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WWE Pins Its Hopes On Over-the-Top Network

After exhausting traditional linear-network distribution options, WWE will go over the top of the cable industry with the Feb. 24 launch of a 24-hour streaming network that will feature the pro-wrestling outfit’s pay-per-view events.

WWE Network, which has been in development for four years, will launch with WWE-produced original programming, reality shows, documentaries, classic matches and more than 1,500 hours of video-on-demand content, the pro wrestling outfit said last week at the Consumer Electronics Show in Las Vegas.

The charge to consumers will be $9.99 per month, requiring a six-month commitment for the network, which will launch on desktops and laptops via WWE.com, as well as on Amazon’s Kindle Fire devices; Android devices such as the Samsung Galaxy series; Apple’s iPads and iPhones; Roku boxes; and on such video-game consoles as Sony’s PlayStation 3 and PlayStation 4 and Microsoft’s Xbox 360.

YEARS IN PLANNING

The network also serves as the final iteration of what were many different versions of the WWE Network since the wrestling outfit began to explore its options four years ago, according to industry sources.

The new outlet had been positioned to operators over the years as an affiliate-fee/advertising-based basic network with license levies in the range of 20 to 25 cents; a premium subscription-based network similar to Showtime or Starz; and a subscription-based, on-demand channel such as HBO Go.

None of those options were projected to generate the revenue return or distribution levels WWE was looking for from operators, WWE chief revenue and marketing officer Michelle Wilson said. “None of those distributors were particularly looking to launch more networks; if anything, they were looking to rationalize their lineups,” Wilson said in an interview. “When we started to look at the economic tradeoffs and how quickly we could go over the top, as compared to traditional distribution, it really became apparent that we could really give our fans a much better user experience with an over-the-top service.”

WWE consumers are five times more likely to consume over-the-top content than the general population, Wilson added, and twice as likely as typical Americans to order Netflix or Hulu Plus.

“They were what we called highly digitally engaged, and we found that to be an amazing value proposition to the current PPV model,” she said. “We feel really optimistic that this is a groundbreaking and visionary move that delivers more value to our consumers, and certainly provides transformative growth for the WWE.”

The OTT-based network is a gamble for the popular WWE franchise, which has a loyal and rabid following for its scripted pro-wrestling content on television. The WWE’s live Monday Night Raw original series on USA Network is among the most popular shows on cable, averaging more than 4 million viewers in 2013.

Other brand extensions, such as Syfy’s SmackDown and the E! reality series Total Divas, draw more than 1 million viewers per episode.

‘WRESTLEMANIA’ INCLUDED

On the programming side, the WWE Network will include the company’s monthly PPV events — including April 6’s tentpole WrestleMania XXX — as part of the subscription service.

WWE will continue to offer events via pay-per-view, including the Jan. 26 Royal Rumble and the Feb. 23 Elimination Chamber events, WWE chief strategy and financial officer George Barrios said.

The company believes revenue from WWE Network subscriptions will off set any cannibalization of PPV revenue, Barrios said.

But it’s unclear whether distributors will continue to offer the PPV events, which range in suggested retail price from $39.95 to $59.95 each.

DirecTV chief content officer Dan York said the satellite provider will have to review its plans to carry future WWE PPV events. “The audience for WWE PPV events has been steadily declining, and this new, low-cost competitive offering will only accelerate this trend,” he said.

“Clearly we need to quickly re-evaluate the economics and viability of their business with us, as it now appears the WWE feels they do not need their PPV distributors.”

Regarding the WWE Network, In Demand senior vice president of programming and business development Mark Boccardi said the industry’s primary PPV event distributor “continues to talk to our cable partners about PPV strategies going forward.”

WWE’s Barrios said about 800,000 to 1 million homes buy two to three PPV events a year, so if the network can generate approximately 1 million subscribers, the WWE will near break-even status with its current PPV business.

‘TRANSFORMATIVE’ MOVE

“Once you’re at 2 to 4 million [subscribers], it’s an additional $50 million to $150 million of profitability, even with the existing PPV business being cannibalized,” Barrios said. “It’s a real big, transformative opportunity for us, which is why we’ve been at it for so long.”

The network will launch with several new, original series, including The Monday Night War, a series exploring the mid-’90s rivalry between WWE and Turner Broadcasting System’s World Championship Wrestling; WrestleMania Rewind, a comprehensive look back at the biggest moments of the WWE’s franchise PPV event; WWE Countdown, an interactive countdown series; and WWE NXT, featuring up-and-coming “Superstars” and “Divas.”

Wilson said the current cable shows, including Monday Night Raw and SmackDown, will not migrate to the WWE Network, even as the current deals for those shows expire at the end of the year. An exclusive negotiating window with NBCUniversal for the shows expires at the end of this month. Executives would not disclose the status of those discussions.

Raw and SmackDown will remain broadly distributed and become promotion for the network and vice versa,” Wilson said.

TAKEAWAY

WWE has opted to go over the top with its much-anticipated network, a move that could prompt grappling with the distributors that carry its lucrative pay-per-view events.