Tuesday, January 14, 2014

Right model, Right formula, Right time -- WWE Network Conference Call

I listed a lot of the questions I wanted to ask about the WWE Network last week.

Today, WWE held a conference call to add some additional context and hype for their new product.

Vince McMahon thanks Investors for "baring with us through the years".
Vince acknowledges they had explored the other models (traditional channel, premium channel) before landing on the over-the-top.  He says that it's, the "right model, right formula, right time."
He promises that everything is "synergistic".  (He views that growing WWE is good for EVERYONE in the aggregate including USA or whomever they're on television with.)

George Barrios takes over.

Things I'm learning:

WWE is especially counting on Tablets and growth in Smart TVs/BluRay players to fuel adoption of "streaming content".  (It's interesting to see how PCs is essentially flat across the years.)

WWE does acknowledge the demographic gap between OTT and TV networks.

WWE throws out bought Netflix growth numbers but more interestingly MLB subscribership (about 3 million). That's an interesting service to compare against.

One claim from the Network launch which I was curious about was "WWE Fans consume more online video than others".  Here's the internal research that "back ups" that claim.  Considering the nutty 52M households with "affinity for WWE", I don't know how much I'd bank on this.

I was curious how WWE was going to handle Customer Service, and as expected they did out-source it to Harte  Hanks - they are a marketing company which provides call center services and support for other brands.

WWE is using the 52M number as the baseline (instead of something like the 4M domestic RAW Viewers or the "15M weekly WWE Viewers") so they can use terribly low adoption rates (2%-6%) that looks possible, instead of the 25%-90% numbers you'd need otherwise.  The cannibalization number is interesting "up to $60M".  I had guessed $55M on 12/6.

International subscribers for phase 1 (UK, Canada, New Zealand, Singapore, Hong Kong, Nordic) is only between 250,000 and 1,500,000 subscribers.  ($10 price point is also being advertised for the international service.

Q&A Section

They did insist they did a lot of testing on the elasticity of the pricing to reach $9.99. "We did a lot of testing; at the end we want to drive value for the audience. How do we deliver more value to our customers?  That's what we were focused on."  

Q: Why aren't consumers able to sign up now?
A: There is a lot of "timing issues around discussions with current providers and PPV", but didn't want to miss the 6-7 week run up to Wrestlemania.  There's "contractual gymnastics". I think this is code for "we're trying to still sell Royal Rumble and Elimination Chamber".

Responding to the DirecTV already threatening to drop PPVs, WWE is going to "continue to work with them" and they want to "ensure their fans have as much choice as possible.  We'll work with them to make that happen."

Q: Why are you comfortable with up to $60M in Cannibalization?
A: "I've got confidence in our ability to execute.  I can't believe that once someone gets a taste of it they are going to back out."

Revenue Sharing Agreements - Roku, Apple: "There's a general standard that's set that goes from whenever the subscription comes from -- inside the platform (70/30 split), outside the platform (no split)."

Expecting to spend about $20M in Programming (OpEx) in 2014.  This doesn't include the PPV cost.
(They're going to amortize the programming they've already created -- will appear on the P&L.)

Q: Will there be a pre-paid annual subscription (at discount)?
A: Yes, there will be pre-paid annual and you can give it as a gift.

Questions I submitted (but were not answered):

  • Will the Network revenue and expenses be split into a separate revenue division for reporting?
  • Will the Network subscription numbers be included in the monthly KPI numbers?
  • How robust of a marketing campaign outside of the "normal" WWE channels will there be to advertise the WWE Network service?  How much has WWE committed to spend for marketing this service?
  • What is the annual investment for the Network going to look like in terms of re-occurring and one-time costs?

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