David

On Observer Radio, Dave mentioned that working with MLBAM will be very expensive, and that it means the break-even point for the Network will be higher than you would think it would be. Does anyone have any idea how much something like that will cost?

1. We don't know for sure, since WWE only reports the amount they get per worldwide buy. In 2012, the amount per worldwide buy was $20.60 (http://www.sec.gov/Archives/edgar/data/1091907/000144530513000441/wwe12311210kdoc-use.htm), and using this number, Chris had calculated the average revenue per domestic buy to be $29.92. However, in the third quarter of 2013, the average revenue per worldwide buy was $19.35 (http://www.sec.gov/Archives/edgar/data/1091907/000109190713000015/wwe-9302013x10q.htm), so the domestic number may be lower. 2. In 2013, the five PPVs during that six month period generated 1.243 million domestic buys (using Dave's figures at http://www.f4wonline.com/component/content...-new-inductees). Assuming the PPVs would take a bit of a hit this year and the domestic buys fall by 75% this year, that would mean about 900,000 lost domestic buys. To be on the conservative side, I will assume that the average revenue per domestic buy will be $28, resulting in $25.2 million in lost revenue. During the six month period. The problem is trying to figure out the cut WWE will get on the subscriber revenue, now that there will be additional costs (bandwidth, customer service, credit card fees, etc.). Maybe I'm misunderstanding this, but when George Barrios spoke at the recent UBS conference (http://seekingalpha.com/article/1890451-world-wrestling-entertainments-management-presents-at-ubs-41st-annual-global-media-and-communications-conference-transcript?part=single) he's expecting about $50 million in incremental OIBDA after the network hits one million subscribers. Based on earlier projections given in their investor materials, they seem to believe PPV cannibalized $5-10 million for every additional million subscribers (under the premium cable model). If we assume $10 million, that would seem to indicate they think they will get $60 million per million subscribers per year. As such, I'm assuming their cut will be half. If we have $25.2 million in revenue, divided by half of the $60 ($30), we get 840,000 subscribers on PPV revenue. Note that this will be much lower during the other six months, since there will be no Mania and SummerSlam. 3. Trying to figure out the production budget is difficult. In earlier investor materials, they estimated their production expenses to be $25-30 million annually (which Dave thought sounded low when I asked him about it). Dave has talked about the estimated production budget recently, and if I remember correctly, he said he expected to be around $35-50 million. If we assume it ends up being $40 million, we take half of that ($20 million) and divide it by $30 to get 667,000 subscribers. For the first six months, for just the production budget and lost PPV revenue, my initial estimate would be 1.507 million.

I don't mean to sound like a cynic, but if WrestleMania is on the Network permanently, doesn't that cheapen the event and make it feel more like "just another PPV?"

So Mania is on the Network permanently and we don't need to subscribe for six months to get it?

Though what they will be offering at first is much smaller than Netflix's library.

A couple extra questions that I hope will be addressed: 1. What is your stance on password sharing? 2. Will subscribers be able to watch content on multiple devices simultaneously?

Something about how cable is dead and a la carte streaming services are the future? It may not be entirely true, but I could see some tech journalists agreeing with it.

I was going by something George Barrios said at that UBS conference recently: "If you went down each line item they differ between traditional and over-the-top distribution. Pricing is different, splits are different, costs are different but similarly about a million subscribers you breakeven with your pay-per-view cannibalization. 2 million to 4 million you are in the $50 million to $150 million of incremental OIBDA, so a real transformation opportunity with the network." I was also using something from the 1st quarter investor materials, specifically page 21: http://webcache.googleusercontent.com/sear...=clnk&gl=us (I could only get the cache version) Going by those estimates, WWE had determined that the average monthly revenue per subscriber would be between $3.75 and $5.63, and the estimated incremental operating income would be the same as that of an over-the-top network. While there will obviously be different costs (and the cannibalization will likely be less under an over-the-top network), is it fair to suggest that the added costs could reduce their take to what they would've gotten from the providers under a premium channel model?

