Originally published on Dec. 1, 2014
[This is an update to my prior article]
The WWE Network was viewed as a bad move by the skeptics as the PPV would be obliterated. However, as the metrics have been lowered substantially, the Network should break even on an OIBDA basis in the near term. When comparing apples to apples, the last full year of PPV with no Network showed OIBDA at 34.1 million.
By the numbers, WWE at the end of the 3rd Q had 731K subs. Of those 731K there are 205K subs whose 6 month obligation will lapse in the 4th Q. In the previous quarter there were 495K subs that were allowed to opt out at the expiration of the 6 month contract. With a 59% decrease in the number of subs who can opt out in the 4th Q WWE's total, the ratio of new total subs various those that opt out should improve substantially. There were 286K new gross subs in the 3rd Q with 254K prior subs not renewing. The brunt had to be from the initial 1st Q 6 month subscriptions. As cited in a previous article on my Instablog there were numerous reasons for WWE Network initial failures and why I feel the Network has corrected numerous deficiencies.
The most important date in the short history of WWE Network is December 1st. With the new subs as of December 1st coming from the free November month combined with the core subs from prior months, this will provide the base sub count on a continuing basis that will fluctuate according to monthly events. WWE management was very smart in giving November free and introducing a legendary figure, Sting, to as many fans as possible. Also the Survivor Series was the 3rd lowest PPV, so the revenue shortfall will be minimal at best. To keep subs through December another smart move is having the Steve Austin Podcast over the Network with Vince McMahon on December 1st. Add to that with the two most popular events, Royal Rumble in January and Wrestlemania in March, the base of new continuing subs should increase to the point where the Network hits the OIBDA that the PPV had in its last full year of 2013 in the 1st Q 2015. This April there were still 400K PPV to Wrestlemania. With over 1 million buys in 2013, there's still room to pull these people to the Network this coming March. And on top of everything else, foreign subs will be added to the count as the Network expanded to this market in August.
Here's my forecast showing 3 scenarios of subs and OIBDA using WWE management lowest revenue numbers:
What the skeptics fail to see is the long term positive implications of favoring Network over PPV. There are 3.02 billion internet users versus 903 million homes worldwide capable of receiving cable. Additionally, on the PPV WWE had to share revenue with cable providers, while the Network gives WWE the whole pie. It's still in the Law of Large Numbers that dictates ultimately the Network will be successful.
Disclosure: The author is long WWE.