Are you one of the million fans WWE is convinced that they can get to subscribe to their channel?
So far, it seems interest in the proposed WWE Network is largely amongst fans who were interested in WWE Classics. That universe is around 100,000 subscribers tops. In order for WWE Network to be successful enough to make the shift from PPV to their own channel, the magical number is one million subscribers. Not 500,000 subscribers. Not 750,000 subs. 1 million.
That’s one hell of a challenge.
The upcoming roadblocks
The first challenge for WWE is convincing cable & satellite distributors to make the channel available.
Challenge two is the fact that the network is relying on subscribers rather than carriage fees. Right now, most cable networks survive & make money through bundling on distributors via carriage fees. It’s why Fox Sports 1 so desperately wanted to command a high carriage fee with their UFC TV deal in place.
Challenge three is convincing the 3.5 million fans who watch RAW weekly that they should pay $10 or $15 a month for a pro-wrestling TV channel. In Japan, Samurai TV has been around for a couple of decades and still remains a small operation. If any country could make it work, it would be Japan. WWE wants their television network to be significantly larger in scope than Samurai TV. If 1 million subscriptions is the benchmark, then what it tells us is that WWE is hopeful that they can convince nearly 1 out of every 3 WWE fans to pay the monthly subscription because of the perception that it’s a better value than paying for monthly PPVs.
Which leads us to challenge four. The biggest challenge WWE has right now is convincing fans that their PPVs are special enough that ditching the PPV model in exchange for putting on “PPV quality shows” on the WWE Network is worth paying $120 to $180 a year. The biggest hurdle WWE faces with this business proposition is that once you take shows off of PPV and condition fans to watch them on cable, then the luster of PPV quality vanishes. In other words, a show is a “free show” on cable even if you are paying for the channel. Once you’re off PPV, that aura is shattered. TNA thought that by cutting back their schedule on PPV events that it would make the events more special. The problem is that the Overton Window had long moved on. You can start out with a few PPVs and do well. However, once you expand the amount of PPVs you run in a year, you can’t go back because the customer base that is interested in paying for PPVs has shrunk. TNA moved some of their “PPVs” to Spike and it hasn’t moved the needle an ounce in ratings. Why? Because fans don’t see cable shows as PPV worthy.
Take HBO for an example. Even though the channel has a lot of subscribers, boxing events that air on the HBO cable channel are viewed by the public as inferior to the events produced by HBO PPV. Same deal with Showtime. The problem the WWE Network faces in convincing fans to subscribe to the network is that many American combat sports fans have a black-or-white approach to TV consumption of the product. Either it’s PPV worthy or “free” TV worthy, broadcast or cable. What WWE Network wants to do is try to thread that needle by promising PPV-quality events on a pay channel. I think it’s going to be a much more difficult sell than Stamford could have possibly imagined.
What if the WWE Network crashes and burns?
There’s a fair possibility that the WWE Network will not pan out financially and WWE will have to go back crawling to PPV.
If this situation arises, WWE’s biggest fear is that they will have devalued their PPV brands like Royal Rumble, Wrestlemania, Summerslam, and Survivor Series by putting them on cable for “free” even if it’s a subscription network. Once you offer something to someone for “free”, it’s really hard for the masses to be convinced once again to start paying for shows on PPV.
If that scenario happens, WWE is in gigantic trouble because it’s business model is heavily predicated on PPV just like the UFC’s business model is. While the UFC has casino money to fall back on, WWE would have to fall back on cable television money to try to keep the ship afloat. One aspect of WWE’s business that has been so valuable is their ability to expand or contract on the fly in regards to how much they pay their talent given the economic conditions. If PPV is out of the equation with the WWE Network in place and the Network fails, it means you can’t rely on going back to PPV and hoping that you draw the same kind of numbers that you used to.
If the WWE Network collapses, it won’t be a death blow to the company but it sure will permanently change the WWE television landscape for good. PPV still remains the top economic driver for combat sports in the United States. Bellator, the Viacom owned rival of UFC, is attempting to get on PPV. The problem they will soon discover is that they have ran so many free shows on television that it’s going to be hard to convince the average Spike viewer to pony up for shows touted as PPV-quality.
Vince McMahon may be super conservative in his matchmaking right now but between the Orlando Developmental Center (Hunter’s pet project) & the WWE Network, WWE is investing a lot of money in some very speculative projects.