WWE Network And TV Rights: The Waiting Game

Traditionally, WWE's biggest event of the year is this weekend's Wrestlemania.

In the last eight incarnations, the event has averaged 1.07 million worldwide buys (667k domestic buys) on Pay-Per-View. In a normal year, that would equate to well over $21 million in domestic PPV revenue for WWE (and using estimates from the Q4 conference call, an additional $7.5M for the Satellite companies and $14M for the North American Cable providers). Plus, there's international PPV revenue. However, this isn't a normal year. By launching the WWE Network in the United States, WWE has changed how they're playing the game. After some initial chaos surrounding Elimination Chamber, it looks like WWE has convinced all major MVPDs to carry Wrestlemania 30 including Dish Network. While many providers have grumbled loudly about WWE Network's $10/month price (though a six-month commitment is required) vastly undercutting their $60 (SD) to $70 (HD) one PPV price, everyone seems resigned to take things "month-to-month" after WM. Everyone - Financial Analysts, Wrestling pundits, PPV Providers - is waiting with bated breath to hear WWE reveal a true update on how the WWE Network is doing. And WWE has promised to do that in less than a week:

"Regarding the disclosure of network subscriber level, we will initiate reporting after WrestleMania, on Monday April 7, 2014." - George Barrios 2/20/14

Originally, WWE believed they'd hit a million streaming customers by the year's end. However, a brisk start and oodles of positive press lauding the service as the "future of television" have driven many to speculate that WWE will be announcing a number above the break-even point (1,000,000). Others, are far more pessimistic. Those nay-sayers cite WWE demographics, cautious fans concerned with the WM30 stream, geographic high-speed internet hindrances and the difference between weekly WWE television viewers & households. Guests that I've polled on my podcast have suggested numbers anywhere between 400,000 (a very weak showing) to 850,000 (a solid number) to 1,200,000 (a spectacular success). Everyone knows that, the "WWE Network's First Big Test is Coming: 'Wrestlemania 30'". If the WWE Network withstands the live demand and delivers a flawless streaming experience, it will be a huge win for the WWE Network and many cautious fans will become believers. However, should there be a crash, the results could be very unpleasant. In that scenario, I expect every PPV provider to remind customers of the failure and WWE will be besieged with negative media reports.

Television Negotiations

According to the Bloomberg Interview that the CFO did back in March, we probably won't have a new read on the state of television negotiations until "late April or early May". So speculation on who will be their partner and how large the new contract will be continues to abound, absent of any new information. AMC announced their future plans with no indication that WWE was coming to their network (though a new reality series,€œUntitled Billy Corgan Wrestling Project€, was mentioned). The 3/24/14 issue of Dave Meltzer's Wrestling Observer Newsletter suggested that WGN may also be interested in bidding for the WWE TV. The idea would be that adding WWE would give WGN leverage to improve their carriage deal (currently less than $0.10/home) and expand their coverage (currently less than 75% of the 99 million Cable homes). While WWFE did partner with Viacom's TNN/Spike channel to do both of those things back in Fall 2000, it's important to remember that WWF made very low TV rights fees with USA (they made far more money on television advertising) and they essentially more than tripled their TV Rights fee when they jumped to Viacom. However, that was a long time ago and that partnership didn't stick. WWE returned to NBCU's USA in 2005 (Sensing they were losing, Spike pulled out of negotiations and WWE ended up with a weak deal that stripped away all of their domestic TV advertising money) and re-signed with NBCU in 2009. In 2009, the only other network that showed interest in WWE was WGN and Vince McMahon wasn't interested in moving any of his flagship shows over to the SuperStation. (Instead, WWE relaunched "Superstars" for WGN America which aired from April 2009 to April 2011). How things have changed since 2009! Their stock is at an all-time high. WWE feels empowered on the back of a newsworthy WWE Network launch. The "WWE is live Sports narrative" has received significantly play in the news media and rumors of several rival networks bidding against each other are keeping investor's hopes afloat. However, it's important to note that little new information has trickled out. The stock was a top Q1 performer ("trading at 800 times trailing earnings") and expectations seem fixated on the Vince McMahon promise that they'll double or triple their TV rights. But media insiders, especially advertisers, haven't all bought into the 'live sports equals buckets of money' argument. It's still terribly unclear whether the major bidding networks (Fox, Viacom, NBCU) are going to pay top dollar for television that delivers lots of viewers, but low CPMs. Between these two announcements (WWE Network, TV Future) I expect we'll see a roller-coaster for WWE stock this month.