1. This Impacts WWE's Relationship With Traditional Television Providers
Historically, cable operators and satellite providers split PPV revenue according to long-standing agreements and contracts. For WWE pay-per-views, it's about a 50/50 split. (On a worldwide basis, WWE gets about $20 per PPV buy.) When the WWE Network launches and traditional WWE PPV purchases begin to plummet, that's tens of millions of dollars that won't be going to Cable or Satellite companies anymore. Does WWE really expect them to take those sorts of losses laying down? Of course not. While WWE promised fans that they'll continue to offer the PPV events via traditional means (at the now-expensive $45-$55 price), their "partners" haven't committed to that at all. In fact, before the WWE Network even launches,
Dish Network isn't planning on showing 2014 Elimination Chamber. The reason was clear:
they're pissed about the WWE 24/7 network. And it's not just PPV money. The likelihood that WWE Network actually is profitable in 2014 seems terribly slim. They're trading a profitable PPV division for something that will likely lose money this year (but does generate a larger base of regular subscribers). Therefore, WWE needs to compensate and generate profits in other their other divisions. It's clear what they're going to lean heavily on: TV Right Fees, which have exploded in the past decade.
WWE has gone from $55M in Domestic TV Rights Fees in 2006 to over $106M. Currently WWE is negotiating the domestic TV Rights for Raw and Smackdown for 2015 and beyond. Vince McMahon has personally promised to get rates more akin to Live Sports Programming and wants to "double or triple" his rates. WWE Stock has soared since Halloween on this notion. To offset potential WWE Network losses, WWE wants to rely on lucrative TV Right Fees well above what NBC Universal (USA/SyFy parent company) has been paying them. But no agreement was reached during the exclusive WWE-NBCU negotiation period and it's very unclear what the future holds. Of course, NBC Universal owns cable mega-power Comcast, and taking millions of PPV dollars out of Comcast's pockets isn't a trivial move.
What happens when WWE give up profitable revenues streams, angers business partners, shortchanges wrestlers on royalties, up-ends the creative value of their PPV product and launches as complex internet "channel" that more than half of their audience is hesitant to embrace? While the venture is an exciting opportunity for WWE fans, it's certainly flush potential pitfalls and controversies.