the positioning of live WWE shows as "DVR-proof" akin to traditional sports programming en route to increasing rights fees for WWE programming.

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The discussion of pay-per-view and the WWE Network opened with a fairly candid comment on the current PPV market. "The network for us is the re-imagining, the re-envisioning of the pay-per-view business," Barrios said. "$45 to $65 for about three hours of content, it's pretty expensive in today's world where there is so much content out there."

While historically PPV price increases either had no bearing on buys or actually coincided with increases in buy rates, the feeling among wrestling fans that the current pricing is too high for monthly events has never been stronger. While the recent string of bad WWE PPV shows certainly didn't help matters, the sentiment was pretty much universal when 249 of Bryan Alvarez's Figure Four Weekly subscribers responded to his survey on PPV buying habits three years ago (F4WOnline subscribers only link):

Many people noted the WWE price increase as a major deterrent. It was noted that paying $44.95 or $54.95 for WrestleMania or even Royal Rumble could be justified, but paying that for pretty much any other B-show was out of the question (and for the record, based on responses a B-show is now anything outside Royal Rumble or WrestleMania, with a few people adding SummerSlam and No Way Out). Nearly everyone, to a person, suggested a tiered pricing structure, where the current prices would be in effect for Mania and maybe Rumble, and all other shows would be priced significantly lower.

In Barrios' presentation, the talk of PPV pricing set the table for discussing plans for the WWE Network. A few of the comments seem to back up some of the rumors reported last week, initially at WrestleZone but seconded by Dave Meltzer at F4WOnline.com in the subscribers-only section.

The CFO explained that "the network for us is taking those a la carte pay-per-views, bundling them together, using our live range, our production capacity to program around those pay-per-views 24/7 linear as well as a large VOD component." In plain English, that sounds like what was reported last week: The network will consist of a traditionally programmed 24/7 "channel" supplemented by a vast library of on-demand content.

How will this content be distributed, though? "We’ve been working with the [cable and satellite companies], the same pitch I just gave you here, let's transform the pay-per-view business together, grow the business for both of us. Quite frankly it's been a bit of a slog, having those discussions but we continue to have them."

While there's still a tinge of optimism to what Barrios said, it still effectively confirms Meltzer's reports that cable companies showed no interest, making online distribution the only realistic way to go. Barrios later added that WWE will "continue to work with the [cable and satellite companies], see if we can knockout a deal in traditional distribution."

If not, though? "We have [the online] option which fundamentally is unilateral. We could do it at our own discretion." Barrios noted that Netflix's efforts across the board in licensing, developing software, etc. have brought about major changes in the online distribution landscape. "Earlier this year we said where two years ago we didn't think there was enough of that happening to make a network viable [online], we now believe it is viable [online]."

When reached for comment today, WWE issued this statement to Bleacher Report, sticking with what they've been saying for the last few months: “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.”

In the question-and-answer session after Barrios' presentation, one analyst asked if, while Barrios was "not in a position to announce anything today despite the swirl of rumors in the press," he could explain the "pushback" from cable and satellite companies to the network and change in the PPV model:

And the pushback continues. I want to be fair to—you are having this commercial discussion, everybody wants what everybody wants and sometimes you can’t agree on what is fair terms. I don't want to mischaracterize the other side in the discussion. What I will say is I have not understood and still do not understand why the pay-per-view transition to a subscription service delivered by the [cable and satellite companies] did not make sense, I still don't understand it.

Other than complete risk aversion and/or state, I am not suggesting that's what was the motivation but what I would say is I don't understand it.

Explaining why WWE is the right fit for this type of service, Barrios said their research shows hardcore WWE fans are much more likely to be into binge viewing of online video:

So in other words if the general population today is viewing X hours a month or a week over-the-top long form our fans generally over index by about 30% to 40%, our most passionate fans but the data seems to indicate 60% to 70%. The combination of the mass consumption and change as well as our own fan change over the last 12 months that’s what we said you know what, this is viable.

I was here 12 months ago and people were asking me then and I said we just don't see the data to say that it’s there yet, now we see the data there. It doesn’t mean we are going that way but it is now a viable option.

To put those numbers into perspective, Nielsen Media Research's 2013 analysis of online viewing habits reported that 88 percent of Netflix subscribers and 70 percent of Hulu Plus subscribers stream three or more episodes of the same show inside of a day. Perhaps more relevant to the potential success of an online WWE Network, the same study provided various figures on how many Netflix and Hulu Plus subscribers use specific platforms (on regular home/work computer, on different mobile devices and on different set top boxes) to watch the services' programming.

WWE via TechFaster.com
WWE "save the date" notice for CES event.

WWE has a special event on Jan. 8 in Las Vegas as part of the Consumer Electronics Show. Between the venue and Vince McMahon being announced as appearing (he's rarely at the more "run of the mill" WWE presentations anymore), it's hard to think that it's anything other than the announcement of a new online network.

Between what appears to be the launch of the network, and the negotiations over Raw and Smackdown, 2014 is going to be a huge year for WWE, and it's likely starting with a bang in Las Vegas.

David Bixenspan has been Bleacher Report's WWE Team Leader and a contracted columnist since 2011. You can follow him on Twitter @davidbix and check out his wrestling podcasts at LLTPod.com.

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