WWE is cutting the cord to launch its network
After four years and tens of millions of dollars spent on developing a new channel, WWE Corp. ultimately decided to bet on itself.
Its new network, unveiled Wednesday at the Consumer Electronics Show in Las Vegas, is not a traditional channel that will be distributed by pay-TV distributors including cable and satellite companies. Instead, it will be an online network that WWE fans can watch if they shell out $9.99 per month.
By going the so-called over-the-top or OTT route, WWE is bypassing launching a network that would likely have been a slam dunk with distributors. Its shows “Raw” and “Smackdown” generate huge ratings for USA and Syfy, respectively.
Besides getting access to all 12 of WWE’s pay-per-view events, including “Wrestlemania,” the channel will feature a mix of original programming, reruns of recent episodes of “Raw” and “Smackdown” and older library content.
For fans who buy multiple pay-per-views, the online channel likely makes more economic sense. Typically, WWE pay-per-view specials run about $55, with “Wrestlemania” going for around $70.
In an interview, WWE Chairman Vince McMahon said the company had deals in place with major distributors for a linear channel at a price tag of 20 cents per month, per subscriber, which is very high for a new network.
But McMahon got concerned about restrictions that distributors wanted to put on the network with regards to making its content available on other platforms. At the same time, McMahon saw how Netflix and Hulu had built their own digital platforms from scratch and figured it was worth a shot rather than enter a partnership with doubts.
“I said, much to the chagrin of my staff, ‘I’m not going to sign it,’ ” McMahon said.
By going with an OTT offering, McMahon is bypassing being in north of 80 million homes right out of the gate.
For the WWE Network to work, McMahon figures he only needs north of 1 million homes in the United States. George Barrios, chief strategy and financial officer for WWE, said he thinks the network should be able to land between 2 million to 4 million subscribers in the U.S.
Given how loyal the WWE fans are, that may not be a reach.
“At this price point, they should not have any issue getting to profitability,” said analyst Brad Safalow of PAA Research . “People tend to underestimate the passion and size of the fan base,” he added.
Going with an OTT platform will also make international distribution easier for WWE.
If there is a potential downside, it is what impact the new channel will have on WWE’s highly successful pay-per-view business.
But Safalow thinks it will be a good thing in the long run.
“Plunking down $55 and watching a show which effectively becomes a lead-in for ‘RAW’ has aggravated the WWE fan base in recent months. However, when you lower 10.0% the economic cost to fans the likelihood of dissatisfaction is considerably lower,” he wrote in a recent report.
Cable and satellite operators may look to rethink their relationship with the WWE’s pay-per-view content because of the channel. However, while revenue will probably take a hit because of the network, there may still be enough casual fans of the WWE to make pay-per-view still viable. For the distributors, it remains found money.
The WWE’s decision, if successful, will not only speak to the power of its brand, but also about the continuing evolution of technology and new platforms and how consumers are getting content. WWE is essentially cutting the cord to traditional media. If it succeeds others will take note.
Follow Joe Flint on Twitter @JBFlint.
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