Evaluating the WWE Network 1 Year After Its Launch

Chris HarringtonFeatured ColumnistFebruary 23, 2015

WWE Network
WWE Networkhttp://www.wwe.com/f/video/thumb/2014/01/sg-wwenet_demo_010714.jpg

On February 24, 2014, WWE launched the WWE Network.

Almost immediately, the sign-up page crashed. WWE’s technology partner, Major League Baseball Advanced Media, admitted that the initial demand overwhelmed their systems.

The prospect of an on-demand service which offered not only a full archive of professional wrestling pay-per-views along with the latest PPV events was clearly attractive. At $9.99 per month, WWE offered fans an enormous discount compared to the traditional $45 price for a single PPV.

By the end of March, the WWE Network attracted over half-a-million subscribers. In the week leading up WrestleMania, another 182,000 people signed up. The first public statement of WWE Network subscription levels was on April 7, 2014, when WWE announced 667,287 subscribers.

For a service less than seven weeks old, it was a respectable number.

However, it was below investor’s expectations. Speculation had driven WWE stock up dramatically to $28 per share. The sub-700,000 announcement quickly knocked the stock down 20 percent.

In April, WWE insisted that the WWE Network was “on track to 1 million subscribers.” The reality was that WWE Network ended 2014 at 816,000 paid subscribers. WWE was able to announce on January 27, 2015 that following the Royal Rumble event, the WWE Network had 1,000,648 subscribers, according to Variety.

It's worth recalling that WWE’s initial goals were much loftier.

At the original WWE Network presentation in January, WWE spoke of achieving 2-3 million subscribers. That was just for the domestic version of the service. The international roll-out planned for 750,000-1.5 million subscribers among the Phase I countries (which notably included United Kingdom, Canada and Australia). And the international roll-out wasn't planned until late 2014 or early 2015.

Plans change.

WWE’s second-quarter results included a stunning revelation: 128,000 WWE Network subscribers had cancelled the service. Subscribers were cancelling despite WWE’s insistence that there was a “six-month commitment.”

Euphemistically termed “churn,” the six-figure declines in subscriptions would prove to be an ongoing issue for WWE every quarter. By October, WWE announced they were abandoning the commitment facade.

Faced with massive churn and slower-than-expected growth, WWE needed to take quick action.

The company sped up the international expansion of the WWE Network.

In Canada, WWE decided to forgo the over-the-top technology. For Canadian fans, the WWE Network was launched as a linear, $11.99-per-month premium channelall part of an expansive, 10-year deal with Rogers Communications.

Furthermore, the WWE Network announced it was going live in over “170 countries and territories” on August 12. At the same time, WWE announced cost-cutting measures (including cancelling the magazine division). The WWE Network was proving to be an expensive venture.

Notably absent from the initial international roll-out was the United Kingdom.

While U.K. fans compromised the largest international pro-wrestling market, issues arose between WWE and BSkyB, (holder of the WWE television rights). These problems would prove quite troublesome when the announced November launch of the WWE Network in the U.K. was suspended literally minutes before it was supposed to go live.

Finally, the WWE Network did launch in the United Kingdom and Ireland on January 19, 2015, though the price was almost 50 percent higher than rest of the world. Yet much of the growth in international subscribers between Dec. 31, 2014 (44,000) and Jan. 1, 2015 (129,000) is presumed to be driven by the U.K. marketplace.

Today, the WWE Network is available in many but not all countries. WWE has yet to announce plans for several major markets including Germany, Japan, Italy, China, India and Pakistan.

WWE Network Growth
WWE Network GrowthWWE Q4 Earnings Presentation

 

CONTENT

When the WWE Network launched, WWE noted they’d have “more than 1,500 hours” available. The original announcement for programming was to include:

  • All 12 live Pay-per-view Events
  • Original Programming
  • The Monday Night Wars [began airing in August 2014]
  • WrestleMania Rewind [began airing in February 2014]
  • WWE Countdown [began airing in February 2014]
  • WWE Legends House [filmed in 2012; began airing in April 2014]
  • WWE NXT [began airing in February 2014]
  • WWE Superstars [began airing in Februrary 2014]
  • Raw/SmackDown pre- and post-shows
  • Daily Studio Show [did not materialize]

The library has certainly grown, with the latest number at “more than 2,700 hours” for the video-on-demand library.

When Ion television did not renew its domestic contract for WWE Main Event, WWE moved the show on to the WWE Network. (However, there was quite a hullabaloo in January, when a conflict with WWE's U.K. television rights distributor forced WWE to pull Main Event off the Network and substitute it with a "Santino's Royal Rumble special.")

What has been put online is only a slice of the massive library of professional wrestling history which WWE controls (estimated at over 100,000 hours). Archival Programming added to the WWE Network includes World Class Championship Wrestling, ECW Hardcore TV, WCW Clash of the Champions and Monday Nitro episodes (which were finally added in September).

