3 Big Dilemmas WWE Network Must Face

2. Raise Price

At this moment, the domestic WWE Network is still new. Subscribers aren€™t programmed to the idea of spending $9.99 every month and WWE has no idea what the €œchurn rate€ is going to be at the end of August when the first batch of subscribers come up for renewal. Will it be higher than 90% or lower than 70% of subscribers that choose to resubscribe? The company honestly has no idea. (Yes, they can look at Netflix statistics or the percentage of subscribers who chose to not automatically autorenew, but those datapoints may or may not be truly analogous.) The marketplace is certainly evolving. Competing services recently announced price increases. In April Netflix announced the intention to raise prices, especially for new subscribers. Amazon Prime (which includes a streaming service that has been bulked up in recent months with content from HBO) just raised their annual full price membership from $79 to $99. Conversely, Microsoft€™s Xbox services decided to discontinue the requirement that users retain a costly €œGold€ membership just to watch streaming apps (such as Hulu, Netflix, Amazon Prime or the WWE Network). Things are changing and WWE needs to figure out where they fit in this complicated space. While raising the price of the domestic WWE Network will inevitably result in some loss of customers, it€™s still very possible that revenue may still grow. Even if Revenue does not grow, it's still possible that profit (which ultimately investors are most concerned with) will grow with a price increase. Historically, WWE customers have been quite price inelastic when it comes to PPV price increases. (Granted, that€™s dealing with a much smaller monthly PPV base, but the experience is telling.) We know that customers that want to watch WWE will go out of their way to watch WWE. However, the rapid commoditization of PPV events from a $60+ event to part of a $10/month service suggests that WWE may have overshot their mark with an inflated belief of the potential audience. WWE Network still is a a niche service with niche programming. In that scenario it may be more appropriate to raise the price and focus more on the core group of €œhardcore€ fans that€™ll stick around instead of worrying about attracting fickle fans that were only interested in €œchecking out€ the WWE Network (and aren€™t likely to renew). The price elasticity charts that I published last week suggest that raising the price to at least $13/month would make a lot of sense in terms of the the profit per customer. Unless the services attracts millions and millions of subscribers, they would likely be much more comfortable than where it sits today if they were to raise prices moderately as soon as possible.