The Piledriver Report 01.16.14: WWE Network

On January 8th the WWE announced the formation of the WWE Network at the Consumer Electronics Show in Las Vegas. The creation of the WWE Network has been in the works since 2011. Back in September 2011, the WWE announced that the WWE Network was on its way.

To prepare for the formation of the network, the WWE conducted a survey asking if the fans would pay for the network if it was offered as a premium channel on cable television and satellite dish providers. They also asked their fans if they would be interested in the WWE Network airing the WWE’s monthly pay per views at no cost to the subscribers of the network. They also talked about airing repeats of RAW and SmackDown!, old footage of WWE, WCW, ECW, NWA, and the AWA. Plus, they would be providing original programming on the network.

The network was supposed to launch on April 1st, 2012 which was the same day as WrestleMania XXVIII. Unfortunately, it was not meant to be, and the WWE would wait almost two more years from that date before the network would become a reality.

THE ANNOUNCEMENT

At the CES event, the WWE announced that the WWE Network would officially be launched on Monday, February 24th, 2014 at 11:05pm. The beginning of the WWE Network would coincide with the ending of that night’s RAW telecast. This launch date is strictly for the United States. Canada, Austrilia, New Zealand, Hong Kong, Singapore, the Nordics, and the United Kingdom would launch in late 2014 or early 2015.

The WWE will be offering a one week free trial during that first week of service. You can first subscribe to the network on 9am on February 24th. Unlike what was previously planned, the network will not be airing on cable television or satellite dish services. Instead, the WWE Network will be a streaming service. The network will be available on desktops and laptops via the wwe.com website. It will also be available through the WWE App on Amazon’s Kindle Fire devices, Android, iOS, Roku streaming devices, PlayStations 3 and 4, as well as Xbox 360. The WWE Network will be available for the Xbox One and selected smart TVs later in the summer. The network will broadcast in 720p, and nit 1080p. However, this is not a negative. MLB.tv, who is partnering with the WWE on the network, runs in 720p, and their picture quality is really good.

PRICING

The WWE will be charging $9.99 a month for the WWE Network service. The subscription will be a six month service where you are billed each month. There will not be a month-to-month sign up option. If you decide to cancel the service before the six month term is over, you will be billed for the remainder of what you owed during that six month period. If you want to cancel the subscription before the next six month subscription kicks in, you will need to cancel before the six month ends. Otherwise, the WWE Network subscription will roll over for another six months. If you currently order every WWE pay per view, and subscribe to their WWE 24/7 OnDemand service, you pay $771.00 a year. The new WWE Network will cost you $120.00 a year. This will save you $651.00 over the course of the year.

PROGRAMMING

The WWE Network will be airing all of its content in the same format that it originally aired. All TV-14 and TV-MA content will remain as such. However, that more adult content will be preceeded by an advisory warning. Any footage of Chris Benoit that was on the original broadcasts will also be intact, with the same advisory warning attached to the show. Matches that contained Jesse Ventura providing color commentary will continue to do so. His voice will not be dubbed over from the commentary track. The service will contain a “remind me” button, which will remind you when shows are airing. If you miss a show, everything will be available onDemand. Although, it is rumored that any new pay per view would not be found onDemand until a month after the original broadcast. If you miss part of the pay per view that is airing live, you can hit the “play from beginning” button in order to watch the whole show from the start.

Between the WWE Network’s original programming and onDemand service, you will be able to watch the following programs:
All 12 WWE pay per view events
WrestleMania Rewind: A retrospective look back at WrestleMania’s greatest moments and matches.
The Monday Night War: A TV series about the RAW vs. Nitro Monday Night War. This will probably be similar, if not exactly the same, as the current version that is on WWE 24/7 OnDemand service.
WWE Legends’ House: A reality series featuring several WWE legends.
WWE Countdown: Each episode counts down a list of “top” things in wrestling, such as Top Catchphrases.
Pre and Post-Game shows of RAW and SmackDown! telecasts.
All new episodes of NXT and WWE Superstars
Encore presentations of RAW and SmackDown!: It is believed this replays would be the current 90 minute Hulu versions since the WWE’s contract with the USA Network forbids the WWE from airing a replay of the three hour version of RAW on another network/format.
Their onDemand service features more than 1,500 hours on content from the WWE Libraries, including every pay per view event ever aired by the WWE, WCW, and ECW.

