WWE Network finally happening

[rovert]

Slides from todays conference call:

http://wcc.on24.com/event/73/42/56/rt/1/do...2014__final.pdf

[cheapshot]

Slides from todays conference call:

http://wcc.on24.com/event/73/42/56/rt/1/do...2014__final.pdf

This report is funny.

 

They think that 53% of all US Households have an "affinity" to the WWE. How the hell can this be quantified?

[mookeighana]

Here were my notes: http://indeedwrestling.blogspot.com/2014/0...right-time.html

 

slides here: http://wcc.on24.com/event/73/42/56/rt/1/do...2014__final.pdf

(If that link stops working, let me know. I saved a copy. They'll be up on the Corporate website soon enough.)

 

OPENING

Vince McMahon thanks Investors for "baring with us through the years".

Vince acknowledges they had explored the other models (traditional channel, premium channel) before landing on the over-the-top. He says that it's, the "right model, right formula, right time."

He promises that everything is "synergistic". (He views that growing WWE is good for EVERYONE in the aggregate including USA or whomever they're on television with.)

 

George Barrios takes over.

 

Things I'm learning:

 

WWE is especially counting on Tablets and growth in Smart TVs/BluRay players to fuel adoption of "streaming content". (It's interesting to see how PCs is essentially flat across the years.)

 

WWE does acknowledge the demographic gap between OTT and TV networks.

 

WWE throws out bought Netflix growth numbers but more interestingly MLB subscribership (about 3 million). That's an interesting service to compare against.

 

One claim from the Network launch which I was curious about was "WWE Fans consume more online video than others". Here's the internal research that "back ups" that claim. Considering the nutty 52M households with "affinity for WWE", I don't know how much I'd bank on this.

 

I was curious how WWE was going to handle Customer Service, and as expected they did out-source it to Harte Hanks - they are a marketing company which provides call center services and support for other brands.

 

WWE is using the 52M number as the baseline (instead of something like the 4M domestic RAW Viewers or the "15M weekly WWE Viewers") so they can use terribly low adoption rates (2%-6%) that looks possible, instead of the 25%-90% numbers you'd need otherwise. The cannibalization number is interesting "up to $60M". (I had guessed $55M on 12/6.)

 

International subscribers for phase 1 (UK, Canada, New Zealand, Singapore, Hong Kong, Nordic) is only between 250,000 and 1,500,000 subscribers. ($10 price point is also being advertised for the international service.

 

Q&A Section

 

They did insist they did a lot of testing on the elasticity of the pricing to reach $9.99. "We did a lot of testing; at the end we want to drive value for the audience. How do we deliver more value to our customers? That's what we were focused on."

 

Q: Why aren't consumers able to sign up now?

A: There is a lot of "timing issues around discussions with current providers and PPV", but didn't want to miss the 6-7 week run up to Wrestlemania. There's "contractual gymnastics". I think this is code for "we're trying to still sell Royal Rumble and Elimination Chamber".

 

Responding to the DirecTV already threatening to drop PPVs, WWE is going to "continue to work with them" and they want to "ensure their fans have as much choice as possible. We'll work with them to make that happen."

 

Q: Why are you comfortable with up to $60M in Cannibalization?

A: "I've got confidence in our ability to execute. I can't believe that once someone gets a taste of it they are going to back out."

 

Revenue Sharing Agreements - Roku, Apple: "There's a general standard that's set that goes from whenever the subscription comes from -- inside the platform (70/30 split), outside the platform (no split)."

 

Expecting to spend about $20M in Programming (OpEx) in 2014. This doesn't include the PPV cost.

(They're going to amortize the programming they've already created -- will appear on the P&L.)

 

Q: Will there be a pre-paid annual subscription (at discount)?

A: Yes, there will be pre-paid annual and you can give it as a gift.

 

Questions I submitted (but were not answered): (from a longer list from last week)

 

* Will the Network revenue and expenses be split into a separate revenue division for reporting?

* Will the Network subscription numbers be included in the monthly KPI numbers?

* How robust of a marketing campaign outside of the "normal" WWE channels will there be to advertise the WWE Network service? How much has WWE committed to spend for marketing this service?

* What is the annual investment for the Network going to look like in terms of re-occurring and one-time costs? (They spoke a little on this regarding the $20M OpEx for new programming and whatnot.)

 

No Perkins Miller.

