WWE Network Numbers Show Reasons for Cautious Optimism
WWE has released the first subscription numbers for its new digital streaming network and while the total may seem disappointing, it shows the company is at least on the path toward making WWE Network a hit.
The network has 667,287 subscribers 42 days after launch, according to a WWE release, well below the company's stated goal of one million subscribers, but not by any means a disaster.
The Wrestling Observer, a highly regarded newsletter that covers the professional wrestling industry, did an extensive preview of how to interpret the subscription number in its April 2 issue, saying that "any number below 850,000 wouldn't be that good of a sign, but it's workable." The actual total of 667,287 did come in slightly above the 650,000 number the newsletter saw as a failure.
Only having 667,287 subscribers leaves the company below the break-even line on the service, if you don't factor in the fact that not all the traditional pay-per-view business that the network will ultimately replace has gone away.
"Our goal is to get 1 million subscribers this year, and if we get 2 to 4 million, it'll just be transformative to our business," Perkins Miller, executive vice president of digital media for WWE, told AdWeek earlier this year. "That 1 million number enables us to break even, and we think the 2 million number is very reasonable."
Why the early number of subscribers matters
While the subscriber base will grow in the United States and on surface 667,287 paying customers after 42 days seems like a pretty hefty total, it's a mild cause for alarm as one of the main draws for the network was that it included access to April 6's Wrestlemania XXX pay-per-view. Just buying that event through traditional PPV channels cost around the $60 that six months of the network -- which requires a six-month commitment at $9.99 a month -- would cost a customer.
Wrestlemania is the biggest show of the year -- the WWE"s Super Bowl -- and has traditionally drawn the company's largest audience of the year on PPV by far. It's also the show that garners the most interest from casual fans -- the ones WWE hoped would make the logical leap that buying one PPV for around $60 made no sense when you can sign up for six months of PPVs, plus all the other shows offered on WWE Network for the same price. It's logical to assume that if Wrestlemania did not entice casual WWE fans into subscribing then perhaps nothing will.
There are reasons for optimism
Early reports on the network were mixed with its initial attempt at streaming a live event resulting in significant problems. This may have led to some fans doubting that the stream would work well for Wrestlemania and not being willing to risk it. If traditional PPV orders for Wrestlemania -- which won't be released for a few weeks -- are anywhere approaching the 650,000 North American buyers that purchased the show last year, you have to assume that all of those buyers are likely eventual network subscribers.
Ben Miller, who writes for The Wrestling Observer, told the Fool he believes WWE can reach the one million goal in time.
"There are still a few cards in WWE's hand, such as opening the service to Canadian subscribers and eliminating the six-month commitment, he told the Fool. "For a streaming service targeting a relatively narrow fan base, I find 667,287 in under two months to be an impressive number. At this point I'm almost embarrassed to say it, but before the network launch I told a friend in the business that I was expecting 250,000 by this point."
WWE also has two others cards in its hands. The first is that while digital streaming to a computer screen or tablet is cool, many potential network customers lack the easy ability to bring the network to a TV screen. That problem should lessen as WWE expands its partner base for the network. Though WWE does have deals with Roku and Microsoft's Xbox that make watching the network on a TV easy, it also has plans to bring the network to Apple's Apple TV, Google's Chromecast and Amazon's new Fire TV. Being on those two platforms should make the network enticing for more people as crowding around a laptop or a tablet with friends is not the most enjoyable way to watch a wrestling PPV.
The second is that despite early glitches and doubts that WWE would be able to handle the Wrestlemania audience, I experienced a nearly perfect stream. Other than a few situations where my computer seemed to struggle a bit to keep up with the action -- likely due to my WiFi, not any problem on WWE's end -- the picture was clear, the audio crisp, and I experienced no lock-ups or other problems. That bodes well for the future as the network is unlikely to be stressed more heavily during a live event than it was during Wrestlemania XXX until Wrestlemania XXXI.
The business numbers are mildly encouraging
It's impossible to know the exact breakdown of revenues for the 667,287 subscribers because WWE receives a different cut of the total depending upon how a subscription is sold. If customers sign up on WWE.com the company keeps all the money; if they sign up through Apple or Roku, those companies take a cut. If we assume a worst-case scenario of WWE paying a 30% share on all 667,287 subscribers, the company will bring in $4,666,337 each month and $27,998,027 during the mandatory six-month sing-up period.
According to WWE's 2013 annual report, the company's PPV revenues were $82.5 million in 2013, $83.6 million in 2012, and $78.3 million in 2011, of which $66.9 million, $66.4 million, and $61.3 million, respectively, were domestic orders. Those numbers are relatively consistent and if you project the Network to stay exactly where it is now in the U.S., it would bring in about $56 million over the first 12 months while foreign PPV orders would bring in around $17 million. That's $73 million in revenue assuming not a single traditional PPV buy in the U.S., which would be a silly assumption.
You won't be able to tell whether the Network as of now is a loss or a gain until the company releases a domestic buy number for Wrestlemania, but 42 days in the network plus traditional PPV seems like pretty close to a wash for the company.
The future looks bright
The beauty of the WWE Network is that it makes it logical for casual fans -- the ones that buy one or two PPVs a year -- to subscribe. Unless those customers either burn out on the product or decide they are no longer interested enough to spend $9.99 a month, the company is unlikely to see much churn. Each new PPV should bring a bump in network subscriptions as will rolling out the network across the world. New platforms, technology partners, and increased customer acceptance of streaming networks should help as well.
Growth is unlikely to be quick in the U.S. as there is no single subscription driver as big as Wrestlemania on the horizon, but growth should occur. WWE Network is not yet an unqualified success but the signs are encouraging and the company appears well on its way to making a massive transformation in its business model.
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The article WWE Network Numbers Show Reasons for Cautious Optimism originally appeared on Fool.com.Daniel Kline is long Microsoft. The Motley Fool recommends Amazon.com, Apple, and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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