WWE 2014 PPV + OTT Revenue/Profitability

When it comes to estimating the cost-benefit of launching the WWE Network, I've put together a helpful little chart.

WWE REVENUE CHART

This looks at the two most important factors:

1. How much will the WWE Network grow (monthly) between now and the end of the year?
2. What portion of domestic PPV buys will remain for the PPVs between now and the end of the year?

WWE Network Growth

Some important notes about this table:

• OBIDA is PRIOR to Cannibalization.
• Growth is looking at "monthly growth over prior month" starting in May.
• Assumes costs begin to grow after 1M subscribers.

More about those Costs

In the original WWE Financial presentation, WWE costs for the Network were $55M for up to 1 million subscribers, $115M for 2 million subscribers and $140M for 3 million subscribers.  We assumed the fixed cost for is about $55M and variable cost that grows once the service surpasses one million subscribers.  That's why they actually have a higher WWE Network OBIDA (remember this is prior to revenue cannibalization) at 1M subscribers than at 1.45M subscribers.

Example of 2% for monthly WWE Network Revenue

WWE PPV Results

Some important notes about this table:

• I established a "baseline" for all PPVs going forward based on the three-year average. (see)
• I assumed PPV Cost of $39M.  It could be more (it was $48M in 2013 and a little less than $39M in 2011/2012).
• I assumed Worldwide PPV buys would remain at about 95% of the baseline.

Because we have estimated buys for Royal Rumble, Elimination Chamber and Wrestlemania that already represents about $26.6M in revenue that has already been achieved.

Combined WWE PPV and WWE Network OBIDA

Combing PPV and WWE Network OBIDA results in this table.  As noted before, because the WWE Network costs were expected to escalate after a million subscribers, the 5% WWE Network growth scenario (just around 1 million subscibers) was actually a higher OBIDA than the 10% growth scenario.

COMMENTARY

For the record, I established growth at about 2% for the rest of the year, and expect somewhere between 33% and 66% of domestic buys retention.  That would put the OBIDA range from $37M to $29M.

I don't consider that a failure, but it's not an astounding success either.  Note that I haven't included any estimates for what other revenue cannibalization might look like (Home Entertainment, Digital Media).

The key is that right now WWE makes between $34.1M (2013) to $44.9M (2012) in PPV OBIDA.  So, in this scenario WWE manages to achieve the same OBIDA but through working a lot harder and generating more top-line revenue.  With the possibility of more PPV providers dropping coverage (ala DirecTV), I'm not sure they can grow the WWE Network fast enough to make up for lost PPV OBIDA.

All Analysis by Chris Harrington (chris.harrington@gmail.com)