[jdw]

The "41M Passionate and Casual fan households" remains a hoot.

 

"So Vince... you've got 41M Passionate & Casual fan households, yet you can only get 4M people to tune into Raw and less than 200K to buy an average PPV? What's up with that? Or are your numbers just full of shit?"

 

John

[JNLister]

Pre-paid annual subscription sounds like a possible way for non-US viewers to get it if they can find a friendly American to take the cash and then give the gift.

[Timbo Slice]

Obviously, there's ways around it.

 

The numbers for this are bullshit from a household standpoint, but WWE is actually correct in comparing subscription rates to MLB as opposed to Netflix. No subscriber out there is going to be on the level of Netflix when it comes to content at this point.

 

As far as the unanswered questions go, I might as well offer my opinions:

 

* Will the Network revenue and expenses be split into a separate revenue division for reporting?

This seems like an obvious "yes" to me. You can't really expect this to be thrown in to the mix without trying to gauge its impact on the overall revenue for the company, especially considering they're expecting so much out of the move. Too much expected money is a part of this.

 

* Will the Network subscription numbers be included in the monthly KPI numbers?

See above.

 

* How robust of a marketing campaign outside of the "normal" WWE channels will there be to advertise the WWE Network service? How much has WWE committed to spend for marketing this service?

Considering the type of content they provide, it should be expected that they work on a transition first before exploring the outside markets because the key for them is to take the fandom they have now and get them going on the new content. There's the expectation that all those fans who watch RAW and SmackDown! each week are totally gung ho for it, but I would spend the money to make sure the transition runs smoothly. That won't take nearly as much money as an outside marketing campaign, and considering they can use WrestleMania as the draw, I'd expect a split like 60/40 in terms of outside marketing. Not nearly as much marketing will be needed to get the fan base they've built involved. Hell, it might be closer to 70/30 in favor of outside.

 

* What is the annual investment for the Network going to look like in terms of re-occurring and one-time costs? (They spoke a little on this regarding the $20M OpEx for new programming and whatnot.)

In 2012, MLBAM reported $620M in revenue, up from $300M in 2006, but they got that number from multiple streams. That spike had to do with the app development and video streaming interfaces that were either non-existent or in their infancy in 2006. Considering that the revenues reported held steady in 2013, it seems like they figured out a way to keep the reoccurring costs stagnant. The one-time costs this year are really going to take a hit on revenue from the start. The problem is that this is only a SINGLE revenue stream, though.

 

10M people downloaded the WWE app since it was released almost 2 years ago, which is a great number, but not unbelievable.

 

Let's say the Network app hits something along the lines of $50-75M on gross across all platforms due to a heavy initial adoption, tapering off as the year goes by. Is this thing going to be in the black by Q1 2015? If you're assuming $20M in production costs, then upkeep with servers and the building of your library, will WWE be able to say by the end of the year that the Network itself is profitable? I doubt it.

[soup23]

2 biggest things I noticed from the slides:

 

1. 1500 hours at launch- so this seems to indicate all of the PPV's being available at launch. Not sure if this was confirmed before or not.

2. 5-10 hours of vault footage a week. This is disappointing to me and seems like we are going to be getting 1 archived Raw, 1 archived Challenge/Superstars/etc and then 1 random territory show a week. I was really hoping for the Netflix model where new "seasons" would be released in decent intervals.

[Migs]

2 biggest things I noticed from the slides:

 

1. 1500 hours at launch- so this seems to indicate all of the PPV's being available at launch. Not sure if this was confirmed before or not.

2. 5-10 hours of vault footage a week. This is disappointing to me and seems like we are going to be getting 1 archived Raw, 1 archived Challenge/Superstars/etc and then 1 random territory show a week. I was really hoping for the Netflix model where new "seasons" would be released in decent intervals.

Agreed - was hoping for big dumps of eps. This looks more like 24/7 with an archive. Which is still cool, but not as cool as it could be.

[Loss]

Whether that's their current plan or not, if they're in tune with their subscribers and there's a demand for more, I could see them following suit. There's probably a lot of pressure on the digital team right now to work quickly.

