WWE Network finally happening

[mookeighana]

For a few years, WWE would break out their PPV revenue into both Domestic & International amounts: (see page 30 at http://ir.corporate.wwe.com/interactive/lo...IP_09212012.pdf )

 

WWE PPV

2006: $74.1 (domestic) + $19.5M (int'l) = 21% int'l

2007: $76.6 (domestic) + $17.7M (int'l) = 19% int'l

2008: $73.6 (domestic) + $17.8M (int'l) = 19% int'l

2009: $65.0 (domestic) + $15.0M (int'l) = 19% int'l

2010: $58.5 (domestic) + $11.7M (int'l) = 17% int'l

2011: $65.8 (domestic) + $12.5M (int'l) = 16% int'l

 

I couldn't find a 2012 number quickly, but let's assume they're around the 16.3% range.

2012 estimated: $70.0M (domestic) + $13.6M (int'l)

 

I'll take the last four quarters as a proxy for 2013...

2013 estimated: $66.8M (domestic) +$13.0M (int'l)

 

So, all together, I think we'll be looking at about $65M to $70M in Domestic PPV income that would potentially be "in danger" with a WWE Network launch that includes Wrestlemania.

 

Full year revenue per buy in 2012 was $20.60 (up from $19.94 in 2011). (source: 2012 10-K)

The Q3 2013 10-Q statement has revenue per buy at $19.35. Let's split the difference and assume $20.

 

So, from a revenue standpoint....

 

$70M in 12 months = 12 months x $5.83M/month = 292k domestic monthly buyers x $20/buy x 12 months

$65M in 12 months = 12 months x $5.42M/month = 270k domestic monthly buyers x $20/buy x 12 months

(This is a number which smooths out the peaks for Wrestlemania/Rumble/SummerSlam with the B-shows.)

 

Assuming a $15 Network Price Point.

50% split = $7.50/subscriber

$70M in 12 months = 12 months x $5.83M/month = 778k domestic monthly buyers x $7.50/buy x 12 months

$65M in 12 months = 12 months x $5.42M/month = 723k domestic monthly buyers x $7.50/buy x 12 months

 

Assuming a $15 Network Price Point.

30% split = $5.00/subscriber

$70M in 12 months = 12 months x $5.83M/month = 1.166M domestic monthly buyers x $5.00/buy x 12 months

$65M in 12 months = 12 months x $5.42M/month = 1.084M domestic monthly buyers x $5.00/buy x 12 months

 

Assuming a $10 Network Price Point.

50% split = $5.00/subscriber

$70M in 12 months = 12 months x $5.83M/month = 1.166M domestic monthly buyers x $5.00/buy x 12 months

$65M in 12 months = 12 months x $5.42M/month = 1.084M domestic monthly buyers x $5.00/buy x 12 months

 

Assuming a $10 Network Price Point.

30% split = $3.00/subscriber

$70M in 12 months = 12 months x $5.83M/month = 1.943M domestic monthly buyers x $3.00/buy x 12 months

$65M in 12 months = 12 months x $5.42M/month = 1.807M domestic monthly buyers x $3.00/buy x 12 months

 

So, to keep revenue flat for WWE - they'd be looking at somewhere in the neighborhood of 800,000 (low-end) to 1.5 million (middle) monthly subscribers depending on the Network Price Point and the provider split.

 

 

Assuming full coverage (big IF), I think they can definitely hit a million subscribers for Wrestlemania provided they do a media blitz. If they are launching with WM, I don't see any reason they would not launch at $15/month. If anything, they can come down off that to $10 if they REALLY have to following the PPV. In fact, I'd almost prefer they launched at $15 for Y1 and for Y2 they did something goofy like dropped to $10 but returned Wrestlemania to PPV-only.

 

This does NOT take into account the cost of starting up the network (which is a $30M to $50M bogey), but at least shows how's it's possible for them to keep a flat domestic PPV revenue.

[Loss]

The new Observer says there's talk of WrestleMania being free on the network for this year only, the idea being to get the biggest possible takeup on day one and then hope a large proportion of people don't bother cancelling. The problem is that although that strategy looks viable on paper for WWE, the cable companies would be very unhappy about giving up Mania PPV revenue.

This seems awfully dumb to me. Keith mentioned the number of subscribers they would need just to break even, but even then, they'd have to do a ridiculous promotional blitz unlike anything they've done before, which would also eat into their profits. I do think Wrestlemania could draw an enormous rating, but I'm not sure what they'd have to show for it the next day.

