All Eyes on WWE’s Online Subscriber Growth

-Streaming Network Is Litmus Test for Direct-to-Consumer OTT Services
-Reached 1/2 Its Goal in First Six Weeks 
-But Still Cannibalized Some of Its TV Business

Wrestling network World Wrestling Entertainment’s (WWE) stock took a hit this week after the company announced it doesn’t expect to sign up enough subscribers to offset losses in its pay-per-view (PPV) and subscription-based VoD businesses.

Content owners and pay TV providers alike are keeping a close watch on WWE. It has become an OTT pioneer after splitting from pay TV and moving the core of its wrestling video content business online.

WWE’s OTT network launched in February of this year. It attracted over 600,000 subscribers in its first six weeks, more than halfway toward its stated goal of 1 million subscribers by the year’s end. The channel costs $9.99 per month with a six month commitment, which will give the viewer access to live streams of 12 WWE events, including the popular event “Wrestlemania.”

“The network became the first ever 24/7 streaming network that combines linear programming, which showcases our premium content, with a massive on-demand library,” George Barrios, chief strategy and financial officer at WWE, said during the company’s recent quarterly earnings call. “As we like to think about it – it’s like Netflix, just better.”

WWE has had a significant online presence for some time now, and recognized early on that online services would serve an important role in its business. Prior to the OTT switch, the company launched a “premium” YouTube channel that delivers original series developed for the platform. It also has a multi-year streaming deal with Hulu that gives Hulu Plus subscribers day-after-broadcast access to its TV content, such as “Monday Night Raw,” “SmackDown,” “WWE SuperStars” and “WWE NXT.” It has a Yahoo online hub and has a presence on AOL’s online video platform, AOL On.

Turning Fans into Subscribers
WWE’s online success will depend largely on its ability to translate pay TV subscribers into OTT subscribers. WWE said its OTT service needs 1.3 million to 1.4 million subscribers globally, at “steady state” for the OTT service to offset the complete cannibalization of the company’s pay per view (PPV) and SVOD businesses. At last count in April, the network had around 670,000 subscribers. WWE noted in its business outlook report, that the “rate of subscriber adoption is a critical determinant of the company’s projected future financial performance.”

WWE said its own research identified its possible subscriber base for the OTT service to be between 2.5 million and 3.8 million globally.

“We expect a gradual ramp-up over time as consumers change behavior and adopt new technology, particularly as new platforms increase the size of the addressable market,” Barrios said. “As such, we believe the network is on track to achieve 1 million subscribers by year end, and 2 million to 3 million subscribers at steady state.”

Those subscribers will be up for renewal in August. While it’s likely a portion of initial subscribers won’t renew at the end of the six month commitment, we’re betting the renewal uptake is overall positive. WWE subscribers are fans, after all. Fans don’t mind seeking out their favorite content on new platforms.

WWE is planning to launch the service globally in six new markets by early 2015, including the UK, Canada, Hong Kong, Singapore, the Nordic countries, Australia and New Zealand. “We feel really comfortable that we’ll get those launches done in that timeframe,” WWE head Vincent McMahon said during the earnings call.

Competing with the STB
There are a few obstacles along the way toward online success for the company. WWE needs to not only inform its fans that the content is available online now, through the OTT service, but also that the OTT service can be watched on the TV screen.

This TV screen issue has become something of a messaging problem for WWE, at least anecdotally. From BleacherReport’s David Bixenspan:

“I was amazed at ‘WrestleMania’ feedback where people would talk about ordering the traditional pay-per-view for $60-$70 because they didn’t want to watch on their iPads – $70, which would have covered a Roku box with $20 left over.”

Wide device reach is important for any OTT service, but for a service that focuses on high quality premium competitive (though not technically “sports”) content with big matches throughout the year, the biggest screen in the house is the most important. WWE needs to make clear that the service is still available on the TV screen, but through a different device.

WWE has acknowledged this sore spot and released an advertising campaign using more “like Netflix” terminology that consumers might find easier to understand.

Here’s a recently released advertisement with wrestler Kofi Kingston: https://www.youtube.com/watch?v=VV4r6HBia7U

The service is currently available on Apple TV, Roku, PS3 and PS4, and Xbox 360. The company is planning to expand its device reach to include Xbox One, Amazon’s Fire TV and a few smart TVs this year.

The final hurdle is that WWE has content deals with NBCUniversal that has exclusive broadcast rights to some of WWE’s best content, which means that WWE’s OTT service can only offer archived matches of “Raw” and “SmackDown,” which limits the service’s value to its subscribers. “Monday Night Raw” airs on USA, and “Friday Night Smackdown” airs on SyFy. WWE really put itself in a bind because it launched the streaming network while negotiations with NBCUniversal were underway, which resulted in WWE receiving a less-than-hoped-for price for its content.

Original Web Content for Fan-Subscribers
Through its OTT service, subscribers will have access to originals such as “WWE Countdown: Season 2” and “Tough Enough,” as well as 12 big PPV events throughout the year. There are reality shows, documentaries, archive footage and pre- and post-match shows for “Monday Night Raw” and “Friday Night Smackdown” series. It has even launched a children’s series, called “Slam City.”

“We obviously know well the value of the compelling original programming, so we really focused on creating that,” McMahon said.

WWE already has a slate of Web-exclusive content that it developed for those other online platforms, including YouTube, Yahoo, AOL and Hulu. AOL distributes an exclusive series call “WWE Top 5,” and two other non-exclusive WWE series on AOL On.

Those deals were made before WWE launched its online network, and it’s unclear if having that content on other digital platforms will hurt or help its own online subscriber growth…

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