Tuesday, December 10, 2013

1 million subscribers...

David Parker asked a poignant question on Twitter:
Is it fair to suggest that a million streaming subscribers is more difficult to get than a million premium channel subscribers? 
It's a good question. 

We're talking about (as we have been for weeks) the WWE Network.  Does it have a better chance as a streaming network (using modern Gaming Consoles, iPads, Roku boxes, ChromeCast, PCs, possible mobile technology, etc.) and or a premium channel (via traditional Cable & Satellite Providers)?

It really comes down to support. 

If WWE had the full support of the cable & satellite providers, I think they could make a concerted push to reach a million subscribers. (Though this would no doubt involve incentives and bundling similar to what is done with premium channels such as HBO, Showtime, Encore, Starz, Cinemax). 

However, ultimately the evidence (demonstrated  by a lack of traction) suggests the conglomerates are not interested.  Participating cable and satellite operators would be forgoing the roughly half of the $45-$55 monthly PPV split they currently get in order to achieve a a monthly majority split on a $10-$15 premium channel.  

A. 250k subscribers at $10/month (60% split for the operator) = $18 million annually for operator
B. 250k subscribers at $15/month (60% split for the operator) = $27 million annually for operator
C. 500k subscribers at $10/month (60% split for the operator) = $36 million annually for operator
D. 500k subscribers at $15/month (60% split for the operator) = $54 million annually for operator

Meanwhile, WWE averages about 1.6 million domestic non-WM buys annually. That works out to about 133,000 buys a month.

133k monthly buys at $25/month = $40 million annually for operator

This state (current state) fits in snugly between scenario C and scenario D.

So, unless the cable & satellite operators believe WWE is going to pull at an average of 500,000 subscribers annually (and that's before we've even factored in the role of Wrestlemania), it's not necessarily in their interest to provide a gateway for a network that offers PPVs at 20% the current price (unless they can more than triple their current monthly domestic base of purchasers).  Wrestlemania throws an even bigger wrench into things because that's a high-price item and the split is very profitable for both WWE and the operators (since it's been averaging more than 630,000 domestic buys over the last five years).

Honestly, the only way I see the Premium Channel hitting a million subscribers annually would be to include Wrestlemania and offer incentives/bundling (i.e. free months) similar to what is done with other premium channels.  They could hit a 1,000,000 people, but it would be at a much lower ASP (average selling price) than full $10/month (or $15/month) retail.

Now, let's flip it around - what is the scenario that WWE hits a million people using only a streaming service?

Let's exclude the world in which WWE becomes an outgrowth of either Hulu or Netflix.  If that happened, it would be quite a game changer (for all involved) and the large base of established subscribers would put the million 'WWE Network' subscriber idea in the realm of possibility; however, I just don't see that situation being likely at this moment.

Instead, let's look at the scenario that appears to be playing out today - WWE Network launches as a streaming "channel" built on the back of MLB Advanced Technology streaming services and includes a large VOD library.  Right now the WWE App has been downloaded in excess of 7 million times (I believe last night's RAW mentioned 9 million,)  That's a free service, worldwide that they've pushed heavily for months on end.

Netflix has above 32 million domestic subscribers.  Hulu Plus has surpassed 4 million subscribers.  Compare with a mega-Premium channel like HBO which has over 30 million with Showtime at over 20 million.

Is it possible to envision a world where WWE can reach 1 million (a quarter of their RAW audience, a tenth of all people who have downloaded their app) subscribers for an online-only network?  Not in 2014. Especially when you consider that half of WWE fans are over the age of 40 and far less likely to be using the new technology required to access an online-only WWE Network on their television.

 However, in the long run, it still feels like the approach that is going to pay dividends in 3-5 years, especially since it seems far more likely to bring back more lapsed fans and more likely to entice younger fans to join the program.

-Chris Harrington (chris.harrington@gmail.com) 
twitter: @mookieghana

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