[Loss]

Does anyone happen to know what the typical advertising budget is for Wrestlemania? Because I would think in order to make this a major success, they would have to spend at least double that in advertising to make sure the casuals who normally buy Wrestlemania and tune out the rest of the year are aware of this change.

[mookeighana]

On a related note: This is stupidly outside the box, but maybe they could try to pursue non wrestling programming with the potential to be "buzz" shows? I feel like in the age of Internet TV criticism where you have shows like Switched at Birth (teen drama on ABC Family that's really about Deaf culture and class issues) and Orphan Black (sci-fi drama on BBC America of all places that has the single best acting performance on TV) picking up strong followings they wouldn't have had years ago, it's something you consider. They're at a disadvantage by being a premium channel, though.

I can only see two avenues for this. First would be Matthew Singerman - if he had some background or connection to a show, it's possible he'd pursue it. However, while WWE is trying to be thought of as an Entertainment company and not just a wrestling content producer, I really don't see this idea getting traction. The second way would be if WWE did have some kind of distribution via Netflix. Since Netflix already has a history of trying to bring original content to their medium, I could see them being supportive and encouraging WWE to try a similar approach. But still, I don't see it happening because Vince desires so much creative control and the success of the network is clearly being built around PPV traction - not other original programming.

 

Unrelated, but I also wanted to point out (or reinforce, I might have said this already) that a Feb 2014 launch would coincide nicely with their annual report results so they'd enjoy being able to tout the WWE Network launch to investors as a big deal - especially since they might not have anything new on TV Rights Fees negotiations to announce at that point.

[KrisZ]

Another thing to take into consideration is that if some cable companies or the dishes don't carry the network then would Mania still be PPV available for them.

 

Showtime does that for their boxing matches

[David]

Is there any data about how much HBO & Showtime subscriptions fluctuate with the season premieres of their various original shows?

I think SNL Kagan might have it, though there's no way to see it unless a journalist would look into it.

 

Unrelated, but I also wanted to point out (or reinforce, I might have said this already) that a Feb 2014 launch would coincide nicely with their annual report results so they'd enjoy being able to tout the WWE Network launch to investors as a big deal - especially since they might not have anything new on TV Rights Fees negotiations to announce at that point.

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?

[Grimmas]

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

Assuming WrestleMania 30 does 600,000 buys in the U.S. at an average price of $65, that would mean 600,000*32.5=$19.5 million in revenue. Say the network's running costs are $4 million for the month. So you would need $23.5 million in revenue from the network to break even. Assuming the price is $9.95 for the network and they receive half of that money per subscriber leads to a little over 4.5 million subscribers.

 

The idea, though, is that they would make the money back over the year by having a lot of these subscribers become lifelong subscribers.

[Dooley]

Another thing to take into consideration is that if some cable companies or the dishes don't carry the network then would Mania still be PPV available for them.

 

Showtime does that for their boxing matches

So if cable systems think WWE Network will under-perform, and they still get to offer Mania on PPV, is there any real incentive to cut a deal?

[JonnyBart]

Another thing to take into consideration is that if some cable companies or the dishes don't carry the network then would Mania still be PPV available for them.

 

Showtime does that for their boxing matches

So if cable systems think WWE Network will under-perform, and they still get to offer Mania on PPV, is there any real incentive to cut a deal?

 

Those cable companies will have a ton of angry customers calling and demanding to know why they have to pay $60 for Mania instead of $10-$15. IMO, that's the smartest part of this strategy. WWE's fans will heavily push for clearance.

[jdw]

NFL Viewers > WWE Viewers

 

It took the NFL Networks years to get clearance. There were factors in it, such as the Carries having to pay the NFL Network for the channel rather than it being sub based (if that's the direction it's going). But angry WWE fans not being able to get Mania... it's not as big of a deal as we think if the cable companies are balking.

 

Or to put it another way.

 

Time Warner Cable's revenue in 2012 was $21.386B.

 

How much of that do you think was off of Wrestlemania?

 

Considering the WWE's entire domestic PPV revenue pulled from every carrier in the country was about $0.070B, Wrestlemania and angry WWE customers are kind of a fly on their ass.

 

John

[JonnyBart]

If the cable companies are that negative on the channel then it's dead no matter what.

[kjh]

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

Assuming WrestleMania 30 does 600,000 buys in the U.S. at an average price of $65, that would mean 600,000*32.5=$19.5 million in revenue. Say the network's running costs are $4 million for the month. So you would need $23.5 million in revenue from the network to break even. Assuming the price is $9.95 for the network and they receive half of that money per subscriber leads to a little over 4.5 million subscribers.

