Beginning Tuesday, Aug. 12, WWE started to expand access to its WWE Network to over 170 countries. With less than six months experience running the over-the-top service, such rapid expansion is certainly ambitious.
The rush is driven by necessity. WWE needs to keep growing its subscription base.
Last quarter, it came dangerously close to showing no post-WrestleMania growth. Through the end of June, the WWE Network registered a net gain of only 33,000 subscribers due to an enormous number of subscribers who dropped the service during the second quarter. WWE executives cited "reoccurring payment issues."
One way to fight back? WWE raced to expand the pool of potential subscribers. While the service is not available in every market immediately, the Aug. 12 rollout represents an enormous swath of the globe.
But will it make a difference? Is it possible to provide an informed estimation for potential WWE Network adoption among international fans who were able to order starting Tuesday?
Current WWE Network Subscriptions
Thus far, we have only periodic estimates of the WWE Network subscription base:
Feb. 24: Estimated 133,500-plus sign up by 4 p.m. EST on launch day (WhatCulture.com analysis).
March 31: WWE reported 495,000 paid subscribers at the end of the first quarter (10-Q SEC filing).
April 7: WWE announced 667,287 paid subscribers as of WrestleMania 30 (WWE press release).
June 30: WWE reported 699,750 paid subscribers at the end of the second quarter (10-Q SEC filing).
It's clear the top-shelf events like WrestleMania are going to draw subscribers, especially at $9.99 a month. It's also possible that other A-list events such as Royal Rumble and SummerSlam may also garner attention. But what about the rest of the year? Can WWE ameliorate its sagging subscription sales through worldwide expansion?
WWE has provided a helpful tool where users can enter their country and receive a detailed list of which over-the-top connected devices the WWE Network will be available on.
It's stunning to consider that the combined population of countries and territories where the WWE Network will be available is over 2.79 billion.
However, that impressive statistic doesn't tell the entire story.
In reality, only about 8 percent of people in these countries (around 230 million) have some form of broadband access. And that doesn't even account for who will actually be interested in even ordering a subscription service like the WWE Network.
|Regions that will be able to order the WWE Network beginning Aug. 12|
|Region||Countries with population over 1 million||Total Population||WWE Network distribution||Countries with population in excess of 10 million|
|Africa||42||914 million||Over-the-top||Nigeria, Ethiopia, Congo, Tanzania, South Africa, Kenya, Uganda, Ghana, Mozambique, Madagascar, Cameroon, Ivory Coast, Angola, Burkina Faso, Niger, Malawi, Mali, Zambia, Zimbabwe, Senegal, Rwanda, South Sudan, Guinea, Chad, Samalia, Burundi, Benin|
|Southeast Asia||7||432 million||Over-the-top||Indonesia, Vietnam, Burma, Cambodia|
|South America||10||406 million||Over-the-top||Brazil, Colombia, Argentina, Peru, Chile, Venezuela, Ecuador, Bolivia|
|Europe||30||374 million||Over-the-top||France, Spain, Ukraine, Poland, Romania, The Netherlands, Portugal, Greece, Czech Republic, Belgium, Hungary, Sweden, Belarus|
|Caucasus||5||242 million||Over-the-top||Russia, Turkey, Azerbaijan|
|Latin & Central America||7||164 million||Over-the-top||Mexico, Guatemala|
|Eastern Asia||4||83 million||Over-the-top||South Korea, Taiwan|
|Central Asia||5||66 million||Over-the-top||Uzbekistan, Kazakhstan|
|North America||1||35 million||Pay channel (Rogers Communications)||Canada|
|Caribbean||5||31 million||Over-the-top||Dominican Republic, Haiti|
|Middle East||1||8 million||Over-the-top||(none; Israel is only country launching on Aug. 12)|
|Total||120||2,791,500,000||OTT with one Pay-TV||65 countries with 10M+ population|
|Analysis by Chris Harrington with information from WWE.com, PWInsider.com, CIA Fact Book and Worldbank.org|
About a third of launch countries have a population of at least 10 million. Two-thirds of the countries have populations of at least 1 million people.