[goc]

I agree with Loss that I think they are underestimating the demand for new content, but I don't think that will hurt them that much because they have SO MUCH of it. They can kind of taper that desire by focusing on a few different things per month to dump. They have a lot of stuff to cycle through on an "every so often content dump" with old Raws, Smackdowns, Nitros, Thunders, Saturday Nights, Primetime Wrestling, Worldwide, Pro, Sunday Night Heats, Mania, Livewire, Superstars, Wrestling Challenge, All American Wrestling, Confidential, Shotgun Saturday Night, Jakked, whatever I'm forgetting. Then AWA, Florida, Georgia, WCCW, Mid-South, whatever else they have that I can't think of. Then add on top of that all the MSG & other taped house shows, Saturday Night Main Events, Clash of the Champions, etc. They can provide alot of varied content per month/week while still having plenty in the tank for future updates.

[goodhelmet]

2 biggest things I noticed from the slides:

 

1. 1500 hours at launch- so this seems to indicate all of the PPV's being available at launch. Not sure if this was confirmed before or not.

2. 5-10 hours of vault footage a week. This is disappointing to me and seems like we are going to be getting 1 archived Raw, 1 archived Challenge/Superstars/etc and then 1 random territory show a week. I was really hoping for the Netflix model where new "seasons" would be released in decent intervals.

I called this.

[Kevin Ridge]

Yeah, I find 5-10 hours a week to be on the small side. But I guess that would still be a decent amount of wrestling for most people to have to go through on a weekly basis. Sounds similar to WWE 24/7 when they had 40 hours of content a month. I think eventually when things have been running for a while that they will be able to add more contest on a weekly basis. Have they hired additional people to handle this venture?

[Bix]

So I guess this means most of the schedule will mostly be old PPVs and DVDs at launch.

[fishbaugh]

Funny how quickly something that seems great can become disappointing when your expectations change. Prior to the announcement, if I knew I could get all the new PPVs live, the entire back catalog of PPVs, and 5-10 hours of additional content a week for $9.99 a month, I would have been excited. But if it is framed as "all the new PPVs live, the entire back catalog of PPVs, and additional new content for $9.99 a month" and that "additional" is revised to "5-10 hours a week" I'm all bummed out! What is even more silly is that I don't have 5-10 hours a week to kill -- I've got hundreds of hours of DVDs sitting around my house I haven't even cracked yet!!

[goc]

The idea that the amount of content that is going to be updated regularly is completely set in stone is really premature. I think they have a general idea of how much they plan to add from their vault, but if the demand is higher they will add more. This is not 24/7 or Classics on Demand where it was just a little niche thing they didn't care about. The Network is essentially make or break for them right now, and I definitely do not see them being stubborn about adding more old content if that's what people want.

[shoe]

According to Meltzer in the new Observer only 1.5% of what they have in the vault is going to be uploaded at 1st, and little of it will be the territories.

[CFTV]

With the ability to block mature programming from kids would the WWE produce some content that is aimed at adults now that they are launching the network? Lets say the WWE and Austin do a deal to pick up his podcast or have him host a talk show on the network would the WWE produce a show that they would rate mature that features Austin and his guest swearing that parents can childproof from their kids? I'd produce commercials on how to childproof the network.

 

If I was the WWE I'd also produce commercials for the network that show younger people showing older people how to get the WWE Network since it is important for the network's success to get older people who aren't as tech savvy as younger fans.

[mookeighana]

The idea that the amount of content that is going to be updated regularly is completely set in stone is really premature. I think they have a general idea of how much they plan to add from their vault, but if the demand is higher they will add more. This is not 24/7 or Classics on Demand where it was just a little niche thing they didn't care about. The Network is essentially make or break for them right now, and I definitely do not see them being stubborn about adding more old content if that's what people want.

What's ironic is that in the call they basically said that if they got lots and lots of subscribers (as in the 1-2 million range), they would work harder on bringing more content online.

 

I guess my take on this has always been that while hardcore fans (and lapsed fans) really enjoy the old content, WWE's experiment with Classics of Demand slash WWE 24/7 only netted a few hundred thousand subscribers at the peak. (Putting aside that this is a network with lots of on-demand content and that was a limited set of VOD programming rotating monthly). They want to create a service that generates a million+ domestic subscribers. The only lever they found in their arsenal was translating the PPV product from an expensive monthly proposition to a economized subscription. They figure with bundling in Wrestlemania they can do that. That's their gamble. It's true that they're not going to be stubbornly resisting attempts for people to give them money, but they're also pretty convinced that the model is all about current PPVs (and past PPVs), so that's their focus. For better or worse, WWE has decided that modern Raw/Smackdown/Main Event/NXT and PPVs are their focus.