THE FALL OUT FROM THE ANNOUNCEMENT

Even though most wrestling fans knew the day of the WWE Network being on the air were coming, apparently the cable and satellite industries were blindsided by last week’s news. DirecTV is livid over the news, and is currently rethinking whether they will continue to carry WWE pay per views for those individuals who choose not to get the network.

In a statement, DirecTV mentioned “Clearly we need to quickly re-evaluate the economics and viability of their (WWE’s) business with us, as it now appears the WWE feels they do not need their PPV distributors.” The statement continued, “(WWE pay per view business) has been steadily declining, and this new low-cost competitive offering will only accelerate this trend.”

Vince McMahon responded to their statement, “I think it’d be foolish for them not to want to carry the pay per view anymore. It’s found money for them.”

In an article in the Los Angeles Times, a WWE spokesman said, “To the contrary, WWE hopes to continue to be in business with our pay per view distributors, ultimately giving our fans the choice between the two offerings.”

Why would DirecTV decide to pull out of the WWE pay per view market, even if it will not be nearly as profitable due to the new network? The reason is simple. The WWE, the UFC, and boxing each have agreements with the pay per view providers. The pay per view providers and the sports organizations have a 50/50 split in pay per view revenue. The sports organizations agreed to not undercut the price of their pay per view telecasts in other mediums. That’s why if you order a WWE pay per view on their website, you pay the same price as you would if you ordered it on television. While the WWE would only earn $27.50 for each pay per view buy, they would earn the whole $55.00 price that people who purchase the show on the Internet. The pay per view providers didn’t have a problem with this, because consumers were more likely to purchase a pay per view on television then on their computers. However, by having the network offer the pay per views for free with your $9.99 a month membership, the WWE is severely undercutting, and practically killing, the pay per view market for wrestling since you are able to watch the network using your television.

Comcast is also upset over this development. Basically, the WWE is taking away money from Comcast by undercutting the pay per view market. However, in a few months, the WWE will be trying to make up for the their own pay per view money loss by having NBC Universal (Comcast’s parent company) pay up more money when the rights fees to WWE programming comes up due later this year.

For future business, it’s important for the cable industries and satellite providers to take a tough stand against the WWE when it comes to the pay per view business. If they decide to keep airing the WWE pay per views once the network airs, the decision for a few extra dollars could have serious ramifications on their business. The UFC just unveiled their own UFC Fight Pass. If the cable companies and satellite companies do nothing, what would stop the UFC from putting their pay per views on their own network and undercut the pay per view providers as well?

AFFECTING THE BUSINESS: WRESTLERS AND THE FANS

While everything regarding the WWE Network seems fantastic on the surface, the WWE Superstars must be asking themselves the same question that the fans are asking. “How does this affect me?” For the wrestlers, the biggest question surrounds the pay per views airing on the network. Each wrestler currently receives a pay per view bonus on each pay per view telecast they appear on. The size of the bonus depends on where they are on the card (the importance of their match), and how many people purchased the show. These pay per view bonus checks mean thousands and thousands of dollars. In some bigger stars cases, it could mean a nice six figure check for WrestleMania. With the network using free pay per views as its hook, the pay per view buyrates are going to shrink even if the same number of people are still watching the show. How will the WWE compensate the wrestlers? You can’t say that they will get bonuses based on how many people watch their match on the show, because the WWE isn’t making any money off of the show. If I order the network, the WWE gets my $9.99 a month regardless of whether I watch the whole pay per view, part of the pay per view, or even if I don’t watch the pay per view at all. It will be interesting to see how the WWE handles this, as there are sure to be a roster filled with upset wrestlers when their pay per view checks start dwindling.

For the fans, the WWE Network looks like a no brainer. They get decades worth of matches, every pay per view, and other shows for only $9.99 each month. How can this be bad? The main effect of the network that will probably happen is in regards to the pay per views. Since fans aren’t paying for these shows, the WWE may not put as much effort into building up the telecasts. Instead of the pay per view acting as the main act of the play, it will probably be used as a building block to hype up RAW instead. Except for WrestleMania, the pay per views will probably become less meaningful as RAW will become the most important show for the WWE to worry about. As the pay per views lose their value, look for more main event screw jobs on the shows instead of decisive finishes. This will hurt those monthly events, but it will make the viewer tune in to RAW to see the “pay per view” type of conclusion that $55.00 used to give us.