The remaining third of the smallest nations and territories include many islands in the Caribbean (such as Aruba, Bahamas and Guadeloupe) and islands in the Pacific (Fiji, Samoa and Micronesia). There's also smaller European nations such as Luxembourg and Montenegro and lesser-known African countries such as Djibouti or Equatorial Guinea.
Perhaps the oddest place that the WWE Network will now be available is in the Arctic Ocean archipelago of Svalbard and Jan Mayen. I doubt we'll see a WWE tour there anytime soon. There's not even a permanent population on Jan Mayen. Still, if you're trapped on the Beerenberg volcano (and can somehow get an Internet connection), rest assured that you can watch SummerSlam on Sunday.
While the service previously was only launched in the United States, many outside users reported being able to subscribe to the WWE by masking their IP addresses using VPN or proxy services.
Even Chief Financial Officer George Barrios acknowledged in May at the J.P. Morgan Global Technology, Media and Telecom Conference that there were at least a "handful" of international subscribers using the WWE Network.
Based on the drop in international PPV buys since the WWE Network had launched, I previously estimated that around 125,000 of the current WWE Network subscriptions were from overseas. Editor Dave Meltzer recently wrote in the Aug. 11 issue of the Wrestling Observer Newsletter (subscription required) that between "220,000 and 280,000" subscribers were from "outside the U.S."
It would appear educated guesses vary that anywhere from 5 to 40 percent of the current WWE Network subscriptions may actually be from international users. In the absence of hard numbers from WWE, that's a wide estimate. Actual domestic WWE Network users estimates ranges between 420,000 (assumes heavy international usage and only 60 percent domestic) to 665,000 (assumes few international subscribers and 95 percent domestic).
That implies in a country of about 84 million broadband subscribers, WWE has attracted between .50 percent (420,000) and .76 percent (665,000) of the broadband population.
The midpoint estimate would suggest that a country with a similar affinity to WWE as the United States and similar economic and broadband situation would likely attract about five WWE Network subscribers out of every 813 broadband homes (0.615 percent).
So where is WWE betting it'll get the most new subscribers?
Many of WWE's largest established international markets (United Kingdom, Germany, Italy, Japan) are rolling out later or still remain unannounced.
The U.K. and Ireland, among WWE's most ardent and active fanbase, will get the WWE Network on Oct. 1. Still, the distribution method (whether it'll be through Sky Sports or over the top) remains unknown.
There's numerous external variables that we can examine to craft global adoption rate estimates. These variables include population, broadband Internet availability, English proficiency, adoption trends of other subscription streaming media (such as Netflix) and worldwide median household income. Additionally, in its conference calls, presentations and SEC filings, WWE has stated which international countries it considers to be their most strategic and important markets.
It's important to note that there's several large countries that are unlikely to drive large numbers of WWE Network subscriptions.
For instance, while there are more than 167 million people living in Nigeria, there is virtually no broadband access in the country. Furthermore, the median household income in Nigeria is around $2,700 annually (compared to $43,585 in the United States).
Can a subscription service that costs $10 a month thrive in this environment? I don't believe so.
Netflix's overseas experience also mirrors some interesting trends. A recent analysis by Digital TV Research estimated Netflix's subscriptions by country showing a surprising growth and acceptance in Nordic countries. As Gigaom's Janko Roettgers observed, "Netflix’s smallest markets continue to be in Latin America, where Netflix admitted in the past that billing has proven to be more challenging."
Estimating Largest Markets
Among the countries that were able to access the WWE Network starting Aug. 12, there are about 40 countries that have a population with a million or more broadband subscribers.
We'll use our U.S. adoption rate (0.615 percent) as our standard and index off of that.
There's six main groups that have the most potential
Group 1: Countries originally targeted for International Phase I rollout (Australia, Sweden, Denmark, Hong Kong, Norway, Finland, Singapore, New Zealand)—assume about 40 percent of U.S. adoption rate.
Group 2: Large European countries with decent broadband access (France, Spain, Poland)—assume about 33 percent of U.S. adoption rate.
Group 3: Remaining European countries with high English proficiency (Belgium, Netherlands, Portugal and Hungary)—assume 25 percent of U.S. adoption rate.
Group 4: Largest non-European countries with decent broadband access (South Korea, Russia, Mexico, Brazil, Taiwan, Turkey, Argentina)—assume 15 percent of U.S. adoption rate.