Going by the numbers WWE released in their investor materials, and the fact that a million subscribers are going to be needed to break even, is it fair to suggest that the added costs from going online (as opposed to cable and satellite) could take as much as half of the subscriber revenue? (That's supposed to be a question for the forum.)

Is there a good timeline of the process of the Network? I'm trying to figure out stuff like when WWE tried to negotiate with providers to get the Network on an expanded basic package (before they tried to get on sports tiers).

It's strange that they've posted two different times. Must be 9 PM.

That's the time on the front page of wwe.com. Where did you see 9 PM?

Following up on my previous post: 1. Dave and Bryan will be attending the CES announcement. 2. WWE.com announced they will be streaming the event on Wednesday starting at 9:30 PM Eastern.

It looks like TNA won't return to Universal Studios for a while. http://pwinsider.com/article/82600/tna-imp...tudios.html?p=1 It's amazing that even though the odds of the road tapings being a success weren't good, TNA didn't bother making a backup plan. Now they're going to keep losing money on road tapings when their main priority should be to cut costs and try to break even. There must be a point where Bob and Janice finally say, "Enough is enough! No more funding!"

Not to derail the current topic of conversation, but do we know of any journalists (wrestling or otherwise) who will be in Las Vegas to cover the WWE's announcement next week, and is it known if there will be some kind of live stream of the event?

I can't see how they won't edit his stuff around Mania 20. They had plenty of positive things to say about him during the buildup to that show.

Today, Bryan Alvarez said that he talked to someone in WWE who has done work for the Network who said they're skeptical next week's Las Vegas announcement will be the launch date of the Network. (Source: http://www.f4wonline.com/component/content...weets-and-more) I guess it's possible the announcement isn't related to the Network, but what else could it be? Vince will be there, so it has to be important, and besides him resigning as chairman and CEO, I can't think of any other reason why he would show up.

This has been referenced recently, but something that I think is important to think about is the fact that this could be a year where WWE programming will experience some big changes. As we know, the WWE Network will launch sometime this quarter, and almost all of the PPVs will air on it for subscribers. This will essentially turn the shows from $45/$55 shows into $10-12 shows (with plenty of added content). Under the subscription model, I think it's fair to assume that subscriber numbers will stay relatively stable, since people may not want to cancel just for one bad PPV when they get plenty of extra content along with it. If this turns out to be the case, Vince and creative may decide it's not worth putting much effort into building up PPVs (not that they seemed to try with shows like last year's Survivor Series) because it won't make a difference in revenue, essentially turning them into commercial-free episodes of Raw. This could turn out to be a good thing. If WWE doesn't need to have a world title match on every PPV, it's easier to do long-term booking, since they can wait until the appropriate time for a big match to happen, rather than throwing it on a PPV because it's pretty much a requirement (for example, if WWE wanted Bryan to win the title at WrestleMania, they could've saved his title shot until then instead of having him feud with Orton during the fall). However, if there's no urgency in building to a show, that could become lazy and just have certain periods (like the fall) become even less important because they won't be building to anything. "Aimless direction" isn't a good policy for a company with six hours of weekly primetime content. If the Network doesn't work out, they can't easily reverse the policy, because they will have taught their fans that the PPVs are just $10 shows that are Raw without the commercials. As we've seen in both WWE and TNA, once the fans believe something doesn't matter, it's difficult to convince them to care about it again.