WHAT THEY ARE SAYING

Michelle D. Wilson Chief Revenue and Marketing Officer for the WWE: “Digital over-the-top offerings represent the future, and given that our passionate fans consume five times more online video content than non-WWE viewers and over-index for purchasing online subscriptions such as Netflix and Hulu Plus, we believe the time is now for a WWE Network.”- Time Magazine

“We believe that is the future (online streaming). I’m just not convinced the pay per view platform is in it for the long term. It’s not the best consumer experience. Most people don’t think fond things of cable or satellite providers. We think we can overdeliver like we always have.”- the Huffington Post

“We have the content and we have the fanbase willing to pay for it and build it…. We looked at when the best time of the year was to launch this, and felt WrestleMania XXX was a great hook. We did our research and said this is catching up faster than we expected… Over-the-top became a very viable option, so we said maybe we should rethink this (having a cable television network) and look at an alternative model (streaming Internet channel) where we would be in control of our own destiny”- Variety

Larry Mann former VP of Sales with ESPN: “Does it maybe potentially boost USA TV ratings because with the digital component they’re able to expand and broaden their awareness? Maybe it becomes a win-win and this becomes a secondary tool to drive a higher awareness for the product. I’m sure they (WWE) had plenty of conversations with USA prior to doing this. My guess is they took the research they did, and when they walked into USA Network and pitched that this is the direction that they’re going to go, was that they could grow the vehicle rather than continue the slide. The TV-everywhere concept in many cases is to try to appeal to the youth. Not only youth, but also technical-savy individuals that may not watch as much television but they’re on the go and they have an interest in a product like WWE. This just allows them to broaden their reach. As a media buyer like myself, this is the challenge we face, to help brands. Now, let’s say I have a rand that’s interested in exploring a partnership with WWE. Well, depending on the brand’s objectives and who they’re trying to target, now I have a whole new way to go about it.”- New York Newsday

George Barrios Chief Strategy and Financial Officer for the WWE: “Research showed it’s (ability to get one million subscribers to the network to break even) within the realm of possibility. It’s going to change the way we do business around the world.”- the Huffington Post

Jim Ross former Announcer and VP of Talent Relations for the WWE: “Talk of starting a network goes all the way back to when WWE started buying wrestling libraries. I was very impressed with their presentation. I watched it on my iPad. I thought it looked great. I hope that fans are as excited about it as I am. I think the value of $9.99, $10 bucks you might as well say, is fantastic. I like the fact that if you are in the mood or something specific from that genre, it’s accessible when you want it.

I’m sure there will be some heavy consumers that can’t get enough. I think it will probably iron out where people have their favorites. Nonetheless, it reminds me when the NFL Network came on and football freaks were overloaded on the network. Then they kind of settled in to watch specific programs.

It’s just an amazing positive development. I think this is a real game changer. I think it’s a terrific way of distributing the content. It will get the WWE in the genre of pro wrestling to potentially millions and millions of people.

If you look at the demographics, people are going to see it for the very first time. For example, that Mid-South stuff, it’s going to be new to them. All of those shows from the territories, they didn’t go into reruns either. They ran them one week and the next week and the next week and so on. A lot of those programs are going to be brand new to a large grouping of viewers. So I’m happy for WWE. It was a big win for them. So on February 24 line up to order it. I think it’s going to be great.”- Miami Herald

John Cena current WWE wrestler: “Take notice … WWE is in a class by itself. We know our fans are the reason why we’re here and we always over-deliver and I’m sure they will be happy with everything the WWE Network has and I know for a fact that it will set the standard on how any other entity tries to present itself through a network platform.”- Yahoo Sports

Steve Austin former WWE wrestler: “I think it’s going to be No. 1. There are so many options here. It’s so slick. It’s like YouTube plus a million. He’s [McMahon] had some great ideas, but this is No. 1.”- Yahoo Sports