Monday, July 07, 2014

On the pernicious topic of International WWE Network Growth

It's natural to be a skeptic.

When you're evaluating a business, it's important to collect enough evidence that you can explore several possible explanations. Still, you've also got to be willing to wade through the murk and look for Occam's Razor.

Covering the launch and growth of the WWE Network has been an exciting and interesting journey.  From the start, it was clear that the venture was going to be expensive proposition. There was a lot of risk involved because WWE was cannibalizing a profitable stream of revenue for a very uncertain future.

What do we know?

We know that when the service launched, several hundred thousand people signed up, at least to try a free week. We know that the on 3/31/14, there was about 495,000 WWE Network subscribers and a week later it had grown by nearly 35%. For Wrestlemania,  WWE announced 667,287 WWE Network subscribers. We know that the service is not technically available in Canada or Internationally, but we've heard many anecdotal reports that hardcore fans are still able to access the WWE Network. We know that since the WWE Network has launched, we've seen the non-US portion of PPV buys (which was worth more than $16M last year), significantly drop since the WWE Network launched.

We could be seeing a drop in WWE popularity (after all, Rock wasn't wrestling on this Wrestlemania and Brock didn't compete on this year's Extreme Rules) and WWE attendance numbers continue to stagnant and fall. We could be seeing a rise in WWE PPV piracy. Or we could just be seeing people naturally migrating to a cheaper technological solution.

It seems surprising that both the survey done by the Wrestling Observer website and the informal survey that we did on launch day revealed between 15%-20% of the WWE Network users indicating they lived outside of the US. It seems surprising that both the estimate I calculated and the estimate that Dave Meltzer calculated looking at the drop in non-US Wrestlemania buys suggested that between 15%-20% of WWE Network subscribers were from outside of the US. When I see the same information coming up again and again from different analysts, I start to believe there's something there.

Still, I encourage everyone to go back and re-read what WWE expected to happen with their Network.  In particular you'll notice that Phase I international countries were only ever estimated at a quarter of the size of the US market. Even in their wildest predictions, WWE never believed that International Growth was going to be a financial panacea for the WWE Network. It was, at best, a pleasant companion to what was supposed to be a strong domestic foundation.

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