6. There Will Be Significant Revenue Cannibalization
The WWE Network will greatly impact many other revenue streams for the WWE. WWE's own financial presentations
suggest that it could be "up to $60M". I originally estimated it at $55M but the reality is that no one can accurately know prior to launch. The largest risk is in the immediate redundancies PPV revenue (which is currently being split with the Cable/Satellite operators) and the WWE Classics on Demand (COD) channel. WWE PPV revenue is about $82M annually, but that is a mix of both Domestic PPV (US/Canada) and International PPV.
It's probably around $60-$65M in domestic PPV revenue, which is being put at risk. While the cancellation of the WWE Classics on Demand channel is certainly disappointing to the loyal subscribers, it only generated about $6M in revenue annually. A much bigger segment which is being endangered is Home Entertainment ($24M revenue annually). We can expect DVD/BluRay sales to likely to take a hit because an extensive on-demand back library will naturally compete with selling discs to consumers with the same content. The WWE Network will likely have any some advertising (you'd think a subscription service would preclude this, but we've seen other pay streaming services like Hulu retain ads), there is going to be some natural competition with the video collections that are currently housed online, especially at WWE.com. In theory, revenue may just pass from the right hand (WWE.com) to the left hand (WWE Network), but there's bound to be some disruption. WWE.com earns about $23M annually, and disruption there could also be costly. Lastly, the fate of WWE Studios is a complete crapshoot. While the two ventures may not be directly linked, it's quite unclear how the boondoggle of WWE Studios will fare - will they leverage WWE Network to run their new content? Will they abandon the film division as a burdensome distraction? Only time will tell. WWE could lose a less than $60M, or they could lose a lot more. The only thing that's clear is launching the WWE Network will be quite disruptive to a lot of different elements in the WWE. Is such a big risk worth taking?