David

There's no reason the streams for new content wouldn't be in HD. I meant to say that it will be cheaper to watch Mania online through the network (with the option to watch it in HD) than paying $70 to watch it in HD through cable or satellite.

On last night's Observer Radio, Dave mentioned that about 3% of WWE's and UFC's PPV buys are bought online, with the other 97% coming from cable and satellite providers. That suggests that people would rather not watch the PPVs online if it isn't necessary. That makes me wonder about the number of subscribers the network will get at first. If it turns out that people have to subscribe for six months in order to watch WrestleMania on the network, will they be willing to sign up for the price? Yes, it's cheaper than watching it in HD, and there will be a ton of "free" content (including all of the PPVs up to SummerSlam), but is there a lot of people that value that content, and will they be willing to go online to watch it?

People cancel HBO, but isn't it seasonal around the end of different shows? It could be, but it's hard to tell based on the data that's publicly available. The most detailed numbers I've been able to find are quarterly figures, and those don't seem to change much. This is what I found when I looked up the last four quarters (note that all of the numbers are for the end of the quarter): 2012 Q4: 28.7 million 2013 Q1: 28.77 million 2013 Q2: ? 2013 Q3: 28.9 million

On today's Observer Radio, Dave said that he thinks that once the Network starts, the PPVs are going to essentially become monthly specials that air on Sundays. There won't be as much motivation to build to a big show because the revenues will stay relatively stable, since people in theory won't be ordering or cancelling for one show. Therefore, the shows are more likely to be based on what Vince wants, not what will draw. If that turns out to be the case, that could turn out to be a big problem for the Network. If they want to have any chance of this becoming a big success, they really need to do some incredible shows that will show people that they really need to subscribe to it. It's not like people don't cancel subscription services. This is a bit old, but according to http://www.economist.com/node/21526314, about 10 million households cancel HBO each year. While about an equal number sign up each year, it shows you that WWE can't just do bad shows and think, "They're too lazy to cancel." It also doesn't help that people would still rather watch content through a channel than through a streaming service.

The fact that it will have a 24/7 live stream makes me think we'll still get plenty of original programming. What issues would they have?

Would a streaming service like this be less expensive for WWE to run than the cable channel they had originally envisioned?

If the PPVs couldn't be broadcast live and there would be issues with replaying stuff like Raw, I don't understand how something like a paid tier would interest a lot of people. It would seem like it would make more sense to just try to expand their current deal.

I haven't been able to figure out any good numbers (and WWE doesn't say in their financial statements how much they get from Netflix under their current deal), but for what it's worth, Dave said earlier this year that content providers don't get a lot of money from Netflix deals. Wouldn't WWE essentially have to do it? Besides maybe full replays of Raw, do they have any content that would convince Netflix to pay a lot of money for it or would really get people to pay for an additional tier? Speaking of PPVs airing on a streaming service, if WWE ended up making a deal with Netflix, there's good reason to believe that it wouldn't air live. If it was put on Netflix after a certain period (such as a day), would the hardcore fans who buy PPVs wait to watch the shows, or would they still pay $45 or $55 to watch it live?

According to Court Bauer (http://mlwradio.libsyn.com/bauer-pollock-25), there still isn't interest in the WWE Network from cable and satellite providers because they don't want to lose their share of the revenue from PPV buys and replace it with a possibly smaller share from network subscriptions. However, he did note that Netflix and Hulu have expressed some interest. While he noted that it's a fluid situation and the interested parties could quickly change, and he wasn't sure how it would work (considering both services are essentially video-on-demand), Court felt this could be an opportunity to work with a company with resources (Netflix in particular), and it would reduce WWE's risk in the network. At this point, it seems like there's at least a decent chance that we could get an "over-the-top" network, considering the target launch date is a little less than three months away and there's still no indication that a single provider will decide to carry it. Still, there a lot of questions as to how this would work.

Just throwing this out here, but I think part of the problem with the network isn't just the fact that providers aren't interested in the WWE Network specifically; there may be no interest in any additional premium channels. In 2008 and 2009, Viacom/Paramount Pictures, MGM, and Lionsgate were in negotiations with providers to launch their own premium network (EPIX). Not all of the major providers signed on to it. In fact, the two largest providers (as of 2012), Comcast and DirecTV, said they felt they already had enough premium channels. Comcast: “It’s a bad idea,” Stephen Burke, Comcast’s chief operating officer, said in an interview at the Allen & Co. media conference in Sun Valley, Idaho. “I haven’t heard of anyone that’s interested.” Consumers already have an adequate number of choices, he said. (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=akMbpdAiHm2w) DirecTV: "We think there are enough of them out there already," (DirecTV interim CEO Larry) Doyle said of premium movie channels. "We don't see the value of adding another movie channel." (http://www.multichannel.com/content/directv-will-pass-epix) Granted, this happened back in 2009, and DISH (3rd), Verizon (5th), Cox (6th), and Charter (8th) eventually agreed to sell it to their subscribers, but it seems reasonable to suggest that this could be a sign that there haven't been any deals yet because providers just don't see the need for more premium channels when they have other things to be concerned about (like falling subscriber numbers). Plus, while I don't have any data to back this up, I would assume there a lot more people who would be willing to pay for a channel with movies from those studios than a channel that shows WWE PPVs, even if WrestleMania is one of them.

