Thursday, January 09, 2014

WWE Network is Announced.

We've been blogging about it every day for the last two months.
I was pleased but not too surprised. 
If anything, I was flabbergasted that the echo chamber of pro-wrestling reporting was actually right.  Special recognition to the DAVEs (David Parker, David Bix, Dave Meltzer), Justin Labar, Keith Harris, JDW and Rich Kraetsch who provided the context, analysis, debate and breaking news throughout the last sixty days.

Here's what most of us expected (and got):
  • $9.99/month 
  • 6 month commitment
  • Will include live PPVs
  • Will include Wrestlemania
  • Will be over-the-top (ala netflix)
  • Will include both a "programmed" feed as well as on-demand
  • On demand will include past WWE Library including PPVs, Raw, Smackdown
  • Will have pre and post shows for Raw and Smackdown
  • Will move the Hulu-exclusive shows like NXT and Superstars to the WWE Network
  • Will launch domestically (US) in 2014 on 2/24 (the day after the elimination chamber in mpls)
  • Will be launching in english-friendly speaking countries (Canada, Nordics, UK, Hong Kong, Australia, etc.) in 2015ish hopefully
  • They are using MLBAM as the backbone for the system
  • Will be available on a whole lots of different apps and devices including video game consoles, SmartTV, mobile devices and Roku boxes 
The new hashtag/company line is #bestvalueinentertainment.  I thought they might try to undercut Netflix when I saw that.  Yet, pro-wrestling media is niche product; I already think they're vastly underpricing themselves already. I guess $9.95 because I figured the $10 mark was about what people consider "cheap enough to try" these days.  They also mentioned in today's SEC filing that they'll be offering one week trials (ala Hulu/Netflix) so they're learning.

I believe they'll get around 600k subscribers for the first 6 month cycle and will be contemplating a domestic price increase by 2015 (to $13-$15 range). I don't believe that they'll hit a million subscribers unless they have an expansive and expensive ad campaign (Sports Illustrated, USA Today, maybe Super Bowl Ad) aimed at older and lapsed fans and I don't think that's the direction... yet.

What I was surprised at was that they are coming along with International so quickly (especially with issues like data caps in Canada!) and that they're only doing a 6-month commitment cycles (no month-to-month). I was also surprised at how little they had in terms of old territorial library content, but we'll know more once it's launched and we can actually see the VOD offerings. 

What's especially interesting is that they aren't allowing signups until 2/24 - launch day. I feel that's a risky move because you're basically counting on a system to start processing orders at 9 AM and go until 11 PM when suddenly they actually turn the whole thing live (following Monday Night Raw). They can't afford a big failure, but I wouldn't be surprised if that first week was almost "free" because they don't have to start processing credit cards that very instant.  Are they waiting until 2/24 so they don't undercut the Elimination Chamber PPV?  (Which really is already going to be hurting because the cat is out of the bag.)

Exactly how this shakes out for Wrestlemania PPV income in the future (we're talking almost $20M domestically - and that's just the half that goes to WWE! There's another $20M that goes to the cable/satellite operators...) and how this changes things like their DVD/BluRay business (they're advertising they put their whole library of releases on demand, which is cool) will be intriguing.  Home Entertainment is a $28.9M annual business for WWE.

It's definitely going to be hurt by launching the Network and putting materials up there. I think one reason they've been doing the $5 DVD blowouts at Walmart was to get ahead of announcements like this.

However, you're right that it's not the end for DVD/BluRays.

a) Older consumers (keep in mind more than half of WWE viewers are over the age of 37) are far more likely to continue to purchase physical media. That's why there's such a split in the Netflix Streaming vs Netflix DVD Rental population by age (DVD peaks in 37-48 while streaming is bigger in 18-36)

B) Content is King. They're going to be putting releases in Big Box Stores (if BestBuy is gonna sell it, they're gonna stock it) and trying to get other companies (like Netflix) to license it. (On an related topic, I don't think we'll see the end of WWE materials on Netflix in 2014 by any means.) Plus, this becomes programming you can use on the Network and then use it to increase your library bragging rights.

c) They're still publishing a magazine. They're still doing C-level PPVs. If they can turn a profit on it and they're already doing it, they'll likely keep doing it. (WWE Films/Studios is another matter though!)

My guess a few months ago was a 1/3 cut to Home Entertainment in 2014. We'll see how that plays out and whether they time delay DVD/BluRay releases versus availability on the Network by several months.

There's still a lot of questions about getting older people to order something like this. More than half of WWE viewership is over the age of 37 and they have the lowest propensity for using streaming services and are far more attached to cable/satellite television as well as physical media. I think they've got to do some heavy-duty selling to convince people that this is going to work and when you're not supporting something like the Wii which was a strong gateway vehicle for people like my parents to using Netflix, you're risking cutting out that older generation if you rely too much on the Roku Boxes and PS4 of the world. Still, nothing's guaranteed!  Plus, it looks like while they couldn't announce it at CES, WWE Network will be available on the AppleTV.

It's been fun following this drama for the last few months; that's for sure!

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