 

The idea, though, is that they would make the money back over the year by having a lot of these subscribers become lifelong subscribers.

Yes, that's true, but given that most fans only watch one to three pay-per-views a year, it's highly likely that most fans will buy just to see WrestleMania 30 and then cancel their subscription until the next major pay-per-view airs on the WWE Network.

[David]

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.

[Loss]

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

Assuming WrestleMania 30 does 600,000 buys in the U.S. at an average price of $65, that would mean 600,000*32.5=$19.5 million in revenue. Say the network's running costs are $4 million for the month. So you would need $23.5 million in revenue from the network to break even. Assuming the price is $9.95 for the network and they receive half of that money per subscriber leads to a little over 4.5 million subscribers.

 

The idea, though, is that they would make the money back over the year by having a lot of these subscribers become lifelong subscribers.

Yes, that's true, but given that most fans only watch one to three pay-per-views a year, it's highly likely that most fans will buy just to see WrestleMania 30 and then cancel their subscription until the next major pay-per-view airs on the WWE Network.

 

They are counting on the apathy and laziness of their fanbase, which I suppose has paid off before.

[Migs]

One thing I haven't seen discussed - if all (or most, either way) PPVs are moving to the network, what will they do in terms of online streaming? Right now they sell the stream for roughly the same price of the PPV. Will they sell an online version of the network? Will they sell the PPVs for a reduced price online (i.e. if its $15 a month for the channel, and you're only getting the PPV online, it would be $10 or so)?

[cm funk]

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.

EPIX was basically another movie/stuff channel though, right? In line with HBO and Showtime. Those networks are deeply embedded, so I can get the "we don't need another one of those" vibe from the cable companies

 

WWE Network would be a niche network catering to a small demo. It's apples to oranges.

[goc]

The thing about the WWE Network that I don't get is that as far as offering a premium channel, they have kinda been doing that for years. Even though WWE Classics on Demand is a limited selection, I can't imagine the subscriber base being much higher for a whole channel like HBO or Showtime. Back when I was getting it in 2007-2008 they also showed PPVs but it was on a 3 month delay.

[Childs]

I'm curious; just among people on this board, how many would subscribe to a WWE Channel? This is obviously as intense a group of wrestling fans as you'll find, but there are also a lot of folks inclined to seek the footage through other avenues.

[Loss]

I would consider it, but I have DirecTV, so I don't expect it to be an option. I would also want to see what the general lineup is before committing to anything.

[Exposer]

I would want it. That's because it would be nice to have something comprehensive of all WWE and old footage that the company owns. However, like Loss said, it might be wise to check the programming first.

[cm funk]

I'm curious; just among people on this board, how many would subscribe to a WWE Channel? This is obviously as intense a group of wrestling fans as you'll find, but there are also a lot of folks inclined to seek the footage through other avenues.

Personally, I'd be more inclined to subscribe to it if it was an a la carte digital service. Cable TV is a dinosaur. Everything is on demand now. The cable companies are fighting tooth and nail against a la carte for obvious reasons, but still, they see the future, and are slowly relenting to it.

 

I'm not a big tv watcher or cable tv guy anyway, I don't want 500 channels to deal with to find what I want to see. I'd pay to watch a WWE channel, but I wouldn't pay the 10-15 dollar fee ON TOP of whatever the cable provider charges

[Matt D]

If I wanted to spend $15 a month on wrestling, I could think of better ways to do so.

[KrisZ]

If you buy the PPVs I would think its a no brainer

[goc]

That's kind of the only way the WWE Network idea works in my opinion. I think that PPV itself is kind of dying off and that if they were able to market it well enough, they could do better business by having the PPVs on WWE Network than what they're doing on PPV now. It would also give them more flexibility in scheduling PPVs, not having to worry about doing a show the night after a big boxing or UFC fight since their shows would essentially be sold monthly and not just on the night of the show.

[Slasher]

Depends on the pay per view model. If you have to purchase them on top of whatever the monthly fee is, probably not. If the pay per views outside of Mania was built in the monthly subscription fee and it was low in comparison to what you have to plunk down monthly on individual shows, definitely.

 

In this day and age, I do have to wonder- how long is the traditional pay per view model sustainable? Obviously the whole way people watch events have changed from the 80s when the concept caught fire. Is it even wise to proceed with the Network plans with that model built in or should they look for different structures for which they market their shows? I know Mania is an event that will never go away but look at the sporting events. The NFL invests a buttload of money in the Super Bowl and they get crazy revenues from it...despite the said event being free. I know this goes back to the whole "Sports vs WWE" argument and it is another branch of the argument, but is this even doable?