If you’re among those who plunk down $49.95 for the average WWE pay-per-view, and more than $60 for WrestleMania, this deal where you can get the WWE Network, including all 12 monthly pay-per-views, for $9.99 a month online is an absolute no-brainer.
Even if all you did last year was buy one pay-per-view like a Royal Rumble or SummerSlam, and then WrestleMania, you basically paid the same amount of money for what you’d pay for a year of the new network, which launches Feb. 24.
If you’re a big wrestling fan, then, why wouldn’t you do it? That’s what WWE is banking on.
“WWE Network allows us to transform and reimagine how we deliver our premium live content and 24/7 programming directly to our fans around the world,” said Vince McMahon, WWE chairman and CEO. “WWE Network will provide transformative growth for our company and unprecedented value for our fans.”
Based on market research prepared by WWE as part of a filing with the Securities and Exchange Commission this week, the company is projecting that WWE Network will eventually attract between 2 million and 3 million subscribers. At that rate of subscribers, the network would be generating between $225 million to $350 million a year in revenues for WWE.
A key drawing point for fans will be the pay-per-views. It doesn’t make sense, off the top, that WWE stands to gain by effectively reducing the price of its pay-per-views from $50 to $60 or more down to $9.99 a month, but this is where the supply-demand curve you learned in Economics 101 comes to play. WWE is banking on 2 million to 3 million subscribers to WWE Network; the top-selling pay-per-view in 2013, WrestleMania 29, pushed 1 million in buys, but most pay-per-views have buyrates in the 200,000 to 300,000 range.
Then factor in that WWE splits the proceeds from pay-per-view buys with cable and satellite companies, and it starts to make sense that the company reported $82 million in revenues from pay-per-views in 2012, the last year for which complete PPV numbers are available.
If WWE hits its targets for WWE Network, then, it turns $82 million in PPV buys into as much as $350 million in WWE Network subscription fees plus whatever sales it continues to get from people who decide to buy the pay-per-views through their cable and satellite providers.
Plus, then, you as the consumer also get original programming, pregame and postgame shows for Raw and SmackDown, and hundreds of hours of classic TV shows to boot.
“The creation of a network is one of WWE’s primary growth drivers, which also include the renegotiation of key global content agreements and monetization of WWE’s best-in-class digital and social media presence. We continue to believe that these initiatives will enable WWE to significantly raise its earnings profile by 2015,” added George Barrios, chief strategy and financial officer at WWE.
Barrios warns that 2014, being a year of transition for WWE, could go either way in the short term.
“Although these initiatives hold significant potential, our financial performance for 2014 could fall within a wide range of outcomes depending on the rate of subscriber acquisition for the network, potential pay-per-view cannibalization and the outcome of our content negotiations. This wide range of outcomes in 2014 includes potentially lower earnings than 2013. As we manage this transition, our plan indicates sufficient financial capacity to fund our growth initiatives, support ongoing business requirements and maintain our current dividend,” Barrios said.
Long term, this move seems to be akin to printing money. Raw draws more than 4 million fans a week most weeks, and at the height of the Monday Night Wars a decade ago more than 10 million fans a week tuned in to see their favorite starts in action.
The early projections could be the tip of the iceberg for WWE. Which is why the company is willing to give away the store for a fraction of what the products seems to be worth.
Column by Chris Graham
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