Breaking Down the Nuances of WWE Network's $9.99 Price Tag

This week, on Tuesday, July 7, the WWE Network launched in Italy.

For a monthly subscription fee of $9.99 (with the first month free for new subscribers), Italian fans have finally joined the “more than 175 countries” which are offered the WWE Network.

Since the debut of the network, WWE has continued to push the trademark $9.99 price point.

In August 2014, Vince McMahon tweeted a picture of a new $9.99 flag flying over WWE’s corporate headquarters in Stamford, Connecticut. Announcers pushed the $9.99 WWE Network on television. Wrestlers brought up the $9.99 in promos. A barrage of online advertising touted the $9.99 price point on websites across the world.

Still, it’s worth noting that in some parts of the world (Canada, the United Kingdom, Ireland and the Middle East), people pay more than $10 each month to access the WWE Network. And soon, even some fans in the United States could find themselves paying more.

Canada

Rogers Communications and WWE signed a 10-year agreement in July 2014 which awarded Rogers the exclusive distribution rights for the WWE Network in Canada. Rogers since has announced carriage agreements with a number of other major Canadian telecommunications companies (including Shaw and Telus).

While Canadian subscribers can access the VOD content online, the linear stream of the WWE Network (including the live broadcasts of the pay-per-view events) is distributed as a traditional cable TV channel in Canada. The price of the WWE Network in Canada? Almost 20 percent higher than the OTT service: $11.99 per month.

A similar arrangement exists in the Middle East and North Africa, where the WWE Network became available in 2015 through the pay TV network OSN.

In a statement given to Bleacher Report by WWE, the company noted the price difference is because “distributors set the price point.”

Why $9.99?

Last month, during a WWE presentation at the Bernstein Global Future of Media and Telecom Summit, an audience member inquired why WWE chose the $9.99 price point for the WWE Network.

WWE’s Chief Strategy and Financial Officer George Barrios explained that leadership arrived at a price range after “a lot of boring analytic work” and “conjoin analysis.” Barrios explained that WWE felt that “the sub-$10 price point was just a powerful marketing message—a tremendous amount of value.”

Looking back, WWE documents from 2013 noted that the company was evaluating “multiple approaches” for the potential WWE Network. This included the possibility of:

• Licensing content to established television networks
• Launching a WWE network “channel” through traditional cable, satellite and telco distribution
• Adopting an alternative digital “over-the-top” approach

Ultimately, it was this third option (OTT) which became the basis for the WWE Network in the United States and what is being offered in most countries around the world (notably, the WWE Network is still not available in Germany, Japan, India, China, Thailand and Malaysia).

In that February 2013 document, the proposed price for the WWE Network was between $12.99-$14.99. At that price point, the service was imagined as including all pay-per-view events except WrestleMania.

However, when the WWE announced the U.S. launch of the WWE Network in January 2014, the monthly price of the service dropped to the now-iconic $9.99 per month (with a six-month commitment). Furthermore, WrestleMania was now included in the package.

Later, when the WWE Network expanded to “more than 170 countries and territories” on August 12, 2014, WWE decided to use the $9.99 price as the global benchmark for the OTT service. As CFO Barrios discussed during an August 2014 “fireside chat” at a Needham & Company conference, WWE was pursuing a single price point so it could leverage global advertising for the WWE Network.

At that time, Barrios noted that Netflix worked on a “same number, different currency” model (such as $8 USD and €8) but WWE was planning on having a single OTT price point for all countries. Plans change.

United Kingdom

In 2015, when the WWE Network finally came to the United Kingdom and Ireland (after a well-documented series of delays), the price was announced at “£9.99 in the U.K. and €12.99 in Ireland with no commitment.”

So much for setting the same price worldwide. Instead, U.K. fans were going to pay more than a 40 percent premium compared to the U.S. OTT price.

WWE released this statement to Bleacher Report:

"

WWE Network is available in more than 175 countries and costs $9.99 US dollars with a few exceptions that include partnerships with Rogers in Canada and OSN in the Middle East where our distributors set the price point. Additionally, WWE Network's price point in the UK and Ireland is based on a variety of factors, including consumer research and a review of the local direct-to-consumer landscape, all while ensuring we deliver an extraordinary value proposition to our fans.

"

A key element in the U.K. price increase is what WWE calls the “local direct-to-consumer landscape.” For instance, Sky Sports Office still offers WWE pay-per-view events at £19.95 in the United Kingdom and €24.95 in Ireland.

When the WWE Network originally launched only in the United States, many international fans paid extra for location-hiding virtual private network (VPN) and ”smart DNS” services so they could access the service. (This has long been an issue for Netflix. In April, Netflix updated the service’s terms and conditions to provide the option of terminating customers who are using such means to avoid their content geo-restrictions.)

Certainly a large number of international subscribers masquerading as U.S. subscribers would help explain the large difference between the WWE Network domestic/global subscription split as compared to the historic North American/international pay-per-view division.

With the United Kingdom representing the largest international market for WWE, it makes sense that WWE decided to adopt higher pricing in a developed country which has shown a willingness to pay more to access the service historically.

Chicago’s Cloud Tax

Even in the United States, the WWE’s $9.99 price tag is in jeopardy.

Chicago’s Finance Department recently announced that starting July 1 (and with enforcement beginning September 1), the city’s amusement tax would be amended to include streaming services. Chicago plans to collect 9 percent monthly from companies such as Netflix and Spotify in what has been called the "Chicago 9% Cloud Tax." Importantly, the WWE Network as a streaming subscription service would appear to fall under this new interpretation of the amusement tax.

When asked for this article, WWE released this statement about the new taxes in Chicago: "We will comply with all applicable state and local tax laws, and any relevant taxes are automatically added to WWE Network's $9.99 monthly subscription fee through our payment system. We continually update our systems to accommodate any changes in tax law."

Netflix has already announced they plan to pass the 9 percent tax onto the end users.

WWE’s statement suggests that Chicago fans may soon expect to pay almost $1 more for their monthly subscription.

With WWE anxious to prove the profitability and viability of the WWE Network, it remains unknown how long the service will remain fixed at $9.99 per month.

Expanding into new markets and excitement over WrestleMania 31 propelled the WWE Network to over 1.3 million subscribers by the end of March.

However, WWE reported that the OIBDA (essentially profit) on the WWE Network segment (which includes WWE Network, PPV and VOD) was a negative $1.5 million for the first quarter of 2015. That's a stark comparison to earlier years when WWE would post a healthy profit from WrestleMania's pay-per-view revenue.

WWE may eventually decide that the company needs to either raise prices or return certain marquee events, namely WrestleMania, to traditional pay-per-view.

Perhaps WWE will be taking down that $9.99 flag sooner rather than later.