I think SNL Kagan might have it, though there's no way to see it unless a journalist would look into it. But if they wait until then, wouldn't shareholders complain (with good reason) that WWE waited until the absolute last minute to announce the launch date?

Keith, how did you determine the number is 4.5 million subscribers?

The PPVs will air live on the network. I get the feeling WWE will put Mania on the network. It's crunch time, and they need to do something to show that there are people who are interested in subscribing. Of course, there's always the possibility that people will decide they don't want to pay $55 or $70 instead of $10 or $15 in 2015.

Back in February, Dave said in reference to the network, "The biggest losers in the deal will be the talent, and I'll bet they haven't even figured that out yet." So it looks like the roster's PPV payoffs will take a hit.

There was something in Bix's most recent column on Bleacher Report (http://bleacherreport.com/articles/1857046-wwe-survivor-series-2013-ppv-is-one-of-wwes-worst-built-cards-of-all-time) that I think is important to think about in relation to the WWE Network: "WWE is on the cusp of changing their business model with the impending introduction of the WWE Network as an outlet for all non-WrestleMania PPVs at one third or less of the current PPV price. If they were to get full national distribution for the network and enough subscribers, I guess that lame duck shows like Survivor Series 2013 could become a little more commonplace. If you have a sufficient number of subscribers who are automatically being billed monthly, they're not going to cancel over one iffy show." For their sake, I hope WWE doesn't feel this way. If they want to be able to get and keep at least a million subscribers, just about every PPV is going to need to have a hell of a build. They can't just throw together a card at the last minute and expect people to want to pay for it every month. Considering creative's track record over the last few months, and the fact that their workload is only going to get bigger once the network launches, I don't see how they're suddenly going to get a lot better and create really compelling shows.

If it's going to launch next quarter, how are they going to get distribution between now and then? There are no indications they've signed any deals with providers, so it seems like they're going to have to either 1. Sign deals that are very unfavorable for them, and then hope that they'll get enough subscribers so they'll have more leverage for the negotiations for the next deal. 2. Try to sign deals with small providers, advertise the fact that you can watch pay-per-views for $15 as much as possible, and hope that enough viewers will call their providers and demand access to the network.

I think a big issue with the network that really hasn't been considered is that the financial numbers WWE has given don't add up. Here are the numbers they've released in various statements on their corporate site: 1 million subscribers: $40-70 million in network revenue, $25-30 million in total expenses, $5-10 million in potential cannibalization, $0-40 million in incremental EBITDA 2 million subscribers: $90-130 million in network revenue, $25-30 million in total expenses, $10-15 million in potential cannibalization, $45-95 million in incremental EBITDA 3 million subscribers: $130-200 million in network revenue, $25-30 million in total expenses, $20-25 million in potential cannibalization?, $75-155 million in incremental EBITDA 4 million subscribers: $180-270 million in network revenue, $25-30 million in total expenses, $20-25 million in potential cannibalization, $125-225 million in incremental EBITDA There are problems with a couple of their claims. 1. The annual expenses. Dave has noted that WWE's internal projection for the annual cost is $50 million, which is $20-25 million higher than their public projection. 2. The estimated cannibalization. A few months ago, Mookie projected that WWE's domestic PPV revenue for non-WrestleMania shows will be about $45 million. If the number turns out to be close to that, how does it make sense that WWE would lose only 11%-22% of that revenue if the network gets a million subscribers (or 44%-56% if it gets 4 million subscribers)? Why would that many people still buy the PPVs if they could subscribe to the network and spend less money? Mookie figured a more accurate cannibalization percentage would be 75%, which he calculated would result in a $33-35 million loss in PPV. The tricky part is the revenue per subscriber. Unless someone on here is a cable industry expert, I don't know of any way to calculate a more accurate number, so I'm going to use their revenue projections for the sake of the example. Here is the calculated range: Low: $40 million/1 million subscribers/12 months = $3.33 per subscriber per month High: $70 million/1 million subscribers/12 months = $5.83 per subscriber per month If we assume the annual cost of the network is $50 million and the PPV cannibalization is $35 million, the network needs to generate $85 million per year in order to break even. Using the calculated range, that means the average number of subscribers in order to break even would be somewhere between 1.214 million and 2.125 million. Considering the fact that they've also cited other numbers to support the network that are pretty illogical (like the supposed number of households that have a current or lapsed fan), I'm guessing the accurate number lies somewhere in the upper end of the range.