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Ring Of Honor Launches OTT Service; Can It Put The WWE Network In A Headlock?

Summary

Ring of Honor has launched a new OTT streaming service, "The Honor Club," as they look to capitalize on their growing popularity amongst a niche, but passionate audience.

I estimate Ring of Honor can probably gain 30,000-50,000 subs for The Honor Club in its first year.

As of now, the absence of footage from the Sinclair Broadcasting era is one major negative.

I don't expect the churn pattern of the WWE Network to alter too much with the addition of ROH's streaming service for the time being.

The Honor Club's major impact on the WWE Network is likely the lost opportunity for WWE to generate additional subscribers by offering ROH on its own Network, absent a buyout.

An Honorable Club Amongst Passionate Fans

Ring of Honor, owned by Sinclair Broadcasting, is considered by many to be the second largest professional wrestling organization in North America, second only to the WWE. As of February 19th, Ring of Honor has launched an over the top subscription service to fans, "The Honor Club". Available at a price point of $9.99 per month, $99.99 per year or $119.99 per year for VIP membership, fans of ROH now have a less costly and more readily available way to access the company's content. ROH caters to a small, but highly passionate group of wrestling fans who enjoy a product focused on the in-ring technical aspects of wrestling with a high quality workrate, and a serious style of presentation. This is in contrast to the more sports entertainment, flashy, and theatrical style of the WWE. As Sinclair has invested more money into ROH since purchasing the company in 2011, the production values have improved immensely, and ROH has continued to grow in popularity, overtaking Impact Wrestling as the number two promotion in North America.

As WWE faces the possibility of the WWE Network growing plus or minus mid single digits for the foreseeable future, one of the things I thought they could do, would be to offer additional programming from other promotions to increase their subscriber count. Ring of Honor content would be a no brainer, as many of WWE's current and former top talent, (Seth Rollins, Bryan Danielson, AJ Styles, Samoa Joe, CM Punk, Cesaro, etc.) and more rose to stardom in the ROH promotion. With the launch of the Honor Club, that possibility is essentially non-existent at this point, but nonetheless I believe it bodes well for Ring of Honor, as the Honor Club is a way for them to garner new fan interest in their product via increased accessibility. With the closest comparison to Ring of Honor in terms of estimating how many subscribers they'll get being New Japan Pro Wrestling's OTT service, it's noteworthy to take a look at NJPW and how they stack up.

New Japan World had 95,000 subscribers before their annual "Wrestle Kingdom" card, however 25,000 of those were due to a last minute spike to see Chris Jericho, mainly a WWE attraction, compete in the co-main event. Not counting those who signed up last minute who wanted to see that match, and assuming they don't stick around after the fact, to be conservative, you've got 70,000 New Japan World subs. Last year the split was about 33% non-Japan subscribers / 67% Japan subscribers. I would believe it's a pretty safe bet to say that the vast majority of those 23,000 fans were U.S. As an ardent wrestling fan, in this country if you're subscribing to New Japan World, the odds are probably greater than 50% that you also watch Ring of Honor, and are a likely subscriber to The Honor Club. ROH peaked at 227,000 viewers when it aired on Destination America, a relatively obscure network. On a given week WWE averages around 3 million viewers plus or minus for RAW, and little over a third are average paying viewers of the WWE Network. Taking that same math, if we apply that to ROH's peak viewership, that would put them a little under 75,000 subs.

It's certainly doable, but coming out of the gate, especially with headwinds of  the pre-Sinclair Broadcasting era footage not yet on the Honor Club service, (which were some fantastic years of wrestling for ROH in my view and many other fans), I'm adopting a conservative view in the first year of 30,000-50,000 subs. In a three year time horizon, given the right marketing, talent and storylines, a conservative estimate of 100,000 subs is achievable in my view. I subscribed to Honor Club yesterday, and I'm content being able to see some classic ROH footage I've never seen before. The VIP subscription includes all of the future ROH Pay-Per-Views. However, as it's only available on an annual basis, that could be the fly in the ointment that prevents some fans from signing up, although I don't expect it to be material. WWE has been generating more revenue from less fans for years as I mentioned in my WWE coverage initiation note. The current economic climate of wrestling is that while the number of fans seems to have gone down over the years, the remaining fans spend more money on wrestling than at any point in history. The feedback I've seen on social media has been more so on the negative side with fans unhappy that pre-Sinclair era footage is not yet on the Honor Club, with some expected first day technical problems of the website not working, although I haven't had any issues at all. 

For most of the current WWE Network subscribers who watch Ring of Honor, I suspect some of them may add The Honor Club, but I don't expect the vast majority of subscribers to drop the WWE Network. There may be a very small subset of fans who appreciate Ring of Honor and New Japan's better quality workrate and caliber of technical wrestling who unsubscribe to the WWE Network, although that number is likely negligible. The best outcome for ROH could be, is if their popularity continues to grow and their streaming service does extremely well, WWE takes notice and buys the company. WWE has approached Ring of Honor about an acquisition as I have mentioned prior. The odds are greater that won't occur, as ROH provides valuable content for Sinclair's TV stations, and Sinclair is in no need to sell. However, it could happen, as the synergies of ROH to WWE are far greater with the talent roster, tape library, trademarks, etc. than to Sinclair. As former WWE star Ted DiBiase always said, "Everybody's Got a Price." 

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.