The WWE may have won the heavyweight title for breaking the internet at CES 2014 by announcing the launch of the WWE Network.
I have previously touched upon how WWE has embraced digital transformation, but the launch of its 24/7 streaming service, which will be showing Wrestlemania 30 as its first pay-per-view in April, takes things to a whole new level.
In case you somehow missed the announcement that drove the WWE Universe into a frenzy, here is everything you need to know about the WWE Network.
What is the WWE Network?
- The WWE Network is a 24/7 streaming and video on demand service.
- The subscription based platform will show all future PPVs live as part of the package (PPVs are normally priced between $44.95 - $59.95 each).
- The online channel and video library will also include weekly episodic shows like Raw and Smackdown (the flagship shows will be not be streamed live but will be made available after the live broadcast), and past PPVs, as well as original content and an extensive collection of old WWE, WCW and ECW footage from generations past.
- It starts February 24 in the US with launches in the UK, Canada, Australia, New Zealand, Singapore, Hong Kong and the Nordics by the end of 2014/early 2015.
- All of that will cost you $9.99 per month with a six month commitment (that’s the bit that really got people excited) .
Why is the WWE Network important?
Apart from feeding its passionate fanbase with endless hours of footage, WWE’s move demonstrates its willingness to dramatically change its current practices in favour of a better business model and customer experience.
The launch of an online streaming service effectively kills the pay-per-view business the company started in 1985 with Wrestlemania.
Consumers that would have traditionally bought Wrestlemania for $60 can now spend the same amount and have the WWE Network for six months, view six PPVs, plus have access to the WWE’s vault of content.
Cannibalising the PPV business is a bold but necessary move. Revenue from PPV buys equated to 17% of net revenues for the company in 2012 and had been growing incrementally over the past few years. However, on the whole, PPV buy rates are down amid a generation of consumers that would prefer to stream content cheaply (or illegally), than pay a premium for a show.
But will WWE get enough subscribers to make it worthwhile? In 2012, the company made approximately $83m from PPV buys. In comparison, conservative subscriber estimates of two million domestic users produces $240m, assuming users subscribe for the year.
The company has stated it needs between 800,000 and 1m users to break even. Assuming the number of subscribers grows over time, especially with international expansion, the initial figures create a compelling business case.
So who are the big winners and losers here? Let’s take a look at some at the fallout:
The company has swapped an aging, eroding business model with a VoD channel that has excited investors and customers.
Sentiment has generally been extremely positive among fans and share price has risen 50% over the past six months as rumours ran wild, Hulkamania style.
The WWE Universe: winner
All-you-can-eat wrestling, with PPVs included, plus I can go back and watch the glory days from the Attitude era whenever I want? AND original programming? All for $9.99? Can it get any better???
So many Undertaker matches to watch...
PPV providers: loser
Naturally this wasn’t going to work out well for the likes of DirecTV and Sky Box Office, who have derived considerable income from WWE PPVs over the years. It is no surprise that DirecTV is considering cutting ties with WWE. Whatever happens, this is a big blow to DirecTV and its international counterparts.
However, it is also indicative of the type of casualties there will be as businesses continue to adjust to changing consumer habits and digitally transform their business operations.
Which leads us to an interesting question: How will this affect cable networks that broadcast WWE's weekly episodic programming? The entertainment juggernaut will be shopping the rights to the six and a half hours of weekly domestic television it produces as a package for the first time in mid-February, which should help it secure higher fees than previous years.
In addition, Raw and Smackdown will not be shown live on the streaming channel, which makes sense given live events are generally seen as 'DVR-proof', making them extremely valuable to broadcasters seeking advertising revenue.
By packaging its collection of television shows, while protecting their value in a market that puts a premium on live sports entertainment, WWE has run a masterclass in how to make the most of broadcast and digital distribution models.
The future of sports television
With other US sports brands appearing to use a similar model (NBA, NFL and even UFC use streaming and VoD services to supplement live broadcast programming), it seems like the future of sports entertainment will not be confined to match day festivities.
The modern sports fan is as interested in the history of their sport, as they are with the current battles for supremacy. Sports leagues should be creating ways and experiences for fans to access their history, so they can recall classic events and make their own mind up on the best players and teams of all time.
If the customer experience is meant to be the relentless focus of modern marketing, how long will it take the likes of the English Premier League to follow suit and create a similar platform? Can such a model be duplicated and used in other parts of the world? Let me know what you think in the comments.