That wasn't it, though I just found it: "An ESPN poll looking at sports fans, and they included both MMA and pro wrestling as separate categories, noted that avid fans, by a great degree, spend more money and time on sports during bad economic times than good. It’s the opposite for casual fans or light fans, who have less interest in sports during times like now. I know there is a feeling that wrestling fans are predominately not sports fans, because wrestling is entertainment. However, in a poll of people who claim they are avid fans of pro wrestling, on average, if you ask them how many other sports they follow closely, the number averages 7.8. By contrast, if you ask avid fans of the NFL, they average 5.4. If you ask MMA fans they would average to being avid fans of 6.9 other sports. As it turns out, avid pro wrestling fans are in general fans of more different sports than NFL, Baseball, and NBA fans. In fact, the more popular the sport is, the less likely avid fans follow more different sports. The only major sports whose avid fans are likely to follow fewer sports than MMA fans are the NFL, Figure Skating, Baseball College, Football, NCAA basketball and the NBA. Pro wrestling fans in that sense are closer to boxing fans. Another interesting note is that when asked, 67% of people who said they were avid MMA fans, when asked what their favorite sport to follow was, said either football, baseball or basketball, and not MMA. 62% of pro wrestling fans when asked their favorite sport to follow, said football, baseball or basketball." (http://www.f4wonline.com/component/content/article/21794-august-24-wrestling-observer-newsletter-g-1-climax-tourney-winner-sinclair-roh-tapings-mania-profit-margins-shawn-tompkins-death-heath-slater-trouble-more-)

Sounds like it, though putting the title on him now seems too early. I think he'll need more time to establish himself as a babyface and a singles wrestler.

It seems like we're focusing too much on just the number of viewers WWE programming gets. Yes, it would help improve the rankings in the top 25 for a number of networks, but how many of them actually care about that? Isn't it also important to look at the kind of viewers Raw provides? If WWE is going to compare itself to sports, I think it's important to see if their audience is actually similar to the sports audience that is desired so much: 1. They're passionate enough that they'll switch providers if they can't watch it because their current provider no longer shows the channel that airs it. - I can't find it in the Observer archives for some reason (*MOOKIE ALERT*), but in the past year or so, Dave talked about a survey that showed that while wrestling fans tend to be fans of several sports, they're more passionate about those sports than wrestling. That could be a sign that wrestling fans might not leave in droves if their current provider won't let them watch Raw. 2. They have money to spend. - According to a survey done in July by the market research firm Scarborough, "The median income of a WWE fan household is $35,229. The median of a U.S. sport fan is $50,667." (http://www.f4wonline.com/component/content/article/110-wrestling-observer-newsletter/31076-may-6-2013-wrestling-observer-newsletter-biggest-money-show-in-pro-wrestling-history-breakdown-boxing-vs-wrestling-and-mma-weird-night-of-fights-at-ufc-169-akiyama-wins-champion-carnival-tons-more) Ad money for wrestling isn't very good. I could be missing a couple other things I can't think of at the moment, but the point is that no matter how much WWE may say that they're like sports programming, it's not necessarily a fair comparison.

I just don't see where it's going to pull in fans aside from the Netflix crowd(Well done on that explanation, Bix) or international viewers(who will get blacked out anyway). I think the people who don't pay for it are going to continue to do so and I think the usual people who buy it are going to also continue to do so. Honestly, this whole thing feels like they are trying to undercut themselves. People don't mention it either but you have to factor in the economy these days. There's hardly a bright outlook for most of America right now and people are finding it really easy to cut out media. Obviously this will be cheaper than the current PPV model, but I don't think people are looking to add any more unnecessary monthly bills. I really also have no idea how anyone with a job and kids could possibly ever find time these days to watch shows. The only real pro that I see here is that it should be pretty cheap for them to pull off. They just need to pay for the set up and the server bills. I don't get the idea people are trying to cut costs rather than add costs in respect to the WWE Network. That would be a big bonus in my book. A wrestling fan wants to cut cable but wants to be able to keep up with Smackdown and Raw and all the other shows. Between a Netflix at $8/month and WWE Network at $10/month they would be spending CONSIDERABLY less than if they had premium cable. As the young fans that WWE has targeted get older this technology is going to be something they have a solid understanding of. As a 20 year old I consume 95% of my programming through the internet and that's how I like it. To me, going with the online format could pay off greatly even if it doesn't pay off immediately. You bring up a good point. If it turns out that people can just watch the most recent episodes of Raw and SmackDown on the network, wouldn't that cause problems between WWE and NBC Universal? People could cut the cord and still watch the shows, unlike a premium cable channel (which would require subscribers to keep their cable) or Hulu Plus (for which NBC Universal gets a cut of the revenue). On a side note, has there ever been any serious research into the number of casual fans who would be interested in buying PPVs if they cost $10 or $15? I wonder if there is a large number of fans who really wish they could watch the shows, but they think it's not worth the money.

