What Does 667,287 Subscribers Mean For WWE Network?

On the heels of an exciting and momentous Wrestlemania, WWE started the morning with a heavily anticipated announcement €“ subscription numbers for their over-the-top WWE Network service. Analyst speculation had ranged enormously from utter failure (less than 500,000) to earth-shattering success (more than a million). In the end, WWE announced 667,287 subscriptions. The company's press release included the requisite spin: €œfastest-growing digital subscription service€ and €œon track to 1 million subscribers€. However flowery and positive these affirmations may sound, $WWE stock opened the day with a swift 15% drop. As expectations eclipsed reality, it seems some investors had sky-high predictions for the WWE. They believed the WWE Network would not have problems reaching the vaunted break-even point of one million subscribers before the landmark Wrestlemania XXX event. In the absence of new information about the domestic WWE Television Rights deals, traders are strongly reacting to this single piece of information. And don€™t be fooled into believing that the WWE Stock drop anything other than the WWE Network subscriber number (667k) combined with overall stock market conditions. The stock is NOT down because Brock Lesnar beat the Undertaker. The WWE Network, while occasionally quirky, handled the massive demand and delivered a perfect adequately streaming experience for the vast majority of subscribers watching Wrestlemania XXX live. There's been nearly zero new information regarding the state of the domestic TV Rights negotiations in the past month. WWE announced a terrific $10.9M Wrestlemania live gate along with claiming 75,167 in attendance at the Mercedes-Benz Superdome. Stock slide aside, the 667,287 subscriber number for the WWE Network is decidedly luke-warm. That€™s not to say some did not expect it. A week after launch, I wrote a piece where I predicted €œ650,000 subscriptions€. As note in my piece reviewing the Forbes€™ profile of Vince McMahon, Intrepid Capital Management portfolio manager Jayme Wiggins nailed it: €œa core of 700,000 but I don€™t think it€™s going to be easy for them to get another 500,000.€ Still, the stock price continued to trade at 800x trailing earnings. But many only saw potential upside and dollar signs in their eyes. For instance, Robert Routh, the director of Equity Reach at National Alliance Capital Markets, said, €œIn the long term I think the network could attract millions more, perhaps up to 6 to 8 million subscribers." At the risk of over-analyzing a service that€™s only 42 days old, let€™s break down what the financials of the WWE Network and put the 667,287 subscriber number into context...