The price for the domestic WWE Network is currently $9.99 per month. When the Network launched, WWE positioned it as being a competitor to services such as Netflix and Hulu. After discussing various possible price points during the leadup, they decided that it was important to stay below the ten dollar ceiling. It's obvious now that they positioned themselves too low. The WWE Network is not like Netflix. Its more akin to a Blockbuster store where you can only rent Football videos. Its a niche service. So they need to price it like a niche service. Initially, WWE positioned the opportunity as capturing a small percentage of the millions of US Households with a WWE Affinity. However, its clearer and clearer that the demand for the WWE Network isnt far & wide. Instead, its very narrow. Youre reaching the hardcore portion of the WWE audience along with some percentage of more casual fans. Perhaps youre even capturing a small portion of older, lapsed fans. But any way you cut it, its still primarily the hardcore and current fans who are watching. These people are the least likely to quit watching WWE due to a Network price increase. Therefore, you need to monetize these customers. Most of the current WWE Network customers were buying one to two PPVs each year. Those customers were accustomed to spending at least $45 per event. Now WWE is offering them the chance to access monthly live PPV events for only $10. Its a ridiculous discount. They have commoditized their valuable Pay-per-view product. It's not about the "annual cost". Wrestling fans are used to the monthly choice of either buying or not buying an expensive PPV. Raising the subscription price to $15/month or even $20/month still represents a serious discount to the original PPV price of $45-$55 per event. (If you price it, they will stay.) Historically, raising the price of monthly PPVs actually resulted in WWE generating more revenue achieving higher profit margins. That may seem counter-inuitive but thats because the base of customers watching WWE were price inelastic. yes, the dedicated fans would grumble about it, but theyd end up forking over the money if it was something they wanted to watch. It's an attraction-driven business. Ultimately, the base popularity of the entire product drives the PPV business. It's hardly a function of the price that WWE was charging each month. In this circumstance, while raising the WWE Network price may or may not generate more revenue (there will be some customers that dont stick around and models are unclear how it will trade off), its indisputable that a price increase will make each subscription far more profitable. Right now, WWE is operating dangerously close to the break-even point per subscription. That means that WWE sacrificed all of their domestic PPV profit (remember, it was nearly a 50% margin business) and started an expensive service which can barely pay to keep itself running. They are not regenerating the profit that has been cannibalized. It's a bad place to be. It's imperative that they raising the price. Furthermore, WWE needs to drop their 6-month commitment. Theres a number of reasons for this. First of all, theyre not enforcing it. Theres plenty of stories of people who have convinced customer service to terminate their account without being charged the excess balance. There are others who have found ways to cancel the reoccurring subscription authorization through PayPal. Secondly, the "commitment" is an artificial barrier. There are some risk-adverse people who would subscribe to the network if they didn't feel "locked in. Thirdly, once WWE drops the commitment requirement, they are free to raise prices without violating long-term agreements. The WWE could choose to raise their Network price for the first half of the year to reflect the optimal value of Royal Rumble and Wrestlemania. Or the WWE might raises their monthly price but offers discounted rates for people who commit to longer term subscriptions (by either enforcing the contract provisions or simply charging the entire amount upfront). While the 6-month commitment made a lot of sense at launch, it has outlived it's purposefulness. Originally it ensured there would not be a mass cancellation after Wrestlemania and it provided a steady base of subscribers while the WWE Network geared up to launch internationally. However, in accordance with the on-demand lifestyle, WWE has to move past their need to lock people into long commitments and trust that they can maintain a high monthly retention percentage. Ultimately, if they can't keep high percentage of their customers sticking around each month, the service can never be successful.
I'm a professional wrestling analyst, an improviser and an avid NES gamer. I live in Saint Paul, Minnesota and I'm working on my first book (#wrestlenomics). You can contact me at chris.harrington@gmail.com or on twitter (@mookieghana)