Group 5: Remaining European countries (Greece, Ukraine, Belarus, Czech Republic, Romania, Bulgaria)—assume 10 percent of U.S. adoption rate.
Group 6: Remaining countries (Israel, Vietnam, Colombia, Indonesia, Venezuela, Chile, Azerbaijan, Kazakhstan, South Africa, Peru)—assume 5 percent of U.S. adoption rate.
|August 12 WWE Network Launch Countries with Highest Broadband Base|
|Group||Countries||Estimated Adoption Rate||Fixed Broadband Users||Estimated WWE Network Subscribers at Steady State|
|Analysis by Chris Harrington with information from Worldbank.org|
My analysis suggests that at a steady state, the largest countries in this launch could generate up to a quarter-million over-the-top subscriptions.
That's a lofty amount. And that doesn't include Canada.
At this time, it's very difficult to evaluate how the plan by Roger Communications to offer the WWE Network in Canada as a pay television channel will be received. It is a promising sign that WWE is willing to adopt many different approaches depending on the worldwide market. While the over-the-top approach is innovative, simply taking a one-size-fits-all approach is not a wise business move.
It's also important to again note that many of WWE's largest and best-established markets (U.K., Germany, Italy, Japan) are not included in the Aug. 12 launch.
I believe the delay rolling out the WWE Network in these countries is due to the recent television deals that WWE has signed. WWE sold specific television carriers the WWE pay-per-view rights as part of the package.
Now, WWE must renegotiate terms before it can simply roll out the WWE Network in these countries. It's possible that we'll see more partnerships where the WWE Network access is bundled with a specific television subscription package similar to Rogers in Canada.
Another tough question is estimating how popular the WWE Network will be in internationally. Will the global attraction of professional wrestling overcome language barriers?
Even WWE doesn't know for sure how well the WWE Network is going to do. Originally, the scenarios that WWE laid out suggested it would be more like a 80 percent domestic, 20 percent international split. However, every assumption has pretty much changed since that time.
The rollout schedule has been accelerated. The pricing plans have been adjusted. Initial subscriptions expectations haven't been met. A lot has changed since the January press conference.
Timing and pricing
WWE has invested so much invested in the WWE Network. Sacrificing its profitable PPV revenues streams for an uncertain future with over-the-top distribution has been a costly and difficult adventure.
This year, WWE has continues to move quickly when it comes to the WWE Network. There was less than seven weeks between announcing the WWE Network in January and launching the service domestically on Feb. 24. Less than two weeks has elapsed since WWE announced that it was releasing the WWE Network globally.
In many ways, such an aggressive expansion in August isn't surprising. WWE knew it faced the potential for serious churn once the initial batch of six-month subscriptions were up for renewal.
WWE knows it loses a portion of the audience in the fall to football. There's no enormous pay-per-view draws between September and December. Considering what already happened in the second quarter this year, the outlook for large numbers of new American subscriptions remains bleak.
With the WWE Network continuing to be an unprofitable financial drain on the company, WWE needs to prop up its subscription ranks as quickly as it can. It makes sense to focus on international marketplaces.
Interestingly, WWE has already changed one element from the plan it announced two weeks ago. The new "month-to-month, no-commitment" tier is going to be $12.99 a month instead of the $19.99 a month that had been previously communicated.
Presumably, the company received some pushback from the $20 price point. Considering the mass cancellations (over 128,000 in the second quarter) that just transpired, WWE must have recognized that it lacked the enforcement authority to rollout a 100 percent price increase and expect to draw anyone, especially for the nonmarquee pay-per-view months. So, it instead settled on a 30 percent price increase. Will this be a sign of the future price for all subscribers?
In other WWE Network news, it was announced that starting Tuesday the WWE Network will be accessible on "Sony Internet-connected TVs, Blu-ray disc players and Blu-ray home theater systems." If your devices are made by Samsung, they'll be able to receive the WWE Network starting on Friday.
Fans and investors can only hold their breath and cross their fingers. We all wonder: Will this aggressive campaign work?
For more Wrestlenomics and WWE analysis, be sure to follow me on Twitter: @mookieghana