However, there remain large portions of programming from WWF and NWA/WCW which have not been added to the service, let alone the archives of smaller territorial companies.

While all the pay-per-view programming is available (with some editing for musical rights, commentary lawsuits, nudity and language), often the televised programming which originally aired between these events is unavailable or incomplete.

WWE is including newer programming on the WWE Network, including encores of SmackDown and Raw. However, these shows can only be aired on the WWE Network after the exclusivity window with NBCU expires, which causes large delays. It’s tough for fans to “cut the cord” and stay current on the WWE product unless they also subscribe to another service such as Hulu, which offers same-week edited versions of Raw and SmackDown.

WWE’s cost-cutting has slowed down the growth of new programming for the WWE Network. Original plans to tape a new season of Tough Enough for the WWE Network was postponed. Instead, WWE made a deal with USA Network to finance and air the new season of the show. Likewise, the advertised “daily studio show” discussed in the launch materials has yet to materialize.

WWE CFO George Barrios told the Wrestling Observer Newsletter (h/t WrestlingInc.com) on which programming is most popular on the WWE Network, noting that live events (monthly PPV events followed by live specials such as the Austin Podcast or NXT Live specials) do best. He also observed that certain short-form content such as the animated WWE Slam City series is more heavily consumed on mobile devices.

He noted that WWE is using these sorts of findings to help guide what programming it invests in and develops moving forward.

 

LEADERSHIP

WWE Network appears to have gone through a lot of internal turnover.

At the original announcement at CES, WWE Executive Vice President Perkins Miller was front and center with Triple H and Shawn Michaels announcing the features of the WWE Network. Shortly before the launch of the WWE Network, WWE had hired Matthew Singerman as the Executive Vice President of Programming and effective head of the WWE Network.

However, in the tumultuous period following the disappointing post-WrestleMania WWE Network subscriber numbers, Singerman left the WWE, and Perkins Miller went to work for the NFL as their new Chief Digital Officer. For several months, it seemed like the WWE Network was adrift.

In October, WWE announced that Lou Schwartz was the company’s new Chief Digital Officer and would be overseeing the operations and product development for the WWE Network. A few months later, in January, WWE announced that Lisa Fox Lee was now the company’s Executive Vice President of Content and would oversee the strategic development of WWE programming and content across all platforms (including the WWE Network).

Hopefully, WWE now has the solid team in place for the programming, content, direction and vision for the WWE Network moving forward.

In order to achieve the ambitious financial goals that have been set out for the service, WWE needs to acquire and retain well over 1 million paid subscribers every month. That’s a tall order and requires a comprehensive vision of how to appeal to both hardcore, casual, lapsed and new fans.

  

FUTURE

In October, WWE announced the company would begin running video ads on the WWE Network. While the practice is currently minimally invasive, it certainly opens the door for more targeted advertising in the future. At the last conference call, WWE Chief Financial Officer George Barrios referred to the revenue generated by the video ads as "de minimis" (too trivial to merit consideration). WWE needs to either generate significant revenue from the practice or ditch the intrusion.

The over-the-top (OTT) landscape is continuing to evolve. Meanwhile, OTT competition continues to grow.

Since the WWE Network has launched, several major media companies have announced their own new OTT services including HBO Go, CBS All Access and Nickelodeon. Established OTT competitors such as Netflix and Amazon Prime continue to invest significant funds to acquire and produce new top-of-the-line programming. Consumer education continues to grow, and OTT devices are becoming more ubiquitous.

Conversely, the increased competition may drive some consumers to ration their OTT dollars and start trading WWE Network subscriptions for other services.

The novelty of the WWE Network will certainly wane during the service's second year. WWE needs to invest in innovative programming, features and personalities to make the WWE Network more than just a glorified video-on-demand service.

Live programming like Steve Austin's live podcasts have been a big hit. Programs such as those are likely to continue through 2015. They're cheap to produce and popular on social media, two elements which greatly appease WWE.

Will this involve expanding the territorial libraries selection? Sadly, this option seems least likely since WWE has focused most of their expansion on more recent programming and new, live content. Adding programs such as a live studio show are more likely. Perhaps we'll see more of the released home entertainment titles appearing on the WWE Network.

There may be an increase in "localization" on the WWE Network as WWE aims to grow the international portion of their audience. This could include adding more commentary in alternative languages such as French, Spanish or Portuguese.

WWE has also begun reaching out to lapsed fans and fans who have already cancelled the WWE Network. Their responses will likely dictate how WWE continues to develop content. I would expect more weekly programming from the Attitude Era to be loaded on the WWE Network.

As the service continues to evolve, WWE will need to show Wall Street that they can deliver increasing numbers of paid subscribers quarter-after-quarter. Will WWE be able to convert fans into year-round consumers of the WWE product? Or will there be a precipitous decline after WrestleMania?

No one knows, yet.