 

I too hope that we'll get more archival content, but I am at peace with the process.

[soup23]

According to Meltzer in the new Observer only 1.5% of what they have in the vault is going to be uploaded at 1st, and little of it will be the territories.

In some ways initially, it feels like they are releasing footage like Meltzer is doing with the old Oberservers releasing only one a week. It doesn't seem to have affected him/Alvarez much but I will say that plays a part in why I no longer subscribe to the Observer as we are almost six years into his partnership with Bryan and are only almost up to 1997 in the archived Observers.

[cheapshot]

Something that's slightly irked me in this weeks Observer regarding the network:

 

Given MLB.tv has 3 million worldwide subscribers, and baseball is far more popular than WWE

How can Dave confidently say that Major League Baseball is more popular worldwide than WWE? I completed disagree with this.

 

In the US, of course I agree MLB is more popular, but outside of the US, where is baseball popular as a sport either domestically (outside of Japan and Cuba maybe Canada?) or has a huge pocket of MLB fans?

[Matt D]

Is it totally unreasonable to posit that MLB is more popular in the US than WWE is in the world?

 

According to wiki, game six of the world series last year, which is probably a worthwhile high point, had 19.2M viewers in the US.

 

WMXXVIII had five million viewers overall according to WWE, according to this random wrestling site: http://www.wrestlinginc.com/wi/news/2012/0419/551910/

 

I'm too lazy to find anything else but it's not a bad starting point for someone like John of Bix or Chris to come in and do something with.

[rzombie1988]

Outside of the US I don't know but inside of the US, MLB is much more popular and always will be.

[cheapshot]

Is it totally unreasonable to posit that MLB is more popular in the US than WWE is in the world?

 

According to wiki, game six of the world series last year, which is probably a worthwhile high point, had 19.2M viewers in the US.

 

WMXXVIII had five million viewers overall according to WWE, according to this random wrestling site: http://www.wrestlinginc.com/wi/news/2012/0419/551910/

 

I'm too lazy to find anything else but it's not a bad starting point for someone like John of Bix or Chris to come in and do something with.

I see your slant on this, but I'd still like to be able to quantify it.

 

I had a long drawn out debate with a work colleague over a similar point. What's more popular worldwide? NASCAR or Formula 1? In a way this is similar... an American sport that's televised worldwide, but still most popular in the US vs. A global sport that's televised worldwide.

 

After 6 months of debate I finally got the evidence to get him to concede and agree it was F1.

 

Either way, I think it's not as clear cut as Dave implies in this weeks newsletter (MLB vs. WWE Worldwide popularity).

[cheapshot]

Outside of the US I don't know but inside of the US, MLB is much more popular and always will be.

I completely agree, but Dave was saying WORLDWIDE MLB is more popular than WWE, and I'm not having that.

[Matt D]

Is it totally unreasonable to posit that MLB is more popular in the US than WWE is in the world?

 

According to wiki, game six of the world series last year, which is probably a worthwhile high point, had 19.2M viewers in the US.

 

WMXXVIII had five million viewers overall according to WWE, according to this random wrestling site: http://www.wrestlinginc.com/wi/news/2012/0419/551910/

 

I'm too lazy to find anything else but it's not a bad starting point for someone like John of Bix or Chris to come in and do something with.

I see your slant on this, but I'd still like to be able to quantify it.

 

I had a long draw out debate with a work colleague over a similar point. What's more popular worldwide? NASCAR or Formula 1? In a way this is similar... a American sport that's televised worldwide, but still most popular in the US vs. A global sport that televised worldwide.

 

After 6 months of debate I finally got the evidence to get him to concede and agree it was F1.

 

Either way, I think it's not as clear cut as Dave implies in this weeks newsletter (MLB vs. WWE Worldwide popularity).

 

In the end what matters for this specific situation is money, not international prestige, unless they can find some way to meaningfully monetize that. It's not that international markets don't matter in any form of entertainment. I feel like the international box office has become a much better deal for movies over the last 2-3 years. That's the impression I get at least.

 

Hell, how important to TNA is their international contracts? Would have NXT Redemption lasted so long were it not for int'l contracts? Likewise Superstars? It's not totally umimportant, but it might well be, as of now, for what Dave was talking about.