Within a single market, absolutely. However, that difficulty isn't as severe if going online means you can take it worldwide rather than be restricted to the US or North America until you work out country-by-country cable deals. Very true, though I can see them having trouble with enabling worldwide access, due to their current international deals. Yesterday, George Barrios spoke at the UBS 41st Annual Global Media and Communications Conference (http://seekingalpha.com/article/1890451-world-wrestling-entertainments-management-presents-at-ubs-41st-annual-global-media-and-communications-conference-transcript?part=single). He essentially stated the WWE Network will be over-the-top (though he declined to confirm it): "We’ve been working with the MVPDs, 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. One of the things that happened over the last 12 months has been happening for quite a while and we have been monitoring it for quite a while, is the consumption of long form video over-the-top and we all have Netflix to thank for this. They have done the spade work of creating the environment and the consumption habit of consumers to watch long form video over-the-top. So this, earlier this year we said where two years ago we didn't think there was enough of that happening to make a network viable over-the-top, we now believe it is viable over-the-top. We continue to work with the MVPDs, see if we can knockout a deal in traditional distribution. If not, we have that option which fundamentally is unilateral. We could do it at our own discretion." And while WWE will get all of the revenue instead of a cut of it, they expect their costs to be higher under an over-the-top network (though Barrios believes the economics will end up being the same as a premium channel): "Run rate today is probably close to 15 million. So we haven't done 15 million in any one year, but if you look at where we are today and extrapolate it you'd say about 15 million. I'd say there is one other slug of costs that is similar whether it's traditional or over-the-top and that's marketing dollars and that's a big part of -- I mean obviously we are not going to have the cost of acquisition like Netflix and HBO because they are an accumulation of brands and content that they have to market. We have a brand and we have a powerful platform to market. So we are not going to do that kind of customer acquisition cost but we are going to have to do some third party costs and it won't be insignificant. So that's -- that will come once a launch date is established and then announced. And then the other part of the costs stack really depends on whether you do traditional or over-the-top. If you go over-the-top you have significantly more costs, you have to do things like CDN costs, credit card fees, customer service. If you go traditional that essentially is covered up in the split that you are paying the MVPDs. What I would say is all those costs, in either model that I described are embedded in that $50 million to $150 million incremental OIBDA that's up there." 100% of the revenue, 100% of the problems. On a side note, I thought this was pretty amusing: "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 MVPDs did not make sense, I still don't understand it." WWE has a vision for something, and outside companies won't go along with it. Isn't that essentially what happens whenever they've tried to rebrand themselves or get others to agree with their viewpoints? (Thanks to Chris for the link.)

Was the "charge the same price online" stipulation added recently? I'd have to check archive.org, but I definitely remember the prices through wwe.com being lower than the cable/satellite prices years ago.

"The contracts with the cable/satellite companies (and how are they getting around that by including the PPVs on the network, anyway?) require them to charge to same price as they do for traditional PPV." I've never heard of this rule. Could you please provide me a source for it, Bix? Also, isn't it fair to say that it's more difficult to get a million subscribers through a streaming service than it is for a premium channel? I know that it doesn't matter for the people on this forum, but online streaming will be less familiar to the general fanbase, since people still tend to watch content through cable or satellite (there was a study that came out a few months ago that showed this was the case, but I can't find it for some reason). Also, for what it's worth, according to Michael Weitz, the reason why the PPVs aren't priced at $15 is because they don't believe there would be enough buys to get the same amount of revenue.