While a more traditional channel could ensure a certain level of distribution, McMahon, chairman of WWE, said in an interview that the terms pay-TV distributors wanted in return for carrying a WWE channel were "too restrictive."
McMahon said WWE had deals ready to go with major distributors for a network that would have generated fees of 20 cents per month, per subscriber.
"I said, much to the chagrin of my staff, I'm not going to sign it," McMahon said.
Instead, the WWE looked at how Netflix was able to create an OTT service and became convinced that its own rabid fan base would embrace a similar approach. "Our fans are early adopters of new technologies," McMahon said, adding that the service will need about a million subscribers to break even.
"This gives us control of our destiny and a better user interface," added Michelle Wilson, WWE's chief revenue and marketing officer. "We think this is the future."
The decision to go with an OTT service may dampen the WWE's relationship with the cable and satellite operators that currently distribute their pay-per-view specials. The WWE said it will still offer its specials to cable and satellite operators.
"I think it'd be foolish for them not to want to carry the pay-per-view anymore," McMahon said. "It's found money for them." Typically, the subscription fee for the WWE's pay-per-view events is split 50-50 between the programmer and distributors. Most of the WWE's pay-per-view specials run about $55, with "Wrestlemania" going for around $70.
Analyst Brad Safalow of PAA Research thinks the network could be a game-changer for WWE.
"At this price point, they should not have any issue getting to profitability," Safalow said. "People tend to underestimate the passion and size of the fan base," he added.
WWE is not planning to move its popular cable shows, including "Monday Night Raw," which airs on USA Network, or "Friday Night Smackdown," which is carried by the Syfy channel, to its own network.
However, reruns of those shows will be available on the WWE Network after their original airings. WWE Network will also start out with between four to six hours of original programming, according to George Barrios, chief strategy and financial officer for WWE.
The service will be mostly commercial-free but there will be sponsorship opportunities for advertisers.
"Our goal is to keep it as clean as possible for our fans," Wilson said.